CEO Success Report -
May 2003
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CEO Success Report
- May 2003
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Increasing the Effectiveness and Enhancing the Lives of CEOs
and business owners.
Contents of this issue...
.. Welcome - A few words from the publisher, Gary Lockwood
.. Thought-Starter - "Learn From Your Experiences"
.. Guest article - "The Easy way to Innovate is - the Hard
way!"
.. CEO Resources
.. Quotes to use in your staff meeting this month
.. Humor to lighten up the executive suite
.. Contact the publisher
.. Subscribe and unsubscribe instructions
See past issues of the CEO Success Report at:
http://www.CEOSuccess.com/archives
===================================================
WELCOME to this issue of the CEO Success Report!
===================================================
Hello again. I'm Gary Lockwood, President of CEO Success.
Welcome back once again to the CEO Success. I know you have
no shortage of material to read and I thank you for choosing to
read our newsletter.
We work hard to provide practical ideas, thought-provoking concepts
and useful information for you.
You (and over 1000 of your CEO peers), have honored me by
being a loyal subscriber. For that, I appreciate you.
Learning in today's fast-paced and ever-changing environment can't
be left to chance. If learning ability is not conscious, it can't be
improved. It just becomes another habit without effective application
to the circumstances in our business (and personal) lives.
My "thought-starter" in today's issue looks at how you can effectively
learn from your experiences.
May I ask a small favor? Please forward this issue to other CEOs
and company presidents who may be interested in receiving
these messages. Thank you.
And now for our guest article this month; a perspective on innovation.
Our guest author this month, Robert W. Bradford, writes about our highly
competitive marketplace where competitors copy your innovations
and bring them to market against you. But sometimes, they don't,
or can't. Robert outlines several ways in which you take advantage of
understanding the difficulties of copying innovations.
I hope you enjoy receiving these articles and ideas to
help you sharpen your thinking about being an effective CEO.
My wish is that you use the ideas in the CEO Success Report to
get the results you really want. If you want some help in putting
them into practice, or if you have questions, email or call.
As you know, our specialty is Increasing the Effectiveness
and Enhancing the Lives of CEOs and business owners.
Enjoy this issue with my compliments.
Sincerely,
Gary Lockwood
CEO Success
P.S. Interesting *new* resource today. See "RESOURCES for CEOs",
below.
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This month's THOUGHT-STARTER
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Learn From Your
Experiences
To be effective, learning must be conscious vs. unconscious,
active vs. reactive. It must be something we seek, not just
"let it happen". If learning is not conscious, it can't be
improved. It just becomes another habit without effective
application to the circumstances in our business (and personal)
lives. We already spend too much of our day "doing stuff."
In today's fast-paced world, we have the opportunity to
learn something every day that has the potential to impact
our lives.
How do we become good learners, and subsequently, good change
masters?
The answer is surprisingly simple. Become an active, conscious
learner on a daily basis by creating a diary or log of your most
important daily experiences. Here's what to record:
* First, state the experience. "I touched a hot stove".
* Second, review what happened. "By touching the stove, I
burned
My hand."
* Third, draw a conclusion. "If I touch hot stoves, my hands
will
be burned."
* Finally, plan your next step. "I won't ever again touch a
hot
stove."
The example is simple, but effective learning goes through these four
steps. In fact, it may happen in the blink of an eye. You touched the
stove and thought, "I won't do that again". You went through all
four
processes without thinking.
Our learning is not always positive. Using the learning process,
think about the first time you approached a sales lead. You picked
up the phone, called Mr. Smith and tried to introduce yourself.
Mr. Smith promptly said, "I'm not interested," and hung up the
phone. Your mind immediately reviewed the experience, "I called
a sales lead and he wasn't interested," concluded that "this isn't
fun," and planned to do anything to keep from calling more sales
leads. Result: Call reluctance and a negative learning experience.
Using the learning process, this same experience and review can be
turned around by considering other conclusions. "I wasn't
prepared"
or "I could have warmed up the call with a letter." Finally,
plan the
next experience with alternative actions. Send a pre-approach letter
or use a referral to provide an introduction.
Many times, also without thinking, we try to shortcut the learning
process. Some examples are:
* Jumping to conclusions. We don't take the time to review and
think about what really happened. We
immediately conclude what
we should do next.
* Analysis paralysis. Nothing ever happens. We review, then
conclude, review, conclude, review,
and so on without planning
or furthering our experiences.
* Quick fix. We take the experience, then immediately move to the
next step without reflecting or
drawing conclusions about what
happened.
Learning in today's fast-paced and ever-changing environment can't
be left to chance. We must make a conscious effort to capture our
experiences and learn from them or be doomed to repeat our mistakes.
Worse yet, we may habitually keep doing those things that are working
for us, while our competition is actively seeking new ideas,
innovation and growth.
Today, learn from your experiences.
C Copyright 2002 BizSuccess All rights reserved. No duplication
About the Author...
Gary Lockwood is Increasing the Effectiveness and Enhancing the
Lives of CEOs, business owners and professionals.
Get the Free BizSuccess newsletter -
http://www.bizsuccess.com/newsletter.htm
or send any blank email to mailto:subscribe@BizSuccess.com
==================================
Guest Article
==================================
The Easy way to Innovate is - the Hard way!
by Robert W. Bradford
People, quite naturally, prefer to do easy things. Easy things are -
well, easy. It often seems, when we look at our businesses, that the
more things we can make easy, the more profitable the company will be.
To a point, this is true. If you are putting more effort than you
need to into creating your product or service, the time and effort
involved may well be coming right out of your bottom line.
Recognizing this, most managers will put plenty of effort into taking
effort out of your processes.
But wait - there's a catch. Management is not just about minimizing
cost - it's also about maximizing value. Some of the effort involved
in your business creates tremendous value for your customers, and
chances are you aren't even sure where the greatest value lies.
When companies set out to innovate strategically, they often rush off
in the same direction as everyone else. In many industries -
especially high-tech industries - this causes markets to mature very
quickly as unique specialty items that took tremendous R&D investment
become "me-too" commodities. If the innovation is a compelling one
that creates real, preferred value for the customer, this
commoditization is almost inevitable. The only place this is unlikely
to occur is when your competitors - for whatever reason - do not copy
your valuable idea.
Let's look at an example of this. For the past several years, AMD and
Intel have been slugging it out over the microprocessor market. Intel,
with deep pockets and first-mover advantage, decided to define the
game in terms of core microprocessor clock speed. This is why, when
you buy a computer, you are told that a 2.8 Ghz CPU is better than a
1.5 Ghz CPU. Superficially, this is absolutely true - the faster
clock speed on the CPU makes it process program instructions faster.
For some time, AMD made the mistake of playing the game as defined by
their competitor (almost always a bad move). Recently, however, AMD
has departed from classifying their products by clock speed (which is
what Intel still does). AMD now wants users to evaluate their
products by effective speed rather than clock speed - and, of course,
they have helped to create the means for customers to measure
effective speed. This is an interesting twist in the history of CPU
innovation, because today, AMD chips with slower clock speeds are
being pitched against Intel chips based upon testing that is
purported to depict the real-life speed of a computer using that chip.
There is tremendous debate about the testing of system speeds in the
technical press today, which means - to some extent - AMD has moved
the game of innovation into the realm of measured effectiveness for
the customer, and away from CPU clock speed. Customers, of course,
will benefit from this move towards real-world comparisons and away
from slavish pursuit of the gigahertz - and AMD is hoping that it has
the know-how to keep up with Intel in the redefined race. For us, the
most interesting part of this is that we are seeing two excellent
competitors investing heavily in markedly different paths of
innovation for the very same product.
The concept that competitors might not copy something that is
strategically valuable seems absurd on its face. After all, why
wouldn't you copy a product that enables a competitor to gain
valuable market share, often at higher margins? There are three main
reasons why competitors do not copy innovations:
They are unable to copy the innovation
They choose not to copy the innovation
They are prevented from copying the innovation
There is one other situation that occurs frequently, and that is:
The competitor copies the innovation weakly because they fail to
focus. If your company is seeking ways to innovate, each of these
reasons may offer ways to avoid competition and earn a substantial
return on your innovations. By understanding each of these, you may
be able to identify useful types of innovation that will give you a leg
up in the marketplace.
First - and this is one of the best - competitors sometimes are
simply unable to copy a new product or service. The reason this is a
very good situation should be clear - if you do something valuable
for your customers that your competition cannot copy, you have
created something that looks an awful lot like a strategic competency,
which we all know is practically a license to print money.
Unfortunately, this situation is less common than we would like to
think. Additionally, we may embark upon a project expecting that our
competitors will be unable to copy us only to find out, much to our
disappointment, that this is not true. The worst thing about such a
disappointment is that it is likely to turn up only after we have
spent strategically significant amounts of time and money. However,
if you want to avoid this disappointment, there is a key choice you
must tend towards in your strategic decision-making: you need to
focus your efforts on the hard stuff. The reason that difficulty
becomes strategically attractive here is that it increases the
likelihood that our competitors, in fact, cannot copy our innovations.
What are the things that will make a competitor completely unable to
copy an innovation? In general, these will be technical issues -
issues of know-how and capability, quite distinct from intellectual
property issues, which are properly dealt with below. Let's take a
look at issues that will completely prevent competitors from pursuing
an innovation:
The competitor does not understand the innovation
The competitor does not have the correct equipment or people
The competitor cannot afford the investment
There is a trick to the innovation that the competitor cannot copy
The first three of these can be related to the others, and - to some
extent - they all boil down to resources. With deep pockets, most
deficiencies in capability can be eliminated. This is not always the
case with the first issue, however - if you don't understand the
innovation, you may end up investing in equipment and people that are
inappropriate for success with the innovation. It is possible,
however, for an intelligent competitor to invest in (1) -
understanding, so this is not insurmountable. It is also possible for
a competitor to correct (2), by spending to get the right people and
the right equipment. The last two issues may be insurmountable. If
investment is required, and a competitor cannot get the required
capital, that competitor is, for most purposes, shut out of the
market.
The fourth issue - the clever trick - is the dream of most
entrepreneurs. If there is a clever trick involved, you can maintain
a monopoly on the innovation almost indefinitely, or at least until
your competitors figure out a way to steal the secret from you. A
good example of this was the formula for gunpowder, which was a
closely guarded secret for the first decade or so of its use in
Europe. Everyone could tell that charcoal and sulfur were involved,
but the use of saltpeter, and its proportion in the mix was a secret
that took years to leak out, effectively giving the monks who
discovered it a monopoly on its manufacture. Thus, while Roger Bacon
is credited with the European innovation in the 13th century, the
first European use of guns in warfare was not noted until nearly 100
years later.
The second reason why competitors may not copy us is that they choose
not to copy. Why would this happen? Basically, competitors are likely
to decide against copying good ideas when they think that either (1)
the cost is too high, (2) the payoff is too small or (3) they just
don't like the idea. Historically, many companies have used high cost
as a barrier to entry, and this can work very well if you have deep
pockets and your competitors do not. Small perceived payoffs can be
just as good a barrier to entry, but it requires that you know
something that your competitors don't. And dislike for an idea can
also be a powerful barrier to entry. Let's examine how a competitor
might reach the conclusion that they should not copy an idea.
First, the cost being too high: naturally, the cost might actually be
too high, but this is one we don't want to use, because it would hurt
us, too. Much preferred would be that the competitor's perceived cost
is too high, while our actual cost is not. There are two key ways to
hit this mark: one, choose innovation projects that appear to be
expensive at first - and turn out not to be, or two, choose projects
where you have some actual cost advantage in the innovation process.
Both of these options require that you know a great deal about your
product, service or processes - companies that are just dabbling will
not likely succeed in either. In addition, the case where there is a
real cost barrier to entry can be quite powerful if you have deep
pockets and your competitors do not.
The second reason a competitor might decide not to copy your
strategic innovation is that they perceive the payoff as being too
low. If the actual payoff is low, this is not a very good situation
to get into. In some cases, however, the perceived payoff may be much
lower than the actual payoff. Some industries are perceived as dull
and unrewarding. If you can gain entry into such a business, the
perception of low payoff will help you almost as much as if it was
real.
You will also find some cases where the low payoff is a reality for
the second player in a market. This is often true with simple
innovations that create strong brand preference. For example,
Domino's Pizza gained tremendous leverage from being the first
nationwide pizza chain to advertise delivery. The players that
followed them had all of the expense of building a delivery capability,
but none of the brand preference that Domino's generated during
the years when "Domino's Pizza Delivers" was a distinction.
The final reason a competitor may decide against copying you is one
of my favorites. Sometimes, a competitor just doesn't like the
direction you are going. The beauty of this is that your competitors
effectively leave you with a monopoly by making this choice. This can
come about because people have had bad experiences with some kinds of
business, or simply because of a gut reaction. For example, after the
collapse of the dot.com bubble in 2001, many people assumed that all
internet business was inherently unprofitable. This has created an
opening for innovators who have developed new models of profitability
for internet companies who would have been crowded out during the
boom years of heavy internet investing.
The third reason why competitors may not copy us is that they are
prevented from copying by someone else. Usually, this is a legal
situation (as in the case of a technology covered by patents), but it
may be driven by other forces as well. While many companies rely on
this tactic in support of their strategic dominance, it has one major
flaw: the prevention that makes this tactic effective is outside of
your control, and may only be temporary in nature.
The very best use for this tactic is to give you a head start on the
next innovation, since - at some point - it may be possible to
get so far ahead of your competition that they effectively give up
on the direction you have taken.
Some of the more interesting examples of this kind of prevention
lie outside of the classic cases, where there is legal protection
of intellectual property. These often occur because of pressure -
real or imagined - brought to bear by customers of your competitors.
For example, you may sell your products through distributors who
are adamantly opposed to direct sales by their suppliers. In such
a case, an innovator who starts selling directly to customers ends
up taking a risk that competing companies are unwilling to take -
the risk of cutting off the distribution channel that makes up most
of their sales. In this situation, it is the customer who is preventing
the copying - but the results are nearly the same as if you had
a patent on direct sales.
So, what can we do to take advantage of understanding the
difficulties of copying innovations? Simply put, we must throw as
many of these obstacles in the way of our competitors as we can. The
chart below is a basic outline of ways to take advantage of these
ideas.
Innovation is a great way to differentiate your company and attain
higher than average profitability in your business. Too many
companies get on an innovation treadmill by improving their offerings
in predictable, copyable ways. With a little care, you can innovate
strategically, and truly put your company in a position that yields
long-term advantage in the marketplace.
Robert Bradford is President of Center for Simplified Strategic
Planning, Inc. He can be reached via e-mail at rbradford@cssp.com
or by phone at (734) 665-2971. Check out http://www.cssp.com
=============================================
RESOURCES for CEOs
=============================================
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QUOTES to use in your staff meeting this month
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"Aerodynamically, the bumble bee shouldn't be able to fly, but the
bumble bee doesn't know it so it goes on flying anyway."
Mary Kay Ash
"Never attribute to malice that which can be adequately explained by
stupidity."
Anon
"Image creates desire. You will what you imagine."
J. G. Gallimore
"One of the tests of leadership is the ability to recognize a problem
before it becomes an emergency."
Arnold Glasgow
"The right to be heard does not automatically include the right to be
taken seriously."
Hubert Humphrey
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HUMOR to lighten up
the executive suite
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1. If you're too open minded, your brains will fall out.
2. Age is a very high price to pay for maturity.
3. Going to church doesn't make you a Christian any more than standing
in a garage makes you a car.
4. Artificial intelligence is no match for natural stupidity.
5. If you must choose between two evils, pick the one you've never
tried before.
6. My idea of housework is to sweep the room with a glance.
7. Not one shred of evidence supports the notion that life is serious.
8. It is easier to get forgiveness than permission.
9. For every action, there is an equal and opposite government program.
10. If you look like your passport picture, you probably need the trip.
11. Bills travel through the mail at twice the speed of checks.
12. A conscience is what hurts when all your other parts feel so good.
13. Eat well, stay fit, die anyway.
14. Men are from earth. Women are from earth. Deal with it.
15. No husband has ever been shot while doing the dishes.
16. A balanced diet is a cookie in each hand.
17. Middle age is when broadness of the mind and narrowness of the
waist change places.
18. Opportunities always look bigger going than coming.
19. Junk is something you've kept for years and throw away three weeks
before you need it.
20. There is always one more imbecile than you counted on.
21. Experience is a wonderful thing. It enables you to recognize a
mistake when you make it again.
22. By the time you can make ends meet, they move the ends.
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CONTACT CEO Success
=================================
Gary Lockwood is the publisher of the CEO Success Report.
Email: mailto:Gary@CEOSuccess.com
Office: (800) 272-1575 (USA) * (909) 739-7444
Fax: (909) 494-4314
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Your Comments, please?
========================================
I appreciate feedback, corrections, and comments about the
CEO Success Report. Please send your thoughts to:
Gary@CEOSuccess.com mailto:Gary@CEOSuccess.com
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