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Some mergers seem made in heaven. Exxon Mobile and Disney Pixar come to mind.  In these cases, each culture contributes to the other, creating a win-win scenario that successfully weathers the transition to become larger than the sum of its parts.

But not all merged companies are able to successfully navigate the winds of change.  Some fail spectacularly. Consider the 1968 merger of the New York Central and the Pennsylvania railroads—a highly publicized merger that created one of the largest corporations in America. The success of the venture was considered a fait accompli.  Both railroads wanted to maintain the popularity of rail travel, despite increasing encroachment by the airplane and automotive industries.  Both wanted to capture a lion’s share of the travel market.

But top executives in both organizations forgot the all-important people element. The railroads were bitter rivals. Their quest for one-upmanship dated back centuries. The change effort needed careful planning to merge the disparate cultures, and it was given only token effort.  Executives failed to build adequate awareness of the need for change among employees.  They failed to create avatars who could set the example for others, championing the change in the workplace. They failed to implement the required new behaviors among the two clashing cultures, and failed to reinforce them.  Two years after the merger, the combined organization filed for bankruptcy. Not surprisingly, employees cited poor planning and poor management as the reasons for the failure.

How does your organization handle large-scale change efforts? Do you carefully plan the initiative? Do you put a highly respected executive in charge, relieved of other duties until the transition “takes” in the culture? Do you create a compelling awareness for change among managers and employees, using two-way communication to judge the degree of that awareness? Do you create avatars that convince others of the need for new ways of thinking and behaving?  Do you train employees so that they can accomplish the new standards? Do you reinforce the change at every level from the executive suite to the shop floor?

If so, you’ll be running a company that people want to work for.  If not, the people who work there will be running for the door.

Two Auto Companies, Two Widely Divergent Strategies

Ford and Fiat both manufacture automobiles, but their strategies for growth and profit are as different as night and day.

Ford Motor Company will post a 1.6 billion dollar profit this quarter, in an industry hard hit across all sectors in recent months.  In a classic maneuver to boost the bottom line, Ford upped the prices on its vehicles while trimming production costs.  It worked. Fords North American profit margin was 12%, a handy triumph over rival American auto makers.

Now, Ford plans to trim costs even further by developing one-size-fits all underpinnings and then building different cars on top.  A recent Wall Street Journal article reported that Ford intends to build 80% of its vehicles on just five underpinnings. It anticipates cutting engineering costs by 60% with the move.

Fiat is going the exact opposite direction.  In the next three years, the company plans to debut nine new Alpha Romeo models, six new Maserati models, three new trucks, and five new Fiats—and to amp up its upscale brand, which already costs far more than similar automobiles by competitors.

It will be interesting to see the results of these antipodal strategies. As Fiat refurbishes its already distinctive cache, Ford goes more homogenous.  Which will produce better results? My bet is on Ford. Although it’s axiomatic you can’t cut your way to growth, there’s something to be said for squeezing excess expenditure out of the production line.

Look what it did for Toyota.

Eight Steps To Determining Your Marketing Strategy (Part II)

Here are steps 3, 4, and 5 for determining your marketing strategy:

3.Form homogeneous submarkets.  These are narrow product markets where buyers are similar in terms of age, socioeconomic group, marital status, occupation, nationality, taste, position in the life cycle, or other dimension.  Different groups have different needs, and may require different marketing approaches.

4.Identify the needs of each submarket.  If the group is buying food, for example, do they look for taste, convenience, long shelf life, freshness, or nutritional content?  This step requires careful analysis and may involve market research and other methods of customer feedback.

5.Name the submarkets.  A simple title, acronym, or mnemonic can serve as a shortcut identifier for the submarket.  Young urbans might be called “yuppies” for example, or women who purchase expensive handbags could be called “status buyers.”

Next blog, steps 6, 7, and 8

Doing the Right Thing: Supply Chain Innovation in the DRC

Sometimes supply chain innovation can arise out of a need to stay true to values.  That’s true of electronic component maker AVX, a company that has developed an innovative method for insuring that its tantalum ore, a critical element for powering smartphones, is obtained conflict-free in the Democratic Republic of the Congo (“Freeing Your Cellphone from African Warlords, Business Week, Apr 16, 2012.)

The ore has long been transported through supply chains of, at best, dubious legality, and at worst, outright criminality.  Self-employed miners have traditionally traded small amounts of the substance (only a tiny bit is needed in the smart phone power chip) to various militias and warlords in the DRC, each of whom got their piece of the financial action.  But the Dodd Frank Act has changed the landscape of trade in the DRC; Congress has expressly forbidden companies to directly or indirectly provide financial support to local fighting groups through purchase or trade.

AVX needed to obtain small amounts of the ore from the DRC without violating any labor laws.  In the difficult and often extortion-prone trading milieu of the DRC mining industry, this posed a formidable challenge.

Their answer?  Third party monitors to insure conflict-free provenance of the tantalum ore.  Their innovation provides for independent auditors all along the DRC supply chain through a contract with Indian company MMR, a company with a longterm, active mining presence in the DRC. MMR provides continuous oversight to the acquisition process, recording product information for each sack of ore every time it transfers to a new carrier.  At port, AVX alone handles the ore’s shipment.

The process has gotten buy-in from powerhouse companies like Intel, Motorola, and Hewlett Packard, who appreciate the fact that AVX has found a way to circumvent corruption and still get the needed amounts of tantalum.  All three have contracted to purchase AVX tantalum after it has been shipped to and refined in China.

This example illustrates the fact that innovation doesn’t always appear in the form of a dazzling new Apple product that revolutionizes its industry.  Sometimes, innovation simply comes from finding a way to still do business despite regulatory changes that limit or negate old paradigms.

And maybe, in the process, even make the world a little better place.

 

 

By-Name Requests: The Ultimate in Branding (Part II)

Not surprisingly, Apple has built gargantuan shareholder returns by being a company that excels in producing by-name request consumer technology.  Apple is now making inroads in the most unlikely of places: General Electric.  Long a company that has had over 300,000 non-Apple PCs, all of them running Windows software, GE is the last place one would expect to find MACS.

Except….

That GE has been running a pilot project which allows workers to purchase computers at work with company dollars that they use at home.  The reason? Workers wanted their MACS.

So Apple now has a little over a thousand MAC users at GE.  It is also poised to increase its sales of PCs and iPads to corporate customers by 50%.

The power of the by-name request.

Are customers asking for your company by name?  Are your products, your services, your relationships so incomparable that your is the name on everyone’s lips?  Does your organization have zealots who wouldn’t dream of going anywhere else?

And if not, what can you do to develop them?

 

By-Name Requests: The Ultimate in Branding

With the proliferation of products and services offered today both in stores and online, it’s easy for the average consumer to become overwhelmed.  Companies struggle mightily to select the right marketing mix to build their reach and brand, but in truth, people often choose arbitrarily, simply because, in a flourishing market economy, so many choices are available.  When is the last time you really cared what kind of laundry detergent you bought?  They all clean clothes, after all.  So you grab the closest detergent-filled plastic container and lob it into your shopping cart, saving your moments of decision for matters more crucial to your interests.

Yet in some products, your choices have distinct personal meaning. You only drink caffeine-free diet coke, and if the store is out, you drive somewhere else rather than purchase a replacement.  You prefer Coach handbags, so that’s the only store you go patronize.  You’re dedicated to your Taurus, or Tundra, or Mercedes, and that is the only car you even consider buying.

Organizations that have products which evoke this kind of fervent dedication have achieved the ultimate in branding: by-name requests.  It leaves competitors in the dust.  An example of this would be the executive who, floundering in strategic disconnects throughout his organization, says, “Get me the Boston Consulting Group.” He knows this organization is well known for its excellent strategy work, and he wants them and no other.

How is your brand? Do customers ask for your company’s products and services by name? If not, what can you do to build this kind of loyalty?

 

How Is Your Organization’s Leadership Perceived?

This week’s business periodicals have two examples of leadership problems trickling down into serious revenue problems—one in the non-profit sector and one in business.  The stories of Susan G. Komen and News Corp. provide cautionary tales about public perception of leadership, and its role in shaping an organization’s success.  If leaders lose credibility, loss of revenue often follows, and the downward trend can be difficult to reverse.

Susan G. Komen for the Cure, the nation’s largest cancer charity, announced the departure of its president Elizabeth Thompson and a new, less-active roll for founder/CEO Nancy Brinker.  Both women were heavily criticized after it was revealed earlier this year that their 119 affiliates would no longer give grants to Planned Parenthood for mammograms and cancer examinations.  The decision set off a firestorm of debate. Critics labeled the move “political”, charging that it was motivated by an effort to cut services from agencies that also conduct abortions. Komen responded that the charity was trying to streamline use of grant money to increase operational efficiency.  Wherever the truth fell, Komen’s eventual reversal of the decision did little to allay the damage: donations dropped off and the famous Race for the Cure participation slowed.

Public perception of leader mismanagement has also damaged the revenue of a once-invincible publishing giant, News Corp. After the phone-hacking scandal in its UK unit, the organization hemorrhaged cash to attorney firms fighting charges and plaintiffs seeking damages—57 million in the past quarter alone.  Public backlash against the leadership (many now indicted on criminal charges) was so severe that News Corp has had to scramble mightily to contain the fallout.  Its recent move to split its entertainment and publishing entities into two separate companies is a clear effort to distance the more profitable film and television enterprise from its scandal-ridden sibling.

One case involved criminal intent, one did not. Yet in both cases, the organizational leadership made decisions which outraged the public, causing enormous damage in repute and standing, and consequent injury to revenue generation.

What is the public’s perception of your organizations leaders? Are they seen as avatars whose activity is above reproach? Do they stand out as exemplars to others?  Or do they advance inadvisable or blatantly unethical agendas to further the organization’s goals, or maybe turn the other way when subordinates do?  The harm that follows when leaders lose public credibility can irrevocably damage an organization’s future.  Make sure it doesn’t happen in yours.