Jun 2, 2009 | Management
The CEO of a significant business in an industry I know well was walked very recently after the collapse of profitability over the last 6 months.
From the outside, after looking at the public reports, a number of common misconceptions are evident:
- The expectation that the good times will continue to roll. This expectation affects the behavior of all stakeholders in all sorts of ways that are inconsistent with frugal management in tough times.
- They failed to plan for the “worst-case”, while taking all the benefits of the good times as they showed up.
- A scapegoat was necessary to demonstrate that those who were supposedly in charge, (in this case the board) really were in charge, and were prepared to take meaningful action.
- Forecasting has become an exercise in using spreadsheets to extrapolate the current trends at the expense of common sense.
Prudent management plans for the worst whilst hoping for the best.
Jun 2, 2009 | Management, Strategy
Did we ever need a better illustration of the hubris caused by a concreted in status quo than the sight of General Motors, the former pin up of American manufacturing might going into chapter 11 yesterday?
Ironically, over the past 25 years as GM struggled, it bought a number of other businesses, Hughes Aircraft for one, paying substantially more than the pundits believed they were worth, then turning them into cash bonanzas.
The question of why they could achieve this in their associated businesses, but not in their core should keep academics arguing for some time.
However, it will not stop the chain saw being applied over the next 6 months, and the probability that a new, improved GM, free of the hubris of the past, will emerge, but it will not be without pain.
Here’s hoping the now most influential shareholder, the US taxpayer, is being managed by someone with sufficient cahunas to inflict the pain now, so that the patient may live.
Jun 1, 2009 | Demand chains, Management, Sales
The churn of employees in large companies often creates difficulties in retaining a continuity of relationship with customers. This particularly happens in situations where a buyer has substantial market power, such as a large retailer.
How do you build a relationship in these circumstances where the buyers get rotated on a regular basis, and there is usually a very active competitive environment for the attention of the buyer currently in the chair ?
- Account management personnel need to ensure there is a focus on the value you bring to the customer, not just on the price of the deal on the table being negotiated, or the person currently filling the buying role.
- Do not allow the costs of doing business with a customer to overwhelm the investment needed in your consumers and the brand benefits you deliver to them. Retailers are not good marketers for you, they are interested in their brand, not yours.
- Maintain as many personal relationships and points of contact as possible by engaging as many people in your business as possible with their peers in the customers business. Particularly valuable are relationships around service provision and logistics, removed from the negotiating battlefield.
- Be proactive in all things, rather than reactive.
- Be prepared to say “no”, and be able to do so without damaging the ongoing relationship, rarely easy to do, just easy to say, but it must be done to maintain a sustainable negotiating position that leaves you with appropriate margin. Many businesses have gone broke being “successful” with customers with whom they have little leverage.
