Doing Business In An Infinite Channel World

In an infinite channel world, not-for-profit may just be the new normal

We were recently invited to attend Professor Donnie Maclurcan’s talk in Islington, London entitled “Not-for-profit enterprise will be at the heart of the global economy by 2050”.

We were unfortunately unable to attend Donnie’s talk, and haven’t yet read the book, but on first glance the forecast seems a little optimistic.

For one thing, the claim appears to be unsupported by current evidence. Donnie’s media release states that “In Canada … not-for-profit institutions now contribute 8% of the country’s gross domestic product.” In other words, a relatively small share of the Canadian economy.  Hardly the ground swell of support that would foreshadow a not-for-profit world by 2050.

The other thing is that the claim appears to fly in the face of current economic thinking. Adam Smith, the founder of modern free market economics, is credited with the idea that many individuals working in their own self interest will produce a socially beneficial outcome (as though guided by an invisible hand).

Unless something dramatic has changed in the way that people respond to incentives, it is not clear why the world would shift from a free market system (dominated by for-profit enterprises) to one comprised predominantly of non-profits.

What could have changed?

It must be something big.

While people still respond to incentives in the same way they always have, the Internet completely changes the playing field.

In the pre-Internet world it was costly to communicate with large groups of people, you needed to own a printing press or a television station. It was also costly to form and build communities, since you needed to be able to build large and beautiful buildings where people would be happy to spend time (think religions and universities).

The Internet changes both of these things.

It is now possible for anyone to share ideas with the whole world instantly, and for anyone to build an online community where people can connect and spend time.

The full implications of this change are yet to be fully understood, but one thing jumps out at us.

An established online community can be self sustaining.

Loyal community members can provide the financial capital to keep the community going through donations and by buying products and services. If all profits from the community are then funneled back into maintaining and building the community, then the community may never produce any taxable accounting profits.

In other words, communities are by their nature not-for-profit (regardless of whether they are registered as such for tax purposes).

In an infinite channel world, where the cost of connecting with people is now zero, everyone has the opportunity to connect with people who care about the same things that they do, and build a community in the process.

Not every community will become financially viable, and of course some communities will produce taxable profits, but the implications should be clear enough.

We are moving towards a world with more connection and less profit. At least, less financial profit in the way that we have always been taught to think of it.

Donnie is definitely on to something, and we look forward to reading his book. It will be published in April 2015, and if this topic interests you then you can place a pre-publication order here.

Saving RadioShack

When the business landscape changes, how can you turnaround a failing company?

Turnaround

(Source: Flickr)

RADIOSHACK, an American consumer electronics giant of yesteryear, faced chaotic trading on Wednesday as analysts predicted the company would report it’s 10th straight quarter of losses.

RadioShack has hired a law firm to provide restructuring advice in an attempt to avert bankruptcy. Assuming this leads to successful refinancing, what should the strategy be to turnaround and save this iconic company?

When faced with a broad turnaround question, it is important to ask a variety of questions to determine the source of the problem.

Why is the company failing?

What have been the prevailing trends in the industry?

Are competitors facing the same problems?

Looking at the stock price of RadioShack over the past fifty years, it is apparent that the dotcom boom represented the height of success for the company.

RadioShack had developed a reputation as the ultimate shopping destination for budding innovators and engineers. Unfortunately, the company has struggled to modernize, doing little to transform itself into a destination for mobile buyers.

By comparison, rivals Amazon and Wal-Mart have continuously adapted and maintain a significant competitive advantage in pricing these products due to scale.

In a competitive landscape fraught with declining sales of consumer electronics and falling margins, RadioShack has fallen into a precarious situation.

What strategy can be implemented to save the company?

Marc Consentino in his book Case In Point suggests the following possible actions for a company turnaround.

Possible Actions

I believe the most applicable actions for Radio Shack involve a thorough examination of current product offerings as well as a transition in company culture.

RadioShack will be forced to close a significant proportion of its brick and mortar stores as part of any restructuring plan. This should present the company with the opportunity to reinvent product offerings and create a new culture.

RadioShack needs to return to its roots as a place of innovation by offering specialty and niche products that are unavailable through the company’s major rivals. Shifting the product focus must also be accompanied by a shift in employee training, encouraging hiring practices that target inventive individuals that can appropriately engage with the new desired consumer base.

Rather than attempt to compete with pre-existing rivals, RadioShack needs to carve out a new niche in the consumer electronics market that celebrates the pioneers and the mavericks.

What strategy would you recommend for RadioShack?

Let us know your thoughts in the forum! (The person with the best response in the next 48 hours will win a copy of Marc Consentino’s Case In Point or another book from the Bookshelf.)

5 Ways to Foster Learning

Learning is a natural process, but management still has a role to play

5 Ways to Foster Learning

(Source: Flickr)

FOLLOWING on from our post on learning from experience, in which we discovered that learning by doing is a natural process, we are finally delivering what we promised – a post which explores some ways that management can help.

Learning may occur naturally, but management can enhance and harness the learning process by:

  1. Fostering a culture of learning
  2. Directing effort to specific goals
  3. Capturing and sharing learning internally
  4. Keeping learning proprietary, and
  5. Commercialising good ideas

We explore each of these five approaches in more detail below.

1. Fostering a culture of learning

The culture of a firm can affect how receptive employees are to new ideas and the rate at which learning takes place. There are five methods that management can employ to help build a learning culture.

1.1. Create space for tinkering

If management wants to encourage improvement then a policy which punishes failure may sound like a good idea. Success is good, mistakes are bad, and therefore anyone who fails should be punished.

This may sound logical, but it ignores what we know about the learning process – mistakes are to be expected and are part of the natural process of learning which, combined with a due sense of stoic perseverance, inevitably leads to the next big breakthrough.

Convex Tinkering

Scientists understand the learning process and have adopted trial-and-error as a fundamental part of the scientific method. Management needs to appreciate this as well.

Small mistakes and discoveries that lead nowhere are to be expected, and should not just be tolerated but accepted as normal.

If management tries to optimise operations and set deadlines so tightly that there is no space for curiosity and tinkering, then employees may be prevented from trying new approaches which have the potential to radically improve performance.

Intelligent and energetic people are more valuable when they have space to tinker. This fact has been willingly accepted by many Silicon Valley firms and was the core idea behind Google’s “20 Percent Time”, a company policy that allowed Google employees to spend one day per week on a project of their own choosing and which led to innovative new products like Gmail and Google Adsense.

1.2 Celebrate success

Incremental improvements and breakthrough advancements are valuable, and management can help by celebrating the employees responsible for making it happen.

Some people are motivated by short term monetary incentives, but when it comes to learning and creativity the process of discovery is often its own reward. By recognising the heroes, management can send a strong signal to everyone in the organisation that innovation is valued, and that the people responsible will be recognised.

The flip side of the coin is that new discoveries are often commercially sensitive, and so in order to protect innovations from the prying eyes of the competition it may be necessary to keep award ceremonies in-house and out of the media.

1.3 Measure Employee Engagement

Employees will only learn from experience if they are actually working – goofing around doesn’t count.

In a factory setting you can assess how much work is being done by measuring the factory’s output. This is easy to do.

The difficulty lies with professional service firms and other organisations where the work involves thinking and creativity. How can you tell whether people are really working? What if they are just going through the motions and filling out boilerplates without applying any independent thought? If this is the case, then they may not really be learning anything.

Our suggested solution to this problem is to measure employee engagement, for example using Gallup’s Q12 Survey. Employees who are more engaged in their work are more likely to be learning.

1.4 Temper Pride with Humility

A common way to boost morale is to encourage a feeling of pride in the organisation. This can be effective, and as you might remember your author’s high school headmaster was pretty fond of this technique, but it has a hidden cost.

As we explored in our post on humility, pride can blind us to the good ideas of others. A special fondness for your own organisation should not go so far as to blind you to the good ideas put forward by customers, suppliers, competitors, government agencies, universities, or your mother-in-law.

Don’t get too full of yourself.

1.5 Avoid Perverse Incentives

Perverse incentives are inducements which lead to unintended consequences, and management needs to be careful to avoid them.

One example given by behavioural economist Dan Ariely is the effect that small monetary payments can have on motivation.

Ariely explains that if you ask someone to help they may be quite willing to do so. However, if you offer them a small payment, say $10, then the person’s motivation is likely to decrease rather than increase.

The inducement has the opposite effect than intended because it crowds out the person’s internal motivation (i.e. the joy of helping), and transforms a social relationship into a financial transaction.

The offer of money changes the question that the person asks themselves from “Do I want to help Tom?” to “Is $10 fair payment for this job?”

According to Ariely, this problem can be avoided by offering a small gift instead of a small monetary payment. In other words, give chocolates or movie tickets to reward a job well done rather than offering a small hourly wage.

2. Directing effort to specific goals

Management guru Peter Drucker is famously quoted as saying “what gets measured gets managed”.

Making measurable progress is important, but before progress can be meaningfully measured management needs to set specific goals which employees can align their efforts around.

Undirected learning can be valuable especially during the early creative phase of product development, but in order to reach its destination the ship’s captain needs to set the sail.

Management needs to determine the direction of learning.

3. Capturing and sharing learning internally

To accelerate the learning process, a firm should establish ways to capture and share learning within and between practice groups, offices and business units.

Management should also be mindful of the fact that sharing information can be hindered by geographic distance and internal rivalry.

Ways of capturing and sharing learning include:

  • Hold weekly team meetings at which learning points are discussed
  • Record know-how by producing internal memos and technical papers
  • Organise regular internal talks and conferences
  • Support working groups that cut across formal departmental boundaries
  • Send employees to external conferences and require them to share learning internally
  • Acquire competitor learning by poaching employees, analysing competitor strategy, reverse engineering products, forming relationships with the competitor’s suppliers, and engaging consultants who have worked with the competition.

4. Keeping learning proprietary

If it is possible for a firm to learn from the competition, then it will also be possible for the competition to learn from it. This is a problem since it may allow competitors to improve performance more quickly and at lower cost.

Management should take steps to limit the spill over of learning to competitors, and ways of doing this include:

  • Produce strategically important technology and components internally in order to maintain, develop and protect know-how
  • Patent new technology in order to slow down the rate at which it can be copied
  • Control publications and media releases to avoid educating the competition
  • Retain key employees
  • Place strict non-compete and non-disclosure provisions in employee contracts

5. Commercialising good ideas

Developing good ideas and new technology is important, but it is only half the battle. A firm also needs to develop a system for connecting innovations with commercialisation opportunities. Many large companies are currently doing this by running an in-house start up incubator that they use to generate, develop and commercialise good ideas.

Growth Strategies

Growth strategy begins with identifying the source of the problem – you will want to look at customers, products, the company and its competitors

Growth Strategy

(Source: Culturamix)

THE frequently used term business growth simply describes the process of improving some measure of an enterprise’s success, ranging from promotion, product development, new market entry or improving employee productivity.

How can we more closely define the objectives a company desires when it speaks of growth?

Addressing this type of case question is achievable, provided you can identify the root of the problem.

Below we look at a specific case scenario.

Our client is the Museum of Fine Arts in Boston. They want to develop a growth strategy for the next five years. What would you advise them to look at, and what are your recommendations for growth?

Before we can begin discussing growth strategy, the direction of the case must be determined by asking vital questions regarding the current state of the museum.

  1. Competitors: How are other museums across the city performing? How are we growing relative to the industry?
  2. Customers: Who are our patrons? For example, they might be senior citizens and middle aged women. How is the mix changing over time, and what do they say about us?
  3. Product: Does our revenue come primarily from ticket sales or other sources? What distinguishes our offering from our competitors in regards to pricing, marketing, and curatorial development?
  4. Company: What is our cost structure? Do we have the financial backing to support higher growth?

Let’s assume Bostonians have decided to reduce spending on museums in favor of other leisure activities such as baseball games and musical performances. The stagnant growth our client is experiencing is caused by a decline in the industry overall.

My recommendation would be to increase revenue by attracting new audiences to the museum by investing in popular exhibitions supported by a major marketing campaign. Engaging local teenagers and university students through social media promotions would increase awareness of new museum programming. By appealing to a wider and younger audience, our client could attract visitors who previously were uninterested in the museum’s offerings, leading to more sustainable ticket sales over the next five years.

What recommendations would you provide the Museum of Fine Arts? Share your thoughts in the forum. The person who provides the best response in the next 48 hours will win a copy of Marc Consentino’s Case In Point (or another book from the Bookshelf).

The scenario above is adapted from Case In Point, a case interview preparation book written by Marc P. Consentino. Case scenario used in the book looked at the New York City Opera. Many firms use a version of this case.

For a more in-depth look at growth strategy, check out this case study by McKinsey that outlines the Three Horizons of Growth framework to develop a growth strategy for a major retailer.

Consulting Firms in Canada

America’s friendly neighbor to the north, Britain’s daughter, Australia’s cousin, the United States of Canadia, or perhaps just the place you call home.

How ever you think about Canada, this week we are sharing with you a guidebook which profiles the country’s most prominent consulting firms.

You can download the guidebook here. This is a free download, no member sign up required, and as with earlier guidebooks we have shared, we are distributing it under a creative commons licence.

Download, edit, print, share, and enjoy.

Courage

The hard part about pursuing a new idea is not the idea itself. There are thousands of good ideas shared every day online for free.

Nor is it the risk of financial failure since it is easier than ever to pick yourself up, dust yourself off, and start again.

The real risk that the trail blazers face is a social one.

Humans are social animals, and charting a new course necessarily means forming new relationships and investing less time in existing ones.

By taking the initiative to build new client relationships a consultant may not have the time or money to wine and dine smaller existing clients, to take the family on the traditional annual holiday, or to go out for drinks with friends.

Social isolation whether real or perceived can be incredibly painful, and so we often choose to play it safe.

We see an opportunity and we delay. Good ideas come to mind and we don’t snatch for a notepad to write them down before they vanish. We meet a wonderful new person and we don’t pursue the relationship.

Better not to risk what we have.

The flaw with this thinking is that it assumes our relationships are static. Something to be fixed, controlled, and bottled up for safe keeping. A rigid worldview which ignores the fact that, whether we like it or not, our relationships are constantly in flux.

Life constantly offers us new opportunities to change, evolve and improve, but in order to reach out we may have to find the courage to let go.