Telling It Like It Is

THE ENTERPRISE--Mental Models & Habits

THE ENTERPRISE
"What do you think about that?" Or so goes the conversation starter. Perhaps you think a lot about "that"...or not at all. Much of what we do is influenced by our subconscious (or is it unconscious?), and much more is shaped by acquired habits or outside influences. I'll devote a couple of editions of THE ENTERPRISE to this topic, and here is the first one.

Mental models
A recent edition of US News & World Report contained a fascinating article entitled "Mysteries of the Mind" by Marianne Szegedyt-Maszak, which is all about the power of the "unconscious mind". http://www.usnews.com/usnews/issue/050228/health/28think.htm

This article particularly resonated with me because of a couple of books-one I am working on and one I read years ago: Influence--The Psychology of Persuasion by Robert B. Cialdini. (Quill, 1984 & 1993). (I'll make that one the topic of the future edition of THE ENTERPRISE.)

In the USNWR article, the author cites a U. of Wisconsin professor, Paul Whelan who says, "Most of what we do every minute of every day is unconscious….Life would be chaos if everything were on the forefront of our consciousness."

He is certainly right about that, although there are days when we feel like everything IS on the forefront of our consciousness. It isn't. Malcolm Gladwell has written two best-selling books about things that happen just outside our normal conscious range of thought-things that are wired into our brain's neural code.  According to cognitive neuroscientists, we are consciously aware of only about 5 percent of our cognitive activity, so most of our decisions, actions, emotions and behavior depends on 95 percent of our brain's activity that is beyond our conscious awareness.  This has huge implications in how we make both personal and business decisions.

USNWR goes on to cite examples of how our subconscious rules. The most dramatic one is the battle of Pepsi and Coke. Researchers at Baylor College of Medicine tested 67 committed Coke and Pepsi drinkers and in blind taste tests, they preferred Pepsi. When shown the company (can) logo before they drank, 3 of 4 preferred Coke! The Coke label created wild activity in the part of the subject's brains associated with memories and self-image; the Pepsi can, (while admittedly containing a better-tasting product) did not! 

What do you believe?
The question for you is "Do you believe what you see? Or do you see what you already believe." Tests have shown the latter to be more likely true. Therefore, the formation of what you "believe" is incredibly important in determining how you behave, act and what decisions you make. This is why I often "rant" about the influence of misleading media reports (which are also attacked in editorials in the same USNWR issue-links attached: "Why Television Makes Us Hostages"  http://www.usnews.com/usnews/issue/050228/opinion/28edit.htm & "Making Media Accountable." http://www.usnews.com/usnews/issue/050228/opinion/28john.htm ).

The Power of Habits
For now, I'll close by citing from the book I am working on, which has a working title of Condensed Experience. In it I write about habits and how powerful they are. Here is a small piece from the manuscript:

Habits:
--The worst thing about habits is that you can drop them and they don't break, they just bounce back (and that applies equally whether they are good habits or bad habits).
--The best thing about habits is that you can do a lot of good stuff without a lot of thought-automatically (which would normally be hard work!)

Habits are very powerful. They influence our lives in many ways -- eating, sleeping, talking, personal mannerisms, and on and on, even breathing. Our thought processes follow habits in many cases. If something happens, learned habits cause us to respond in predictable ways. For example: "Thank you." "You're welcome." "How are you doing?" "Fine, how are you?" Auto-response is very powerful, and usually occurs without much conscious thought.

These familiar phrases and responses are just elementary examples of how we habitually react in specific ways to certain situations or stimuli. Relying on habits becomes an automatic part of how we operate-good or bad. Habits often become powerful unconscious reactions. Doing things by habit allows them to happen very quickly, and can seem nearly effortless. 

Good habits can be learned; so can bad ones. Bad habits can be unlearned too, provided you replace them with good ones. Otherwise, in pressure situations, old habits and behaviors will emerge resulting in regressing or a total "relapse". Good habits can replace the bad ones. New habits can fill in the gaps, where no particular habit existed. Habits that have been found to be effective by others can be learned and adapted for your use, advantage, and convenience. 

Learn the right habits, the right ways of thinking about things and you can arrive quickly at solutions to problems, analyses of difficult situations, and ways of dealing with people that have been proven effective. It's almost like magic, because it happens with little conscious thought. Best of all, once these behaviors and/or actions have become habits, they will happen very quickly and with much less effort.
(The preceding was an excerpt from a forthcoming book by John Mariotti©2005)

I've already gone on too long, but there is much to be said about the power of "instinct" of "gut feel" and of the subconscious mind in how we behave in our businesses and in our lives. What we think about--or don't--and what we think is a powerful combination of influences and our unconscious reactions. We may not completely know which is working when, or why, but it is valuable to realize how we arrive so many of our decisions and actions.

My unconscious (or is it subconscious?) now tells me it's time to wrap this one up and move on. Until next week..."unconsciously yours truly..."

Best, John

THE ENTERPRISE--Retailing Upheaval

THE ENTERPRISE

A couple of weeks ago Kiplinger Forecasts led off its newsletter with a prediction of a dramatic retail shakeout that will significantly thin the ranks of store chains over the next 5 years. Kiplinger made a sweeping series of statements, synopsized below:

--Change will force thousands of retail suppliers to adapt and consumer products makers to merge. Landowners will redevelop malls for new uses; good space for small merchants will vanish. Hardest hit will be mid-tier department stores--squeezed out by discounters and luxury chains.

--Supermarket chains are getting pounded by discount food sellers such as Wal-Mart and Costco. Wal-Mart food sales are 10 times higher than those of many food chains, including A&P and Winn-Dixie. Also on the endangered list: All types of specialty outlets... consumer electronics, linens, cosmetics, auto parts, furniture. Discounters are extending their reach in these areas at a fast clip, as they have in toys.

--Up to a quarter of the current 47,000 centers may disappear. Every time a Lord & Taylor, or Sears disappears, its host mall loses a draw that generates vital customer traffic.

--In spite of this, total retail space will hold steady as discounters plan to open still more megastores, surrounded with small specialty stores. Defunct malls will become new office or residential projects with limited, related retail space.

--Suppliers will continue to feel pressure to cut prices and yet, endure less-secure buying relationships. Far fewer retailers will lock in shelf space for slotting fees. That'll cut costs for suppliers but increase volatility. 

--Suppliers of consumer products have to bulk up to gain clout in negotiating with big chains. The merger of Procter & Gamble and Gillette is just the beginning. Johnson & Johnson, Nestlé, GE and other big players may go shopping, too.

--Strong Internet sales growth is reinforcing this retail consolidation as demanding consumers find it easier to comparison shop before they actually shop to buy. Expect on-line sales to increase 20% annually and account for at least 10% of total retail sales in the next decade.

These statements, even if only partially/directionally accurate will have far-reaching implications for both suppliers to retail and to consumers. America has been over-retailed (by perhaps 1/3) for the past decade or two, possibly more. This has led to many of the retail store/chain consolidations and closings.

Two conclusions come immediately to mind.

1) If you sell to retailers, understand your retail customers' businesses, and if you are once removed from retailing, then study your customers' customer. Some retailers are fundamentally better positioned for growth and profitability. Learn their business model and strategies and consider them in your own.

2) This next one will not surprise anyone who knows what I believe in.  Choose your partners carefully. You will need to "choose sides" and align your business strategies and tactics with the retailers that will survive and prosper. If you do this, you will get dragged along in their growth. If not...well, you know the answer to that one...(Can anybody say Kmart?) 

I didn't say it would be easy, but it will be critical. A wise man once told me "there are only two kinds of problems in business--growth problems and liquidation problems." I know which kind I'd rather have.

Best, John

THE ENTERPRISE--BUDGET MANIA

THE ENTERPRISE

Happy Valentine's day from THE ENTERPRISE. Take the occasion to tell the ones you love, how much you love them. You can never do that too often.

The economists couldn't find much to talk about this week--that's good news. The Super Bowl is over, so now we can concentrate on the Michael Jackson trial, which rap group will win the Grammy for the most outrageous performance, and who will win the Grammys, Oscars and assorted other awards designed to glorify entertainers and make lucrative TV shows.

But hold it a minute. A lot is still going on. In Iraq real people are dying for freedom...both the Iraqis and US/Allies. Our Federal Budget deficit is still too large, but as you'll see if you scan the proposed budget, the only one courageous enough to tackle the big problems (entitlements) is (gasp!) President Bush--who has been widely blamed for the size of deficit. (By the way, repealing the Bush tax cuts for the richest 2% of Americans will NOT balance this budget--or even come close.)

(See Budget Chart below--from Kiplinger Forecasts, vol. 82, no. 6, Feb. 11, 2005)
Note: The Iraq military campaign could add $100 Billion more to defense spending in 2005-2006.

Where would you cut to get the Federal budget under control? And how would you do it? And if you could stimulate the economy to grow revenues and help reduce the deficit that way--why not? If we don't cut the rate of growth of entitlements, can anyone ever get this budget under control?

Vilfredo Pareto taught us centuries ago that in most instances, 80% of the results are caused by 20% of the events--the old 80/20 rule. It is little different now. We can argue about a billion here and a billion there, but as my old Illinois Senator Everett Dirksen once said, "a tenth of a billion here and a tenth of a billion there and pretty soon you are talking about some real money!" Still, 70% of the $2.5 trillion budget is concentrated in the top 6 line items, four of which are self-sustaining, continuously growing entitlement programs.

That doesn't mean we should continue to fund many of the ridiculous pork barrel projects sponsored by virtually every legislator--we shouldn't. These show up in the bottom 2/3 of the line items. But arguing over the little numbers at the bottom of the list fails to address the really serious issues that exist at the top of the list.

As every good manager and executive knows, budgeting is a bottom-up and then top -down process. Part of that top-down is to sort the revenues and expenses in descending order of their annual magnitude...and then work them all. Work diligently on the big ones and squeeze the (pork) fat out of the small ones by looking for the unjustifiable waste.

Most important of all, don't lose track of the forest and the trees. Let's hope our government doesn't either.

Best, John

THE ENTERPRISE--NEED HELP? ASK FOR IT!!

THE ENTERPRISE

A business contact once told me there are five things people just don't say--especially when they should. I asked what these five things were and he told me:
1. Please.
2. Thank you.
3. I don't understand--please explain.
4. Would you please help me?
5. I'm sorry, I was wrong.

The first two are simple good manners. It seems these are taught and learned at early childhood--or not. The next two require that the person saying them expose what might be considered a weakness. I'll expand more on these two. The last one may be the hardest of all to say, and perhaps the most important one--when it is appropriate.

Unfortunately, too many people think all of the last three are phrases to be avoided. Perhaps this is like male drivers who will never admit they are lost, even then they don't have a clue where they are or how to get where they want to go. There is a sort of macho pride to not admit being lost--or not "understanding something"--or "needing help."

Get help--from good partners...
I'd like to take a shot at explaining why asking for help is often the smartest thing a person can do. No one can be smart enough to be good at everything they encounter. This is why I have said repeatedly (in 3 books and countless articles) everyone needs "partners" and whoever chooses the best partners, usually wins. But how to choose a partner is a difficult matter. Most people feel better if there is a first-hand referral involved, and that usually reduces the chance of making a really bad choice.

There are many people I have come to know over the past 30+ years who have valuable education, training or life experience that can be of immense benefit to others--if only someone will ask them for help. Some of the best companies I know take pride in getting help. These companies ask the best and most talented people they can find and benefit greatly from the help they receive. After all, no one has to accept help that is offered or take the advice that is given. The wise companies take that advice and improve on it.

After having this discussion with several of my friends and associates last year, I decided to add a "Need Help?" section to my web site. So far a small, but talented group has been invited to be listed. I tried to avoid duplicating the disciplines or types of help offered, yet provide a source of "help" in all of the primary business fields. There are just 1-2 remaining to be covered. (Of course I am always ready to do what I can to help.)

Now is the time....
This is a perfect time in the business cycle to tackle new growth initiatives. It is also a risky time. It is an era of global competition, while material costs are escalating rapidly and profit expectations are higher than ever. I am a firm believer that change represents opportunity and those who capitalize on change gain a competitive advantage. That means getting help, right now, to capitalize on change--can be a very wise move.

I am not a fan of consultants that stay around too long. That usually means some of the (client's) management is not competent and should be replaced. On the other hand, a bit of sage advice from a experienced professional can only cost a few thousand dollars and save hundreds of thousands of dollars. If that advice results in a successful new initiative, it can even be worth millions of dollars. (I recall one of my engagements several years ago that I billed at $10,000 + expenses and because the client followed my advice--implemented by most of the incumbent management, it saved nearly a million dollars a month! I wish I had been on a percentage deal on that one!

I'll close with this thought. If you are in a situation where you... or a company you are involved with... needs help, when are you going to ask for it? And if you are in the business of giving help, hand this email to your prospective "clients"--because they all will need help at one time or another. Most of them are just too proud to ask for it.