UPDATING PORTER’S FIVE COMPETITIVE FORCES: THE NEW SEVEN

Article by Herb Rubenstein, President, Sustainable Business Group

Introduction

Michael Porter has developed a useful framework for analyzing a company’s immediate and future competitive environment from the customers’ point of view. We combine these five forces with another element identified by author Tony Grundy in his book, Breakthrough Strategies for Growth: Delivering Sustainable Corporate Expansion.  Together with our seventh and eighth tool, you will have the integrated elements you need to guide your organization in developing strong and stable sustainability strategies.

Porter’s Five Competitive Forces

Porter is known for his generic strategies (cost leadership, differentiation and focus) which have guided many strategic planners for years.
His five competitive forces are as follows:

• Entrants of other companies, non-profits, and schools
• Substitutes – better, cheaper products, alternative products that reduce demand for your services, NPO’s agenda
• Buyer Power (i.e. of customers) – reduction of loyalty, increase in group purchasing, buyers becoming sellers to compete with buyers
• Supplier Power – when supplies of one or more elements in the supply chain diminish and the price goes up, or when a supplier has such a large share that it can dictate the terms of the deal
• Competitive Rivalry (between existing players) – which may result in price wars, mergers, acquisitions, etc

Industry Mindset

The next competitive force we incorporate is what Grundy identified and explored – Industry Mindset. Industry mindset applies both in the for-profit and non-profit sectors. It refers to the perceptions, expectations and assumptions about the competitive environment, the level of financial returns and the factors critical for success in an industry. Industry mindset is, on one level, easy to discern by reading trade press and going to conferences.

For example, the industry mindset in the computer industry is that people expect the speed of personal computers to double every 18 months. This leads many people to replace computers every two years, or more often.

In the computer industry, there is a competitive mindset that if your organization is not gaining market share, it will die. This mindset clearly sets the stage for the goal of every computer technology organization to increase its market share. History has shown that the computer companies that aren’t increasing their market share are becoming targets for acquisition by those companies that are.

In the 1950’s and 1960’s, US cars were so badly made that they were replaced every 2–3 years as they fell apart. Now, improvements in the automobile industry are such that replacement within two years because of poor craftsmanship or design is rare, and car owners are holding on to their cars for much longer periods of time. In addition, with the improvement of automobile manufacturing, the industry and customer mindset pertaining to used cars and long-term leased cars has changed in a positive direction quite dramatically.

Scenario Planning & Visualization

Scenario planning and visualization are actually different tools, but we are combining them since they fit together so well. Scenario planning, as used extensively by Royal Dutch Shell and other major corporations (as well as every little league baseball coach and family gardener), is the simple to sophisticated use of “what if” questions. These questions allow you to develop a set of futuristic pictures and planned behaviors designed to achieve certain objectives.

The more “what if” questions one can ask, answer and organize, the more sophisticated the analysis. Diagrams, flow charts, computer simulation, computerized mapping and the old pencil and paper can be used in scenario planning, and can help your organization plan for differing versions of the expected future.

Scenario planning sets out several different comprehensive pictures of the future relevant to your organization and its strategic plan. It looks at the future like a video, taking one frame or time period individually, with each one building on the results of the previous. A story line moves the scenario through each time period.

Scenarios are greatly affected over time by key transitional events that are envisioned by the planner that combine to create a predicted future pattern of events. Since key transitional events are difficult to predict with any certainty, often an organization will construct three scenarios of the future (optimistic, neutral and pessimistic) and then assess their probabilities.

The value of scenario planning is that it allows organizations to create strategic plans consistent with each of the potential scenarios. It also allows them to leverage some value out of their view or views of the future.

Scenarios have, in the past, been the result of brainstorming sessions. They usually involve one or two small teams working in parallel fashion. The teams identify first the key issues/drivers that are of most concern to the organization and its future. Then they take these key issues/drivers and plot how they may occur in the future.

The process is intricate, but not necessarily difficult since everyone has some view of how the future will look, based on their own form of scenario planning. In order for scenarios to benefit businesses, the scenario builders must take into account the interrelationships of many unpredictable factors. These include technology, government policies, personal attitudes, economic and political trends, and lifestyle changes. They must also consider changes in relative economic costs and personal values in areas that can affect an organization’s future economic viability of its products and services.

Computer technology could enable you to include inputs from large numbers of people from your organization to contribute to the scenarios that are developed about the future.
Visualization is the “seeing” of an event before it actually occurs. Jack Nicklaus said that he had never hit a golf shot without first visualizing exactly how and where he wanted the ball to go. That’s why he is such a slow player, especially on the green where he sees in his mind the ball roll along a line into the cup before he actually putts the ball.

One great composer, when asked if he had ever heard his greatest symphony played perfectly said, “Yes, when I composed it.” Walt Disney is given great credit for his visualization skills.

Visualization in business has been prompted by computer graphics and some argue that visual modes of thinking are now becoming more and more popular due to the influence of television and computers. The authors welcome the myriad of books touting visualization, “scientific visualization,” and environmental scanning. They suggest that “foresight” is the goal of strategic planning and strategic thinking.

Through rigorous scenario planning, putting things down on paper in novel, picturesque ways and through being willing to innovate with computers, 3-D graphics and data mining tools, the reader can go far along this recommended path to “seeing” the objectives of the organization and the best ways of getting there.

Conclusion

Your organization needs to delve into these issues and others such as differentiation and cost leadership, and future economic value and analyzing it from the customer’s point of view.

Analyzing the Porter competitive forces along with the industry mindset and the scenario planning and visualization techniques, you and your organization can plan strong, successful sustainability strategies. 

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

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MEASUREMENT AND PRECISION: KEYS TO BUSINESS SUCCESS

Article by Herb Rubenstein, President, Sustainable Business Group

Introduction

In the, “Recruit, Organize, Manage and Deploy” approach, one aspect of running or working at a business, non-profit organization or educational institution transcends time and strategic categories: the aspect of measurement. It is crucial to create a system to measure as many different aspects as possible of your organization and how it operates. With these measurements in place, your organization’s strengths, weaknesses, goals and objectives will be more clear and you will be better able to implement high-growth and sustainability strategies.

Metrics

Organizational development requires two types of measurement. First, it requires measurement of what is going on today. Second, it requires the setting of a standard that each part of your organization is to achieve as part of your high-growth strategy.

The term used today to discuss these types of measurements is “metrics.” Every organization seeking high sustainable growth must firmly answer the question of “What metrics are important to the organization?” Identifying the metrics that best describe your organization’s current level of performance, current level of ability, and willingness to adapt and grow and its ultimate growth potential are as critical to creating high-growth strategies for entrepreneurial organizations as maps are on a road trip.

The good news is that there are many places companies, non-profits, and educational institutions can turn to for help in getting new measurement systems put into place. Often professors and students from MBA programs and organizational development programs can assist your organization in developing measurement systems.

Other companies and non-profits are often willing to share or give away the descriptions of their measurement efforts. Joining into a strategic alliance with another company or non-profit organization can also speed up implementation and reduce the cost since some of the measurement issues will overlap between your organization and the business down the down the street.

Designing a Measurement Plan

Much has been written about the work of Robert S Kaplan and David P Norton, whose book The Balanced Scorecard: Translating Strategy Into Action and consulting services have made the term “balanced scorecard,” synonymous with an organization creating and implementing a system of measuring carefully numerous aspects of your operations and using this information to help guide your organization. We endorse wholeheartedly the concept that organizations seeking to develop and implement high-growth strategies should:

• identify benchmarks or levels that are considered to be “success”

• identify carefully what it is they intend to measure (“the metrics”)

• determine how to measure key aspects of the organization

• allocate resources for measurement and analytical efforts to insure that adequate resources are deployed in this effort

• develop a plan to integrate the results of their measurement and analytical efforts so they are properly used by the organization in strategic
planning and implementation efforts.

The Balanced Scorecard and EVA

A common approach to measurement emphasizes profits or earnings using generally accepted accounting principles. For some companies, this approach may be seriously flawed and must be modified in order to use valid economic measures to drive bonus systems, resource allocation and investment decisions. This will allow economic success of the enterprise to be measured accurately.

The Balanced Scorecard is a measurement tool used by businesses and business consultants to collect information and statistics on many processes in the business. For example, using the Balanced Scorecard, a sales operation can collect data on the number of cold calls made, number of calls answered, number of sales made from these calls, etc. The point of the Balanced Scorecard is to support companies in collecting useful information on many of the internal processes where they had previously not collected date on a real time or short delay.  With new information management systems, collection and analysis of these data can occur a very short time after the data are entered by the employees.

EVA, Economic Value Added, is an analytical tool based on the return on the value of the assets used in a business process. For example, if a generator cost $1 million, and produced $200,000 in annual value, one would know that the payback period is five years. If the life of the generator is 20 years, and assuming no maintenance costs exist, the return on investment, $4 million income vs. $1 million cost would be 400%. However, in many companies assets are valued on some other figure far less than cost due to depreciation or some other write off.  When companies calculate ROI on a reduced asset amount, it actually overstates the ROI. EVA simply makes companies look more closely at the true amount of investment in their operations and seeks to make operations produce positive returns on the higher figures for cost rather than lower figures for cost often used by companies.

Both the “balanced scorecard” and “EVA” represent advancements to the state of the art in measuring important elements of organizational behavior and their results.

Measuring the RIGHT Elements

Often large and small companies, non-profits and educational institutions fail at measuring key elements of their economic activities, employee behavior, customer attitudes or true growth potential in terms of either revenues or profits. No company can or should measure everything that an analyst can imagine.

However, it is critical for both non-profit and for-profit organizations to expand the number of items in their operations that they do measure and to measure them over time. This is the best way to discern trends and patterns.

For example, one non-profit, Child Trends, Inc., is in the business of measurement. The 30 researchers at Child Trends, Inc. measure poverty levels among children, teenage pregnancy rates, and the impacts of new federal programs on children’s well being. They are considering to be creating a “youth well-being index” that will track changes over time. The organization has an annual budget of $3 million.

One of the authors asked the organization’s leaders if they realized that they were spending only a nickel per year per youth of this country (there are approximately 60 million people under the age of 18 in the US).

Not only did the organization’s leaders admit that they had never made this calculation, they were quite surprised when asked if their research, their publications and their findings were worth $1 per youth per year. The CEO’s unequivocal answer of “Yes” to this question did reveal that in their eyes their agency should be a $60 million per year organization and not the $3 million per year organization trying to eke out a few percentage points of growth each year.

High-growth and sustainability strategies must be based on some rational belief or aspiration regarding just how big a company or non-profit organization can become within a given period. Measuring key elements of the economic and demographic landscape in which a businesses or a non-profit operates provides critical insights regarding how much growth potential it really has.

Measurement of the outside economic environment, competitors, and total market size and market share within your particular markets is critical to becoming intelligent about your organization’s high-growth potential.

This high-growth potential will change over time and only through measurement will an organization know whether it has vast room for growth in its market segment or needs to begin to explore other markets for high-growth opportunities.

Non-profits may have a tougher research task in measuring the appropriate indicators of their external economic marketplace, but the job is no less important than it is in the for-profit sector.

Precision is required when measurement takes place, especially if wages, jobs, investments, resource allocation and other important business strategy decisions depend on the measurement results. The segmentation and fragmentation of the training industry today may serve as a “growth brake” limiting either service providers (trainers or their companies) or service receivers (trainees or their companies) from ever doing rigorous research on the actual impacts of the training in such areas as changing workplace behavior, contributing to increased  productivity or profits or enhancing employee well-being.

Human Capital

Companies and non-profits cannot wait until the perfect measurement devices are created to begin to evaluate the effectiveness of the training programs in which they invest billions of dollars each year. Before sending someone to training, the organization must have a clear set of expectations of the results and be able to measure employee behavior against those expectations both before and after the training.

Econometricians are not needed (though they may be helpful at a steep price) to help organizations figure out whether a training program has  increased productivity, increased profitability, reduced costs or has been a waste of money.

Measurement of human capital is in its infancy though it has been discussed for over 100 years. Human capital, as we described earlier, is a measure of the relevant skills, knowledge and ability of the individuals that comprise an organization. While it may be arbitrary to say, “John’s Ph.D. is worth ‘x’ dollars,” we can assign a value to it because organizations are willing to pay Ph.D.s, on average, more than they are willing to pay for those with Master’s degrees. This is true if the knowledge gained or human capital gained through the Ph.D. program is expected to be useful to the organization.

Even more important than measuring the static value of the human capital on a particular day, if the organization wants to grow in its skills, knowledge(s) and abilities, it is important to measure the change over time of employees’ skills, knowledge(s) and abilities. While precision is always preferred, crude measures of human capital and the changes of human capital may be useful to an organization that seeks high growth and sustainability. They are certainly better than no measures at all.

Involving Employees

Measurement is a way that an organization says to everyone that what is being measured is important. Measuring the number of suggestions that employees make for improving an organization and measuring how many of them  management has adopted sends a strong signal to employees that their suggestions “count.”

Measurement programs can create opportunities for the rational allocation of rewards and friendly competition within different sectors of an organization. Measurement has never been cheaper. With new technology, a simple measurement system could be designed that would ask every employee every week to measure such factors as the following:

• attitudes
• self-assessments of how well they performed that week
• assessments of how well their co-workers performed that week
• assessments of how well their managers performed that week
• how much they learned on the job that week compared to previous weeks
• how willing or able they think they are to implement new procedures
• how willing or able they think others in the company are to implement new procedures
• how good their products or services were that week compared to previous weeks
• how satisfied or not satisfied their customers were that week compared to previous weeks
• how wasteful or efficient they believe their organization was that week
• other questions relevant to your organization.

Having employees, suppliers and customers (and students of educational institutions) pencil in answers in a multiple-choice format on a pre-coded answer sheet or respond by e-mail to questions posed by the organization can reveal, for pennies per answer, tremendously valuable information.  The organization can use this information to assess where it is, how to improve and give direction in developing and implementing high-growth and sustainability strategies.

Precision in Measurement

The implementation and improvement of measurement activities do not require a bevy of consultants, although many consultants will sell you fancy measurement tools that may be a step up from your home brewed version.
Some of us from the “old school” still appreciate the home brew for what it was: “the best we could afford under the circumstances and a lot better than nothing.” One of the silver bullets to high-growth strategies is that your organization, regardless of its size, can improve its measurement of key factors immediately and can learn and grow from the process.

Precision is important regardless of the size of the organization. Certainly, precision in space engineering is important because a small mathematical error can send a spacecraft thousands of miles off target due to weightlessness in outer space. In outer space, imprecise approaches and calculations can costs millions of dollars in a split second.

The importance of your organization, your business, your application of talents, energies and dedication is no less valuable than the millions that we shoot into outer space. Precision is the goal, but the inability to reach it with your organization’s first efforts at measurement must not get in the way of starting in earnest to measure what previously has been unmeasured.

Non-profit organizations would be well served to calculate the costs as precisely as possible of each service they provide (using some form of “activity-based accounting”). In addition, they should also enter into that equation a “cost” for capital that is donated to the organization and is employed in providing the service.

Measures of efficiency can be created for non-profits and educational institutions, just as an efficiency measure can be created for for-profit companies and, for example, NFL quarterbacks. The goal of this measurement is not to figure out to the last hundred of a cent how efficient your organization is at the present time. The goal is to track over time how efficient your organization is in delivering its goods and services in order to be able to think rationally about how to become more efficient over time.

Conclusion

Growth strategists often suggest that reinvention will yield greater results than improvement. From our consulting experience, we are clear that there is generally room for both improvement, which must always be based on some measurement system, and reinvention, which is the use of a completely new approach to success.

Measurement does not always require the use of an outside party to do the measuring or the analysis of the information/data generated by the measurement system. Self-measurement, by employees and managers, may well produce valuable information at low cost. In all measurement systems, the quality of the information generated will be the result of the quality of the questions asked and the integrity of the answers and analysis generated.

Measuring employee output and performance, measuring the amount and types of leadership exhibited by a senior manager, measuring the contribution of a board member, measuring the efficiency of your direct marketing program, sales and training efforts, measuring the value of the office location are just the tip of the iceberg of measurement activities that can be performed today. Measurement systems will evolve, and some will be abandoned along the way.

Organizational growth and development does not occur just because someone wants a bigger bottom line or higher revenues. Organizational growth is not just the result of trying to create a better product or advertising campaign. Organizational growth is promoted by knowing the current level of success or failure that each part of your organization is currently experiencing and this requires measurement.
Early implementation efforts of measurement systems will be experimental in nature and patience is required in implementing full scale, intensive measurement systems. The rewards from these systems can be bountiful and can contribute handsomely to your high-growth and sustainability strategies.

The existence of such measurement systems can be a significant asset in promoting your organization to foundations for contributions, to venture capitalists for funding and to other companies as they seek merger or acquisition candidates.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

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THE LEARNING ORGANIZATION: THE KEY TO SURVIVAL

Article by Herb Rubenstein, President, Sustainable Business Group

Introduction

In today’s fast-paced business world, staying ahead of the competition is more crucial than ever. With the recent struggles the economy has endured, one key element in your organization’s sustainability strategy planning is the evolution into a “learning organization.” 

It is important for organizations to be successful in their sustainability strategies, but it is also important for them to know why the strategy was successful. Daryl Conner uses the term “consciously competent” to describe the situation when a person or organization is both successful and has learned the key ingredients and processes that will assist in achieving future success.

Organizational capacity for growth is enhanced by the creation of conscious learning resulting from experimentation, from implementing new strategies and from undertaking new activities.

Consciously Competent

In many businesses and non-profits the approach is to try “x” or “y” and see if it works over time. Most often, people inside of the organizations can rarely tell you why an activity worked or did not work. We acknowledge that serendipity may play some role in organizational success; but more often than not there is no clear understanding of the key factors that led to that success.

Understanding why and how an organization’s actions produced results is critical to being able to replicate that success, and to build on it to promote future breakthrough growth.

An organization is consciously competent when it understands why its actions produce, both internally and externally, results, and it can teach its entire organization (and others) why the result occurred. An organization is not consciously competent when it cannot determine quickly why something is working or not working.

For example, two chefs may each produce a great dish. Ask one how he or she did it and the chef may not be able to describe the recipe at all. The chef may be able to reproduce the dish, but cannot teach others how he or she does it. The chef is not conscious about all the ingredients, their amounts, the order, the cooking process, or why the exact combinations worked so well for the dish.

Ask another chef who has studied cooking from a different, more conscious, vantage point and he or she can show you exactly the recipe followed, the technique employed, and can describe the role of each ingredient.

The first chef will not have the ability to teach others or transfer his or her knowledge, skill or ability in his or her organization. This chef will not be able to create a legacy of improved culinary skills in succeeding generations. Most importantly, the chef who is not consciously competent will not be able to generate breakthrough economic growth through creating a cooking school and opening up four-star restaurants around the globe.

While the chef example may seem somewhat far-fetched in an article about sustainability strategies for entrepreneurial organizations, a close look at the restaurant industry reveals there is no successful large scale “four-star” restaurant chain in the world. The restaurant chains that thrive are generally “no star” operations, yet they are very consciously competent in their ability to make bad food that sells well.

The high-end restaurant market is dominated by chefs that are fabulously competent, but not consciously competent and therefore cannot expand their economic base.  Becoming consciously competent is one of the silver bullets to sustainability strategies as shown by the fast food and other franchise operations.

In the software development world, accurate, clearly worded documentation represents the consciously competent part of this highly creative industry. Yet, software developers often require six months to a year after the development of their custom-made software to document each step in the process. Outsourcing companies like Information Experts, Inc. are now growing rapidly to meet the demand to write documentation and on-line help systems for the software industry.

A critical test for sustainable growth in entrepreneurial organizations is to devote sufficient resources to becoming consciously competent while not getting so bogged down in the process that the creative elements start to lag.

Conclusion

Today with the use of video and other forms of technology, organizations will be able to document more carefully how they undertake activities. This allows the knowledge obtainable from a careful study of “best practices” to be bottled and disseminated throughout the organization quickly and at low cost.

The communication technology available can give organizations the ability to test the knowledge of each employee (and customer) periodically, if not daily.  With this, we can begin to measure quickly just how much of the newly created knowledge and conscious competence is spreading throughout your organization. Then the transition to a “learning organization” will ensure successful sustainability and growth strategies.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

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FINDING YOUR PROFIT ZONE

 Article by Herb Rubenstein, President, Sustainable Business Group

Introduction

Sustainability strategies in for-profit companies must be based on a clear understanding of the “profit zone” within a given industry. This phrase –made popular by Adrian J Slywotzky and David J Morrison in their book The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow’s Profits – identifies that within broad industry categories, some subparts of the industry are quite profitable while others are not. All organizations will be able to benefit from properly identifying profit zones, especially when deciding on which sustainability strategies to implement.

Profit Zone: Not Where You Might Think

In the late 1980s and early 1990s when IBM focused on making and selling computer hardware, the profit margins were so low that the value of the company dropped from $80 billion to $20 billion in five years. Digital, Inc. suffered a similar fate focusing on the large mainframe computer market.

The profit zone in this industry was in the software side of the market. Similarly, Coca-Cola discovered that the profit zone was not in the syrup they made, but was in the bottling, the signage and the vending machine area. Over the past decade, Coca-Cola consolidated its holdings by buying forward in the distribution chain to capture the profit zone.

Similarly, IBM has consolidated operations by moving into the software and consulting side of the computer business. The creation of the Business Intelligence Division and The Knowledge Management Institute represent IBM’s efforts to capture some of the rapidly growing market share of the large accounting/consulting firms and to capture some of the huge profits in the software industry were successful.

One company decided to terminate its relationship with a supplier of a platform on which its software was based to consolidate its operations and produce its own platform. This decision was made even though it temporarily deprived the company of many important customers who did not have equipment to use the new product. 

Although the decision was originally painful for the company, it was the result of a clear strategy to capture the profit zone within the software industry and proved to be the right decision.

Finding the profit zone within the software industry and other industries is a daunting task,  and one for which consultants are paid huge sums. Business strategists, however, must take this type of analysis into account when assisting companies in developing sustainability business strategies, especially when sustainability is defined as “high profit” by the organization.

Non-Profit Profit Zone

A similar analysis is applicable to educational institutions that focus not on profits to such a great extent, but on growth and gross revenues.
In addition, as non-profit organizations seek to find ways to cover overheads that grants do not and to stabilize income through the thick and thin of grant awards, they will need to find services they can provide and products they can sell that constitute their entry into profit zones that surround them.

Many non-profits provide training programs that are not profitable. However, there is a significant profit zone “next door” to the training program, and that is in the temporary and permanent placement business now inhabited by Manpower, Inc. and other companies.

We are personally aware of non-profits that assist their trainees in finding jobs on a regular basis and charge fees for this service. They can capture part of this profit zone that had previously been outside of their business model.

For many organizations selling some of the information they gather, such as mailing lists, books, sharing their website domain name, etc. can prove to be profitable. Non-profit organizations who find for-profit organizations with similar values may form strategic business alliances. They can leverage the organization’s brand name and reputation when the non-profit assists in the marketing of the company’s products.

A good example of this is the American Society of Association Executives’ endorsement of the Legg Mason Wood Walker investment firm’s cash management products for non-profit organizations. This type of leveraging of a non-profit organization’s asset (its name as an endorsement) requires a careful analysis of the value of the non-profits assets to the for-profit world. They must involve stakeholders early in the process to secure their input and approval.

Recently, the American Medical Association had to stop a potentially lucrative endorsement program when there was a backlash by members who did not believe that the AMA should be endorsing products for a fee.

In another example, the American Automobile Association (AAA) has started an interesting, socially useful and potentially remunerative expansion possibility. AAA has begun to offer driver education services in Maryland and charge for its driver’s education programs. The leveraging of their AAA brand and the reputation for quality that they have achieved could provide a good basis for its strategy to expand into this market which is currently very fragmented and often viewed as providing a low quality service.

In addition, with 42,000 deaths on American highways annually, AAA’s driver education program has the potential to become very large as improved driver education is obviously required in the US.

Conclusion

Each industry, either for profit or not, has a unique profit zone. Identifying what that profit zone is, and then expanding on it, is crucial in the today’s economy. Your sustainability strategies will have everything to do with where you decided to position yourself in the market based on what your most lucrative profit zone is. All organizations large and small, for profit and not for profit, will benefit from carefully analyzing their profit zone and incorporating that information into their sustainability strategies.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

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THE ECONOMIC GROWTH PLAN: THE ALTERNATIVE TO THE BUSINESS PLAN

Article by Herb Rubenstein, President, Sustainable Business Group

Introduction

In the current state of the economy, instead of extensive business plans, organizations are now focusing on creating survival plans.  This article outlines what should be in your organization’s economic growth plan (EGP). 

Contents of an Economic Growth Plan (EGP)

1. Description of the Organization

Your EGP will begin with a description of the organization. This can be presented in three simple paragraphs. The first should be a financial, organizational, and product & service history. The second part is a description of current management and operations of the organization. The third part is the projection of the future of the organization and its capacity. 

2. Opportunities

This section describes the market 

(a) financial, organizational and product/service history
(b) description of current management and operations of the organization
(c) description of the future of the organization and its capacity.

3. Description of the market, product, service opportunity – four paragraphs:
(a) product/service need/utility
(b) competition
(c) description of the customers and why they choose (will choose) the organization
(d) marketing strategy.

4. The economics of the organization – seven paragraphs:

(a) current economic picture
(b) start up/expansion/initial high-growth costs
(c) ongoing operating costs in high-growth state
(d) prices for various products/services
(e) numbers of product or service units to be sold/distributed in a timeframe
(f) financing needs
(g) future economic picture.

5. General description of high-growth strategies – one paragraph for each growth strategy (select fewer than 10).

6. Ownership and compensation – six paragraphs:

(a) ownership allocation plan – present and future
(b) compensation, benefits and bonus plan – present and future.

Assuming a large number of sustainability strategies, 10, for example, this plan is only 33 paragraphs long and would include fewer than 5 charts.

That means in 10 pages your organization can have an economic growth plan (EGP) to guide it into the future. The plan will assist your organization in capturing both its focus and its breadth of opportunities and may help you raise money from investors.

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

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COST MANAGEMENT: THE ESSENTIAL SKILL OF BUSINESSES

Article by Herb Rubenstein, President, Sustainable Business Group 

Introduction

The worlds of business, non-profit, and educational institutions are merging. Nowhere are they doing so as quickly as in the area of cost management. When critics say that non-profits need to be run more like businesses, they most often mean that they must integrate service strategies with cost management strategies and figure out how to provide more service for less money. In business, strategic cost management makes companies focus on where to make investments and how to measure their profits and returns.

Cost management in most organizations is done in an ad hoc, tactical manner. The question, “How can we save money here or there?” is no longer adequate for running even the smallest non-profit, much less the largest conglomerate.

Today, organizations can operate at many different scales. They can sell “x” number of widgets or “10x.” Non-profits can do the same with, for example, serving “x” number of meals to the elderly or “10x.” The cost per unit sold (delivered) may significantly go down as the number of units goes up. Similarly, we know that cost per unit levels may go up when a business or non-profit offers more services or different products.

Strategic planning must take this type of cost into account when arriving at an estimate of the optimal size of the operation. The plotting of this analysis is called the “experience curve” and the generic term for this is “economies of scale.”

Strategic planning must take into account the impact on the overall cost structure of the enterprise resulting from adding or keeping diverse products and services in its range.

Cost leadership is defined as the ability to produce or distribute a certain product or service at the lowest cost, either within an industry or among a certain group of competitors. Low cost-per-unit is a strong form of competitive advantage. It is the key supporting link in the consolidation wave moving across America. It is certainly the driving force in the boom of “ecommerce,” where costs of service can be a fraction of the costs of doing business in the normal bricks and mortar way.

The alternative to cost leadership is a strategy of differentiation. By making your products different, by finding your niche, your organization can charge a premium or can seek contributions at very high levels without much direct competition. The strategy of differentiation involves costs – the costs to make your product or service better or different, the cost to serve one geographical area over another, and the cost of educating consumers of your differentiated product.

Strategic planning must focus on the costs of differentiation as compared to the returns. This will help you make economically rational decisions regarding when to pursue cost leadership and when to pursue value-added differentiation.

A critical role for strategic planning under the label of strategic cost management is to identify all of the costs associated with each part of the organization. EMMAUS of Washington is a non-profit organization in the business of serving the elderly population. However, when the company purchases a building, they are actually in the real-estate business. 

By identifying each of the costs associated with a business or non-profit, you can identify the “businesses” that your organization is actually in. Once you have identified and isolated each of these “businesses,” you can then manage each section by evaluating the costs and the returns of that section. This is often called “activity-based accounting.”

This way of looking deeply inside your organization is critical for strategic planning in several respects. Your organization may not need to be in all of these businesses. If you determine that you are losing money from one element, you can spin off or outsource that activity. The key distinction in deriving value from outsourcing is the notion that “leasing” is sometimes cheaper than owning.

Possible Value-Chain Analyses

The following are questions to ask and points to consider during this type of strategic planning. 

1. What are all of the costs that your organization incurs broken down into normal accounting terms and broken down again programmatically (if your organization has more than one program, service or business)?
2. Which costs are discretionary?
3. Which costs can be incurred in another manner – such as leasing rather than buying, outsourcing instead of hiring in-house, distributing electronically, moving locations or staying where you are, sharing costs and revenues of an endeavor with another organization or incurring all of the costs and returns within your own organization, foregoing the expense rather than continuing it?
4. Which overhead costs have little economic value added in the short run? In the long run?
5. What economic value added can you attribute to each employee, each division, each activity within your organization?
6. What economic value added can you attribute to each product or service that your organization provides?
7. What are your organization’s financing costs and how can they be minimized?
8. What are your organization’s cash, receivables and other asset management policies, and how can maximum benefit be obtained from securing the highest possible return from assets within your willingness to tolerate risk?
9. Is your organization promoting a “cost-aware culture?”
10. Are your organization’s cost information systems operable daily, weekly, monthly and are they well monitored?
11. What “sacred cows” are there in your organization that cost money, such as real estate, employee policies, pricing policies, etc?
12. At what price does your organization achieve quality internally in the administration and externally in services and products for customers and how can the quality/price ratio be improved dramatically?
13. Which 20 percent of your organization’s costs offers 80 percent of the potential for improvement?
14. Does your organization set target cost levels systematically?
15. Does your organization benchmark costs and outputs on a regular basis?
16. Does your non-profit or educational institution regularly compare the costs (including time spent by volunteers) of fundraising activities to their returns?
17. Is there significant underutilization of resources in your organization?
18. Are non-quantitative beneficial results targeted rigorously and monitored over time?
19. Are there areas of new investment that could greatly improve economic performance?
20. A re there areas of old investment that are not producing reasonable returns?
21. Are you in the right area of the market or should you migrate to another area of the market where your organization would have a competitive/financial advantage?
22. Is your organization’s strategic planning system running in accordance with a schedule?
23. Is implementation of strategies monitored for financial costs and economic or other returns both in the short run and in the long run?
24. Have the actual returns of your organization’s business strategies equaled, fallen below or surpassed the expectations expressed in the strategic plan?
25. Is your strategic planning process cost-effective, lean and dynamic?

By identifying which aspects of the organization provide economic value added, you will be better able to assess the overall value of each individual function of your business. This approach to strategic cost management will allow businesses and non-profits alike to offer more product and service for less cost.   

About the Author

Herb Rubenstein is the Executive Director of the nonprofit organization, THE LEEEGH, which stands for leadership in education, energy, environment, governance and health.  He is also the President of the Sustainable Business Group, a consulting firm to businesses, He is an adjunct professor of strategic management at the Global Energy Management Program of the University of Colorado Denver.

He is the lead author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations, lead author of Leadership Development for Educators, and the author of the American Bar Association book, Leadership for Lawyers.  He has authored over 100 articles and over 80 videos on business strategy, entrepreneurship, leadership, and improving organizations.

He can be reached at herb@sbizgroup.com or 303 910-7961. The website for the Sustainable Business Group is www.sbizgroup.com and for THE LEEEGH please see www.theleeegh.org. You can learn more about Mr. Rubenstein’s books at www.leadershipforattorneys.org, www.leadershipforeducators.org and view his videos at www.youtube.com/theleeegh and www.vimeo.com.

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Measuring “MARPERATIONS™” – A NEW MEASURE OF BUSINESS SUCCESS

Article by Arjun Sen, President, ZenMango®, and Restaurant Management Group and
Herb Rubenstein, President, Sustainable Business Group

Introduction

Whether it is in business school, successful corporations, or in motivational speeches, we have all heard over and over the statement, “What gets measured gets acted upon.” While that statement shows the importance of measurement, very few stop to question whether or not they are using the right measures, and not just acting on any measure.

In a previous article we introduced “Marperations™” as the unification, synergy, and integration of marketing and operations; however, since we previously did not have a word for it, no MBA program has yet taught it. This term opens the door for the world of business to benefit from a cohesive system; one in which marketing and operations are two sides of the same coin.

One of the two co-authors of this article, Arjun Sen held the unique position of VP of Marketing and Operations Services for Papa John’s International. In this position the new science of Marperations™ was rigorously tested in a highly competitive environment.  This new science proved to be robust then and now with the new emphasis on sustainability, it will be even more robust as marketing will have as one of its key future components educating the public of the environmental and energy impact of products and services.

Current Measurement Approaches

Our past experience with Operations and Marketing personnel suggested to us that these two “types” of senior executives were made of different DNA. They seemed to be born differently, certainly acted differently, even when  they both donned the same company colors. When one puts the report cards of operations and the report cards of marketing next to each other and tried to compare them or make sense of them in a unified, rational, synergistic manner, the differences between marketing and operations become clear.

Both have clear Key Performance Indicators that measured their functional efficiency.

Marketing measures include awareness, trial, frequency, advertising effectiveness, and top line sales. All these measures are based on PCYA (percentage change vs. year ago).

Operations’ measures, on the other hand, are tactical. They are about measuring cost of goods or raw materials. Operations’ directives in most companies have always been about sustainability in some respect as many of these measures we efficiency measures on the input side, the process aspects of creating the product or service, or pointd toward controlling waste or reducing key cost inputs such as labor. Maximum efficiency, a hallmark of sustainability, was and remains the key goal of operations, plus, of course, measuring and improving quality by a greater measure than the increase in cost necessary to improve the quality.

These measures are commonly used because, when viewed separately, they best showcase the accomplishments of each department. Until recently, marketing came from and lived on another planet, seeking “eyeballs” for quality or convenience claims.  Today, when marketing has to answer the questions customers ask like, “What is the carbon footprint generated by this product?” – an answer that only operations can provide, at least we see the beginnings of marketing and operations becoming synergistic.  While many forces have led to the new science and reality of  “Marperations™”, it is sustainability becoming a part of the central core, the central nervous system, the DNA of every company, that will put “Marperations™” into the lexicon of “C” level managers, business students, and writers on business topics.

The Problems with the Current Measurement Approaches

Having Marketing and Operations work in their separate silos in companies causes the following three problems:

1. Marketing measures are trailing indicators of the brand. The measurement period looks back to last quarter and month. The insights generated buy these marketing measures, though needed, do not predict future brand or product success nor reflects the value to the customer of the way operations in a company shepherds the company’s resources to produce the best product in the most efficient manner.  urgency of a brand’s operations. Operations are an ongoing process that never stops and operational improvements never stops.  Marketing that does incorporate wisdom and sustainability oriented success stories of operations misses the boat that customers want to get on these days.
2. Operations measures are more current when compared to Marketing’s measures. However, they still reflect yesterday’s measures, which are not leading indicators.
3. Marketing and Operations could each meet their individual goals, but there is no guarantee that the company as a whole will meet its overall goals.

For example, Marketing can meet its goals through effective advertising, and increasing its same store sales with price discounts. Operations can meet its goals by attaining labor or other supply chain efficiencies. The brand, however, may not meet its overall goals if the customer level of satisfaction or experience drops significantly due to one or more company efficiencies actually causing a reduction in customer satisfaction.  A deteriorating customer level of satisfaction will eventually, if not sooner, cause sales to drop, the reputation of the brand or product will also suffer, and the combination of these two results produce a critical situation for the brand.

Measuring Marperations™

The three rules to consider as one develops a unified measure of Marperations™ are:

1. The measure must be a leading indicator and not a trailing indicator.  A leading indicator allows a company, brand, or product to tweak its marketing and operations strategies to influence the leading indicator.
2. The measure should be simple and communicated throughout the organization. It needs a life outside the company’s boardroom.
3. Both Marketing and Operations departments should be encouraged to have their own functional report cards. However, they must clearly understand how their report cards connect to each other and the brand’s overall success.

Consider these examples:

Three Marperations™ measures for a Senior Care could be:
• number of guests (% occupancy)
• avg number of days a guest stays
• avg number of visitors a guest gets

For a high fixed cost business like the hotel industry, percentage occupancy is key to profitability.  Avg. number of guest stay indicates the performance of the brand and the avg. number of visitors can be a leading indicator of referrals.

Three Marperations™ measures for a pizza brand could be:
• number of customers
• number of dough balls
• revenue per dough ball

The pizza brand orders dough balls a week in advance, Marketing efforts can increase demand for the coming week. This will necessitate sending more dough balls to a store, and also necessitate Operations to adjust its service standards in order to better serve the increased number of guests in the coming week.

Achieving Unified Marperations™ Measures and Positive Impacts on the Bottom Line
It is not enough for companies to identify measures for Marperations™. The company should make an effort to live it on a day-to-day basis at all levels of the organization.  Marperations™ measures will become critical sustainability measures in all three key areas of people, profit and planet.  Since sustainability must permeate both Operations and Marketing, it is the door that opens up the opportunity for a new breakthrough in business we call Marperations™.

In a reality where operations has their holiday party away from the corporate office, and marketing holds its annual brainstorming ideation in a deluxe resort in the mountains, there is a need for a day to day common connection. For a unified Marperations™ measure to work, there must be more shared working, a true integration between Marketing and Operations. Shared working is not merely about frequent Marketing and Operations meetings. Shared working is about Operations being present when marketing strategies are developed, and similar Marketing presence in the Operations trenches.  Marketing offsite should move from resorts to stores and Operations holiday party should be in corporate office, hosted by Marketing. Sustainability should be a common these in all key strategies of Marketing and Operations for every company in the future.

Conclusion

The benefits of developing and living a unified measure of Marperations™ are obvious as it is directed towards the company’s overall success and provides the best approach for integrating sustainability into all key aspects of the company’s activities.  This common report card will result in shared accountability and less finger pointing in case of a failure. In addition, there will not be any more Marketing and/or Operations wins without an overall team win and a sustainability win. In a way, this marks the beginning of the end of silos and “individual players.” Sustainability requires such a unified approach to product development and manufacture and customer education about how the company is, what is stands for, and how it is contributing to reducing energy use, pollution, climate change, and being an excellent steward of its resources and the planet’s resources.  Companies can no longer afford doing business as Operating or Marketing silos. Instead, companies will hire and retain those who can and relish working together under a unified company banner and help generate  an overall report card of MarperationsTM.

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About the Authors
   
Arjun Sen is President of ZenMango®, a research driven marketing consulting firm focused on consumer research, branding, strategic planning, and marketing and operations research. He has used his 18+ years of corporate marketing experience to teach marketing and marketing research at the University of Colorado, Boulder, and serve on the Colorado Governor’s Small Business Council. Contact Arjun at Arjun@zenmango.com or 303-521-1988. More information about ZenMango® and ZenMango®’s restaurant specific arm, Restaurant Marketing Group, can be found at www.zenmango.com and www.rmktgroup.com.

Herb Rubenstein is the President of Sustainable Business Group, a consulting firm to businesses and has its headquarters in Denver, Colorado.  He is the co-author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations (Financial Times/Prentice Hall, 1999) and Leadership Development for Educators (Rowman and Littlefield, 2009), and the author of Leadership for Lawyers, 2ed. (American Bar Association, 2008), plus over 100 articles on business strategy, entrepreneurship, leadership, and improving how organizations function and deliver value. 

He also served as an Adjunct Professor of Strategic Planning George Washington University, and has been an Adjunct Professor of Entrepreneurism at George Mason University and Colorado State University.  He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974.  His email address is herb@sbizgroup.com and he can be reached at 303 592-4084. For more information about the Sustainable Business Group, see www.sbizgroup.com.

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“MARPERATIONS™” – THE NEW SCIENCE OF BUSINESS

Article by Arjun Sen, President, ZenMango®, and Restaurant Management Group and
Herb Rubenstein, President, Sustainable Business Group

Introduction

Graduate schools of business have long sought to create a science of business. From Frederick Taylor to Peter Drucker, who “practically invented the science of modern corporate management,” (WIRED Magazine) there have been great developments in forming standards, norms, and best practices in business. Today an overarching pillar of business has emerged.  It will impact the way businesses design and build their products and services, deliver these services, educate their customers about their services and products, and it will impact not only how a company operates, but what is stands for in the eyes of the customer.  That new pillar of business is “sustainability.” 

This article produces a new development in the bridging of science and business. It creates a new word never found in the lexicon of any language to describe this new science. Science is about to discover, as it usually (if not always) does, a truth that has always existed in the universe. “Marperations™” the unification, synergy, and integration of marketing and operations has existed since the beginning of time; however, since we did not have a word for it, no MBA program has yet taught it. This term opens the door for the world of business to benefit from a cohesive system; one in which marketing and operations are two sides of the same coin, just as price and quality have become.  This new reality of business “Marperations™” is an essential link from business done the old way to business being done in a sustainable manner.  Changes of philosophy only have broad impacts when there are changes in operations of equal innovative stature. “Marperations™” is a massive innovation in business and a critical element in making sustainability an integral component, if not, the integral component, of a business’s identity, its way of doing business and its way of marketing its products and services.

One of our authors, Arjun Sen, held the unique position of VP of Marketing and Operations Services for Papa John’s International. In this job, the new science of Marperations™ was tested in this highly competitive environment and it was proven robust. It is based on sound principles and has produced great, long-term value for the company. While it that it took years of practice before the one word, “Marperations™” came into our vocabulary, now we realize the need for a name that connects and integrates marketing and operations.  With the new push toward sustainability, and planning for sustainability, it has become readily apparent that a company’s marketing and operations, or “Marperations™” must work as a unified aspect of the company for the full benefits of sustainability to be achieved within the company and understood and appreciated by its current and future customers.

This article shares some of the wisdom found in the concept of Marperations™ that contradicts the prevailing theory that separates marketing from operations and makes them silos in most companies.

The Prevailing Wisdom

Currently, marketing and operations are separated by job titles, division of departments (not to mention personalities), and by how success is measured. They are further divided by different planning processes and budgetary silos. It is not natural, nor is it wise to have this compartmentalized approach to marketing and operations for many reasons.

The primary reason this is an unwise compartmentalization exists in these two facts:

1. A company’s marketers know that marketing takes place 100% of the time in the enterprise. Every customer interaction is an opportunity for marketing.
2. Operations personnel know that operations takes place 100% of the time. Every aspect of operations determines product design, manufacture and delivery, plus determines the company’s contact with its customer (often referred to as “sales”).  Also, operations controls the company’s use of energy, its carbon footprint, its treatment of its employees, and determines if the company is operating in the most sustainable manner possible.  All of these factors ultimately contribute to the customer experience of the product and the company and they determine the customer’s future relationship with the brand.

These two processes always exist at the same time and in the same place. Therefore, the science of business will tell you they are related and, in fact, intertwined, and should not be planned, executed, or examined independently of one another.
The New Wisdom of Marperations™

Science is built on universal truths. The six universal truths behind the concept Marperations™ are:

1. Every customer interaction – which is usually in the exclusive domain of operations (including sales as part of operations) – is actually marketing to a significant extent.
2. Every advertising campaign – which is usually in the exclusive domain of marketing – sets the expectation that governs every sale and is therefore in the operations realm.
3. Linking marketing and operations is critical to presenting one unified message to the customer. This occurs from the start of the marketing communication to the actual sale of the product or service.
4. The better a company’s operations run, the easier and more effective it is to market its product or service.
5. The better a company’s marketing runs, the easier it is to perform the business of operations. At the same time, operations’ measures are better when they operate close to capacity rather than at half capacity. If a company links marketing and operations so they can plan, implement change, set goals, and feed out of the same budget together, then improvements in marketing will always spill over to create improvements in operations.
6. Sustainability must operate throughout a company’s operations and marketing or it will be subject to “greenwashing” claims and attack by competitors.  This overarching philosophy of sustainability needs a home and a champion in companies to withstand challenges and become pervasive in the company’s identity.  Only by linking marketing and operations into “Marperations™” can a company create a true and bullet-proof home for sustainability.

Creating the Path to Marperations™

Marperations™ is not a theory. It is a fundamental, yet new operational approach.  It starts with integration of all marketing and operational platforms at every level of the organization. In essence, marketing must inform everyone in operations of all key marketing approaches, and operations must inform everyone in marketing of all key operational strengths, challenges, and change efforts in the organization.
CMO’s and COO’s must meet regularly and coordinate their activities closely. CEO’s must assure this takes place and act as the owner of Marperations™. The Board of Directors must require a Marperations™ report every quarter for the first year to assure this new way of doing business is fully exploited. The CFO must become an integral part of these discussions since this new integration of marketing and operations will require new budgeting formats, new reporting scorecards, will enable a new emphasis on sustainability throughout the organization, plus, will link improvements in the “brand” or reputation of the company to actual improvements in the operations of the company.  The nexus of sustainability and linking operations to brand is now becoming apparent in the new marketing campaigns of companies touting their sustainability ratings and improvements.  “Marperations™” is the institutional home for sustainability to have the impact inside companies that customers will be calling for in ever increasing numbers every year for the foreseeable future.

Conclusion

The benefits of Marperations™ to the company’s bottom line, to achieving its revenues goals, and to creating sustainability as a critical force within the company are obvious. Plans to create this new unified force within a company are the subject of a upcoming series of articles.

A company can develop its own approach and own procedure to integrate this new science into their business. Undergraduate and graduate schools can fight over whether the Marperations™ course fits in the marketing or operations department of their school.  Operations research and marketing research gurus can begin to build success metrics for this new science. Marketing executives can begin to construct new marketing messages that promote the sustainable operations of their companies as a unique value proposition.

Marperations™ is the future of business, but we cannot deny its role in the present. Many companies already have the basis for linking marketing and operations through enterprise wide data systems and new sustainability initiatives. These systems allow the company to merge marketing data with operations data to form enterprise wide reports, reports that measure the existence and results of the new activity we call Marperations™.  They allow a new theme, sustainability, to permeate operations and marketing simultaneously and in a cohesive manner.  Books will surely be written on Marperations™, but every business can immediately start down this fruitful path and gain the wisdom and benefits of this new science of business.

About the Authors  

Arjun Sen is President of ZenMango®, a research driven marketing consulting firm focused on consumer research, branding, strategic planning, and marketing and operations research. He has used his 18+ years of corporate marketing experience to teach marketing and marketing research at the University of Colorado, Boulder, and serve on the Colorado Governor’s Small Business Council. Contact Arjun at Arjun@zenmango.com or 303-521-1988. More information on ZenMango® and ZenMango®’s restaurant specific arm, Restaurant Marketing Group, can be found at www.zenmango.com and www.rmktgroup.com.

Herb Rubenstein is the President of Sustainable Business Group, a consulting firm to businesses and has its headquarters in Denver, Colorado.  He is the co-author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations (Financial Times/Prentice Hall, 1999) and Leadership Development for Educators (Rowman and Littlefield, 2009), and the author of Leadership for Lawyers, 2ed. (American Bar Association, 2008), plus over 100 articles on business strategy, entrepreneurship, leadership, and improving how organizations function and deliver value. 

He also served as an Adjunct Professor of Strategic Planning George Washington University, and has been an Adjunct Professor of Entrepreneurism at George Mason University and Colorado State University.  He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974.  His email address is herb@sbizgroup.com and he can be reached at 303 592-4084. For more information about the Sustainable Business Group, see www.sbizgroup.com.

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MANAGING FOR THE LONG RUN: LESSONS IN COMPETITIVE ADVANTAGE FROM GREAT FAMILY BUSINESSES

By Danny Miller and Isabel Le Breton-Miller

Book Review by Mike Powers and Herb Rubenstein, President, Sustainable Business Group

Introduction

The book, Managing for the Long Run, explores family controlled businesses (FCBs) – businesses, whether public or private in which a family controls the largest block of shares or votes and has one or more of its members in key management positions. The book proposes that the “great” FCBs can teach managers valuable lessons about achieving an enduring competitive advantage. Although conventional thinking asserts that FCBs, by their very nature, are rife with the potential for conflict. It is this unique nature that allows FCBs not only to succeed, but also to endure. 

The authors point out that “the book is not about the average family-controlled business, but about the great ones – large, old companies that have achieved market share leadership.” The “great” FCBs tend to demonstrate four driving priorities termed “the four C’s” (Command, Continuity, Community, Connection), each of which give rise to a “thematic set of remarkable policies and practices”.  

These driving priorities, and the practices they engender, blend together to support certain strategies common to FCBs. The book discusses four  of these strategies in detail: brand building, craftsmanship, superior operations, innovation, and deal making. Note:  The four C priorities and their elements must work in concert as complimentary elements, each counterbalancing the other so that one does not dominate.  

The book suggests that problems arise “as a result of mismanaging the four C priorities – the majors, or focal organizational priorities, and the complimentary priorities that offset excess and ensure resilience and balance,” and  identifies three error types:

• Type 1: Some elements of a major priority became dangerously excessive,
• Type 2: Some elements of a C priority weaken,
• Type 3: A complementary priority erodes.

Evidence

The authors conducted two studies, an initial pilot study “that identified the common FCB  practices and many of the driving priorities and practices”, and a later more in-depth study referred to as the current study. A series of filters was applied to identified FCBs resulting in a final 40 company sample.  (Note: J.P. Morgan was later added to this sample for a total of 41.)    

The data gathering process included assemblage of extensive files for each company.  “Secondary data were collected in the form of a series of articles and books that recounted key facts and decisions regarding a company’s mission, goals, policies, strategy, leadership, culture, administrative practices, competencies, challenges, and performance.” In addition, certain executives, consultants, customers, and partners of 10 of  the 41 firms were interviewed, providing mostly context and “a sense of the firm’s mission, values, strengths, and weaknesses.” (240)  Information regarding the actual strategies and practices of the 41 were derived from secondary sources. (240)  The incomplete nature of the aforementioned interview process could be considered an empirical weakness in the study, which could have affected the overall results.  

Firms
FCBs highlighted in the book include:

• Adolph Coors Company
• Bechtel Group, Inc.
• Bombardier Inc. (Canada)
• Cargill, Incorporated
• Corning Incorporated
• The Estee Lauder Companies Inc.
• Fidelity Investments
• Hallmark Cards, Inc.
• IKEA
• J.P. Morgan & Co., Inc.
• J.R. Simplot Company
• L.L. Bean
• Levi Strauss and Co.
• Michelin
• Motorola, Inc.
• Nordstrom, Inc.
• Olympia & York Developments Ltd. (Canada)
• S.C Johnson & Son, Inc.
• Tetra Pak AB (Sweden)
• The New York Times Company
• The Timken Company
• Tyson Foods, Inc.
• W.L. Gore and Associates, Inc.
• Wal-Mart Stores, Inc.

Quotable Quotes

“A business concerned with short-term profits will try to exploit its employees. But for a company in it for the long run, the more it invests in its people, the more it will reap from them.” – Francois Michelin

Conclusion

Rather than focusing on the special challenges of FCBs, the book concentrates on the valuable lessons FCBs have to offer, such as:

• Leadership that is independent and courageous rather than imprisoned by quarterly financial targets
• Strategies that are focused on and orchestrated for long-run capabilities, rather than distracted by tangential opportunities
• Cultures that are cohesive, caring, and single-minded, rather than individualistic or bureaucratic
• Enduring, win-win relationships with the external environment, rather than fleeting transactions with it.”
In essence, the book is about the “revealed priorities and remarkable practices of great FCBs and how today’s managers can develop and configure them to build powerful strategies that produce competitive advantage.”

About the Authors

Mike Powers is a consultant to the Sustainable Business Group.

Herb Rubenstein is the President of Sustainable Business Group, a consulting firm to businesses and has its headquarters in Denver, Colorado.  He is the co-author of Breakthrough, Inc.: High Growth Strategies for Entrepreneurial Organizations (Financial Times/Prentice Hall, 1999) and Leadership Development for Educators (Rowman and Littlefield, 2009), and the author of Leadership for Lawyers, 2ed. (American Bar Association, 2008), plus over 100 articles on business strategy, entrepreneurship, leadership, and improving how organizations function and deliver value. 
He also served as an Adjunct Professor of Strategic Planning George Washington University, and has been an Adjunct Professor of Entrepreneurism at George Mason University and Colorado State University.  He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974.  His email address is herb@sbizgroup.com and he can be reached at 303 592-4084. For more information about the Sustainable Business Group, see www.sbizgroup.com.

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LIVING AN EXTRAORDINARY LIFE

by Robert White

Book Review by Herb Rubenstein, President, Sustainable Business Group

Introduction

Robert White’s book, Living An Extraordinary Life is not about extraordinary people at all. The book is about you and me, your brothers, your sisters, you children, your parents, and basically, every one of us.  If you have read twenty personal development books and taken a dozen or so personal development courses, you will find some familiar material.  The book describes the strategies that most of us deploy most of the time in our lives, and why they don’t work.  The book shows the obvious shortfalls of these strategies.  However, the shortfalls of many of these strategies that we use that don’t work too well, are not obvious until Mr. White explains why and how they don’t work.  This review will not steal the thunder of the book.  It is a book worth reading a few chapters at a time and the chapters are mercifully short.

The most important aspect of the book is that it is a great first step for anyone who wants to improve their lives and the lives around them.  That just can’t be said for many other books.

The Basic Premise of the Book

Every personal development book must start with the premise that you can be more in control of your life.  You can make it better.  You can learn to accept or take responsibility for what occurs in your life and you can spend your life making it better and assisting others in making their lives better.  This book makes those points repeatedly. 

What this book does that other books do not do is actually give you a few good handles to help you pull yourself up in life and bring others with you.  That does not mean necessarily that if you read this book you will earn more money, but it might give you the ability at least to look introspectively about why you have not made more money in your life, if that has been one of your goals.

Mr. White often writes things in the book to provoke, because the purpose of his book is to provoke, just like an alarm clock in the morning, or a coach that yells in your ear.  The stories of the book give examples of how people have discovered how to transform their lives in a manner that leads to greater personal satisfaction, more effective behavior, and less suffering.  Distinctions are everything in this book, and one can learn from one simple quote the true difference between pain and suffering.

Manage Your Expectations When You Read This Book

Each person who reads this book will get something different out of it because each person is different going into it.  Some chapters of the book will simply not apply to your life.  Other chapters may change your life for the better. For example, if you want to be able to become more aware of things as they occur in your life, you can achieve this by reading this book.  If you want to stop feeling sorry for yourself, you might, probably with some great resistance, make some headway on this front as well.

If you really want to be President of the United States, this book won’t help much, but it won’t hurt either.

The section of the book on expectations is especially useful.  Just think how often you went to a play or restaurant or talked with someone and when you thought about the experience and judged it, you said, “It was not as good as I expected it to be.”  Mr. White shows you how making expectations sets up people later to make judgments not based on what they actually experienced, but how they thought it should have been.  How many divorces in our lives are caused by the fact that the marriage or the other person just did not live up to our expectations?  Probably most of them.

The best example in the book of sheer insight is the section “givers” and “takers.”  Many examples in the book show clearly that those who are willing to give, share, and contribute to others are far happier, more “self” fulfilled, and more appreciative of life than those who are “takers.”  This lesson is useful.

Another great example in the book is the section on “commitment.”  Commitment to something does not have to mean that you are committed to it forever.  Some commitments lead us in the wrong direction and should be abandoned.  What is clear from the book is that people are often not aware of their unspoken commitments and beliefs and these unspoken commitments and beliefs often get in our way of having the life we want to have.

One section of the book, the section on perfection, is useful in two ways.  First, it shows the great fallacy of creating a definition of perfection that is impossible to reach, and then each of us turning ourselves into a pretzel in order to try to meet this definition of perfection.  Second, Mr. White makes the great case for accepting yourself as you are and others as they are, rather than comparing them to some standard of perfection that makes one incapable of appreciating or loving fully one’s self or another person.

I once wanted to teach my then five year old daughter the definition of perfection.  I told our eight year old son I would teach her this word at dinner. At dinner I asked her what would a good word be to describe an evening where the food was outstanding, the conversation with the guests was great, the weather was nice, and everyone had a really good time.  My daughter said, “That would be perfect.”  Then, I asked her, what if everything the next night at dinner was even better, what word would you use to describe that.  She said, “More perfect.”  I immediately responded, “No, Kathleen, perfect is an absolute.  Perfect is as good as it gets.”

My son, Jason, immediately said, “No Dad, perfect is as good as your measure of perfect gets.”  At eight years old, Jason, had discovered a key secret of the universe.  Each person, for himself, or herself, has the power to define the word perfect for every situation.  Jason had been amazed that no one in gymnastics had ever scored a “10” in the Olympics until Nadia Komenici.  Perfect was surely not as good as it gets, he understood.  Perfect was merely an “opinion.”  And he understood the truth that each human being has the power, and I would argue the duty, to create his or her opinion as to what perfection is.  Freedom is developing your own definitions of perfection and living consistent with them as a goal.  For starters, Mr. White, makes the cogent point that each of us is a perfect “us,” unique and much of the effort we spend trying to change ourselves toward to standard of perfection created by others, or society, or our culture, gets in our way toward living an extraordinary life rather than helping us achieve it.

Conclusion

Many believe that the personal development surge of the 1970’s and 1980’s is over.  In some ways it is. But there are important lessons to learn from one of the masters of that time and a person who has continued to seek in his professional career an ever deepening understanding of how humans work and don’t work.  This book is only worth the time reading if you want to improve your life.  A diet is only potentially successful if you are truly committed to losing weight and maintaining a life style and diet that will keep you at the desired weight once you achieve it.

So, if you are ready to tackle some of your challenges, or are ready to take on bigger challenges because you have been playing small and just trying to survive, or be safe in this world, then this book is for you and for your friends.  Even if you think, after reading this book, “Hey, I knew that stuff already,” you might find that the day after reading this book your perspective on some things has changed and changed for the better.  You might also find that you are better at observing others who are doing very well or employing strategies that keep them from doing very well.

You might not have an extraordinary life just because you read this book.  In fact, I can assure you that you won’t have an extraordinary life just because you read this book.  But if you are committed to having an extraordinary life, if you are committed to being stronger in your ability to make crisp decisions that will guide your life, if you want to be more of the architect of your life, and if you want to be more effective in your life, this book is a good first step to rekindling your commitment to yourself, your life and the lives you can positively impact during your time on this earth.

About the Author

Herb Rubenstein is the President of Sustainable Business Group a consulting firm to businesses.  The headquarters of the Sustainable Business Group is Denver, Colorado.  He is co-author of Breakthrough, Inc. – High Growth Strategies for Entrepreneurial Organizations (Prentice Hall/Financial Times, 1999).  He also served as an Adjunct Professor of Strategic Planning George Washington University, and has been an Adjunct Professor of Entrepreneurism at George Mason University and Colorado State University.  He has his law degree from Georgetown University, his Master of Public Affairs from the LBJ School of Public Affairs, a graduate degree in sociology from the University of Bristol in Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate from Washington and Lee University in 1974.  His email address is herb@sbizgroup.com and he can be reached at 303 910-7961. For more information on the Sustainable Business Group, see www.sbizgroup.com.

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