Archive for March, 2016
Roll with the Punches (in other words ADAPT to your environment)
I can’t think of a single business that isn’t threatened in some manner by a changing business environment. This has always been the case; technology is just making the changes faster for most of us.
In 1967 Scientific Instrument manufacturer Keuffel & Esser interviewed a number of scientists as part of a study to gain an understanding of what the future might look like.
Some of their findings were startlingly prophetic. They predicted 3 D TV, electric cars, automatic controlled traffic lanes, and other innovations.
One thing they didn’t uncover however, was what was about to happen to their business. Keuffel & Esser was the country’s largest producer of slide rules. Somehow, they failed to take into account what the electronic calculator would do to their business.
I first heard that story many years ago. There’s a certain nostalgia to it, because I went to school using a slide rule. But, the business lesson here is unmistakable, and is repeated all too often: you MUST stay atop changes and innovations in your market. You cannot sell slide rules in a calculator marketplace.
My own experience might prove helpful. When I first started Electronic Maintenance Associates (EMA Inc) I had a pretty clear and simple business model. Namely:
Become the warranty service center in the Southeast for a number of electronic motor drive manufactures.
Do an excellent job for them.
Use the warranty service as an entre’ into the facility, and expand the business.
It worked very well.. I picked up good and profitable business.
BUT.. that market changed. We still to this day do warranty service for manufacturers, but with the motor drives becoming less expensive and more reliable, that business model began to lose its appeal. IF we were still depending on that, I think we’d be out of business. Everyone has to roll with the punches.
Stanford Professor Charles O’Reilly says that companies and organizations need to have organizational ambidexterity. Defined, as the ability to keep your existing business going, while adapting to new opportunities and challenges.
That’s not as easy as it sounds. Abrupt change can destroy a company for a number of reasons. You can run off loyal customers, demoralize your people, and lose all economies of scale with your systems. I didn’t tell all of my warranty customers to get lost, we continued to serve that market, even as it was declining. We gradually moved into a different model.
That’s what O’Reilly means.. by organizational ambidexterity. Your successful strategy in the past, may in fact be the wrong thing to do in the future, but if you’re still getting business from it now, you have to keep it going for the present. Your other hand has to work on the future.
Innovation is often perceived as a threat to an existing organization. I’ve seen this not only in business, but in churches. Within your organization employees are likely to feel threatened.
That means that as the leader, you have to do what most of you hate most.. process. You must communicate the need for the change. (and by the way, don’t make this up, do your homework)
Shoving change down people’s throats is a recipe for disaster. Change may be completely necessary; just be sure your folks understand and embrace it.
There are many examples of companies that lost their edge by failing to respond to change.
Blockbuster was the ubiquitous video rental company. You saw them everywhere, and most people you knew used them. They had a great business. But, they misunderstood the threat that Netflix, Redbox, and video on demand posed. Had they understood it, they were well positioned to respond and keep their market.
But that’s the trick isn’t it? They didn’t roll with the punch and change; they stood flat footed and got knocked out.
How about companies that did change? Did you know, for instance, that Nokia is the world’s largest cell phone manufacturer? Did you know that Nokia was founded as a pulp and paper company? Talk about changing!
Dupont began manufacturing gun powder, but they rightly saw themselves as a chemical company. Because of that we have polyester, teflon, and many other great products.
Paypal began as a cryptography company. After years of trial and error, they emerged as the default online payment system for millions of people. Stanford’s O’Reilly encourages companies to do small “experiments” as a response to market changes. Not everything works. But, had Paypal continued as a cryptography company, probably none of you would know their name.
Changes come in many ways. If you’re in a maturing market, then you should expect the market to provide lower margins. As a general rule of business, hi volume markets = low margins, and low volume markets = high margins. The guy selling Fords will sell more units than the guy selling Lamborghini cars, but the latter will have much higher margins.
If you are in a hi volume low margin business, and intend to stay there, then you must adapt your business model.
Roll with the punches!
Eddie
Eddie Mayfield is the host of Driven to Business, heard 11 AM every Saturday on Atlanta’s business radio, Biz 1190. The show is streamed live on biz1190.com and podcast on eddiemayfield.com and Itunes.
Cross Technologies CEO Heinz Wegener
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Heinz founded Cross Technologies, a manufacturer of Satellite communications equipment after leaving Wegener Communications; a large public company he founded. Heinz has achieved business success far beyond many of us, but he also has a unique approach to business and life that you’ll enjoy. Give it a listen.
Driven to Business Hosted by Eddie Mayfield airs at 11 AM each Saturday on WAFS, Atlanta’s Biz1190 AM, and is streamed live on biz1190.com .
Simply the best business radio program in Atlanta.. Driven to Business.
Heinz Wegener, Founder and CEO
This week, Eddie’s guest on Driven to Business is Mr. Heinz Wegener. Heinz is President of Cross Technologies, Inc., and former Chairman and Executive Vice President of Wegener Corporation, a publicly traded company (WGNR on NASDAQ). More…
Business opportunities: always
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Business opportunities always exist. During the depths of the great depression, there were entrepreneurs who saw great opportunity and in fact, became wealthy.
The trick is to look at the environment from a different angle. I heard a speech by famed quarterback Peyton Manning who said his job was to scan the field and see things that others don’t. Things such as where the safeties are lined up, and call an audible when prudent.
As a business leader, that’s your job as well.
Think all opportunities are gone? Read these quotes from the past:
- “Everything that can be invented has been invented.” Charles Duell, US Patent Office, 1899
- “The horse is here today, but the automobile is only a novelty-a fad” President of Michigan bank advising against investment in Ford.
- “What use could this company make of an electric toy?” Western Union turning down rights to the telephone.
When I was in the US Coast Guard, I had a chief electronic technician tell me, “This solid state stuff is not here to stay. Concentrate on tubes”
Do you get the pattern? Many, if not most, people fail to see trends and the opportunities they present. J. Paul Getty put his inheritance at great risk by buying depressed oil stocks when everyone else was dumping them. When the great depression ended and oil prices rose, he became a billionaire.
It’s not always true of course, that going the opposite direction of everyone else is a winner. But, in most cases, that is what winners do. The trick is to spot opportunities others are running away from.
Many business people fall into the trap of nostalgically longing for past times. “Things were great in the 90’s.” Well, the nineties are gone, and we live in what is the new normal. If you’re going to be successful, you must do it in the environment of now, not the past.
Change simply for change’s sake is a disaster. But, not adapting to a changing business environment is suicide.
Former GE Chairman Jack Welch said, “I am convinced that if the rate of change inside an organization is less than the rate of change outside, the end is in sight.”
For almost all businesses, whether you will change isn’t the question. You almost certainly will. But, will it be a healthy controlled change, or will it be a very unhealthy change forced on you by the market?
Businesses today face a rate of market change that is probably unparalleled. When I started my career, almost no one owned a computer. Now, about 85% percent of American households own at least one. The internet has grown even more rapidly, transforming almost all of modern life.
Not all changes are positive, in fact, many are frighteningly negative. But, the smart business person, like a good quarterback, looks over the heads of the team lined up against him and spots the holes.
Here are some examples.
- During hard economic times, companies tend to pull back on capital spending, but spend more on selected services such as maintaining their equipment. This presents great business opportunities to the discerning.
- With the increased cost of an employee, companies are outsourcing jobs they would have done in house in the past. Think opportunity.
- History shows us that during hard times, the entertainment industry flourishes.
- There are recession proof industries, like water and waste water treatment. Do you suppose that people flush their toilets less during bad times? (just to be clear.. they do not)
- China recently ended its atrocious one child per family rule. Aside from ending a morally reprehensible practice, it’s going to result in a huge baby boom, possibly the largest in history. For the smart entrepreneur, that should look like an opportunity.
Here’s one tried and true way of anticipating change. Ask your customers. What new needs do they have, that they didn’t have a few years ago? And since you’re the great business leader, why shouldn’t they use you to fulfill those needs?
Eddie Mayfield