“Sales remain anemic, and Gap needs to get people excited about its clothes again even as consumers pull back and the competition heats up. The man largely responsible for making that happen is design chief Patrick Robinson... Since his appointment 14 months ago, Robinson, 41, has pushed Gap to reconnect with its roots: classic American apparel with a modern twist...
“When Gary Muto, who oversees adult apparel for Gap, opened Robinson's portfolio, he saw what he was looking for: the ability to create a cohesive look for everything from belt buckles to blouses, a skill Gap had lost in recent years. ‘If you look at his work,’ says Muto, ‘there is a consistent handwriting and point of view.’ Beyond bringing clarity to the brand, Gap's aim is to allow shoppers to mix and match garments and come up with different looks that make them feel individual. The hope, of course, is that Jane or Joe Consumer will buy several items per visit.
“Beyond that, Robinson had a pretty good idea of what ailed Gap. It was targeting too young a customer (18- to 24-year-olds), stocking poor quality clothes, and imitating Uniqlo, H&M, and Zara, which have transformed the industry with their focus on fast fashion -- rapid-fire mini-trends. ‘It wasn't being Gap,’ says Robinson, who was determined to get off the trend treadmill and revive the signature classics that he wore growing up in California...
“Gap, under former Disney executive Paul Pressler, relied heavily on focus groups and spent little time in the stores. Early on, Gap North American President Marka Hansen encouraged Robinson to have breakfast with store managers... ‘It was eye-opening,’ says Robinson of the meeting with store managers. ‘They are the only people who don't have a motive except to sell product. I've said to every designer, ‘Get into the stores and talk to the salespeople’.’”
(“A Fashion Guy Gets Gap Back To Basics; Charged with reviving the ailing brand, Patrick Robinson is putting a modern spin on classics.” Jane Porter. Business Week: August 18, 2008. pg. 56)
IT CERTAINLY DOESN'T TAKE A GENIUS to know who they are, what they do best, who they serve, and what not to do.
Focus on the primary questions: Who are we? Why? What is our core? What makes us distinctive? What are we good at that others will value? What do our workers see? And, how does our customer feel?
And remember, imitation may be flattering, but it surely makes for poor strategy.
That's it.
It's Not Rocket Science
Your Attention Please
“Swiss banking giant UBS AG has for years trumpeted the idea that melding an aggressive investment bank and wealthy-client private bank would create a revenue machine. On Tuesday, UBS conceded it had all been a bad idea.
“In an effort to scale back ambitions and take on less risk, UBS says it now plans to apply a little tough love to its investment bank...
“The moves are another blow to the cause of ‘universal banking,’ a concept that came in vogue during the 1990s positing that banks could cram a range of different products and services under one, cheaply-funded, banking umbrella. The idea has crumbled amid the credit- markets crunch, leaving the likes of Citigroup and UBS grasping for new directions.
“While UBS will continue pushing the private bank and investment bank to share clients, internally their separation was seen as a dramatic and disappointing capitulation.
“Chairman Peter Kurer says the old structure was the wrong one to run a big, global bank in Zurich, London and New York.
“‘Agility -- we want to get that back,’ Mr. Kurer said Tuesday.”
(“UBS Gets Tough on Its Investment Bank In a Retreat From 'Universal' Concept.” Carrick Mollenkamp and Katharina Bart. Wall Street Journal: August 13, 2008. pg. C.1)
FOCUS -- What do you know best? Focus -- What do you do best? Focus -- Who can you serve best?
There is little room for those who are not at their best. Without focus, the world will eat you up.
Get rid of the vogue -- stop watching and listening to others -- and learn the agility of focus.
It's So Easy
“Ronald E. Hermance Jr. is something of an oddity these days. He is a banker who has not been battered by the credit crisis.
“Hudson City Savings Bank, where he has served as chairman and chief executive for 11 years, never issued a subprime mortgage or sold a collateralized debt obligation. It did not hopscotch into faster-growing markets offering easy money, nor did it plunge into making risky construction loans...
“‘It seems dull and boring,’ Mr. Hermance said, flashing a grin in a recent interview. ‘But it happens to have made a lot of money over the past year.’ ...
“As many of the nation's lenders widened their loan offerings, Hudson City stuck to collecting deposits and issuing mortgages, preferring to operate as a mom-and-pop boutique instead of a financial department store. It continued to screen borrowers carefully, since it planned to hold their loans instead of selling them to outside investors. And it steered clear of complex investments its executives could not value...
“Now, the bank that flew under the radar screen … has been on a tear. Shares have risen more than 51 percent since the credit crisis began last August …
“‘They have stuck to their markets. They have stuck to their loan product, and they didn't chase,’ said Tom Alonso, a banking analyst at Fox-Pitt Kelton. ‘Now, they are sort of the last man standing.’ …
“Founded 140 years ago by immigrants in Jersey City, N.J., the bank never strayed from its roots as a community lender. Mr. Hermance is fond of describing Hudson City as an old-fashioned bank…
“Hudson City [has] remained focused with a simple business model... And it kept its costs more than 50 percent lower than its big banking peers by offering fewer products and frills at its branches, while maintaining a relatively small back-office staff.
“‘This is not a black box,’ Mr. Hermance said. ‘This is a glass box. You see how everything operates.’”
(“Caution Pays For a Lender In New Jersey.” Eric Dash. The New York Times: August 14, 2008. pg. 1)
A CLEAR MIND and a steady heart make everything so much simpler. Simplicity separates the wheat from the chaff, and demystifies the way things work. Distractions and foolish enticements are eliminated. And focus becomes a real power.
What are the two or three factors upon which success hinges in your field? Can you explain it clearly to your grandmother in one sentence?
What is the core of delivering value to your customers? to your employees?
Sell stuff for more than it cost you.
Greater Fools?
“In Charles Dickens's ‘Great Expectations,’ Miss Havisham lives a life stopped in time by her canceled wedding. Floating around her house in a tattered wedding dress, with a marital feast decomposing on the table, she pretends that life never changed.
“Miss Havisham may well be the model for companies that launched quixotic, failed bids to take over rivals. The executives of two of those companies -- Microsoft Corp. and Blockbuster Inc. -- have described a future in which they gained all the advantages of an acquisition without actually doing one.
“Blockbuster Chief Executive Jim Keyes argued to investors on Thursday that his company is just as well off after dropping its $1.35 billion bid for Circuit City Stores Inc. as it would have been if it had done the deal...
“Of course, that result must only make investors wonder why Blockbuster offered a hefty 58% premium for Circuit City back in April, with no knowledge of its target's finances...
“Even as Blockbuster barreled forward, the market dragged down Blockbuster's stock. Investors feared a big acquisition would be a distraction to Blockbuster's turnaround, take the video-rental company far afield of its business model and use up financing that could be devoted to other purposes.
“The same pattern could be detected in Microsoft's bid for Yahoo Inc.
“The unsolicited offer… defied any predictable takeover strategy. Microsoft argued that an acquisition of Yahoo would improve its standing in the search business.
“Investors weren't quite so sure about the deal, which would have been a radical strategic move for Microsoft.
“Microsoft's shares sank on the fear that a large acquisition with a lightly thought-out integration would only drag down the software giant and denude its strong cash position.
“When Microsoft finally said it would drop its bid, it disavowed its aggressive pursuit and adopted a ‘Yahoo who?’ stance. ‘Yahoo was never the strategy we were pursuing,’ Chief Executive Steve Ballmer said.”
(“Deal Journal / Breaking Insight From WSJ.com” Heidi N. Moore. Wall Street Journal: August 11, 2008. pg. C.3)
DISINGENUOUS, dissembling, dissimulating -- look them up in the dictionary, and you'll see pictures of Jim Keyes, Steve Ballmer, and the whole gang.
Say what you mean; mean what you say. Or, try to have it both ways. We are taken for fools.
Idiot wind, blowing through the buttons of our coats,
Blowing through the letters that we wrote.
Idiot wind, blowing through the dust upon our shelves,
We're idiots, babe.
It's a wonder we can even feed ourselves.
(Dylan)
Icarus, Einstein & Commitments
“In 1991, General Motors posted a then-amazing, full-year loss of $4.45 billion, and 10 months later CEO Robert Stempel was out. Last week, GM reported a $15.5 billion loss for just one quarter, and GM's board this week reaffirmed its support for CEO Rick Wagoner. GM's loss easily eclipsed the quarterly loss of $8.7 billion announced by Ford just a week earlier. As for Chrysler, pick a number. The company is owned by private-equity firm Cerberus Capital Management, and thus its results aren't public…
“Should Detroit have seen this disaster coming? Yes. Gasoline prices have been climbing steadily for more than three years now...
“But the Detroit Three stuck with a business model based on leasing SUVs for way too long...
“Let's acknowledge that it's human nature to resist changing behavior that has been successful, as SUVs were for two decades. If Detroit is Exhibit A, then Exhibit B surely must be the newspaper and magazine industry. It has been equally clear for most of this decade that the business models of print publications, which are based on selling advertising, were becoming as obsolete as big SUVs…
“Not many journalists saw this sea change coming, much less acted on it, in their own business. The stock of McClatchy, one of the nation's largest newspaper chains, has plunged from nearly $75 a share to around $4 a share in the last three years, a 94% collapse that exceeds even the 89% nosedive in GM's stock since the beginning of this decade…
“Detroit's fight for survival doesn't threaten economic doomsday for America, but it's incredibly sad nonetheless. The three companies, and General Motors especially, once symbolized the bedrock strength of American capitalism….
“Motor City residents must be regretting the message on a T-shirt popular in their town for years – ‘Detroit. Where the Weak are Killed and Eaten.’ Let's hope it wasn't a prophecy about General Motors, Ford and Chrysler.”
(“Can America's Auto Makers Survive?” Paul Ingrassia. Wall Street Journal: August 7, 2008. pg. A.13)
ICARUS LEARNED TOO LATE that the very thing that allows us to soar can become the cause of our downfall and destruction.
Einstein noted that doing the same thing over and over again and expecting different results is insanity.
Liberation from a failing course of commitments requires a paradigm shift away from risk aversion, the enshrinement of consistency, and a culture of defensiveness toward trust in experimentation and learning that challenge orthodoxy. It requires genuine, reality-based humility.
Strategy's Heart & Soul
“There's no question what Wall Street thinks about Motorola's new co-chief executive, Sanjay Jha. The communications conglomerate's shares jumped 11% to nearly $10 on Aug. 4 after announcing the former Qualcomm chief operating officer would take the reins of Motorola's mobile-phone business. Jha brings loads of industry experience and extensive familiarity with wireless investors, ending the Schaumburg, Ill. company's five-month search for an executive to head the troubled cell-phone unit. ‘He is the perfect guy for Motorola,’ says Mark McKechnie, an analyst with American Technology Research... ‘If anyone can turn this handset division around, it's Sanjay Jha.’
“Still, for all of Jha's experience, he faces one huge challenge: Motorola's corporate culture. For the cell-phone unit to recover, Jha will have to fully cleanse Motorola of its sluggish, bureaucratic ways and teach a company that has long let engineers drive product development to think more like marketers, in tune with consumer tastes. It's a challenge that has proved insurmountable for several top Motorola executives…
“Every CEO who has run the company since Gary Tooker took over in 1993 has attempted to infuse the company with more entrepreneurial DNA. Under Edward Zander, who left in December, Motorola managed to hasten the production of a new slim phone, which became the spectacularly successful Razr. But leadership could not keep pace when consumers turned their attention away from hardware to an increasing focus on the software that bestows new functionality on phones...
“Jha, an engineer by training, sounds hesitant to overhaul the company's deep-rooted engineering culture, however. ‘I think the engineering culture is a tremendous asset to Motorola,’ he told BusinessWeek in an interview. ‘I think the challenge is to make that culture stay in tune with the marketplace. When it's a problem is when it gets disconnected with the marketplace. And my job is to keep it connected.’”
(“Motorola: The New CEO's Real Challenge; Co-CEO Sanjay Jha has strong experience in wireless, but his most important task is dismantling the mobile-phone unit's bureaucratic culture.” Roger O. Crockett and Olga Kharif. businessweek.com: August 5, 2008)
ALL ACTION, ALL CHANGE, all strategy comes from our foundational beliefs about the way things are and the way things work, and from our values and priorities.
When shared norms exist around these beliefs and values, there will be either inertia or potency, recalcitrance or revolution, momentum or initiative.
But it all begins in the heart and soul of the firm, begging the question, "Is the CEO in touch?"
Perceptions and Icarus
“Investors have sharply cut the stock price of Whole Foods Market Inc. in the past year, pushing shares into the low $20s from more than $50…
“A big part of the company's problems stem from its success. After branding itself as a high-end shopping experience, it's now contending with an apparent misperception among consumers that it's expensive.
“While Whole Foods is ostensibly a consumer staple (a company that performs in a down economy because consumers must shop for food), the reality is that ‘the shares actually trade like a consumer discretionary stock,’ says Mark Miller, at William Blair & Co. Stock analysts who have done apples-to-apple comparisons report that Whole Foods, despite its image, is competitive on prices. The chain doesn't sell the down-market brands its peer do, but where products overlap, and with its well-regarded private-label brand, Whole Foods is often as a good a deal or better than traditional grocers. But shoppers often stuff their carts with pricier items that fatten their bills, leading to the impression that the chain is a luxury.”
(“Ahead of the Tape.” Jeff D. Opdyke. Wall Street Journal: August 5, 2008. pg. C.1)
THE VERY THING that allows you to soar can become the cause of your downfall and demise...
...especially to the degree that our world of action is founded upon a world of decisions founded in a universe of perceptions, images and impressions.
We weave our realities as our eyes, minds and hearts filter what is being filtered by others' eyes, minds and hearts.
The New Ball & Chain
“Should a [CEO] use a computer? … Are there jobs that are too important for the office holder to be spending the day deleting spam or closing pop-up windows in a browser? …
“It's a fair question to ask: Can someone who never touches a computer truly be in touch with what is happening in the world? The computer industry has worked very hard over the past few decades to cause us to suspect as much. But what about the opposite question: Does anyone who spends all day in front of a PC, forging a river of data posing as information, have any time to think?
“A group of technology reporters once received the CEO of a midsize, low-tech company eager to impress his listeners with his connectedness. He described his day as one long session checking emails and news alerts, save for the occasional interruption of a staff meeting or a sales call.
“All this was related with pride, as though it was what modern executives were doing. His listeners, though, were struck by how he seemed to have no time left in the day to think, which was surely why he had yet to realize that he was spending his day consuming the information version of junk food…
“A computer, far from making you more productive, instead loads you down with things to do, and it's important for the machine to know who is boss…
“For a [CEO], a computer can be a … distraction. Sure, he could spend five minutes reading an especially insightful blog post from one of his core constituencies. But it would be better for him to be spending the time having coffee with the person thinking the thoughts that the world will be blogging about a week or a month hence.
“With the world at his beck and call, a [CEO] is one of the few people lucky enough to be able to learn more off-line than he would chained to a keyboard.”
(“Technology; Portals: Note to Next President: Avoid Computers.” Lee Gomes. Wall Street Journal: July 30, 2008. pg. B.6)
LOOK 'EM IN THE EYE. Listen to them breathe. See them think. Hear their hearts beating. Get in touch. Connect.
Connected strategists turn off the workplace version of the boob tube, leave their offices behind, and listen, watch and connect on the shop floor and out in the field.
That's the real world; that's the real deal. There is real insight.
My World, The World
“Many newspaper readers, recalling what they read at the beginning of this year, must be rubbing their eyes. How can the economy still be functioning despite the perfect storm of recession and housing collapse that was supposed to engulf it?
“Although markets are volatile and segments of the country are having a hard time, the national output is up, not down, this year. How has the economy pulled this off? Is there something the pessimists were missing?
“The answer is yes, and here's why. People tend to anthropomorphize the world around them, and not just in economics. We look at the outside world and assume that it is governed in the same way as our own lives…
“The same parochial streak in human nature is rife in economic commentary. In the context of a household or a business, debt is a burden and can become a threat. But for society as a whole, debt finance is a prime means of capitalizing production and growth.
“It's extraordinary, then, that in national debate the narrow view drowns out the broad…
“What's excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively. Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits…
“We shouldn't expect forecasters to shrug off the depressing effects of what's happening in their own back yards. This is human nature. We just need to keep things in perspective when we listen to them. A more objective diagnosis is especially needed during an election year, in which many unfounded fears are broadcast and amplified by the media…
“Failure to recognize this endangers the mental health of our society. We create a far bigger tragedy when we lose heart, change the rules of the game, or act recklessly with quick fixes.”
(“Economics as Metaphor.” David Ranson. Wall Street Journal: July 25, 2008. pg. A.15)
EYES, MIND, HEART, actions. That is the universal pattern of managing strategically.
Objective business and social realities are constructed out of millions of perceptions, interpretations and feelings weaving together through time. So, the way things are may not match the way things ought to be; but still, that is indeed the way things are.
Our real challenge then is to remain clear-eyed, open-minded, and true-hearted through the bobbing and weaving of our times.
Perception 1, Reality 2
“Business confidence is falling but at a less alarming rate than previously, according to the latest global business barometer, a quarterly survey of more than 1,000 executives conducted for The Economist by the Economist Intelligence Unit, its sister company. The overall confidence index, which measures the balance of bosses who think business will pick up over those who expect it to worsen, was still fairly negative. Yet most industries saw only a small decline in confidence, and the mood of executives in entertainment, media and publishing, and in health care has lifted a little. North and Latin America were the only regions to see an overall improvement in executive mood in the past three months.”
(“Global business barometer.” The Economist: July 26, 2008. pg. 53)
UNDERSTANDING that perception is reality, then what is the reality of our perceptions?
(check out tomorrow's posting for more... )
Hire, then Higher than Higher Ed
“Indian industry isn't relying on India's education system to gain an edge. Indian industry has developed a surrogate education system that can take workers with weak educational backgrounds and turn them into world-class R&D specialists…
“India graduates around 200,000 engineers a year, but the quality of the students varies widely. India's main tech trade group, NASSCOM, says that only half of these new graduates are employable…
“Yet… India is rapidly becoming a global R&D hub in several industries. Its scientists are doing sophisticated drug discovery for Big Pharma. Its engineers are designing key components of jetliners for Boeing and Airbus, [and] developing next-generation networking equipment for companies like Cisco Systems…
“In all of the companies we studied, we found that the intense focus by senior corporate executives on implementing companywide staff-development initiatives caused dramatic improvements in productivity and performance.
“Workforce development helps to explain, for example, how IT service firms have been able to increase billing rates and productivity levels and maintain high levels of growth and profitability despite skilled-talent shortages, rising salaries, falling exchange rates, and other challenges. Employee development similarly explains how companies in India are able to hire bright but largely inexperienced talent to successfully engage in R&D and other innovation.
“The achievements of companies in India show that employee investment, development, and empowerment are central and critical means to building and sustaining long-term competitiveness and innovative capacities in a global knowledge economy. The U.S. can learn and incorporate these lessons from India as it rethinks how to train and develop its workforce to maintain its global competitive edge. U.S. companies have long played the guru. Perhaps the time has come for the guru to learn from a disciple.”
(“What the U.S. Can Learn from Indian R&D; Engineering companies in India play a leading role in educating their research employees, a practice the U.S. can adopt to help keep its global competitive edge.” Vivek Wadhwa. BusinessWeek.com: July 24, 2008)
IF PEOPLE ARE INDEED potentially your greatest asset and your greatest potential liability, then what is your best investment?
Private enterprise has always out-educated educational institutions. So let's not lose our grip on the future by loosening our grasp on where the future really lies.
