Making Changes Stick

These are times of change. The company you are working for right now is not the same as it was eighteen months ago. It probably has changed quite a bit with all macro economic swings that are going on around the world.
I had very good mentors in times of change. Based on what I have learned from them, here is my advice for you who is trying to manage a team in volatile times:

Give People a True North
Drive the change process by providing a clear vision. let people know where they fit (if they fit!) in the organization. Keep the message simple and clear. Even if your organization does not have a vision, build a vision for your department and stick to it. You and your team will be rewarded by results, not by speculating about the future. Having a clear direction will help you get better results.

Take the Context into Consideration
Understand the situation you are in. Some things are not worth fighting for, but others are! Your context will say the leadership style you will need to use. For instance, if things are slowing down, maybe it is time to revisit that shelved improvement project you were dying to implement, but never had time to deliver it. Or, if your ship is sinking, maybe it is time for quick and assertive action, to save whatever is left from your department. In any way, remember to consider the context you are in.

Communicate, Communicate, and Comunicate!
People may not absorb all the information you pass them in one go. It will make an enormous difference if you repeat the message you are conveying to people. Remember that things are changing and consider recurring meetings to address any gaps of understanding your staff may have. It is better to know through you, rather letting them find out information in the water cooler. In times of change there is no such a thing as over communication.

Be Remarkable
Be human. Understand that on the other side there is a living being. Everyone has a place in the world and is capable of something. Help people indentify their new place in the organization and contribute to the new direction. They will appreciate your help on that.

In my professional life, I've worked with people I consider true leaders of change. I will never forget them. It is your chance to inspire your team and to effectively change your organization. Go for it!

Who moved my market?

Often I hear interesting stories while working in the business trenches. These stories teach me a lot about the art of doing business. Here is one that I like in particular.

Karl had an idea and decided to create a business with it. He had lots of professional experience and a long career working for many large organizations. He thought it was time to sharpen up his entrepreneurial skills and start his business. Looking at the right places, he found useful information that allowed him to build his business plan.

The elaboration of the plan wasn't easy; soon he realized that he needed some deep understanding of his competitive landscape. After spending a couple months researching his target market, Karl thought he finally got all the information required. With that, he was able to derive his financial analysis, forecast sales and staffing requirements.

Time passed and he suddenly got very busy setting up his venture. If finding the right people was a difficult task, never mind convincing them about joining his business initiative. Getting money to start and stay in business was also a time consuming effort. But he was positive and overcame these obstacles one by one.

A year later, things were starting to happen and, finally, the first version of his product was almost ready. So much effort and time was invested to get to this point. Now it was time to go out to the streets and get the product sold.

Karl had an unpleasant surprise. In reality his market research done many months ago was outdated. Times have changed dramatically and the product he designed wasn't in demand any more. His market had evolved and moved.

Speaking to an industry advisor, he learned that another company had entered the market three months before. Using an aggressive positioning strategy his competitor had captured many of his potential customers. Karl was shocked with the news.

While working on his product, he didn't realize that his market was shifting and that new competitors were entering the market. It was too late to back up and chose a different approach. Had he leaned about the competitive landscape earlier, he could have adapt his strategy and competed head to head in his market.

Watching Your Market
In a recent conversation with Karl, he provided me useful advice to avoid his situation:

• Always check your plan against reality: don't disconnect yourself from the market place and this may cost you your business.
• Use an agile product development cycle: don't wait to until you have a final product to get feedback from potential customers, interact with them as you go.
• Have good advisors: talk to people who have been around your industry for a while. They will tell you what happened in past economic slowdowns and help you get prepared.

Indeed, markets move with time. Revisit your business plan occasionally. Verify if your market has changed. Aligning your strategy with your target market is the best investment for your venture.

Interview with Hal Varian on how the Web challenges managers

The McKensey Quarterly brings an interview with Hal Varian, chief economist at Google, providing his views on a more and more integrated and networked world. Varian mentioned that "Managers need to be able to access and understand the data themselves. You always have this problem of being surrounded by “yes men” and people who want to predigest everything for you. In the old organization, you had to have this whole army of people digesting information to be able to feed it to the decision maker at the top. But that’s not the way it works anymore: the information can be available across the ranks, to everyone in the organization." Indeed, in a positive way, I believe large amounts of data are flowing to managers in corner offices and to their staff located around the world. Many knowledge workers are celebrating that they are finally getting access to data which will help them achieve their goals. Others are just confused with the fact that they are becoming statisticians, a subtle new role they thought they never had before. Hal Varian's interview is definitely worth watching.

Selling like Water

Last week, while traveling in the interior of Minas Gerais, Brazil, I stopped at a gas station to refuel my car and get something to drink. While waiting in line, a person in front of me asked for a bottle of carbonated water. The owner of the gas station promptly put a bottle of Bonaqua on the counter. Then, the person replied, "Oh, sorry. Could you please give me a bottle of H2O instead?" The owner politely replaced the bottle of water with the other product, as requested. Looking at the bottle, I asked the person if this was a new type of soft drink. She answered, "It's not pop, it's water with a bit of lime in it... I hate pop. I would never buy this if it was pop!" I was astonished...

Positioning: Carbonated Water or Soft Drink?
I was surprised to learn that Pepsi had introduced a new type of soft drink called H2OH! in the Brazilian market. It seems to be a diluted version of Seven Up positioned as flavoured water instead of carbonated beverage. In my opinion, Pepsi just provided me with a great example of how to smartly position a product in a jam-packed market place.

Instead of fighting the competition and adding yet another pop in a crowded market, Pepsi called its new product “H2 Wow!” (direct translation of water in Portuguese). A superb move because selling water to locals is much easier than competing against Coke's Sprite, the absolute market leader in the carbonated lime juice segment in Brazil. Indeed, the idea seems to be working quite well: even people who are not a fan of carbonated drinks are buying this new soft drink! (I mean water!)

Product Positioning Matters
If your products are often mistaken for a competitor's products or you find yourself in an endless price war with your competition, you may want to revisit your positioning strategy. Clear positioning helps you differentiate your offerings from other products in the market. Investing in a sound positioning strategy not only helps you capture the right market segments for your products, but also helps your customers understand that your product offering goes beyond price and features.

While creating a positioning strategy, you need to contemplate some important aspects. In Pepsi's case, for instance, they may have decided to position the product as flavoured water and then used clear bottles to mimic sparking water. In addition, they may have considered the potential for bottled water customers to try the new product and expand their sales potential by adding a new type of customer to their target market – bottled water drinkers. On the other hand, Pepsi may have considered the implications of calling something “H2O” when it is, in fact, not water. Evidence of that possibility can be seen in the number of notes in small print on the label. In my opinion, the end result of this positioning strategy worked really well.

Perception is Everything
A common misconception when dealing with positioning is to focus solely on product features and to compare them to the competition. The problem with this approach is that when you position your product against a competitor’s products, your product doesn’t have its own set of perceived values. In the end, you are positioning yourself in the same workspace as your competition and losing the ability to differentiate yourself.

Creating a positioning strategy has more to do with identifying how your product is perceived by your customers and less to do with the actual product features. For instance, your customers may perceive your products as easy to use regardless of how complicated and complex your features are. If you resolve problems quickly, you can actively change how your product's complexity is perceived. In fact, customers may prefer working with you because they trust you to help them when problems arise, an inherent characteristic of your brand that is positively perceived. With that reputation, you gain an opportunity to provide something intrinsically different from anything else in the market.

Take Control of your Marketing Positioning Strategy
Take a look at your products and determine if they are more like cola or more like water. Instead of letting your customers decide by themselves, actively plan your marketing campaign by making sure you have a clear positioning strategy. Help your customers understand what your product does, but, go even further and help them understand what your product is. I assure you that your sales team will thank you.

Happy New Year!

Hi Folks,

Happy New Year everyone. I wish everyone a great and prosperous 2009 with lots of new business ideas and accomplishments!

I would like to take this opportunity to thank everyone who has been helping me shape this blog. It is hard to believe that this initiative started with a small posting and is finally taking full shape now. I never thought I would make it this far, but your emails with feedback and comments have been a great source of motivation. You guys are awesome! I must say this has been a great experience and I enjoying writing every word here. I am constantly looking for stories from the trenches that may help you one way or another.

Happy 2009!

R. Caetano

Crisis? What Crisis?

Real crises are rarely anticipated. When newspapers start reporting that a crisis is imminent, we are probably already in the middle of it. At that point, many people panic and, acting in fear, make illogical decisions. But, is it possible to anticipate a crisis and be more prepared to deal with it?

Of Course I Knew It!
As soon as the word “crisis” is out, post-mortem specialists flock to the airwaves to brag about how they had anticipated the critical situation and analyze the current state of affairs with the advantage of hindsight. Interestingly enough, these specialists were never brave enough to speak up before the milk had already started spilling.

Yet, a rare number of trendsetters use their unique skills to anticipate events and put their reputation on the line. They suggest the direction of what is coming next. It takes courage to guess where the current situation is heading, and even more courage to say it out loud in public. Not many people are willing to risk being wrong.

Developing skills to understand the current context and interpret trends is a survival skill for strategists. Knowing how to do it well can give you a competitive edge and help you position yourself as a trendsetter.

Learning to Guess
A long-time friend of mine, called Alan, is good at noticing the early signs that a critical time is approaching and predicting the mood in his industry. Alan has a large cattle ranch in the Brazilian farmland's interior. His business is constantly exposed to ups and downs in the harsh reality of the agriculture commodities market in a developing country. But, his business is thriving. Alan is able to time the market in a way that none of his competitors have been able to. With that ability, he grew his business into one of the most profitable operations in the entire region.

One day we were sitting on the "veranda" of his farm, and Alan explained his approach to me. While other farmers were looking at the daily commodity news provided by BOVESPA on the Cattle Channel [yes, Brazil has a cable channel that discusses cows and bulls 24 hours a day!], he looked at more noticeable signs of change in his local market. In other words, he used local events to help him predict the direction of his regional market.

For instance, when passing by a restaurant where truck drivers usually gather to chat and wait for business, he would note the parking lot. A large number of empty parking stalls meant that drivers were busy transporting livestock. Then, calling on his expertise about the cyclical nature of the cattle market, he would know if people were buying or selling cattle. With that information, he could determine if it was time to join the stampede of farmers selling cattle or wait until the other farmers’ cattle were sold and then leverage better prices with the sudden scarcity in the local market. At other times, he would drive 100 km to a regional slaughter house, just to see how many times his conversation with the owner would be interrupted by the phone ringing with other farmers trying to sell their cattle stocks. A flood of calls in the owner’s desk meant farmers were desperate to sell and meat prices were about to take at hit. This information would help him understand the level of influence of stockyard owners in his market.

Alan’s message is clear: to identify a trend, you must follow your local market first and pay attention to what is going on around you. For him, the information reported on the Cattle Channel just indicated the general trend, which would influence other cattle ranchers. He preferred to observe the local trends, which were more relevant to his situation. Understanding the slight differences in his local market provided a major competitive advantage for his business, making him a trendsetter instead of trend follower.

No Guess Work
Most likely, you don’t deal with cattle on a daily basis. But, Alan’s lesson can be applied to other situations. As I was picking up a newspaper at a coffee shop in Vancouver Yaletown about a year ago, I learned from the barista that Starbucks was laying off a few hundred people. "Slow sales" mentioned another person behind me in the lineup. This news was an early sign that the economy was slowing down. People get scared when they think they might run out of money, and they start cutting back their spending here and there. Instead of going out for a 10am coffee at Starbucks, they stick to the free-for-all black tar (i.e., office coffee) at the office. This trend towards spending less money on disposable goods was an early sign that the economy was changing and slowing down.

There is no empirical evidence to prove that a slowdown in Starbuck’s coffee sales indicates a coming recession. That is not my point. What I am suggesting is that, as a strategist, you need to develop your ability to observe the events around you and your industry and make educated guesses about what they mean. Amazingly the more you do it, the better you get at it. Observing the world with curious eyes will help you have out-of-the-box insights and predict trends in your industry with more accuracy.

Dealing with This Unforeseen Crisis
Many people in Canada are just starting to realize that the American credit crisis is already affecting them. The worst part is that they are learning this through CNN and through the slow down in their industries. They completely missed this big elephant coming their way.

Changing course appropriately is essential in these types of situations, but knowing which direction to go is even more important. The ability to adapt and move in the right direction can save your organization big bucks in times of crisis. If you haven’t started looking for the right direction yet, it is better to start now than to keep waiting.

Bad times also have opportunities. In bad times, people are more conscious about their choices. They may eat less filet mignon, but they may also eat more beef ribs and port chops. They may sell their gas guzzling SUV and buy a more fuel efficient car. Likewise, companies may give up expensive products and use products that reduce their costs and improve their efficiency. Thus, you should keep your eyes on what your customers are asking for and customize your strategy for the current times. Give up old formulas that don’t work in the current context.

In times of crisis, learn to guess, be courageous, and set your own direction! This is my advice.

Build a Strong Strategy, Go Beyond Numbers!

“I need to improve the profitability of my division!” I often receive this request from customers who want to improve the results of their organizations. However, doing that is more complicated than it seems.

Beyond Numbers
Using a simplistic view of how business works, you may decide to focus solely on numbers to improve the profitability of your company. You may argue that there are only a few ways to improve the numbers. You can increase revenues (sell more), decrease expenses (cut costs), or operate more efficiently (get a better bang for the buck). However, this may not be the whole story. To truly have a winning strategy, you have to dig a bit further and understand the underlying drivers of profitability.

Beyond Customers
You can improve profitability by looking externally to find sources of growth and better manage your current accounts. In many situations, your frontend employees will have insightful information about the state of the market and where your competition is at. You may realize that, with your current product offering, you can invest as much as possible in sales only to find that there is no market for what you are trying to sell. Examining how your product is promoted and distributed may indicate whether you’re really adding value to your customers. Brief conversations with a few long standing customers may help you gather insights and out-of-the-box solutions. Then, you can go beyond just selling something to selling the right products to the right customers.

Beyond Processes
From an internal perspective, the company can operate more efficiently by innovating and streamlining processes. Selling more doesn’t mean making more money. Once in my career, I witnessed a company folding before its management’s eyes because they started to sell too much. In that case, their internal processes were so complicated that the costs of scaling up production created a perfect storm and suddenly the company ran out of capital and – bang! – they were out of business. Beyond controlling costs, you need to understand the structure of your costs and the scalability of your internal processes.

Looking internally for sources of innovation, you may be able to find new ways to do business, thereby, positioning yourself as a trendsetter in your industry. A Forrester report I was recently reading reminded me that companies are not spending enough time in innovation, but spend most of their budgets maintaining existing products and systems. If you can find ways to increase efficiency, you can spend less effort maintaining what you have, and, suddenly, you will have more time for innovating.

Beyond Numbers, Again
Instead of looking at your total headcount, look after your people. Consider investing in a better team and overcoming internal communication barriers. Investing in team collaboration pays off big time. I know a few companies that have taken the time to reduce internal bureaucracy and integrate similar areas. They were extremely successful. Note that investing in people does not necessarily mean sending them to expensive retreats in Cancun; it means having real conversations with your staff and empowering them to resolve issues.

Results, not Numbers, are Important
Finally, manage expectations by aligning your profitability goals with your strategy. Use numbers to verify that you’re achieving the expected results and use them wisely. The business world is more complex than that complex spreadsheet model sitting on your desktop. Remember, Excel is just one of the tools you have at your disposal. Think wide and get better results!

A Picture is Equivalent to Many Words

Being so much time on the road lately, I decided to share a few of my pictures with you using Animoto. Panama is a very interesting country for doing business. Feel free to spread the word and send this video to friends. Here it is:

Tom Peters and Seth Godin AMEX Talk

Seth Godin and Tom Peters took questions from entrepreneurs at the AMEX Open. This is a great discussion about the current credit crisis and how it is influencing business decisions. Great video interview. I highly recommend it.

A Reality Check for Entrepreneurs

Today I started my day by reading an interesting article by Guy Kawasaki published yesterday in The New York Times. In this interview, Guy discusses the fact that if you are waiting for perfect credit and capital market conditions to seek funding for your growth opportunities, you are probably not an entrepreneur. He suggests that you ignore current market conditions and move forward with your strategy. I find these hard, but wise words.

The ability to keep your team focused during hard times is an essential survival skill. Understanding that you have to keep your business running is fundamental. Closing your business during tough times will yield very little for you or your customers, whereas, by not giving up, you have the possibility to earn respect from your employees and trust from your customers.

Close your ears to the distracting noises coming from the markets and work closely with your team to keep your business running. Indeed, work with your staff to find solutions and alternatives. Understand your financials in a thorough way. Be transparent with your employees, and you may find them to be your biggest allies who will help you overcome obstacles.