Telling It Like It Is

THE ENTERPRISE: THE PRACTICE OF MANAGEMENT--A TRIBUTE TO PETER F. DRUCKER

I FOLLOWED THE WORK OF PETER F. DRUCKER FOR MOST OF MY CAREER UNTIL HIS DEATH AT AGE 95 IN 2005.

One of his most brilliant books, many say his seminal work was a book titled The Practice of Management, published in 1954, a book that featured GM, the behemoth of American industry in that era.

While seeing the words used to describe things throughout my life I noticed how words are meaningful. Office buildings cal their entry area “foyers;” medical facilities call them “waiting rooms.”  Most companies serve “customers or clients,” but the medical service providers call them “patients.” Finally, medical professionals, doctors if you will, do what they call “practice” medicine. Combining science, observation, experience and intuition leads to diagnoses, which in turn lead to course of treatment—not always sure to cure the ailment, but made of their best informed choices.

Drucker employs much if the same progression in his most powerful book, written 67 years ago…and still highly relevant, and in most cases brilliantly insightful. 

I read The Practice of Management years after it was published. I graduated from high school in 1959, college in 1963, & grad school in 1964. I really can’t recall specifically when I read it, but my guess is during my college days. I do know it has had a profound impact on my life, my thinking, and my career. Although his examples are circa the 1950’s, the situations have recurred repeatedly in business after business. 

As I reread parts of the book in successive decades, I’ve recognized how what Drucker described has repeated itself (for example) in the evolution of retailing (Sears/Wards, Kmart, Walmart, et. al.) and of the American steel industry going back to US Steel, and of course the auto industry, in which GM and Ford are two of his primary examples.

SOME OF THE MOST PROFOUND CONCLUSIONS—BUSINESS PURPOSE 

There are many words leading up to this, but in its essence, Drucker arrives at this conclusion: “…the ultimate test of management is business performance. Achievement rather than knowledge remains, of necessity, both proof and aim. Management, in other words, is a practice, rather than a science or a profession, although containing elements of both.”

Peter Drucker puts it this way: "There is only one valid definition of business purpose: to create a customer. It is the customer who determines what the business is… What the business thinks it produces is not of first importance, especially not to the future of the business and to its success in the market place. The customer determines what a business is, what it produces and whether it will prosper."

"There is only one valid definition of a business purpose: to create a customer. —Peter F. Drucker-- The Practice of Management (1954) 

Drucker adds, “...of course it is always important to adapt to economic changes rapidly, intelligently, and rationally. But managing goes way beyond passive reaction and adaptation. It implies responsibility for attempting to shape the economic environment, for planning, initiating, and carrying through changes in that environment, for constantly pushing back the limitations of economic circumstances on the enterprise's freedom of action.”

This is why I constantly come back to how the economic and political conditions have such a large impact on business and management. Those who wish the business's management and economic/political environment could be kept separate simply do not understand the interdependency. One impacts the other constantly and significantly—there is no other way to say it, Drucker uses interesting terms, He says, “the economist’s economic conditions…is only one pole in managing a business. What is desirable in the interest of the enterprise is the other [pole].” 

Closing out this part of his opening on the Jobs of Management, he goes on…" Management is not just a creature of the economy; it is a creator as well. And only to the extent to which it masters the economic circumstances, and alters them by conscious, directed action does it  really manage. To manage a business means, therefore, to manage by objectives.”

Drucker could not have imagined how much impact his wisdom would have in the second half of the twentieth century. The term "manage by objectives” led to an entire body of work about what that meant. To many it is just common sense to set objectives and measure progress toward achieving them. To many others it was a fearful, threatening practice: to actually set specific objectives, reduce them to writing, measure progress toward them, and base rewards on results became a threat to the incompetent and a gift to the competent people engaged in "the practice of management.”

My gift to you is this link, to buy the book on amazon.com. My advice is to use it as a learning tool—not only what to do but how and why: https://www.amazon.com/Practice-Management-Peter-F-Drucker-ebook/dp/B003F1WM8E/ref=sr_1_1?crid=3L0CHLN7PLTTR&dchild=1&keywords=the+practice+of+management+peter+drucker&qid=1623771212&s=books&sprefix=The+practice+of+management,aps,306&sr=1-1

I cannot think of anywhere managers—aspiring or practicing—who are willing to actually read and think about what Drucker wrote, can learn as much from a single book, especially one written almost seven decades ago.  I have applied his principles for sixty years of my career, and still use them constantly.

I hope you will make this your summer reading and be sure to substitute the generational evolution of different companies (from those he used on the 1950’s) that you recognize in it.

HAPPY READING—AND LEARNING FROM ONE OF THE GREATS.

HAPPY FATHER’S DAY TO ALL YOU FELLOW DADS—DON’T UNDERESTIMATE YOUR IMPORTANCE IN YOUR CHILDREN’S LIVES.

JOHN

PS: Remember one of my favorite quotes, from originator Josh Billings or later users, Will Rogers and Mark Twain:

It ain't what you don’t know that gets you; it’s what you thought you knew that ain’t so!” 

Check your sources…over and over…only believe half of what you see and none of what you hear….without checking it. And be very suspicious of what you find in books, articles, podcasts, blogs, from TVs talking heads, and on the Internet—there is very little (or no) quality assurance on most of  it…just lots of opinion and biases.

 

 

CHANGING THE WAY AMERICA WORKS—Redux

©John Mariotti 2021

Fifteen years ago, I started a series of several columns with this title. It was intended as a play on words—a double entendre—changing the way our country,  America Works, and changing the way we, as Americans work in our day to day lives. During that era we were holding annual “think tank” — roundtable conferences — called the Reunion Conferences, and this was the theme a very important one of them.

I never imagined I’d be resuming this topic after fifteen years and so much change. Ironically, when I review my columns from 2-3 decades ago, I’m surprised at how much is still the same—no doubt the result of human nature. 

Certainly after this Covid pandemic, much more has changed in how America works, and how Americans Work! I even began a book manuscript of the same name. What I plan to do now, like I’ve been doing, is to reflect on, point out, and speculate about how Changing the Way America Works (in both meanings) will change our behavior, our lives, our country, and its future. 

We have now seen the generations get names—Baby Boomers, Millennials, GenX, GenZ and recently iGen, for those born since the advent of iPhones in 2007-2008. Those devices, numbering 1.5 Billion as of now, and their successors yet to come, have changed so much in our world—and will continue to do so.

Hang on. This will be a wild ride! At the end I’ll share a few conclusions I reached along the way. Feel free to share yours in reply.

Headlines about this year of the Covid pandemic definitely tell many things that have changed about how America works, changed more than any year in recent history. They typically fall into several topical categories. The first is how many workers are needed, to work where, doing what—compared to pre-pandemic. Companies went from slashing workers and closing office buildings to control costs, to recalling them while figuring out how to operate in the totally different hybrid situations, and trying to ramp up both suppliers and supply chains and their workers and locations. 

None of these are easy, and doing them simultaneously and/or in rapid succession tests organizations, managers and leadership. 

Hybrid workplaces and work situations offer unique challenges, whether the hybrids are locational—office/home  or hi-tech/hi-touch (that’s mixing Zoom-type and live meetings in the same venue, at the same time, on the same topics.) Companies are still figuring out what works and what doesn’t—and won’t. 

Doing hybrids that work is harder than just staggering days in the office and adding monitors for video.  What’s lost in hybrid setups is collaboration and cooperation that happens spontaneously when people encounter each other in the context of the workplace and workday.  What’s also lost in hybrid setups is the power and value of non-verbal communications—movement of the eyes, body language, both active and passive and the ability to sense subtle cues that lead to agreement (or disagreement) and consensus.

How and where people work matters a lot, as does how the USA works...

RECENT HEADLINES:

Job openings surge to a record high

US Jobless Claims Decline to Pandemic Low

Demographics Help Squeeze Labor Supply

Study: Long hours at work killing people

**Hiring: As economy heats up, workers are scarce

The Return to the Office Weighs on Workers

Firms Brace for Hybrid Workers

Small Businesses Struggle to Fill Jobs

Retailers Retrain Staff Amid Shift In Skills Needs

Companies Weight Faster Office Return

How to Rally a Jittery Workforce

Good Moods Often Lead to Bad Decisions

Reopening Tests Appetite for Goods

Food Suppliers Scramble as Diners Return

Help Wanted: Restaurants surprising new labor shortage

Dry Cleaners might be undressed by pandemic

**Is the Work Ethic Dying?

**The Covid Welfare State

How Remote Work is Reshaping America’s Urban Geography

**Remote Work Poses New Questions

Home-Improvement Retailers Raise the Roof

**What the Pandemic Taught Us About Telemedicine

 

The Governmental Actions (reversal from Trump to Biden executive orders) complicate everything.

MORE RECENT HEADLINES

**The Real Infrastructure Problem

Vaccine Proof is All in the Cards

You Can Cope with Chronic Uncertainty

Shoppers Feel Bite as Prices Rise

Gretchen Witmer’s Pipeline War

It Isn’t a New Era for US Productivity Yet

Commanding Amazon’s Army of Workers—With Software

**The Old New York Won’t Come Back

Big employers cut office space

**Woke Corporations: Why they've switched sides

Corporate America’s ‘Big Lie’

Joe Biden: Labor Economist

Europe Balks at Biden’s Tax Plan

**Did Biden Peak on Inauguration Day?

Here Comes the Biden Tax

Democrats to States: No New Taxes

H.R.1—A Time Bomb for the 2022 Elections

**The GOP’s Post-Trump Trauma

McCarthy Grapples with Legacy of Trump

Tim Scott Takes a Larger Role in GOP

Florida Republicans See Model for GOP

 

** These indicate some of the most vexing issues…

 

ITS CLEAR FROM THE HEADLINES THAT MANY VEXING ISSUES REVOLVE AROtUND FOUR CORE PRINCIPLES:

1. People working together as partners, make everything good happen—and vice versa.
2. Complexity in organizations, work and government is wasteful and unless measured and managed, creates masss ive waste.
3. Unity of purpose leads to strength in organizations, countries and the world; lack of unity of purpose leads to failure.
4. "What goes around, comes around,” And that means Covid and its variants...sooner or later…to change everything again! Get vaccinated!

THE PIVOTAL QUESTIONS FOR NOW (with a few of my answers)

• HOW SHOULD AMERICANS GET BACK TO WORK—AND WHERE—AND WHEN—AND DOING WHAT? Yes, but hybrid work setups are unlikely to be broadly successful, except as a transition, and when used to connect widely scattered work forces. The ethybrid workers on the video inevitably are less involved than those in person. That’s not a good outcome.  A good outcome would be to redesign processes to fit a new paradigm—fostering collaboration, partnerships and innovation in offices while reducing complexity of doing routine jobs via machine learning and AI
• HOW DOES THE WORLD INTERACT WITH AMERICA AND WHAT DOES IT MAKE OF THE NEW BIDEN/PROGRESSIVE DEMOCRAT REGIME? The world will like having a weaker, more docile America that it can take advantage of—a good system for them—a bad one for America.
• WHAT IS THE IMPACT OF COMPETING POWERS—CHINA, RUSSIA, THE MIDDLE EAST, ET. AL. ON AMERICA IN THE NEXT FEW YEARS? As America’s weak leadership bends to the will of stronger, more aggressive foreign countries, America will suffer, become weaker, and suffer adverse consequences. America’s stature in the world will decline.
• HOW MIGHT COVID REQUIRED NEW BEHAVIORS AND NEW WAYS OF WORKING—GOOD OR BAD? A few areas will do better, such as Telemedicine, and the use of remote systems to eliminate wasteful travel to faraway places. Eliminating wasteful commutes for jobs that can easily done remotely is good. Losing spontaneity and collaboration from in person offices will damage innovation, communication, and coordination. Taking out the element of human interaction too much will make companies and leaders less effective even if they seem to be more efficient.
• FINALLY—WHAT DO AMERICANS BELIEVE, AND HOW WILL THEY BEHAVE? 
• IS America is a Systemically Racist country? OR Is Critical Race Theory more relevant?
• HOW should America Reform/Rethink Law Enforcement & Policing, in the face of traffic stops, demonstrations, shootings, looting, etc.?
• WHAT IS THE PROPER ROLE OF GOVERNMENT? 
• SHOULD GOVERNMENT WORK FOR THE AMERICAN PEOPLE? (PROVIDING ONLY WHAT THE PEOPLE CANNOT DO BEST?) Yes.
• IS CAPITALISM THE BEST ECONOMIC SYSTEM? Yes…definitely.
• SHOULD THE AMERICAN PEOPLE WORK FOR THE GOVERNMENT? (WHO PROVIDES MORE & MORE AS WORK ETHIC DECLINES) No.
• IS SOCIALISM THE BEST ECONOMIC SYSTEM? No…a proven failure over and over.
• THESE AND MANY MORE INFLUENCE “HOW AMERICA WORKS” (AS A COUNTRY), & “HOW AMERICA WORKS” (AS A PEOPLE)… 

 

THINK HARD ABOUT THESE ISSUES…RE-READ THE HEADLINES... AND CONSIDER THE IMPLICATIONS & WHAT HAS BEEN PROVEN TO WORK (Representative Democracy)—& WHAT HAS BEEN PROVEN TO FAIL (Progressive Socialism)

 

THE CHOICE WILL BE OURS TO MAKE AS WE ELECT OUR LEADERS IN THE FUTURE.

 

HAPPY MEMORIAL DAY WEEKEND.

JOHN

 

FYI—HERE IS MY ARTICLE FROM 2006

================= 

Changing the way America Works  ©John Mariotti 2006 

This column continues a series begun last year, reflecting on people in the work environment. Most of us have a clear understanding of how we think about work. But the more recent entrants into the workforce--those born in the 1970s and early 1980s--often have different perspectives. Managers today must deal with workforces that are demographically bimodal. To younger workers, many significant events in the lives of their supervisors and managers seem like ancient history. The assassinations of John F. Kennedy, Robert Kennedy, and Martin Luther King are not personally relevant to them. They think TV sets always had remote controls. And the phrase "winding a watch" has no meaning for them in this battery-powered age. 

Managers born 20 or 30 years earlier lived through the boom of the 1960s and the inflationary 1970s, when interest rates soared to double-digit levels. New workforce entrants barely understand the term "runaway inflation." Technology comes naturally to them, while older, technophobic managers are often unable to cope with the avalanche of new technology. Personal life choices weigh more heavily with new workers than with prior generations.

In dealing with the workforce of the 21st century, managers should keep a couple of rules in mind: --The first rule: Judge people, as well as leaders, on their competence, character, and courage--not on the color of their skin, country of origin, age, or sex.

In many cases, older workers will find themselves reporting to managers who are a generation younger, different looking--or both. The new workers (or managers) may be female or may come from African, Asian, or Hispanic roots. Many are immigrants whose heritage is evident from their physical appearance--unlike earlier waves of Caucasian immigrants whose features did not readily identify their nationality, even if their language did.

A worker's country of origin is relevant only because it likely shaped his or her values. The values of the newer groups differ widely, and their perceptions of meaningful leadership are often different, too. Almost all immigrant workers are seeking a better life, and thus are very diligent. Asians are often more educated than earlier generations of immigrants.

In time, sociologists will develop theories on how to lead this new generation of workers, but that guidance may come too late. We must deal with the issue now, in today's context, and determine what that means to managers and supervisors. --The second rule: Learn all about computers, communication devices, and new technology--the uses, shortcomings, and potential--or get left behind.

Computer literacy is a given for much of the new workforce. Many managers are less computer literate than the incoming workers. This presents a problem when new computer-based tools are introduced into the workplace. The workers may grasp their use and significance more quickly than their superiors. This can diminish the respect they have for their leaders and damage manager-employee relationships.

Devices like cell phones, pagers, and personal digital assistants, as well as use of the Internet, are familiar to a generation that grew up with video games, remote controls, cordless phones, beepers, and PCs. As new technology permeates the workplace, older workers often must learn to swallow their pride and rely on the younger ones to adopt, use, and master the technology. This may be a bitter pill for many experienced workers and managers to swallow.

By itself, advancing technology is powerful. But it works best when married to the skills and experience born of years of work. And it is especially powerful when combined with a strong work ethic, youthful exuberance, and a drive to succeed. Successfully blending the knowledge, ambition, and experience of diverse groups is the key to success in the future. Management, more than ever, must be willing to look at workers based on what they can do--not their age or their ethnic origins.  Older, more experienced workers can provide experience and context while the younger ones contribute their technological prowess and energetic drive. The combination should produce exciting times in the years ahead.

===================== 

THE ENTERPRISE—“Hard Times Are Coming”—HOW DISTORTED MEDIA CREATES SERIOUS CONSEQUENCES!

Over twenty years ago I wrote the column posted below as a cautionary note. As media has migrated from “factual news” to “positioning bias” in its so-called news coverage, the consequences can be—and often are—enormous. Whether you call it “Fake News” or “biased reporting” such misinformation is very damaging when it creates self-fulfilling outcomes. 

======================

Are hard times coming? 

©John Mariotti 1999

The current business buzz is all about which way the economy is headed in the next year or two. No one can predict the direction confidently, because there are too many complex factors--not the least of which is how businesses will react to Y2K and global economic events. In short, will companies focus on problems or opportunities?

Many years ago, I read a short story that describes a chain of events that can unfold in such a situation. The story stuck in my mind, although I can't recall where it came from or the name of the author. But I think the message is appropriate in the current business & political climate.

 "Hard Times Are Coming--All Will Suffer from Downturn."

 The scene is a bistro in Paris. A young painter enters the bistro and asks the waiter for a bottle of his finest wine to celebrate his first big commission--on a painting for a rich businessman. As waits for the wine, he notices a newspaper lying on a chair at the next table. The headline reads, "Hard Times Are Coming--All Will Suffer from Downturn." 

Alarmed, he calls the waiter back and asks whether he has opened the wine.

Finding that the expensive bottle is still unopened, the artist tells the waiter to bring him a more modestly priced wine instead. The waiter asks why he wishes to change--is he less excited about his good fortune? "No," replies the painter, "but look at that headline--'Hard Times Are Coming.' I think I should be cautious."

When the waiter goes to exchange the wine, he encounters the owner of the bistro, who asks why he is not opening the fine wine. The waiter relates the painter's reaction to the headline, "Hard Times Are Coming--All Will Suffer from Downturn." As the owner returns to his office, he ponders the food and wine order he'd just placed for his bistro. He has ordered the finest wines and cheeses, and assorted trimmings, because business has been good lately.

But now uneasy about it, he picks up the phone and calls his supplier back, asking to reduce the size of the order and downscale the assortment of food and wine. When the supplier inquires why, the bistro owner repeats the headline, "Hard Times Are Coming." The supplier, himself a small businessman, then calls his supplier--a larger company--and cuts back on his future orders--just in case.

When the owner of the larger company sees the order from one of its best customers reduced sharply, his concern is great, especially after he hears the reason--the headline, "Hard Times Are Coming--All Will Suffer from Downturn." The owner then decides to cut down on his extravagances, so he calls the young painter and cancels the painting he had commissioned.

The young painter returns to the bistro that evening, crestfallen, and asks for a bottle of its cheapest wine--to drown his sorrow. As he awaits the cheap wine, the painter reaches over and picks up the newspaper, still lying on the chair next to him. He discovers that the date on it is two years old!

Self-fulfilling prophecies like the one in this little story may influence the economy next year. For companies, the pivotal decision is whether to to be aggressive, in hopes of gaining market position, or defensive, in fear of more hard times.

Perhaps more than anything else, the decision depends on how well-managed and financially sound a business is just prior to the decision point. It also depends on the strategic thinking of the management team. Downturns present an opportunity to gain market share and position, while defensive-minded competitors blame their losses on the down market, the Asian crisis, and a host of other excuses.

Which decision will your management team make? Have you prepared to capitalize on this kind of opportunity? Are your finances in order, overheads under control, inventories in line?

With the right plans and preparations, great gains are possible. Without them, it could well be that "hard times are coming--and all will suffer from the downturn."

LESSONS TO LEARN?

Actions taken because of expectations are usually perilous and either too slow or too fast—or both. 

When times are good, the human tendency is to expect them to stay good—too good, for too long.

When times turn bad, human nature is to be too slow to react to how bad they might be, and not take action, until things get even worse. 

Then human nature expects things to stay too bad, for too long again & miss the start of a recovery. 

Such behaviors ripple through industries and sometimes the entire economy…often based on something as simple as an article HEADLINE on a two-year-old newspaper.

===========================

HOW MIGHT THIS BE RELEVANT TODAY? READ ON...

 

Mass Media is now the most influential and loudest voice heard or read by most Americans. IF we believe propaganda-like biased news is true and accurate, then we are all its victims. And we deserve the dire consequences.  Even grossly wrong media often goes viral across the Internet and gets accepted as “truth.” (Trump overworked the “fake news claim" so that many people forget what’s what.)  

 

NOTE: Even “fake news” gets accepted as truth after it’s blasted into the public consciousness millions of times.

 

FINALLY, CONSIDER THIS INFO AND ASK YOURSELF IF MEDIA & POLITICAL MANIPULATION LED THE AMERICAN PEOPLE INTO ELECTING A NEW PRESIDENT OUT OF FEAR AND/OR MIS-INFORMATION.

 

(THIS SCENARIO HAS BEEN FLOATING AROUND THE INTERNET FOR MONTHS. )

"Figures Don’t Lie, but Liars Figure—Food for thought!” (source unknown, but CDC data is verifiable!)

 As reported by the CDC ... Here are the US deaths by Year and the change from the previous year. —Year 2017—2,818,503 Americans died. —Year 2018—2,839,205 deaths (20,702 more than the previous year 2017). —Year 2019—2,855,000 deaths (16,300 more than the previous year 2018). The year of the pandemic ...—Year 2020—2,913,144 deaths (Only 57,641 more than the previous year 2019).  

BUT WAIT: There were zero deaths from Covid-19 during 2018, and 2019 and the jump from 2019 was only 57,641? 

We've been told that COVID was responsible for 375,000 deaths in 2020. Shouldn't the 2020 CDC annual death increase be A LOT higher than 57,000 ?  

How many people really died of COVID, and how many died of other pre-existing illnesses or “co-morbidities” counted as (or triggered by) COVID?

=============

WHAT DO YOU THINK? WHAT'S THE TRUTH? ARE "HARD TIMES COMING?"

With the Stock Market hitting new highs every week or two, buoyed by the massive influx of money in government handouts/stimulus courtesy of the Federal Reserve’s Debt Printing Press. Someday, someone must pay—or else there will be massive inflation and/or a devastating devaluation of the US dollar—in which case, “Hard Times WILL Come, and All WILL Suffer.”  

 

The problem is “Bidenomics" and the Democrats' spend & tax plans, which will feel good in the near term, but not in the long term. (Like an addictive drug fix  Bidenomics offers “highs” in the short term, followed by "downers and painful withdrawal" later.) 

 

When Biden says he will not raise taxes on anyone making under $400,000, he fails to mention three inconvenient facts: 

1) Raising corporate taxes will force corporations to raise prices to everyone—rich and poor alike—regardless of what they make; 

2) Raising corporate taxes will drive companies (and their jobs, payrolls and taxable profits) out of the USA, and into foreign countries and subsidiaries.

3) Even the poor and middle-class will see their costs go up, and jobs go away—to faraway places.

 

CAN AMERICANS RECLAIM CONTROL OF THEIR GOVERNMENT BEFORE THIS INSANITY TURNS INTO A PROGRESSIVE DEMOCRAT AVALANCHE? 

 

MANY BELIEVE THAT UNLESS SUCH AN “AVALANCHE" IS AVERTED, AMERICA IS IN DANGER OF BECOMING A “ONE-PARTY” COUNTRY.  

 

Historically and politically—THAT’S NOT GOOD FOR ANY OF US.

Winning back control of the House and/or Senate in 2022 mid-term races—the only way to stop it?

 

JOHN

 . 

 

THE ENTERPRISE--BONUS EDITION: Suddenly Last Summer--A Perspective on Diversity and Life

I CELEBRATED MY 80TH BIRTHDAY LAST WEEK—WHICH MAKES A PERSON THINK

As I read the all nice cards and birthday wishes, my thoughts went more and more to “what matters most” (in life). Pastor Craig Groeschel of Life Church (https://live.life.church) reminded us a few years back: “Be patient, and focus on ‘what you want most' instead of 'what you want now’.”  Craig also reminded us the God has a plan for us—but it may not match the one we have. Figuring out God’s plan requires a lifetime, and we may still not "get it." That doesn’t mean we should stop trying, and we shoud be willing to expect (and accept?) obstacles, when our plan encounters God’s “detours." 

Then I realized that I’ve actually been thinking about these same things for years as I wrote about life and business. As we grow older, hopefully we grow wiser. We also might reflect more on perspectives, other than the seemingly urgent (but not all that important) things right ahead of us. I found several things I had forgotten about. One was this piece I wrote a long time ago. The second was written by Brian Dyson, CEO of Coca-Cola Enterprises. I want to share both of them to help you think about your perspectives on life.

========================                       

 I  FIRST WROTE THIS ARTICLE 25 YEARS AGO.  I LIKED THE MESSAGE THEN, AND I STILL DO.

Suddenly Last Summer--A Perspective on Diversity and Life

People are where it all begins … and ends

©John Mariotti 1996

I had an interesting five days last summer, and I want to share some of the thoughts these days brought to mind. I grew up in a very small midwestern town where I learned, above all else that people are "just people." I hadn't even thought much about wealth, status, or such things for a lot of my early years. I guess the professionals and business owners did have slightly larger homes, but few people said much about it.

People have often asked me about the key to leadership success and one of the first words that usually comes out of my mouth is "caring," usually followed rather quickly by words like "character, values, integrity, and doing good!" Over the years of my career I have found the old phrase "what goes around comes around" to be especially true when it involves leading people or being part of a real team, in a successful (or even a not so successful) setting. 

There are times that success is based on more than "just people," but they are relatively few. Competency is required, no doubt about that. Courage and persistence and hard work are necessary too. Perhaps most of all, the appreciation of the richness of the diversity and talents of people is what makes the whole picture complete.

This summer day, as I walked the streets of my old hometown with my wife of 32 years, the beauty surrounding me moved me. On a weekday morning, the streets were quiet and peaceful. The sun shimmered with a special clarity and brightness. The old shade trees cast big, cool shadows as a light breeze rustled their leaves. A few people washed windows or tended their gardens. A dog barked and the faint sound of hammers signaled some repair work being done. The yellow of the day lilies and the green of the grass were so bright they could have come from an impressionist painting.  Nearly everyone who drove by waved. This is a place where people cared about people; a place where they knew your name and your face; a place with a slower, warmer, friendlier life and pace.  In this place, I learned that people are above all else, regardless of their station in life, just people.

The next day, I visited a company where I had worked for 12 years--but that was seventeen years ago! I had not been back for over ten years, but there were still about 15-20 people working there who I knew well.  The reception they gave me was terrific. I found I immediately recalled names of people I had not seen for 10-15 years, and I realized how much people meant to my career and life. Two specific events stick in my mind. 

One was the parting handshake and after a brief hesitation, a warm hug from a man with 41 years service (whose father before him had worked for this company over 45 years!). This was a man I found working in the service department, who has been a management stalwart in production planning for over 20 years. What an exceptional treasure.

The second event was a comment by another close friend whose job the past few years might best be called "human relations."  While discussing some of the managerial errors of the past, he said emphatically, "It's pretty simple.  Tell the people what's going on, make sure they understand what needs to be done, and then help make sure it's getting done.  But never, ever lie to them!!" So much for high-minded theories and fancy terms.  Common sense, honesty, and decency with people can accomplish a lot.

My next stop that week was for my mother-in-law's 80th birthday party.  Seeing all the family together was a special treat.  As I photographed the four generations of women in my life--mother-in-law, wife, daughter, and granddaughter--I realized how precious this cycle of life was, and how rich the diversity around me was.

I never really considered the enormous range of talents and work lives of my own family represented there: a meat cutter, a maintenance supervisor, an art gallery owner, a computer system supervisor, a tow-truck operator, a police officer, a pipe-fitter, a bank officer, a teacher, an office worker, a retail operations manager, a sales manager, a transportation consultant, a retired pharmacist, and on and on.  

One common theme--all part of my family, all loved ones with spouses, children, parents, aunts and uncles, cousins. When the "human resource" professionals speak about diversity, it somehow comes out sounding like something in a bottle or out of a textbook.  It isn't.  It is the very fabric of life and the richness of business itself.

The last event of the five days was a sad one. I came home to a message from the wife of a former colleague and friend that he was dying of cancer and didn't have long--so if I wanted to speak to him, I should call soon. (I did, and had a nice conversation--he died five days later.) It was then that reality hit me.

We worry about a lot of things in business and in life: promotions and demotions, projects and deadlines, late airplanes and early meetings. We espouse fancy theories and speak in high-sounding phrases. When it comes to the bottom line, I believe the life of business and the business of life are pretty much alike. Care deeply. Do good. Help people. You never know when your time is up. 

Enjoy the sunshine and flowers on a summer day. Give somebody you love a hug. Live, love and leave a legacy. And be sure to keep things in perspective. Most of all appreciate the richness and diversity of the world and the people around you--they are what success in life (and business) is all about.  I am not sure of many things--but of this I am certain!

 

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THE “PRESENT”
–– Brian Dyson, CEO of Coca-Cola Enterprises

Imagine life as a game in which you are juggling five balls in the air.  You name them - work, family, health, friends and spirit, and you're keeping all of these in the air.  You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls - family, health, friends and spirit are made of glass.  If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or even shattered.  They will never be the same.  You must understand that and strive for balance in your life.  How?  

• ·        Don't undermine your worth by comparing yourself with others. It is because we are different that each of us is special.

• ·        Don't set your goals by what other people deem important. Only you know what is best for you.  

• ·        Don't take for granted the things closest to your heart. Cling to them as you would your life, for without them, life is meaningless.

• ·        Don't let your life slip through your fingers by living in the past or for the future.  By living your life one day at a time, you live ALL the days of your life.

• ·        Don't give up when you still have something to give. Nothing is really over until the moment you stop trying.  

• ·        Don't be afraid to admit that you are less than perfect.  It is this fragile thread that binds us to each other.  

• ·        Don't be afraid to encounter risks.  It is by taking chances that we learn how to be brave.  

• ·        Don't run through life so fast that you forget not only where you've been, but also where you are going.  

• ·        Don't forget that a person's greatest emotional need is to feel appreciated.  

• ·        Don't be afraid to learn.  Knowledge is weightless, a treasure you can always carry easily.  

• ·        Don't shut love out of your life by saying it's impossible to find. The quickest way to receive love is to give it; the fastest way to lose love is to hold it too tightly; and the best way to keep love is to give it wings.

• ·        Don't use time or words carelessly.  Neither can be retrieved.   Life is not a race, but a journey to be savored each step of the way.  

REMEMBER—Yesterday is History, Tomorrow is a Mystery and Today is a Gift.  That's why we call it – “The Present.”        

Brian Dyson, CEO of Coca-Cola Enterprises

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i HOPE THIS BONUS EDITION GAVE YOU SOME THINGS TO THINK ABOUT … JUST REREADING THEM DID THAT FOR ME.

ALL THE BEST,

JOHN

 

THE ENTERPRISE—WHERE HAVE ALL THE HEROES GONE?

THE ENTERPRISE—WHERE HAVE ALL THE HEROES GONE?

I once worked with a behavioral sociologist who would often ask,”Who screwed up that we needed a hero?”  This question made us all think hard.  Our conclusion was “maybe nobody ’screwed up,'—maybe someone just did something above and beyond—something really heroic.”  The three pieces below frame the subject of “heroes” in three different ways. (I didn’t cover “first responders" like police, EMT, firefighters, etc.whose jobs put them in heroic crisis situations.)

Today, far too often, we have replaced admirable heroes with celebrities. Role modeling is hard. Real heroes are role models—in that moment at least. “Sully," the pilot who safely landed a jet plane on a NYC river, was, in my book, a hero. The tragedy of 911 created many heroes, too many of them are no longer with us. Everyday people are heroes; maybe by saving a child or a dog from an oncoming car, or rescuing a person from a flaming auto crash or a frozen lake. 

Heroes exist in all walks of life, at all ages, and in all genders, races, and ethnic backgrounds. Take a minute right now and think of 2-3 real heroes you’ve known, seen or emulated.  Deciding who are real heroes these days is very difficult. Media's always-on coverage exposes many people to be neither as heroic or admirable as we might have thought. Fame is fleeting; so is misplaced heroism.

Who do you truly admire and tried to emulate during your life? If you can name a few (other than your parents or Jesus Christ) you are truly  fortunate. Think about people who inspire you to be a better person.

We need more genuine heroes these days. Our next generations desperately need people worthy of admiration and being role models. Being able to win, to run fast, throw or hit or catch a ball accurately, sing a song or play an instrument, or portray real heroes from history in dramas. That doesn’t make those athletes, musicians, actors or entertainers no matter how highly they might are regarded in their professions.  Ditto elected officials, business leaders, and other notables.

There is a depth to people who are true heroes—and it is no about being famous. It is more about being worthy of respect, admiration and an inspiration to others for what they do and why or how they do it.  So now tell me: Where have all the heroes gone? Who are yours?

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Where have all the heroes gone?  Perhaps business leaders can help fill the void.

©John Mariotti 1998

When I was growing up, the folk-singing group Peter, Paul and Mary had a hit song: "Where have all the flowers gone?" The melody is coursing through my head as I begin this column. Another thing I remember about growing up was that, back then, we had heroes. They were real people, but somehow larger-than-life figures whom we could admire and emulate.

Maybe it was the influence of being a post-war child that made it possible to believe in heroes–-at least some of them—like Sir Winston Churchill. You may remember his stirring admonition--"Never, never, never, never, never give up."

I remember heroes in sports. There were legendary figures like Joe DiMaggio, Jackie Robinson, Mickey Mantle, and Green Bay Packers Coach Vince Lombardi. We looked up to Presidents like Franklin Roosevelt, General Dwight Eisenhower, and John Fitzgerald Kennedy. 

Even business and congressional leaders commanded respect in days past--people like Thomas Watson of IBM, Alfred Sloan of General Motors, and Sen. Everett Dirksen.

Music and the movies created stars--not as role models for their own personal lives, but for those they portrayed.  What man hasn't at times admired "The Duke"--John Wayne--or at least the characters he brought to life on screen?

Today's young business people--the so-called "Generation X"--grew up in an era when their heroes inevitably were proven to be not only human, but fallibly so. With the assassinations of John Kennedy and Martin Luther King, our heroes began to die--although more often at the hands of the media than from an assassin's bullet.

Sports heroes fell victim to the excesses of their youth and riches. Meanwhile, business and government leaders lost their luster as inspiring figures. Often they were painted as the "Ugly American," "The Man in the Grey Flannel Suit," or "Barbarians at the Gate."

In the wake of all this disillusionment maybe--just maybe--things are about to turn around again. Perhaps a revival of the age of heroes can be built on the legacy of such people as the late Sam Walton, who was a hero to those who worked for him; or Michael Eisner, whose main asset is a big-eared mouse named Mickey; or even a wunderkind billionaire named Bill Gates.

Walton believed in his Wal*Mart "associates" and he treated them well. He also believed in giving Americans the best value for their money, and treating them like friends. While Michael Eisner is not as revered as Sam Walton was, he is respected by many for what he has done with the Disney legacy. With only a few exceptions (in the movies) Disney has done it with largely wholesome products.

Young people are incredibly computer literate today--and getting more so. They know Bill Gates, who recently was named by IW readers as America's most-respected CEO. Gates is young enough to be a real role model for the next generation. So far he has only been "exposed" as being brilliant, tough, visionary, and hugely successful.

I know who my heroes were. They are all gone now, but I really got to know three of the four--my mom and dad and "Mr. Sam" (Walton). The fourth was Coach Vince Lombardi. I could do worse than to measure up to them.

My dad was a talented professional musician who died when I was eighteen. My mom was my real mentor--a successful businesswoman in an era when that was very uncommon.

Lombardi was well known for his work ethic, his insistence on flawless execution, and his relentless pursuit of excellence (and winning). So was Sam Walton. I admired these traits. And I can think of literally hundreds of instances in my business career where hard work, superb execution, and high standards led to success.

What is it about heroes or maybe I should call them role models that make them worthy of respect? 

First and foremost, these role models have integrity, character, and principles. They invariably have a fire within them based on deep-seated beliefs and values. There is an almost-visible "aura" about them that makes people want to believe in them and follow their lead. And, finally, they have energy and enthusiasm for what they do and believe in.

We all need role models, a mentor, and some heroes. They don't have to be famous people--just someone we can aspire to emulate. It provides a foundation upon which to build the success of our country, our businesses, our careers, and our lives.

Who are your heroes? 

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Corporate Executives--Villains or Heroes—Can you really tell how compensation much anyone in "worth"

© John L. Mariotti 2002

Headlines lately have been vilifying corporate CEOs for their downsizing actions and large compensation gains. Is this right or wrong? I have been considering this dilemma and decided to share my thoughts here. Business leaders are not (categorically) villains. They are not ogres or mindless, heartless, evil people. They are usually hard working, God-fearing people trying to do the right thing. Only a small minority of business leaders deserves such criticism.

Businesses exist for the purpose of creating and delivering value, for which customers and consumers will pay money. This money goes to pay the employees and suppliers (and their employees) of those businesses and create wealth for those who have invested their money (at a risk) in the businesses. In free enterprise systems such as ours, the private sector--companies--are the only real source of wealth creation and employment. 

The government can create jobs. They certainly have proven that as employment in the public sector--U.S. government now exceeds the private sector.   Those jobs and the paychecks of those employees can only be paid from the revenue created by taxes. These revenues come from taxes on profits of companies and earnings of employees.

Raj Aggarwal, the Mellen Chair professor of Finance at John Carroll University reminds me that a business, which cannot earn a return on invested capital that exceeds their cost of capital, will eventually cease to exist. Some of the cuts in employment are made to reduce costs and generate a sufficient return to stay in business.  If competitors, particularly foreign competitors whose countries enjoy a much lower pay level and standard of living (such as China) choose to compete with U.S. companies, the jobs held by employees of those companies come under attack in a different way.  The result is the same.  Compete or cease to exist.

I am not a fan of downsizing. It hurts, often more than it helps. I just helped a corporate client go through it. They had to do it or go out of business.  In the U.S. alone, millions of lives have been disrupted, and whole communities damaged. The way it is done often seems heartless and even cruel. But is it so terribly wrong--or just painfully necessary? In nature, trees and shrubs require pruning. Dead wood must be cut out. 

The words from Star Trek ring very true. In these shows, Captain Kirk and First Officer Spock remind us "...the needs of the many outweigh the needs of the few or the one..." Many of the corporate layoffs are done to save the jobs of the many people by the layoff of "few." (While ATT's well-publicized 40,000-employee cutback was devastating, those cuts represented only a small percentage of their total employment.)

Productivity gains, which are critical to improving our standard of living, have another side to them. When population grows at 1-2% and industrial productivity grows at over 2% the total increase in output is 3-4%. If our economy is only growing at a 2.5%, then1% must be added to the rolls of unemployment (or underemployment--working for less pay). This is why the growth side of the equation needs attention. Controlling inflation by restrictive monetary policy (instead of fiscal responsibility--spending less than income) limits growth and adds to the dilemma. High taxes (especially on capital gains) consume investment capital that could be used for growth and channel it to one of our least productive sectors--government.

Corporate management usually does their best to make such painful cuts in the most humane manner possible. They will also continue unless or until we can grow our way into using our improved productivity.  Stephen Covey's research confirmed that as a country, we have created a generation or two of managers and executives who sometimes are misguided. They fail to create new value and growth, and thus must reduce costs (and people which are usually one of the highest "cost" items in the budgets of companies). This is wrong and can lead to what is called corporate anorexia.

What is the manager, executive and professional to do? First, understand that the market is the relentless predator of the weak. If corporate management doesn't do the necessary pruning, either the plant will die, or it will happen due to competitive pressures "clearing the dead wood." William Safire says it this way in his New York Times column; "You can't make a prosperity omelet without breaking some eggs." When this happens, many more who are undeserving will likely suffer.  Second, productivity gains must be made or the jobs will just as certainly be lost in even larger numbers. 

 Competitiveness is driven by constantly improving productivity.  Third, <i>don't let yourself or your department/function/team become technically obsolete--continue learning to be competitive.

Victims often choose to be just that. Be proactive about continuous learning.  Most companies encourage it and pay for it.

What about the conflict between the rights of shareholders to profits and the rights of employees, customers, suppliers, and communities. I contend they are not in conflict in the long run--just in the short run. Corporate executives are paid to look out for  all of their several constituencies:  Shareholders, Employees, Customers, Suppliers, and Communities. If they do not look out for the shareholders interests adequately, they are fired and replaced. If they do this well, they are rewarded, sometimes handsomely (or even excessively). But what about these exorbitant compensation packages received by CEOs.   Most of the "really big ones" are due to performance bonuses or appreciated stock options. This means they did what the shareholders wanted, and helped cause the stock value to rise. 

Why shouldn't they share in the rewards?  Think about some of our society. Mike Tyson gets millions of dollars for a few minutes in the ring.  Madonna and Rush Limbaugh make more in a year than a hundred working people make in their lifetime.  Stallone or Schwarzenegger make millions for mediocre, violent movies.  Twenty-two year olds receive multi-million dollar contracts in many professional sports.  Who complains about these as injustices.  How many jobs do they help secure?  Should we indict them if their teams lose, movies fail or attendance falls?  Or are they just being paid "competitively?'  The same could be said of CEO pay levels!

The solution to this dilemma is not simple.  What most of us can do is simpler--provide superior customer value and do it in partnership with suppliers, employees and intermediate customers.  This is the foundation on which to provide excellent rewards to shareholders and communities.  This is what the majority of these corporate executives are trying to do--not to be "villains, killers or hit men."  

They may not all be heroes.  A minority are selfish, and misguided, but don't let the few reflect on the many who are trying to do the right thing.  Do your share to help by understanding the competitive pressures of the marketplace, improving productivity, and staying personally competitive through continuous learning.   That is the best "job security policy" there is.   These companies and their leaders (with the exception of the misguided minority mentioned earlier) are the only source of jobs and wealth.  Let's start looking at the good they do instead of the harm.  We might be surprised.

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UNSUNG HEROES

©John Mariotti 1999

Every successful company has these “unsung heroes” – and no company can survive without them.They are seldom recognized, appreciated or properly compensated. They are not listed among the assets, or even itemized in the “goodwill” on the balance sheet. One hardly even notices that they are there, but without them the wheels of business slowly grind to a stop. Who are they?  They are the unsung heroes who make a business hum. 

• They are dedicated line employees who come to work every day, do boring and repetitive jobs over and over, and take pride in the quality and quantity of work they produce. 
• They are group leaders who risk ridicule and resentment from their peers and take the heat for decisions in which they had no input. 
• They are supervisors whose cars are the first in the parking lot and the last to leave, because they feel the responsibility for the company’s and the employees’ well being. 
• They are the maintenance people who work weekends and holidays so the plant can function at the optimum level during normal running hours.  
• They are the line engineers who labor long and hard to design and build increasingly efficient and profitable equipment. 
• They are customer service representatives who handle each customer’s concerns courteously and effectively, even though no one seems to notice or care. 
• They are truck drivers who leave their families on Sundays, drive on increasingly crowded highways to get product to ever-more-demanding customers, and try, by their example to sell the customer on the fact that theirs is the best company in the industry. 
• They are the accountants, clerks, middle managers, janitors, buyers, computer technicians, and ordinary people who do their level best to do a good job every day in spite of the fact that they are seldom asked for their input or given credit for their dedication and intelligence. 

God bless them all!

Without these unsung heroes, America’s unprecedented run of prosperity in the last couple of decades would not have been possible.  People who are visible and in the spotlight in their companies should make an effort to seek out these folks and, once in a while, give them a sincere face-to-face “Thank You.”  It costs nothing and means so much to the individual who contributes every day.  In our experience, executives who do this are seen as heroes themselves, because it is so rare for someone in the “visible” organization to recognize the people who make them successful. 

If you are one of the unsung heroes, give yourself a pat on the back, and accept a sincere “thank you” from one fellow American to another for your contribution.  You have made and are making this a better world.  If you are a “visible” person in your company, remember the efforts of all the people behind you who are making you and the entire economy look good.

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NOW TAKE SOME TIME TO THINK ABOUT WHO YOU THINK DESERVES THE NAME “HEROES!”

JOHN

THE ENTERPRISE--ON THE IMPORTANCE OF CONFIDENCE & EXPERIENCE--KNOWING WHAT YOU KNOW & HAVING BEEN THERE BEFORE

THE ENTERPRISE--ON THE IMPORTANCE OF CONFIDENCE & EXPERIENCE--KNOWING WHAT YOU KNOW & HAVING BEEN THERE BEFORE

 

I’m a big fan of Ralph Waldo Emerson’s brilliant essay “On Self Reliance.”  You must find it and read it several times to get the full impact of what Emerson was saying. I’ll let you do that, but for those who want to be led to the conclusions, read on. Believing in yourself is an important realization that can grow with time and experience—as long as you first become convinced that you have “the right stuff” to begin with. There’s no faking it. Once you "get it,” you’ll see that.

 

I also hope most of you are familiar with the story of the Wizard of Oz. With all the media hype about heroic management, who somehow become less heroic when they must deal with adversity, I am reminded about the Wizard, and the illusion he had created, and the lessons learned by the characters in The Wizard of Oz. The moral of this timeless classic story is worth recalling whenever you (or others) go searching for those critical attributes of character and leadership you fear you might be lacking. Fear not—just look inward—you will be surprised what you’ll discover.

 

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On Self Reliance and The Wizard Of Oz—Often what we need is already inside us.

© John L. Mariotti 1996, 2001

One of the recurring themes of conversations with consulting clients and the people in those organizations who I am coaching or mentoring led to the title of this column.  Ralph Waldo Emerson is considered by many to be the first great philosophic mind created by the American Republic.  From his birth in Boston, one of the centers of the new republic, he seemed to strike chords in the hearts and minds of Americans with his writing.  One could almost say his ideas were at the root of the principles upon which this great nation was founded.

On the other hand, L. Frank Baum's story "The Wizard of Oz" (actually a series of stories) written in 1900 and made into a movie in 1939, has captivated the hearts and minds of children and adults for almost 60 years. The message of this heart-warming tale is not so different from Emerson's.  It is a message that every manager, professional, indeed, every person should take to heart.

Frequently, in the world of business we are like the characters in the Wizard of Oz, searching for the Emerald City and the magical, mystical Wizard who will solve all of our problems and bestow upon us all of the characteristics we fear we are missing.  The tin woodsman needed a heart; the scarecrow needed a brain, and the cowardly lion needed courage.  No doubt you can think of many companies with people who could use all three of these characteristics.  The truth, revealed in the end of the movie (I hope I'm not spoiling it for those who haven't seen it)--is that the journey to find the Wizard and the Emerald City showed each of the characters that what they were seeking was already inside each of them, and simply needed to be recognized, acknowledged and used.  Thus it is with all of us.

I could quote much of Emerson's wisdom from Self Reliance, but I have chosen just these four.  I think they will give you the essence of his timeless message:

"To believe your own thought, to believe that what is true for you in your private heart is true for all men, -- that is genius."

How often have you been guilty of saying (often only to yourself and closest confidants), "I knew that was what should be done," but I lacked the courage to stand up and say so publicly."

"What I must do is all that concerns me, not what people think.  This rule, equally arduous in actual and in intellectual life, may serve for the whole distinction between greatness and meanness."

"We pass for what we are.  Character teaches above our wills.  Men imagine that they communicate their virtue or vice only by overt actions, and do not see that virtue or vice emit a breath every moment."

A simple phrase I first heard from Stephen Covey and oft-repeated comes to mind here.  "Your actions speak so loudly, I cannot hear what your words are saying."  What I am saying, as "loudly" as the written word can convey, is this:  People will judge you by what you do and believe, not by what you say.  The truth will be conveyed by your actions.  Great leaders have an innate sense of this;  they have an aura about them that others perceive, even though they often cannot identify it in words.  Whether it is the brains, the heart, or the courage, you have it inside you, if you will only bring it out to be fully developed, appreciated, and used

"Nothing can bring you peace but yourself.  Nothing can bring you peace but the triumph of principles."

My first column this year was on "The Death of Ethics” and brought an encouraging response from readers.  Just as Dorothy in the Wizard of Oz only wanted to go home to Kansas, many of you only want to find a place where principles still rule over convenient, dishonest or unethical behavior. 

There are always a few people who will take the easy route, and blame their intransigence on others—or on circumstances.  Most people want to manage the right way, lead the right way and live by Emerson's "Self-Reliance."  You have the brains, the heart, and the courage inside you to make a difference in your place of work and in the world.  Go do it.  Life is too short to search for your own Wizard of Oz.

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“I’ve been there before, & I know the way out”

© John Mariotti 2001, 2021

I heard a story the other night on the popular TV show “The West Wing”, and it struck me as a good theme for a column.  The story goes like this: 

“A man was walking along the street and as he passed a construction zone, he fell in a deep hole, and he could not figure out how to get out.  He yelled for help and the first passerby was a doctor, who asked if he was injured.  After he answered that nothing was broken but he hurt all over, he saw a prescription come floating down into the hole and the doctor was gone. The next passerby was a minister.  After the minister asked if the man was alright, a prayer on a piece of paper came floating down into the hole.  The third passerby was a friend—and the man in the hole was jubilant—until the friend jumped into the hole with him.  The man asked his friend, ‘Why did you do that?  Now we’re both in the hole."  The friend answered ‘yes, but I’ve been down here before and I know the way out!”

Here we are facing the first big slowdown in the longest economic recovery ever, and the tone in many people’s voices is one of panic.  Like the man in the hole, they have never been down here before. I have!  And I know the way out!  And the next few columns will be all about “the way out” and what to do while we are “down here”.

First let’s consider what happened.  The Fed was concerned about the economy and the stock market getting overheated, and triggering a round of serious inflation, so the Fed tightened monetary policy and raised interest rates—not once, but several times.  This increased everyone’s cost of money, and cut into earnings.

Next, the administration and leading experts were not paying close attention to oil prices, and they shot up. Fuel costs more.  Petroleum byproducts cost more.  That made transportation and chemicals both cost a lot more.  Another hit to profitability.

There is latent over-capacity on a global basis for nearly all products—especially big-ticket ones like autos—thus prices of autos could not be increased to cover higher costs.  The consolidation of retailing made the big retailers very good at resisting price increases, so consumer prices couldn’t be increased either.  Mergers have made “mega-buyers” the rulers in most industries—and you guessed it—prices couldn’t be increased much of anywhere.  Another hit to profits.

Then there is the strong dollar, which hurt the profits of multi-national companies, and they lost money on exchange rates/currency translations.  The baby boomers are retiring, and the ‘baby bust”—a population shortage in the key employment ages of 25-44—is here and will remain for the next 7-8 years.  This made employees scarce and more expensive, thus another hit to profits.

Add all of these profit hits, include the collapse of several industrial behemoths—AT&T, Lucent, Xerox, Kodak, etc.—and you get a stock market that finds earnings missing estimates regularly.  Now top that off with the fall back to earth of the dot-coms and the irrational valuation of technology stocks, and consumers’ newfound wealth has evaporated.  So, consumers stop spending—which ripples through the economy another time.

So here we are, in the hole.  What do we do to get out? The answer is not simple, but many of the key elements of it are.  I’ll list the ten key elements of what to do here, and then follow up for the next few weeks with more details about how to do those things.

1. Don’t panic, you’ll only make it worse.Make your plans before “doing stuff”!  Flailing around wastes time, money & energy, and demoralizes the organization.
2. Don’t hack and slash blindly trying to prop up the next quarter, because this won’t get fixed in a quarter or two.  Look at taking your lumps now, and making things better next year.
3. Do study where you have added fat in the good times, and get rid of it.  Consolidate jobs, functions, eliminate the “nice but not necessary” things, and use the power of technology to streamline processes—don’t just cut people and expect fewer folks to do all the same work.
4. Do understand where you make your profit and where you don’t—and then get rid of the losers—that goes for products AND customers.  Consider the long-term competitive implications of these moves too. What you sell, to whom, and how is a critical decision.
5. Do know your costs—which are fixed and which are variable—then reduce the fixed costs to get your breakeven down where you can make money even in a down market.
6. Do watch your cash flow and your asset utilization.  Lack of profits will eventually kill you, but running out of cash kills you right away! (Ask any dot-com.)
7. Evaluate people with the thought that fewer, better quality are better than more, lesser quality. Cut fat, not muscle.  And don’t just use more early retirement programs.  Remember that the older workers are more expensive for good reasons—they know more, have more experience, and are usually more versatile.
8. Get closer than ever to your customers (and to your suppliers and employees, too!), because they are essential to getting out of the hole.  Get inside the mind of your customer, and serve them superbly.
9. Do plan to attack the competition and take share from them while they are in denial, saying “woe is me, the market is down and that’s why my sales are down.”  It’s a great time to gain share without giving up profit margin to do it.
10. Finally, above all remember the old saying, “united we stand, divided we fall”.  Pull together and eliminate any internal competition.  Focus on the outside competition and beating them—by serving the customers needs and wants better than ever.

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See, that hole wasn’t so deep after all.  It always looks deeper when you are down in it than when you are out of it looking down there. Having been there before and knowing the way out makes all the difference.

NOW, GO OUT THERE AND ACT LIKE YOU “GET THAT."

JOHN

 

THE ENTERPRISE--FAILING TO PLAN IS PLANNING TO FAIL, (COMMUNICATING THE PLAN IS AS CRITICAL AS HAVING ONE)

THE ENTERPRISE--FAILING TO PLAN IS PLANNING TO FAIL, (COMMUNICATING THE PLAN IS AS CRITICAL AS HAVING ONE)

START AT THE BEGINNING—WITH A PLAN—AND DON’T FORGET WORKING CAPITAL NEEDS

This sounds so obvious, you might wonder why I’m just raising this issue now. I’m raising this issue because many people, many organizations, and far too many companies “start in the middle.” Someone has a good idea, translates it into a product or service, and discovers that idea “will sell.” Off they go, to sell it to whoever seems inclined to buy it. 

This idea grows and expands into related similar ideas. Before they know it, they have built a company around a single idea and all of its off-shoots. Inevitably, things get complicated, and finally, (you hope) someone decides to figure out what it was that made that product or idea attractive to which kind of customers. During this time, no one actually sat down and prepared a plan for the company: What is its purpose, and how can it be "most successful" (remember, it was “successful" to start with, but usually no one thought hard enough to figure out why!

This is the point where lacking a plan can become a very big problem. Theodore Levitt, in his great book The Marketing Imagination  wrote, “The purpose of a business is to create and keep a customer…”  Many companies did that but stopped reading the rest of what he said. To paraphrase in the interest of brevity, Levitt pointed out the necessity of financial viability—selling the product for more than it cost to acquiire or produce and deliver it—and doing that over and over. At that point financing rears its ugly head. 

The bigger a company gets, the more it needs working capital to bridge the time gap from ideation and creation, through procurement/production, marketing/sales and then delivery—until the time comes to get paid (collect from those who bought). Until then, all the money goes out and none comes in! That time can span months. Unless the company has made a plan to determine how much financing it will need to bridge that gap, it will predictably underestimate its working capital needs.

If or when a plan is made, then communicating it to the people who must execute it is essential. (How can anyone execute a plan if they have no idea what it contains, consists of or contemplates?) By now, I think you get it. Pasted below is a very simple article that was first written 20+ years ago, then evolved for decades (note ©dates).  On the subject of financing and working capital needs, the next column explains the “ins & outs” of capital...

Failing to plan is planning to fail.

Sharing the plan is as critical as having it.

©john Mariotti 1998, 2002, 2007 

Most people agree that a company should have a strategic plan.  After all, as Satchel Paige the famous baseball pitcher said, "If you don't know where you're going, any road will take you there."  Yet, amazingly, many large, sophisticated companies have complex, incomprehensible plans that fill binders and are never shared with the people who are responsible for implementing those plans.  (After all, this stuff is "sensitive, and confidential information.”)

The key to a good strategic plan is not bulk--it is clarity and focus.  The best plans are short, concise, and written in simple language.  Some plans are not "plans" at all; they are compilations of industry or competitive background information.  Sure, it is necessary to understand the history, market analyses, demographics, etc.  But having all of that does not assure either a good, clear, concise, or a well-communicated plan.  In fact, just the opposite often occurs.  The real essence of the plan is buried in reams of data, often self-serving in nature, usually far too internally focused, and frequently tucked away on a shelf of a locked cabinet (remember--it is "confidential stuff”).  There it resides, untouched, from the time one plan is done until another must be started.

Business changes too fast these days for that archaic approach.  If the plan can't be shared with those who must execute it, how do they know what to do?  If the plan document is so thick, detailed and complex that only the most tenacious reader can wade thorough it, what good is it?  Only a short, well-focused, and clearly understood plan, which is revised regularly, can keep up with the constantly shifting business environment.  The "shape" of the business situation is constantly shifting like a ship in a stormy sea. The plan is the chart that tells us whether we are on the course we have chosen.

Nobody has enough time these days.  Broad, effective communications of a strategic plan that fills an inch thick binder (or larger) is impossible.  It can't be done.  But a really focused strategic plan can be communicated clearly on about 5-6 pages, and understood by everyone from hourly workers to the board of directors.

The plan must contain:

1. What business are you in? How big is the market, how fast is it growing, and where; what is the scope of the part you hope to carve out for yourselves?
2. What is the competitive situation? In those target markets, who owns how much of them now, and what do they do that permits them to hold that share--and where are they most vulnerable (or strongest)?
3. What is your strategy?  List 5-6 one or two line, specific strategy statements that tell what you plan to do--and what you plan to get done.
4. How are you going to do that? For each of the 5-6 strategic points above, list 1-2 terse one liners about how you are going to do that, by when.
5. What are the critical assumptions? Invariably you made assumptions that underlie this plan, and which, if wrong, blow the whole plan to pieces.  What are they?
6. What are the critical unresolved issues? Certain events, some beyond your control, can make this plan sink or swim, and can only be identified now--list them!
7. What are the next five years high level financial projections? Only 5-6 lines: Sales, Operating Profit, ($ and %), Return on assets, capital required, and cash flow are the essential ones.  1-2 others may be uniquely needed for each business.

If written concisely, this will all fit on 5-6 pages.  If the language is not understandable by a tenth grader, it is too jargon filled or stilted.  Making a brief, concise plan like this will take the senior management of a company as long to do as the binder sized one. That's because this one requires real thought, clear focus and careful wording. 

Little of the actual development of the plan can be "delegated," but it must be a product of extensive listening to input from all levels of the company.  Then the final outcome must be shared with all levels, in varying detail according to their responsibilities.  Without these two steps, there will be insufficient "buy-in" by large groups of people in the company.  No buy-in, no success.  It's that simple.

As the old saying goes, "failing to plan may be planning to fail."

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Watch the “goesintos” and the “goesoutas”.

© John Mariotti 1990, 2005

One of my former associates was a financial executive and his favorite phrases was the title of this column. Watch the “goesintos” and the “goesoutas”.  The “goesintos” are where money “goes into” the company—revenue and profits—from customers mostly.  The “goesoutas” are the many places where money “goes out of” the company—expense items, payroll, materials purchases, interest costs, etc.

During tough times, it is critically important to monitor the flow of money in and out of the company.  When lenders get tight and interest rates go up, just getting the necessary funding is hard enough, but using it poorly is doubly wasteful.  There is the waste of squandering valuable financing on things with poor returns, and the lost opportunity of good returning uses going unfunded.

At times like this, it is essential to understand where you make your profit and where you don’t—and then get rid of the losers—that goes for products AND customers. What you sell, to whom, and how is a critical decision.   You know that there are those low profit items that consume a lot of time and money, and go to a customer that is slow to pay, but fast to take a deduction for the slightest slip-up—real or imagined. 

Now is the time to streamline the product line.  Trim the marginal items and the loss leaders.  Sort the sales by product; list in descending order of annual volume and trim the bottom 1/3 of it.  Do the same thing with the gross margin by product.  Of course you must consider the long-term competitive implications of these moves too, but many of those products “we need to fill out the line” are losers.

Sort your customer-sales and margin lists in descending order of annual volume too.  Then find some other way to serve the bottom 1/4 of the customers without necessarily handing all that volume to a competitor.  Maybe you divert them to a “master distributor” or service them via the Internet.  For the few with the absolute worst profitability, the best thing you might do is to pass them on to the competitor.

In tough times, more than ever, you must know your costs and where they come from.  Old-fashioned direct-labor based cost systems will lead you down the wrong decision path more often than not.  It is also critical to know your breakeven point—the level of volume at a given customer and profit mix where you do not lost money at the bottom line. 

It is also critical to know which expenses are “fixed” and which are “variable”.  Fixed costs are usually incurred because of some management decision at a higher level or in a longer time frame.  Thus, the top management must review these fixed costs carefully and reverse or undo some of those decisions.  Only if you reduce the fixed costs can you get your breakeven down where you will make money even in a down market.

Finally, watching the “goesintos” and the “goesoutas” is really about watching your cash flow.  In many cases this is also about watching asset utilization—are you collecting Accounts Receivable effectively; is there bad debt exposure (downturns usually worsen this problem); is your inventory in line, or is it loaded with “slow movers?” 

Lack of profits will eventually kill you, but running out of cash kills you right away! (Ask any dot-com.)  That is why you MUST make cash flow projections for the next few quarters and monitor cash flow very carefully.  Cash is like oxygen, without it you die.  Profit is like food and water—necessary, but useless if there is no cash!

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IF YOU GOT ALL OF THIS, YOU WILL BE AHEAD OF MOST COMPETITORS… “FOLLOW THE MONEY” AND PLAN WHERE IT NEEDS TO BE MOVING…

JOHN 

 

PS: A colleague recently pointed out the competitive back and forth over technology capability, between China & the USA. China is gaining fast on the USA. Why? China has a plan. The USA, not so much/\. It just has a bunch of political proclamations with nothing much behind them. The same could be said if comparing thte USA to Russia (include Ukraine) or even the USA to the middle East (Iran & Syria are the biggies.) We both suspect that the US is so fractured, divided and polarized that any plan it has is now broken apart. I spoke with him about Technology, but we could as easily have been discussing Energy policy/plan—or several others. No plan yields no success. The plan alone is not the secret sauce. It’s the thought that went into the plan—the planning process. Now re-read the first article. Failing to plan is indeed, planning to fail.

THE ENTERPRISE--COLLABORATION IS ESSENTIAL, EVEN WHEN THE COVID ERA MAKES IT DIFFICULT.

THE ENTERPRISE--COLLABORATION IS ESSENTIAL, EVEN WHEN THE COVID ERA MAKES IT DIFFICULT.

 

Staying at home to avoid exposure to Covid means a lot of TV time. My favorite TV pastime is watching team sports: Football, Basketball and Hockey. There is a common misunderstanding that teamwork and collaboration are one and the same thing. That’s close, but not quite right. A couple of decades ago, I was asked by a publisher (Berrett-Koehler in San Francisco) to write a mini-book on Collaboration. Sounds easy, right? Not quite. Covering this kind of topic in 25 pages, is harder than writing a longer book.

Teamwork and Collaboration are different but interdependent parts of the same process. Good teams find ways to collaborate, to win. Great teams find ways to work together, that makes their performance through collaboration evident. Elite teams take collaborative teamwork to a whole new, almost instinctive level.

You can see that in football (Brady and Gronkowski) where a passer and receive seem to have a second sense about where to connect. 

In basketball, the fast break is the ultimate rapid collaboration, which results in such fast, effortless scoring that it demoralizes the opposing team. Only through careful collaboration, exceptional teamwork and lots of practice, can fast breaks look almost so easy and effortless.

In hockey, the Power Play attacks with a plan that has invested a lot of time understanding their roles, and how they can best collaborate to break down defenses—and deceive the goal tender—to score.

A former professor friend reminded me that in business (and lots of other areas) Covid has made the collaborative process much more difficult. Why? Because at its core collaboration is all about people, figuring out how to best work together, to accomplish a common, agreed upon goal. However, the lack of face-to-face contact removes much of the non-verbal communication and feedback necessary to resolve differences and arrive at the best way to collaborate.

Studies show that 70-90% of communication is non-verbal; body language, facial expressions, tone of voice (or silence, which has its own tone). Video conferences only show the head and upper torso, but not the way a person is sitting, leaning, shifting, squirming, or generally sending non-verbal signals about whether that person agrees, buys in, supports and will work toward the consensus based action. If participants don’t like the consensus at all, and don’t, can’t, or won’t  “say” (verbal) or show it, make obvious gestures or expressions that teammates and/or co-collaborators can easily recognize as disagreement and then discuss, argue and agree upon the result.

Since few people want to take the time to read a whole book these days, here are two pieces on collaboration The first was written as a brief magazine article. The second was lifted/excerpted from my book. The say largely, but not exactly or entirely, the same things. 

After you think about this whole collaborative/teamwork area, you’ll understand why changing just a single member of a unit: a basketball team, an offensive line in football, or a line in hockey—changes everything. (The coach is "that person in authority” mentioned.)

To succeed in the era of Covid, understanding collaboration is more important than ever.  Key point: it’s all about people and how they behave and react—and work together.

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Collaboration: Working together is more fun

©John Mariotti 2000

To get things done through collaboration, a group works together toward a common, agreed-upon set of goals.  Until the goals are agreed upon, there is a danger that the collaboration will be fragmented and not cohesive.  This wastes energy and demoralizes people.

Common, well understood and mutually agreed upon goals are essential to getting things done through collaboration.

 A group that wants to get something done must encourage collaboration by valuing the input of its members--even when that input does not appear to be immediately useful.  Managers, leaders and other people with authority can have one of two effects on collaboration--a stimulating one or a chilling one. 

The stimulation comes from cases when the person in a lead or authority position genuinely appreciates the input and attempts to use it --or at least incorporate it into their thought processes as the group moves toward decisions.  The chilling effect occurs when the person in authority acts with disdain, disinterest or open contempt of the ideas presented.  This is demeaning to the individual giving the ideas and chilling to the group's collaborative efforts. 

Positive reinforcement and support of the group by persons in authority positions is an essential part of getting things done through collaboration.

Smart people will try to use all the collaborative help they can get.  Smart workers will recognize the kind of manager they have and conduct themselves accordingly--this means active collaboration with a good manager, and cautious input with a poor one.  In either case, it is important to avoid becoming discouraged--even by a poor manager; they sometimes wake up and see the light as information accumulates and collaboration begins.

We are no longer in an age of bosses who can succeed by controlling and directing people.  Things are changing so fast that people want and need influence over their own destinies.  This means the opportunity for collaboration is great, but the leaders must change from old command and control behavior to the new one of leadership, motivation and involvement. 

The traditional way to control organizations was to have policies and procedures, which were followed and rigidly enforced

When conditions, circumstances and competition change rapidly, these old, rigid rules fail.  They become inflexible, slow, obsolete, and ineffective.  This is when collaborative groups of people can step forward to save the day.  Personal values and integrity will beat policy manuals every time for assuring that the right things get done the right way.  Collaboration will help to assure that the right things are getting done.

Unfortunately, unless there is open information sharing across all of the so-called “boundaries”-- between people, between departments, between offices or plants, and between customer and supplier companies, true collaboration is difficult or impossible.  Without sharing of information, the collective knowledge of the groups involved is not used to solve the problems.

A Checklist for Successful Collaboration

q   Form a group that is likely to cooperate first, then collaborate. 

There should be something in it for each member.

q  Make sure the current situation is clearly understood by all constituencies.

q  Establish the leadership and sponsorship of this collaborative group and identify the natural leaders.

q  Set group goals and objectives, and discuss potential outcomes, timetables, and resource needs.

q  Establish measures of progress, both tangible and intangible and measure results and review how the group is getting them.

q  Provide regular feedback and document progress and agreements. Keep records of disputed issues and communicate openly and often.

q  Identify known obstacles and challenges and seek help in eliminating them.

q  Build partnership relationships to gain help and sustain progress, but choose partners carefully

q  Concentrate on new learning through the collaboration. Apply collective wisdom of the group to test the outcomes.

q  Celebrate and share the knowledge gained about collaborative success. Leave a legacy of successful collaborators to seed new teams.

"The only one who likes change is a wet baby."

"There is no use whatsoever trying to help people who do not help themselves.  You cannot push anyone up a ladder unless he is willing to climb himself. --Andrew Carnegie (industrialist)

"Build for your team a feeling of oneness, of dependence upon one another and of strength derived by unity." --Vince Lombardi (football coach)

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What is Collaboration?

An Excerpt from the book Collaborating for Success, ©2000, Berrett-Koehler. San Francisco. ©John Mariotti 2000

Many people would say collaboration is teamwork, and that is close, but not quite right.  Teamwork has become an over-worked word in America.  Teamwork is not always collaboration--although collaboration is usually good teamwork.  Let's start with a definition.

Collaboration is an act of shared creation or shared discovery.  At the heart of collaboration is the desire to create something, discover something, solve some sort of problem, or get something done. 

That should be the case with team efforts, but it isn't.  Too often, teams are formed by just assembling a group of people.  They are assigned a purpose that is sometimes unclear, and given a set of goals (if any are defined at all) that they had nothing to do with choosing and are a long way from a shared creation or discovery.  Maybe a problem solving effort is the team's purpose.  Even then they are supposed to figure out how to be good team members while they determine how to solve the problem.  The two challenges are not even related--the first involves interpersonal and group interaction, and the second requires problem identification and solving skills.

One part of collaboration is a relationship. 

Throwing together a group of people no more insures a relationship than dumping a bunch of ingredients in a bowl insures that a cake will result. 

Teamwork can become monotonous, because similar problems often require similar solutions and the team members will fall into familiar, comfortable roles.  You do this; I do that; someone else does something else.  This is not collaboration--it is simply a division of work.  This might have been collaboration the first time we went through it, but it is not any more.  Collaboration is original.  Circumstances are constantly changing.  Thus the team described above is not really collaborating--they are just going through the motions.

Don’t confine your definition of collaboration to a single group or team of people. That is not how it works in many cases.  The most powerful collaborations are spontaneous ones.  The people involved work together in a technical sense, but not necessarily in a literal sense.  When a loose-knit group of people from different areas or departments (or companies!) decide to collaborate, real breakthroughs can happen.

Another part of collaboration is a process

Let's consider a more complete definition:

Collaboration is the process of two or more people with complementary skills and/or knowledge interacting to create a shared understanding where none had existed, using understanding to create something, discover something, solve some problem, or get something done.

Nothing in that definition says these people need to be part of a team. They may not even need to be in the same place at the same time.  What is important is that they engage in a process--a series of steps in a defined order that will lead to a desired outcome.

Collaboration is the end of a series of steps.

A group must go through a series of steps on the way to collaboration.  Sociologists have a shorthand set of terms, which describe this sequence:

• Forming (getting to know each other),
• Storming (fighting for control, power, etc.),
• Norming (arriving at accepted group norms for how things are done and people behave),
• Performing (Getting on with the successful work).

Another set of collaborative relationship steps are shown in the table below.  It would be nice to jump right to Cooperation or Collaboration, but unfortunately, it is often hard to skip the earlier steps.

Relationship Stages of a Collaboration

Peer Relations     Stance                 Key Characteristics              

Combative            fighting                Aggression, resistance, damage

Competitive          striving                 Rivalry, mixed motivations

Cooperative          agreeing               Acquiescence, obedience

Collaborative         partnering             Synergistic, interactive

Source:  If Aristotle Ran General Motors, Tom Morris, Henry Holt and Company, New York, 1997

The best you can hope for is to move past each step of the way quickly and positively.  The important thing is to know about all these steps, and to avoid poisoning the relationships in their early stages.  It will be much harder to get to collaboration if the storming or combative stage becomes bitter and hurtful.

Constructive disagreement

There is a widespread misunderstanding that to be a good team member and a positive collaborator means to agree with the group or be quiet when you disagree or don't understand.  Nothing could be further from the truth.  Powerful collaborative efforts come from constructive disagreement.  Constructive disagreement is flexible, always trying to see other viewpoints that might change a person's perspective and position.  Destructive disagreement is a "take it or leave it" mentality, one which says, in effect, "I'm right, you're wrong, end of discussion!"  Failure to understand denies you the ability to be a collaborator.  The only dumb question is the one that is not asked.  Understanding allows everyone involved to pool knowledge and viewpoints.  Even if you have no new knowledge to apply to the solution, sometimes just a different viewpoint will expose new solutions. 

Four Powerful Questions to Build Collaborative Groups

• "Will you help me, please?"
• "I'm sorry, I don't understand."
• "I don't know, but I will find out and get back to you"--and then be sure to do it.
• The hardest: "I'm sorry, I was wrong."

Understanding the task is one of the most important ingredients in collaboration--what problem must be solved or what new discovery or creation is desired.  Another important part of collaboration is saying what you will do--and then doing what you said you would--because others are depending on you to hold up your end of the deal.

Collaborating in a crisis can happen faster than collaborating simply to generate positive change.  Crisis collaboration is also easier to get started, but harder to sustain, especially after the immediate crisis is resolved.  Many companies pull together when their existence is threatened, only to fall apart after they have weathered the storm. 

For real collaboration to occur, trust must exist.  Talking about collaborative behavior is “easy", but achieving true collaboration is “hard."

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NOTE: In the end, great teams learn collaboration—although the journey to getting there is often rocky.

In sports, the coach & staff try to enable the collaboration, but ultimately it happens when the team members settle into their roles and trust each other to do their parts. When you watch any team at work—in a game, in an office or on a Zoom call—test it to see if these conditions have been met. (You will already know by the results, but watching how it gets there will help you learn how to do it, over and over.

 

THE ENTERPRISE— A WALK AT THE MALL--SCARY--BUT PROPHETIC? CASH IS LIKE OXYGEN!

THE ENTERPRISE— A WALK AT THE MALL--SCARY--BUT PROPHETIC? CASH IS LIKE OXYGEN!

This edition was panned to lead into one of my most popular old columns—Cash is Like Oxygen— posted below. 

While I was thinking about what to say as a lead in, my wife and I decided to go for a walk in the Mall—specifically the Polaris Fashion Place Mall on the north side of Columbus, OH.  That started a sequence of events, that led to this long “current events” preamble:

1)  I was stunned by how empty & desolate the Mall was (more on that). Many stores closed or closing, or with totally new occupants—unproven upstarts?

2) When we went home, I exchanged emails with son Mike, who recapped a presentation by a Fannie Mae exec.

Being in construction, Mike is very interested in the future of housing, the recovery, and what Fannie Mae is doing/planning to do. The questions cited were: Will the vaccines Work? IF they do work, will consumers return to prior consumption levels?  What do you think? When?

3) Just today, less than a week after I started writing this, Polaris Fashion Mall missed its monthly rent payment. The company’s stock plummeted and the mall operator retained advisors to help review strategic options. (There’s a 30-day grace period to pay the rent—whether it can, or will, is anybody’s guess.)

My answers were:

1) Yes, the vaccines will work (pretty well), at least on known Covid variants. Better than Flu shots, not perfect, everywhere, for everyone.

2) If the vaccines work, will enough people get the shots to begin to reach "Herd Immunity"  (70-80%) ? Doubtful. Right now 1/3 of people are resisting the shots

3) This is like a place hit by a hurricane or a tornado. It will not be the same for years. First sign of real recovery: Sports and entertainment venues begin filling up.

We went for a walk at the Mall last week.. The photos are from Polaris Fashion Place Mall, a few miles from home—mid-afternoon on a week day. See all the people shopping there? (No?) The other large Columbus indoor mall, Tuttle Crossing, is reportedly in economic trouble too. With Sears is gone & Penney wounded & Dept. stores like Malls relied overbuilt/failing/consolidating, while full of unsold goods and empty of shoppers. Malls are hunting for any way to fill the unused space with something that can produce cash flow. 

No. I could have taken these at countless locations. There were a few people, but very few of them were carrying merchandise. Stores are open restricted hours 11-7 most days. Many are full of inventory (tying up cash) like in the aisle shot of a Macy’s store—goods that have been there for months. 25% of the former stores are GONE…another 25% are just hanging on. Half the places in the Food Court are closed. But no one was in them anyway. To add insult to injury an Outlet Mall opened just over a year ago, 11 miles north of Polaris.

I really don’t know how these companies & retailers can even stay in business. All their fixed costs continue, but their revenue based cash flow has been devastated.  A huge store might have a few (3?) people working in it…and not sell enough to even pay for them. Inventory, aging in style and seasonality ties up their (cash) working capital.  

A Lifestyle “Mall” (outdoor shopping areas) Easton Town Center is doing better—but not great.) Movie theaters are in deep trouble. Crappy movies. Quality is going to streaming. Restaurants that remain are down more than 20%, and many of them are simply closed—gone. Outdoor dining and takeout/delivery got them through summer & fall, with cash flow, but winter weather is coming  like a lion right now. Indoor dining is open, in some places, at a fraction of the seating, but even that is often not full.

People are shopping more on line, or at ”popular priced” big box retailers like Target, Walmart, Kohls, etc. Just look at the parking lots. Grocery stores are busy. Costco was full on Monday at mid-morning. Even drug stores are stressed, but less so; they're simply overbuilt; too many of them, too close together. 

Indoor dining will still be ailing until it warms up: May? Maybe. Bars may fill up as curfews are lifted. Will consumers return to prior consumption levels? No, not for at least a year or two. And then from a different array of stores and shopping venues. 

 

This is a massive structural dislocation. When will things come back? Who knows. Act too fast and you burn through precious cash. Act too slowly and you miss a chance to generate cash flow.  Watch to see when people feel OK about sitting shoulder to shoulder,  in a stadium, or a theater or concert, yelling or cheering. Maybe 2+/- years from now…Maybe? 

Key takeaways  from my exchanges with Mike.

• The pandemic has ACCELERATED traditional retail's demise. 
• Hurricanes stimulate the economy via repairs; conversely, the pandemic didn't do "physical" damage to be repaired.
• Government’s actions did psychological and economic damage—tough to repair.
• "Retail" will be re-born to match new lifestyles. ("Going-out" is not dead and gone, although it feels that way (in wintry Ohio).
• Consumption & shopping habits have shifted many times through decades (e.g mom & pop, discount & department stores, 1-800, TV, Big boxes, online, etc). 
• There will be more shifts of where/how $ are spent, and on what before it settles down…to a New Normal...someday.

By then the government will have dumped more than $5 Trillion (all borrowed or printed money), to fix the mess it made, and try to prop up the people it hurt. In doing so, handouts are destroying the people's "will to work” via too-lucrative unemployment and welfare payments. (Most people are saving more than ever of the government handouts. They are no fools; they know this is a temporary solution—and a very expensive one at that.)  Many parts of the trillion $$ handouts haven’t even been used and yet, more are being authorized. 

Why? They are trying to replace cash flow! No cash flow = no Oxygen. Cut off the oxygen to any living organism and it dies! 

Somebody has to eventually pay for all this welfare; welfare which kills the will to work, and the spirit of free enterprise and capitalism. (Socialism has been tried over and over. It doesn’t work. Someday, (as Margaret Thatcher once said) "other people's money runs out," and gratitude turns into resentment.)

 

Here’s what I wrote 25 years ago...

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Cash is like Oxygen.

Without it, you can't survive long enough to make a profit.

©John Mariotti 1995

Lately, I've encountered a number of companies who seem to be running short of cash. At the same time, cash flow appears to have fallen out of vogue as a hot measure for management theorists, being supplanted by economic value added (EVA)--a term coined by consultants at Stern-Stewart. Strong   Positive EVA measures depict a business that is earning returns in excess of its cost of capital.

This shift in the measurement emphasis may be creating a problem. While a positive EVA indicates good long-term business health, cash flow is the ultimate necessity for short-term survival.

Most business people are familiar with the income statement and the balance sheet. These two accounting stalwarts are where encounters with the IRS most often occur. As a result, most managers have learned to emphasize pre-tax profit and various balance-sheet ratios as the prime indicators of financial well-being.

Cash flow, the third major measure, is too often ignored. When you show a negative profit, but maintain a positive cash flow, life goes on--for a while at least. Run out of cash, and trouble brews real fast. Payrolls cannot be met. Suppliers cannot be paid. New products cannot be launched.  

My most memorable personal cash-flow crunch occurred just before I became a newlywed. The $100 deposit on a new apartment (this was a long time ago) was due. Since I was fresh out of grad school and hadn't earned a paycheck in over nine months, I was down to my last $50 in cash. The first paycheck in the new job was four weeks away. I was forced to humbly ask my fiancée to help. She didn't have much more than I did, but at least she'd been working. Together, we scraped up the $100.

Whether it is a personal or business crisis, that "out of cash" feeling is very unpleasant. When entrepreneurs start new businesses, they often go deeply into debt. Some max out their credit cards. Others mortgage their homes. Only the fortunate few find an "angel"--an investor who puts up seed money for a “modest” part of the equity in the business, in contrast to venture capital investors who want majority ownership. As these businesses grow, their margin for financial error is usually quite small.

Planning for cash needs is not all that complex. Yet many companies fail to do it properly. Often, they're misled by income-statement and balance-sheet projections that show the company will be financially healthy at the end of the year--if they get that far.

Astronauts who take off on a long space flight must take along plenty of food and water (their "healthy balance sheet"). If they happen to run out of oxygen any time between takeoff and landing, all that food and water is of no use to them. They will be goners. Cash is like oxygen. When it's there, it's easily taken for granted. When it's not, death can come quickly.

Why do many budding entrepreneurs overlook this simple fact? They fail to do an accurate, detailed, and realistic cash-flow projection on a month-by-month, week-by-week basis. The killer is usually working capital needs. To make a product, it is necessary to purchase raw material and parts, and to pay employees who convert that material into the product. You also have to pay for product designers, tooling, equipment, a sales force, marketing materials, travel expenses, phones, computers, etc. And those outlays must be made before the first product is sold. 

Keep in mind that "sold" doesn't mean you have an order. It means the product has been produced, shipped, and “paid for.”

If product design takes four weeks, and the lead time to obtain materials and produce the product is another four weeks--both unusually short periods compared with real situations--and if nothing major goes wrong, then at least eight weeks worth of working capital is needed for inventory, payroll, overhead expenses, and so forth. The payment terms--usually 30, 60, or 90 days--don't start until the product is shipped.

Since we started eight weeks in the hole, we may now be 12 to 21 weeks without any cash coming in!  Easily one-quarter to one-third of a year may elapse with all the cash flow going out, rather than coming in. At this point, the venture capital "vultures" may begin to look like friendly creatures.

It is hard to believe that a company with a great product, big potential profit margins, and strong market demand can still end in financial collapse. But it happens. And, ironically enough, sometimes the bigger the demand, the faster and harder the cash problems hit--all because inadequate attention is given to planning for cash needs.

Before you take off, be sure to check your oxygen supply carefully. You'll enjoy the journey more--and you'll still be around at the end of it.

 

BEST WISHES

JOHN

 

THE ENTERPRISE--HOW DID THINGS GET THIS WAY--PART 1? YOU MIGHT BE SURPRISED TO KNOW.

THE ENTERPRISE--HOW DID THINGS GET THIS WAY? SOME INSIGHTS…

 

WE ALL WONDER HOW MANY THINGS CAME TO BE…HERE ARE TWO OF THEM

I wrote these and many other columns you’ll read in THE ENTERPRISE twenty years ago—in the year 2000.

 

We forget that the USA’s mere 200+ years in existence is but a small part of history. At least 2000+ years came before the USA was even imagined. During a lot of that time, Rome was the dominant power in the world, and “horsepower” (not of the engine type) was the principal means of travel. 

 

We don’t realize that the Internet, the Telephone and Interstate Highways, made us forget predecessors like the Telegraph and Railroads.. Those were the big breakthroughs of the prior century, which allowed information to spread across the US faster than "the speed of a horse.” Before that, and the spread of Railroads paralleled by Telegraph lines, there was the Pony Express, delivering the mail—“ at the speed of a horse! 

 

(This past holiday season some USPS Mail behaved like the Pony Express, as Christmas cards mailed in December were delivered in late January!) 

 

Keep reading to learn how Roman chariots determined the design of US Railroads, and even the Space Shuttle. The title is a tipoff. Lots of things were determined before this country ever existed.

 

==================

How a Couple of Horses' Asses Changed the World

©John Mariotti 2000

There are a lot of people in a lot of companies that resist change.  “We’ve always done it that way, and it’s been good enough for years.” is the cry.  In the age of cyber speed, old ways of doing things die hard and the reasons for them are often lost in the annals of corporate history.  Well, here’s one that won’t be any longer.

The US standard railroad gauge (distance between the rails) is 4 feet, 8.5 inches. Why was that odd gauge used?  Because that's how they built them in England, and the US railroads were built by English expatriates.  But why that spacing?  Because the first rail lines were built by the same people who built the pre-railroad tramways, and the people who built the tramways used the same jigs and tools that they used for building wagons, which used that wheel spacing. If that’s so, why did the wagons use that odd wheel spacing?

Well, if they tried to use any other spacing, the wagons would break on some of the old-long-distance roads because that was the spacing of the old wheel ruts.  The first long-distance roads in Europe were built by Imperial Rome for the benefit of their legions, and used ever since. The ruts, which everyone else had to match for fear of destroying their wagons, were first made by Roman war chariots which were made to be just wide enough to accommodate the rear ends of two war horses!

The United States standard railroad gauge of 4 feet, 8.5 inches with which we all still live and use was based on a centuries old specification for an Imperial Roman Army war chariot—and based on the width of a horse’s ass—well, two horses actually! 

So, the next time you are told “we’ve always done it that way”, look around you.  There may be a horse’s ass or two involved in that reasoning.  And if you are inclined to go with the flow and not argue for the change—think about the implications. 

But, our little story isn’t even over. When we see a Space Shuttle sitting on the launch pad, we see two big booster rockets attached to the sides of the main fuel tank.  These are the solid rocket boosters (SRB), made by a factory in Utah.  The engineers who designed the SRBs might have preferred to make them a bit fatter, but the SRBs had to be shipped by train from the factory to the launch site. The railroad line to the factory runs through a tunnel in the mountains, and the SRBs had to fit through the tunnel, which is slightly wider than a (you guessed it!) railroad track.  Well, we all know where the width of the railroad track came from.

Thus a major design parameter of one of the world’s most advanced transportation systems was determined by a couple of horse's asses!  I wonder who will determine the critical decision points on your company’s next project.  

Hopefully, whoever it is will have heard and remembered this little story -- and make wise decisions based on good reasons—and understand the basis for those reasons completely!

=================

We just came through a political/election season that may well change the course of US history more than any other. Voting by millions of insecure, generic mail-in ballots were accepted and used (some say mis-used, which is probably true) The “stop" in vote counting in many battleground states (in the wee hours of election night) is believed by many to be part of a “reset” to see how many (insecure) votes needed to be “found” and added to Joe Biden’s totals, to overcome Donald Trump’s margin at the  polls and on secure absentee ballots. 

 

Believe what you want, the polarization in the USA, was fueled by the Mainstream media’s pervasive communications (formerly known as  “News”). The middle part of the USA is now known as “flyover country” because of where the media, financial and political power resides—on or near the “coasts.”

 

====================

The Coasts and the Chasm

©John L. Mariotti 2000

An alarming thought went through my mind recently.  What if the tidal pull of the earth’s oceans is influencing our businesses and society in ways we don’t even recognize?  As I looked through my pile of reading material, and then considered my investment portfolio, I realized that the vast majority of the information generated today in print and electronically either originates in or is controlled by people located within 100 miles or less of the ocean(s). 

Maybe there is some phenomenon bigger than the Internet at work.  Most major book publishers are located in New York, Boston, or San Francisco.  The same can be said for major magazines and national newspapers.  Ditto the headquarters for major TV networks—nearly all in or around New York or L. A.  Do "birds of a feather flock together", or is there some other, more mysterious force at work?

Then I realized that between San Diego, Silicon Valley and Seattle on one coast, and Boston to Washington, DC on the other, the coastal influence was even more striking.  Check the market capitalization of companies on the major stock exchanges and see where the headquarters of the biggest and most valuable are located.  Cisco, Microsoft, GE, Intel, IBM, Lucent, AOL, Time-Warner, and on and on—all are within 100 miles (or much less) of the oceans.

Of course it is a given that much of the nation’s policy originates in Washington, DC.  Most of the country’s financial wealth is brokered and traded on Wall Street, in NYC, where else?  Then consider that many of the legendary universities: Stanford, UCLA, Harvard, Wharton, MIT and many others are all located in these two narrow bands of geography. 

Is there anything wrong with this?  Maybe, maybe not!  There is not really a "chasm"--physical or intellectual--between these coastal bands of influence.  A lot of very important stuff goes on in the middle 2000+ miles of the U.S. A.  For starters, almost all of the food we eat is grown or raised there.  Nearly all of the "creature comforts" that aren’t made in the Orient are made in the good old central U. S. —the chasm.  It is often called the "Rust Belt" but it isn’t so rusty any more.

Try to do without furniture, carpets, beverages, automobiles, plastics, gasoline, steel, appliances, computers, pipes, wires, fiber optics, and the tools and machinery needed to actually produce all of this and much more.  The vast majority of these are made in the "chasm"-nowhere near the coasts.  People actually make physical things there, instead of just having ideas and reducing them to words on paper, policy in laws or digits in cyberspace. 

But much less is said or written about those who reside and work in the chasm, except in the media that is mostly regional, local or of a "controlled circulation".  This means they go primarily to the same people that they are created about and for.  Of course there are some national media in the chasm—WGN, Chicago’s TV super-station comes to mind, as does Turner Broadcasting in Atlanta with its CNN, TNT, TBS, etc.  MCI WorldCom is even a non-coastal company—for now anyway.  UPS in Atlanta and FedEx in Memphis deliver the goods and are "chasm dwellers". Dell & Compaq actually make lots of computers in the chasm.  But these are the exceptions, not the rule.  They (mostly) make things!

There are even real cities located in the chasm: Atlanta, Charlotte, Nashville, Dallas, Houston, Phoenix, Denver, St. Louis, Chicago, Detroit, Cincinnati, Columbus, Cleveland, Pittsburgh and lots more of them.  People from the coastal areas may know of them because their airplanes stop at these hubs when they can't go direct.  There are also some major sporting teams located in the chasm’s major cities.

Where am I going with this?  Here’s where.  Anytime the vast majority of the creation and communication of ideas is localized to a few cultural areas; it can easily become biased and ingrown.  That is decidedly NOT good.  If a (relatively) small cultural area influences most of the financial markets in the country (and maybe the world) that also is NOT good.

Diversity is what made this country great.  Diversity is what supports the richness of our social fabric.  Diversity of thought can be threatened by the concentration of knowledge, wealth, and most of all information influence in the "coastal" cultures.  If it isn’t about dotcoms or e-commerce, financial markets or stock prices, the Fed or the government, it isn’t news—at least not at quite the same level. 

If you disagree, fire up your computer, go to a newsstand, or stop at a bookstore and do a random check.  We are in danger of developing and promulgating a skewed, biased version of every kind of information, but especially that about our business world. Pick up 50-100 magazines that you recognize as the "biggies", and see where they are published—that means where the people live who decide what goes in them—and what doesn’t. 

Do the same thing with books.  Just choose 100 at random and look where the publisher's headquarters are located.  That is where the decision to publish that particular book, on that topic, by that author was made—and in a lot of cases that's where the author also resides.  Then check where the major TV networks and national newspapers originate.  Sure, they all have local affiliates and branch offices—and we all know how much influence they have compared to the "home office".

Thanks to the Internet, it is possible to break down this coastal cultural bias—but it won’t happen easily, if at all—because that is also where many of the powerful web sites originate, either at major publications and corporations or with portals like AOL/Netscape, Yahoo, MSN, etc. 

What must happen is for balance to be regained is for everyone in the "central chasm" to start taking a much more proactive role in ensuring the diversity, quantity and balance of information and perspectives needed to keep our country great.  That means, start generating good, insightful, interesting information and getting it widely disseminated.  Build the reputation capital of the chasm-based colleges and universities.  Take proactive positions and speak out.  Otherwise, we all better move to one of the coasts and either get a subway pass or grow a beard and lose our shoes.

=================

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Thank you,

John

 

 

THE ENTERPRISE—MULTI-GENERATIONAL CHANGE—SHARE THIS WITH FAMILY & FRIENDS OF OTHER GENERATIONS: BOOMERS, GEN X, GEN Y, & GEN Z

I CAN’T KNOW WHICH GENERATION YOU BELONG TO. I ONLY KNOW THAT ALL “GENERATIONS" ARE SEEING UNPRECEDENTED, UNIMAGINABLE CHANGE
What differs is how they respond to the change. The quote below is important for all Generations to consider as we enter 2021:

“Those who cannot remember the past are condemned to repeat it! (George Santayana-1905). In a 1948 speech to the House of Commons, Winston Churchill changed the quote slightly when he said (paraphrased), “those who fail to learn from history’s errors are condemned to repeat them.”

Consider the various “Generations”—Baby Boomers born 1946-1964, Gen X born 1965-1979/80, Gen Y born 1981-1994/96, and Gen Z born 1997-2012/15+…and the placeholder for the youngest people. None of them have ever endured the magnitude of change in a single year, as we have in 2020.  And yet, as I looked through my old columns, I was constantly reminded about how much unimaginable change has happened in the past two decades. 

Who could have foreseen that we’d all be wearing masks, millions would have contracted this new virus and in America alone hundreds of thousands have died. Office buildings lie empty while Zoom (video) calls involve millions. Shopping centers no longer attract hordes of people, and vacant, failing stores are everywhere. Restaurants are failing equally rapidly. Big entertainment and sporting venues are largely empty. Few people have ever seen, predicted or endured anything like this. “Normal" social and commercial activities, (including travel) are unable to perform "normally.” 

 

(Many (most) people are hoping that the vaccine(s) now being introduced, will enable a return to something resembling “normalcy”—and maybe they will)

 

In future editions of THE ENTERPRISE I’ll share thoughts about Collaboration, a critical part of any successful organization or enterprise. The normal social events like weddings, funerals, celebrations and family gatherings have been totally disrupted. How much of this is temporary remains to be seen. One thing is certain: Change will continue to offer challenges—and opportunities—and how we adapt and evolve will be the largest challenge of coming years.

What will be critically important is how we respond and react to this “new (not-so) normal.” Past predictions don’t help. You can read now about how wrong they were in the past. 

 

See what I wrote about in 2002—almost twenty years ago. 

How we react as individuals, as organizations and as a society—that’s what matters.

===================

When Old Rules No Longer Apply

©2002 John Mariotti

 

The cry sounds out so often, “The Future…is uncertain”!  Few realize just how uncertain it is.  Predictions about the future are notoriously inaccurate.  Consider the statements by these four learned experts!

 

•     “The radio craze will die out in time.”  --Thomas Edison

 

•     “No woman in my time will be prime-minister.”  --Margaret Thatcher

 

•     “There is no reason for any individual to have a computer in their home”  --Ken Olson, CEO, Digital Equipment

 

•     “640K of memory ought to be enough for anybody”  --Bill Gates

 

Time has proven and nature has confirmed that change is certain!  If further confirmation is needed, just look at the change in the population that defines the ten largest cities in the US.  Comparing the ten largest going into the 2000 Census shows that only three of the ten from the year 1900—New York, Chicago, and Philadelphia—remain in the top ten.  The shift of population to the Sunbelt and West Coast of the US has completely restructured the population distribution of the country and along with it, is restructuring the social and political power as well.

 

The other fact we know to be true is that change is difficult—difficult to bring about and even more difficult to accept.  The risk to the change leader is enormous.  It has been so for centuries and was recognized by Niccolo Machiavelli in “The Prince”, published in 1513.

 

"It should be borne in mind that there is nothing more difficult to arrange, more doubtful of success, and more dangerous to carry through than initiating change.  … The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new.”

 

If we are to open our minds to change, we must learn from errors and successes of the past.  We must struggle to clearly understand the present too.  But most of all, we must commit to finding and creating a new future.  Sadly, we are so preoccupied with perfecting the present or protecting the past that we fail to work on finding the future!  But this has been the case throughout history!  What do these have in common?

•     The Dinosaurs
•     The Roman Empire
•     The American Bison
•     The Open Range Cowboy
•     The Sony Betamax

 The answer, of course is that all of these powerful forces fell to changes because they couldn’t or didn’t adapt:

•     Dinosaurs--a environmental event--a meteor hit
•     The Roman Empire--fell to personal strife & greed
•     American Bison--herd instinct = hunting with rifles
•     The Open Range Cowboy--technology/barbed wire
•     Sony Betamax--technology/more user-friendly systems

 

But the more telling question is which powerful forces fell to natural enemies?  The startling answer is “None of them”!  They all failed to adapt, to cope with or to capitalize on CHANGE!  Technology changed.  The environment changed.  They struggled internally or herded together and then fell to change!  Yet change presents a great opportunity.

 

Since denial is a natural human reaction to change, one of our favorite forms of denial is that “this time is different”.  But, is this time unique?  Perhaps every generation thinks this is the case.  Consider this:

 

“Over the course of a few years, a new communications technology annihilated distance and shrank the world faster and further than ever before.  A world-wide communications network whose cables spanned continents and oceans and gave rise to new forms of crime.” 

This quotation sounds like today’s claims about the Internet, doesn’t it?  Except this was said in 1840 about the telegraph! 

 

And so, is change a terrifying threat, or is it a wonderful opportunity?  How you answer that question is will determine how you behave!  To put it another way, are you spending your time and resources protecting the past, perfecting the present, or are you focused on finding the future?  You know which one you must do!  Do it!

 

===============

2021 HEADLINE IN COLUMBUS (OH) DISPATCH: LAST VIDEO RENTAL STORES TO CLOSE. 

 

I PURPOSELY USE THE TERM "DISRUPTIVE CHANGE.” 

 

CAN YOU THINK OF A MORE DISRUPTIVE CHANGE THAN THE CORONAVIRUS. 

Look at what COVID-19 has done in the USA alone, with over 300,000 dead and the toll climbing daily. 

(And many more globally.) 

 

When the late Clayton Christenson wrote his brilliant book “The Innovator’s Dilemma”  and coined the term "disruptive change” he certainly never considered a change as disruptive and deadly as the Covid virus. However, even in the face of such a deadly and daunting foe, the principles to consider and the actions to take are largely the same. 

 

1) Understand and define the problem, and 

2) Solve the problem. 

 

To do those successfully, you must understand and solve today’s and tomorrow’s problem—not yesterday’s. In business and in life,  denial can be deadly—just with a different set of consequences. 

 

The key to Finding the Future is to build new plans, based on new circumstances, keeping in mind what worked in the past—but not relying on that to work now, or in the future.  These are different times, calling for different plans and new solution, based on new realities.

===================

This is not so new if you consider that I wrote this twenty years ago:

 

Perfecting the Present vs. Finding the Future  ©John L. Mariotti 2000

Harvard professor Clayton Christenson created a stir in industry circles with his work on disruptive technologies and how these seemingly mundane approaches are undermining the positions of industry leaders.  

A few years ago, I met with and studied a prospective consulting client who was in deep denial.  His company was on the threshold of decline—and yet, perversely, it was doing great—at the moment.  He wanted to talk to me because I think he sensed that trouble was just around the corner, but did not want to admit it.

As it turned out, he did not want to face it either, (so I did not get the consulting assignment to help him).  Why should he seek help?  His company was an industry leader with over 50% market share.  It was multi-national, with almost half of its volume coming from outside the U.S.  And it was handsomely profitable, although not as much so as it had been just a few years earlier—and profits were trending downward.

This company made metal products, mostly using the same materials and equipment they had for years.  Their processes were poorly documented, but deeply ingrained in the minds and habits of a group of loyal employees.  Their cost and information systems were flawed—and they knew it—but margins were so good, it did not matter enough for them to change.  Although the CFO complained loudly about the need to change, the CEO would have none of it. 

The company had started a token venture into alternative materials applications for its products, but this was clearly a stepchild, staffed poorly and narrowly focused on the simplest current applications.  The top sales executive simply refused to answer my questions with any weaknesses or competitive threats—not because he was withholding information.  He did not think there were any!  Scary?  You bet it was!  This story is still unfolding, but at last check sales have stopped growing and profits continue to fall in spite of making internal operating improvements. 

The principle here is that industry leaders nearly always fall victim to outsiders because they are so deeply invested in the know-how or technology that got them to the top, they cannot admit that it won’t last forever.

Upstart competitors upset the market and knock off the entrenched industry incumbents.  In addition to Christenson, Gary Hamel (Leading the Revolution. Harvard Business School Press, 2000) has made a crusade of pointing this out to large companies but with only modest results.  It is so hard to leave that safe, comfortable place, even when the risk of staying there is greater than the risk of leaving!

Somehow, it is always easier to work on “Protecting the Past” or “Perfecting the Present” instead of “Finding the Future”.  Don’t fall into that trap.  Disruptive technologies are coming.  Is it your industry’s time yet?  Now that you know it, what are you going to do about it?  Don’t bother to ask loyal, entrenched incumbents—they, too are the likely victims.  Find a bunch of rebels, or a small upstart company, and hire them or buy it.  Cisco learned this lesson and “Finds its Future” exactly this way.  Will you?=================

PS: Here’s a useful formula I discovered many years later:

PP*2≠FF: Protecting the Past, while Perfecting the Present does not equal Finding the Future.

================

HOW WE ADAPT AND EVOLVE WHEN FACED WITH DISRUPTIVE CHANGE, LARGELY DETERMINES OUR FATE—AND MUCH OF THIS IS WITHIN OUR CONTROL.

 

Will you spend your mental energy and resources (time, talent and treasure) on Protecting the Past, and/or Perfecting the Present, or are you Focused on Finding the Future?   That recurring theme will appear in future editions of THE ENTERPRISE.

 

STAY SAFE AND WELL…AND BE POSITIVE…

JOHN

---------------------------------------

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Thank you, John