Product Managers as Business Interpreters

      Translation

Product managers need to interact with multiple departments and work with cross-functional teams. We are required to understand a multitude of skills, tools, and techniques to successfully perform day-to-day job requirements. Our skill-set balances marketing, engineering, information technology (IT), and manufacturing. We move from understanding nuances of customer insights to ensuring products are equipped with features that deliver high-valued benefits. Then, our winning features and benefits need to be clearly communicated to customers.

Working between such diverse groups requires a key skill – business interpreter. Business interpreters help to bridge the gap between diverse groups within an organization. So, what is a business interpreter? A typical language interpreter converts concepts from a source language to a target language. For example, Lucy is helping a Spanish-speaking customer explain problems she is having with a new product. Lucy interprets what the customer is saying into English for the non-Spanish speaking to Steve, the customer service representative.

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A business interpreter is an individual that is able to seamlessly work between multiple departments through a strong understanding of all aspects of the business; theoretical, practical, and most importantly simplistically. The product manager communicates from one department to another through the diverse “languages” each group “speaks”. This is a critical skill for product managers as we work between and with technical and non-technical groups.

Let’s look at a typical scenario a product manager might encounter. Consumers are rating the headlights on our new minivan very important but below expectations during usage (high importance, low satisfaction). Dealership owners are complaining sales are slowing due to internet chatter that families do not feel safe while driving. We need to understand what is happening in the marketplace and communicate the situation back to executives with recommendations.

headlight

We visit dealerships and customers of our product and competitors. We drive our minivan and competitor products in a variety of situations. After weeks studying the situation, we compile all our data and start building our story for executives. Our first meeting with executives goes well, but they request more data to ensure this is a real problem.

Minivan family

One of our first stops is with the information technology (IT) department. We need help gathering various sales and warranty data, as well as segment sales information to help executives understand the situation better. We work with several data analysts by providing crucial direction for data aggregation (from multiple sources) to provide impactful insights and direction for executives. The goal is to help executives make an effective business decision. We need to communicate what executives ant to review to ensure analysts gather the correct data.

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The analysts joke that it is nice working with someone that understands data and knows exactly what they want. Typically executives make requests that are not logical and the analysts waste lots of time going back and forth with executives until the executive finally gets what he wants, which is often completely different from the initial request. Our understanding of data helps the analysts quickly gather the correct information and compile it in a way that executives will understand. The new data clarifies the story, and executives approve the recommendation for a new headlight design.

The product manager now needs to communicate the field findings to engineering teams to develop an updated headlight design. Quantifying qualitative findings allows engineers a deeper understanding of the customer needs. If headlights need to be brighter, the product manager cannot just say “make us brighter headlights”. This does not provide much direction for engineering teams (and often causes a lot of frustration). A more impactful discussion would focus on the technical aspects that would meet customer needs while providing product differentiation. For example, lumens, watts, headlight shape, bulb life, etc. are more concrete and provide a better foundation for engineers to begin development.

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An effective tool to communicate market needs into technical details would be a House of Quality (HOQ). The HOQ translates qualitative customer needs into quantitative directions to ensure engineers understand what is needed and provide direction on how to achieve it. The HOQ provides measureable directions for product development. It provides a direct, visual relationship between how engineering characteristics affect the customer needs.

HOQ

Similarly to the data analysts, the engineers joke they are glad they did not have to deal with the VP of sales. He always asks for what competitors already have, but for a lower price. He doesn’t understand the product development process or what customers actually want; he never supports his requests with data. They appreciate working with someone who has a grasp of engineering and uses evidence-based decision making for requests.

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In addition, the product manager needs to understand how manufacturing teams are developing and assembling the new headlights. This “factory story” can then be communicated to marketing teams for additional feature and benefit “golden nuggets”. She is able to explain to manufacturing engineers what unique production techniques or processes are helpful to marketing and customers. As the product manager leverages her technical knowledge of the lights and is familiar with the production process, she is able to uncover additional insights to provide ongoing stories for press introductions, dealership training, customer ride-and-drives, and develop advertising and promotions to targeted customers.

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After the new headlights are added to the updated minivan, the product manager needs to prepare sales and marketing teams for product launch. The product manager needs to explain how the headlights exceed customer expectations and provide a clear competitive advantage over competitor minivans. The product manager needs to explain what the engineers did and how to properly communicate to dealers and customers.

Meeting

For example, along with technical specifications and explanations, the product manager needs to communicate how the lights will be appreciated by customers

  • Able to see farther down dark, country roads avoiding growing populations of deer.
  • Help keep the children in the backseat safe – piece-of-mind for parents.
  • Brighter lights ensure oncoming cars see them but do not blind the oncoming drivers, avoiding possible accidents.
  • And most importantly, demonstrate how these new headlights exceed competitive products and result in a safer, more confident and comfortable driving experience.
  • The headlights are developed with a new plastic designed by NASA that incorporates a special manufacturing process for longer life

The product manager needs a multitude of skills; strategy, marketing communications, sales, finance, engineering, quality control, data analysis, design, statistics, etc., to perform her job properly. Product managers need to be the center of the product environment – seamlessly moving back-and-forth between technical and non-technical teams. Ensuring clear and simple communication between cross-functional teams is vital for effective and efficient operations.

Well used old tools and red tool box

Taking on the role of a business interpreter allows product managers to ensure all teams have clear understandings and move in the same direction. As the role of a business interpreter becomes increasingly clear, product managers become a vital element for successful development and launch of products. Elite product managers are highly skilled in strategic marketing and data analysis, along with strong technical understanding of the product. Grasping a holistic understanding of key business operations enables a successful career and long-term growth for the organization.

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Groundhog Day

autopilot-button    Is your organization on auto-pilot? Does your company do the same thing year after year? You’re your company announce new products at the same time, attend the same trade shows, use the same marketing tactics, engage with customers the same way you did in 1998, or use the same software that you bought from the 1990s? If your answer is yes to these questions, you need to wake up!

The world is changing – yes, it has always been changing, but it is moving a hell of a lot faster than previously. New competitors, changing demographics, advancing technologies, and socio-economic issues are creating a world of volatility, uncertainty, chaos, and ambiguity. If this sounds frightening, relax, this should excite you at all the possible opportunities you can take advantage of.

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If you are living in a groundhog day, doing the same thing day after day, your business performance is probably doing the same thing. If you are lucky, business performance is flat. Worse, it is slowly shrinking. What it is probably not doing is growing. Is this acceptable? Are you happy?

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If your competitors are operating the same way, then there is no need to change, right? Wrong! Why should you be worried? Well, someone is probably watching your industry. Someone with the resources, energy, and creativity to come in and disrupt your nice, quiet, uneventful life. Where will this threat come from? Anywhere. It could be from Asia, South America, or some small country no one has heard of. Or across the street. It could be right in front of you, but you are blind.

Too many organizations (and individuals) are complacent and stick with the status quo. If something worked 5 years ago, then just keep doing it. If your margins are 5%, why should you work hard to get 7%? If your customers keep buying your products, why should you be worried? Well, business should excite you and your teams. You should come to work every day energized to do new things. You should get pumped-up thinking about how you can try a new marketing tactic to increase sales.

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Worse case, if you cannot get excited about work; then get paranoid. Get paranoid that someone is going to put you out of business, or take your job. Get paranoid that your Baby Boomer customers are quickly aging and Gen Y could care less about your products (I am talking to you, U.S. motorcycle industry). How about being excited and paranoid?

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Business should be an exciting, challenging and fun “game”. You typically spend more time at work than with your family. If you are spending all this time doing the same old thing, you are wasting your life. And yes, cliché time, you only live once and it is damn short. You might as well have fun and do cool things. Sure, not everyone has this mindset, but your organization needs to build a “team” of proactive, creative, disrupters. And yes, those “bumps on a log” that have done the same thing for 25 years, can be changed. People like to contribute. Even these people can be engaged to help change the business.

How about every day working to win? How about enjoying the challenge of beating your competitors? How about the fun of your competitors fearing you? How about your competitors constantly reacting and playing catch-up? How about your customers excited about every new product announcement? Now that is fun. That is a fulfilling life. That is how you grow your business.

Think of business as a game that you want to win, not survive. Come into work every day with new ideas, work with team members to create something new, or develop a new way to outsmart your competition. Listen, most business is about competing and winning. If you are not playing to win, then why get on the field? Why waste your time doing the same thing? How about enjoying your work by constantly figuring out a way to improve what you do (or offer) and improve your customer’s experience.

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Too many people are defeated from hearing “no” or “but” that they finally gave up. Too many people use excuses. If this is you, change. If your leaders are stuck in the past, have fun. Keep developing new things to drive them crazy. Push their buttons. Conduct experiments and tests to prove new ideas produce increased value. Demonstrate how your new idea can position the organization ahead of the competition and how your customers will love it.

These mindsets and actions are not just for sales and marketing. Any department can improve. If you are in accounting, how can you improve your processes to make employee and supplier lives’ easier? Are there forms that are a nightmare to complete? Well, change them. Is the expense reporting procedures archaic? Change them. Talk to employees who interact with your department and use your processes. Understand what they like and hate. Then, change it and see their reactions? Then, show your boss and co-workers. Start a movement within your group for continuous improvement.

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An organization that focuses on continuous improvements will keep growing and be a great place to work. Engaged employees who are excited and creative are contagious. New ideas and experimentation will lead to long-term growth through developing new products, processes, and gaining new customers.

This does not have to cost a lot, it just takes work and time – think of all the time you waste and how it can be put to good use. If leaders won’t do it or champion the change, then employees need to take charge. Don’t wait around for a leader who is stuck in the past or just counting his days. Everyone within an organization has the right to push for change and improve the business.

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What can be more fun than driving people crazy (those stuck in the past) as you develop new, creative ways to improve the business and your skill set? Now get up, start learning from your “customers”, build your skill set, and change the world. It is not that hard. You just need to stay positive and keep moving forward.

It is time to win! It is time to think and act. In the words of the Lean Startup clique, it’s time to build, learn, and measure. So stop watching the clock, waiting for the weekend, or accepting a boring existence. Remember, every one of us has the power to change the world, even if your world is not very big.

Asymmetrical Marketing

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How often do you hear marketers complain about not having the proper resources to perform effective marketing? These leaders continually whine and make excuses for poor awareness or lack of effective influence on sales. They leverage vanity metrics to boost the perception that the marketing is effective. The problem with these leaders is the confusion between strategy and tactics. Marketing is strategy. Marketing communications (e.g., advertising, public relations) is tactics. These leaders are focusing on tactics, not strategy.

Hand drawing a game strategy with white chalk on a blackboard.

When resources are scarce, the time to get creative and leverage non-traditional methods should excite leaders and teams. The opportunity to do more with less and demonstrate to senior leaders the effectiveness of marketing, will lead to increased resources. Demonstrating marketing as an investment and not an expense is a marketer’s job, not a narrow-minded CFO or leader focused on price discounts to move product. It is the marketer’s responsibility to earn more resources from narrow-minded executives.

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Asymmetrical marketing is the ability to surprise, shock, and awe. It is outthinking competitors and wowing customers. It is developing a clear, focused strategy after a thorough analysis of internal resources, competitors, the market environment, and the customer. A clear and focused asymmetrical strategy leads to the use of conventional and unconventional tactics.

Asymmetrical marketing is founded on the principles of asymmetrical warfare. The use of asymmetrical warfare is when one side has a disproportionate advantage to the other. In warfare, this is typically a standing army with large amounts of resources against an insurgency of local fighters. It can also be a small unit using insurgent-style tactics; think of U.S. Navy Seals fighting like guerillas to hit-and-run and leverage unpredictability to surprise, shock, and confuse the enemy.

Examples of asymmetrical warfare is the American Revolution (the British army vs. American colonists), the Vietnam War (French and American armies vs. North Vietnamese guerrillas), the British against the Irish Republican Army (IRA), the U.S.S.R. vs. Afghan Mujahidin, the current Syrian war, or the Israeli’s ongoing fight against Palestinians. The David vs. Goliath wars. The little guy overcoming adversity against a larger, more well-equipped foe. A smaller, less equipped force using deception, knowledge, and maneuver to overcome the opponent’s strengths. These military lessons are effective in the business world, also.

Afghan

We see this battle in business as well. Wal-Mart focused on small, local towns until it could fight against K-Mart, Sears, and Woolworths in larger markets. The UFC struggled in small markets while the large boxing organizations (in the beginning) dominated TV, cable, and large markets. As the UFC slowly gained fans and entered larger markets the appeal of traditional boxing decreased. The Japanese motorcycle companies in the 1960s initially lost against Harley Davidson and the British brands. They won when they offered small, fun motorcycles that anyone could ride – differentiation of product and a mainstream customer target. Business results are often very similar to the military examples; the little guy slowly builds strength and resources as it gains on the incumbents and gradually overtakes them.

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Asymmetrical marketing has many components. It leverages the business environment and technology to offset lack of resources. It focuses on gaining local support (e.g., retailers) as it gains strength locally to compete nationally – attacking the larger foes’ flanks (the sides, not attacking head-on, focusing on weaknesses, not strengths). Marketers who use this strategy are adept at agility, quickly moving to areas of opportunity, and being unpredictable.

Cat attack

For a firm that competes against larger competitors (who have more resources), here are a few suggestions. First, carefully analyze the market. Know your competitor’s weaknesses and strengths better than they know themselves. Focus on geographic areas where you are strong and the Goliaths are weak. Use combined forces to attack these areas and dominate. Focus on small wins. Learn from every battle, share the information within the organization, and keep building on strengths.

Talk to customers (and consumers). Find out what they value. Uncover their pain points. Figure out how you can deliver value better than competitors can.

If your competitors have poor relationships with retailers, attack them there. Provide retailers incentives to do business with you. Spend more time training them and providing them tools to increase sales. Occupy more floor-space and gain an increase in mindshare. Focus on your product and services. Deliver what retailers and customers need.

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Communicate. Do not launch a new product, have lots of fanfare, and then go dark. Launch the product and maintain a sustained campaign. No matter the budget, never stop. If you cannot afford national advertising, then find out how and where to reach your customers. Leverage social media, YouTube, or even traditional media (e.g., magazines, radio, billboards). Keep testing and experimenting until you find what works the best.

No matter how many millions of dollars your competitors can spend on advertising, continually counter with creative messaging and ways to reach your target customers creatively. Use your resources like a laser. Experiment and test. As you find what works, target your resources there. Never stop communicating inside the organization and out.

Most importantly, develop a clear strategy based on a thorough analysis. Build a culture focused on trust, learning, and agility. Study your organization carefully. Know how you can lower costs and drive up quality. Train your organization. Develop an organizational mindset of continuous improvement.

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Share your strategies across the organization. Ensure everyone is marching in the same direction. Build a knowledge-based organization that shares information and learns from one another. Allow lower-level staff to make tactical decisions based on their local knowledge. Embrace failure as a way to learn. Develop a culture of agility, learning, and frugalness.

An organization does not have to spend millions to win. The Dollar Shave Club exploded based on a $4,000 YouTube video. Apple focused on design and differentiation. Tesla leverages an environmental perspective and close ties to government. Many of today’s famous comedians use social media, podcasts, and other viral forms of engagement to build loyal armies of fans. Casper Mattress changed the game of buying mattresses. Amazon leveraged technology. Start small and learn from your wins.

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It does not always take a large war chest to succeed. Careful analysis of the market environment, combined with creative thinking, and ongoing experimentation leads to victory. Use methods that have worked in war and business for thousands of years. A combination of the conventional and unconventional, a focus on both the local and national, and the ability to surprise competitors and wow customers is key.

Winning is about rethinking how you think and act. It is not about doing the same thing year after year. Creating an agile and innovative organization can lead to victory. Winning is about culture and the exploitation of knowledge. It is about outthinking your competition.

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So, stop crying about not having enough resources. Rethink how you think and avoid the status quo. The more you understand your internal operations, the marketplace, and your customers, the higher probability of success you will achieve. Create differentiation and understand what motivates customers. Think like a guerilla, an insurgent, or a revolutionist. Leverage asymmetrical marketing to win.

Fighting Your Brain for New Ideas

Brain fight

Ideas drive business. Developing new products, improving processes, making effective decisions, and solving complex problems all require innovative ideas. Often our attempts at ideation fall short of expectations. We struggle to develop new ideas using ad-hoc methods, ineffective brainstorming meetings, or “our gut”.

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The problem we have when developing new ideas is how our brains have evolved. To improve our creativity and be able to develop new ideas deliberately and systematically we need to overcome the brain’s tendency to stick with what it knows, take shortcuts, and avoid new perspectives. The brain’s evolution has focused mainly on survival, not creativity.

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Our brains have evolved to ensure our survival. The brain did not bother waiting around to determine the accuracy of what it was experiencing. Is that a lion or a deer? Our ancestor that waited around to be 100% positive was dinner for the lion – the survival of the fittest. Our ancestor that did not bother waiting around to figure out if it was a lion or deer, ran away and survived, and that is who we evolved from; the guy that lived. Our survival also depended on developing biases.

How did we know if that person is a friend or foe? If they looked different, they were probably an enemy. No time to wait around, either run or attack. Live or die. Familiar is good, different is bad. The problem with our brain is it seeks patterns to avoid having to analyze every situation.

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This is how we get through every day and not consciously think about what we need to do or what we are doing. This is extremely effective for us to survive and get things done. The problem is our brain loves shortcuts and avoids things that are unfamiliar. This makes it very hard when we are trying to solve complex problems or be creative.

The brain wants to focus on what it is familiar with, not taking its time and analyzing a situation thoroughly. We see this in meetings when people fallback on what they know rather than sit back, be objective, listen to all the information and perspectives, and then make a decision. Knee-jerk decisions or maintaining the status quo are just our brain doing its thing. We need to fight this to develop new ideas. We need to breakout of our usual patterns and see things from multiple perspectives and be objective.

The brain’s love of intuition from experience and what is familiar does not help us when we need to create new ideas. As we understand how the brain operates, this knowledge helps us overcome these innate tendencies. These biases to new information are what we need to overcome.

Our brain will often mislead us to stay with what we know or focus on the first solution we are familiar with, rather than hold off and fully analyze the situation. Understanding this allows us to deliberately work to overcome these biases and focus on patience and structured processes. Logical thinking was not in man’s best interest to stay alive. The brain evolved to quickly analyze a situation and move on, and keep us alive.

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It becomes hard to overcome the innate mindsets our brain has developed. For example, if we think Iran is the evil empire and wants to kill us, it is very hard to change our minds. We have to fight our brain’s tendencies to ensure we are objective and view multiple perspectives before making a final decision. We need to use critical and creative thinking to analyze the situation and make a decision based on information and a thorough analysis.

As we understand how the brain works, it helps us deliberately focus and work hard to gain new perspectives. We need to be aware of our biases and mindsets and use a rational and systematic framework to analyze problems and develop new, creative ideas. Using tools and techniques to structure our analysis ensures we are focused, and avoid wasting time. We need to train our brain to stop, analyze, synthesize, and then decide.

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Structured tools and techniques help us avoid trial-and-error. We need to balance rational and intuitive thinking to use our entire toolbox to ideate. We must keep an open mind, ask lots of questions, and seek out new perspectives. We must force ourselves to have the discipline to wait until all analysis is complete to determine the optimal solution. Focusing on multiple alternatives and being objective will allow us to create valuable differentiation and drive competitive advantages. As we understand the forces against creativity, the better we can work to overcome them, and outthink our competitors and wow our customers.

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The Black Hat and Critical Thinking

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An excellent tool for decision-making, problem solving, new idea generation, or effective meetings is The Six Thinking Hats (Hats). Developed by Dr. Edward de Bono, the Hats are the cornerstone of de Bono’s parallel thinking theory: separate thinking to ensure participants work in parallel (together) to achieve the optimal solution.

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The Hats are imaginary “thinking hats” that strive to separate thinking to avoid argument and develop issues more thoroughly. Each hat represents a specific thinking role, ensuring participants focus on one role at a time. The following is each hat’s focus.

Blue hat — facilitator

White hat — data and information

Red hat — emotions, feelings, intuition

Yellow hat — benefits, values, feasibility

Black hat — concerns, cautions, problems

Green hat — creative ideas, alternatives, possibilities

Parallel thinking and the Hats are designed to ensure each area of focus for a topic or problem is discussed individually, then the group moves to the next area of focus until the topic is analyzed thoroughly. For example, the group only discusses the white hat, what data and information is available, and then move to the red hat, only discussing emotions or feelings. The group does not jump back-and-forth between different hats. The group stays on one hat, and then moves on; leveraging focus and discipline.

The black hat is the driver for critical thinking within the Hats. The black hat is not negative. It is about ensuring a topic or problem is properly dissected. As any critical thinker knows, it is essential to dissect the evidence and recommendations of arguments to ensure nothing is missed and the best idea is developed. Too often, someone brings up an idea and the resident “dark cloud” immediately starts picking it apart. This is often why the black hat gets a bad rap as being the negative hat, it’s not.

Black hat negative

I see this too often with those who use critical thinking without tact. Most decisions are based on emotions and supported with biases and assumptions. When using critical thinking to analyze an idea or decision, it is recommended to let the group know a specific time for critical analysis is needed. Let the group know, “it’s time for some black hat thinking”. Then, the group is ready for questions and dissection of the argument to ensure it is based on strong evidence to proceed. This method will reduce any tension or defensiveness.

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You should also initiate black hat thinking when presenting your own ideas. Encourage the team to conduct some “black hat thinking” on your proposal. This will demonstrate to the group the need for critical thinking, especially with your own ideas. This activity will demonstrate to team members that everyone’s ideas must be critically analyzed – our own and other team members. In relation to creative thinking, the black hat is a vital part of green hat ideas.

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Creative thinking and critical thinking work in tandem. Creative thinking (green hat) is used to expand, move forward, and focus on the generation of ideas; divergent thinking. Critical thinking (black hat) comes into play to narrow the list of ideas and determine those with the highest probability of success; convergent thinking. Unfortunately, too often people feel black hat activities focus on “killing” good ideas and being negative. What the black hat is designed to do is analyze and question ideas, decisions, or solutions. The black hat is crucial to ensuring nothing is missed or identify potential problems not previously noted.

Black hat reality

The strength of the Hats is forcing team members to analyze a topic holistically. Those who are against the idea, must come up with positive aspects (yellow hat), while those who love the idea must identify possible problems or concerns (black hat). The power of the black hat is to impart skepticism and a reality check (and devil’s advocate) into the discussion in a positive way. Practicing critical thinking skills as black hat exercises develops a team’s capacity to accept questioning and analysis of all ideas for the betterment of the organization.

 

Musings From Russia

I just got back from a great trip to Russia (St. Petersburg and Moscow). I highly recommend going. Great people, food, and amazing history. Very clean, excellent transportation, and a feeling of relative safety. Let’s ignore the current news topics, for now. From a business perspective, it was very interesting to see what’s happening within our “arch-enemy’s” territory.

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First-off, all of our terrible American fads are already over there. Fidget spinners and vape pens are everywhere. Yes, the Russians love cigarettes, but seeing vape pens is one export we should not be proud of (ok, I’m not sure where these started, but …. ). Fidget spinners are in every shop and seeing adults using these on trains makes me want to toss them out the windows (yes, the windows are open in the subways – it gets damn crowded and hot down there).

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And yes, there are Russian hipsters all over the place. Sorry hipsters, but your painfully complicated mustaches and beards are just too much work. Don’t get me wrong, I love the whole cool factors of clothing and coffee, but it is a crack-up seeing them walking around the Kremlin.

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Talking about coffee, it is everywhere (thank god!). The coffee craze kicked-off a few years ago and is going strong. Yes, Starbucks is everywhere, but so are local coffee chains and small cafes. It is an eye-opener seeing small kiosks with $50,000 espresso makers. I hope it lasts for these small businesses. What is lame is seeing many kiosks using regular pod coffee makers and charging a few bucks for a cup of coffee. No thanks. What’s the differentiator there? Get creative.

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High-end barber shops are also popping up. I guess these are for the hipster community, but please, we don’t need $50 hair and beard cutting services. (yes, I guess I’m becoming a grumpy old man). And to add to over-priced things, high-end gourmet burgers are moving in. Yes, we all need good hamburgers and not the typical fast-food crap. But $15 burgers? Really? Please stop. Hey, if there is a market, go for it. But will it stop or will we only have $15 burgers in the future?

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Two other great fads/trends are appearing; food trucks and Vietnamese pho. I had an amazing hamburger from a couple of guys in a fancy truck – luckily the burger only cost $5. And going through Vietnamese iced coffee detox was not needed as I found great pho shops in Helsinki and Moscow. If you haven’t tried Vietnamese soup (pho) and the addictive Vietnamese iced coffee, please get on Yelp, find a shop, and try it. These are good things spreading around the world!

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Sure, the whole culture experience can be diluted with the expansion of Western trends, but hey, the world is supposedly flat, so you might as well enjoy it. Trust me, the Russians I met and watched are not becoming Americanized anytime soon. They are very Russian – not sure what that means, but you know it when you see it. Just like Americans stick out like a sore thumb around the world, you know a Russian when you see one. The experience was amazing and the people were great.

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As business pros we need to see how others do it. To create new products requires new perspectives. The way to develop new, creative ideas is to experience new things. The best way to get new experiences is to travel. Be it a new city or state, or a new country, go! Learning how a country runs its trains, the types of cars on the streets, or simply what the locals eat, opens up your mind and can spark great ,new ideas.

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So update your passport and hit the road. Don’t listen to the news stories or be afraid of what people warn you about. Be smart and do your homework, and enjoy life. We only live once so go live it! Travel, learn, and create innovative solutions for your customers.

Sun Tzu and The Art of War

Art of War

Most of us have heard about the book The Art of War – or maybe it’s even on your bookshelf. Chinese General Sun Tzu is the reported author. I say reported because everything about him is not clearly identified in history – there is a lot of ambiguity of who he was – no one knows for sure who wrote the book, or who Sun Tzu really was. But for simplicity, Sun Tzu was a Chinese general who lived around 400 BC.

The Art of War is a treatise on military strategy that contains 13 chapters.

  1. Laying plans
  2. Waging war
  3. Attack by stratagem
  4. Tactical dispositions
  5. Energy
  6. Weak points and strong
  7. Maneuvering
  8. Variation in tactics
  9. Army on the march
  10. Terrain
  11. The nine situations
  12. The attack by fire
  13. The use of spies

The book outlines key areas on the philosophy of war. It presents guidelines to control conflict and defeat an opponent in battle. It has been translated in hundreds of languages and is the de facto Bible of strategy. Sun Tzu outlined five essential learnings for victory:

  1. He will win who knows when to fight and when not to fight
  2. He will win who knows how to handle both superior and inferior forces
  3. He will win whose army is animated by the same spirit throughout all its ranks
  4. He will win who, prepared himself, waits to take the enemy unprepared
  5. He will win who has military capacity and is not interfered with by the sovereign

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A famous story about Sun Tzu is when the King of Wu gave him a test. To test his abilities as a general, the King challenged him to command his harem of concubines. The King wanted to see Sun Tzu’s abilities in leadership. Sun Tzu organized the concubines and made the King’s two most favorite the commanders of the group. Then, Sun Tzu ordered them to turn left, the concubines laughed. He ordered them again and again they laughed.

Sun Tzu informed the King that leadership and the actions of the army is the general’s responsibility. Since Sun Tzu was the acting general, he ordered the two favorite concubines beheaded for not obeying the orders. The King tried to intervene, but Sun Tzu executed them.

Concubines

He then assigned two more concubines as company commanders and all the concubines quickly obeyed his orders. He told the King that since he was appointed the general, it was his responsibility to carry out the King’s orders. Though the King was deeply upset by the death of his favorite concubines, he realized the ability of Sun Tzu and let him lead his armies to many victories. This example showed how serious Sun Tzu was with the aspect of leadership and achieving objectives.

The majority of military practitioners and leaders have studied The Art of War. It has been used by many historical military figures such as Napoleon and also for many successful guerilla campaigns such as Mao Tse Tung and General Giap during the Vietnam War. The lessons learned have been applied in many battles. The teachings have also been referenced for business and politics.

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In the 1987 movie Wall Street, Michael Douglas’ character referenced the book as he taught Charlie Sheen’s character, quoting the phrase, “Every battle is won before it’s ever fought”. So how can business leaders utilize Sun Tzu’s teachings? First, read The Art of War and read it again. Take your time, read it carefully and think about it. It is written simply, it’s easy-to-read, but has deep meanings and multiple ways of interpretation. There are many ways to use the teachings in every area of the organization.

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Some key areas that can be used in business are:

  1. Laying plans
  2. Waging war (Protracted Campaigns are Doomed)
  3. Attack by stratagem (Know your enemy and yourself)
  4. Weak points and strong
  5. Terrain
  6. The use of spies (Use deception)

Laying plans can be directly applied to business. This section focuses on the commander and his method of leadership. A strong commander is sincere, honest, ethical, and courageous. Within businesses a strong leader is critical to the success of the organization. An example of poor leadership negatively affecting the organization is the current issues with Uber. Former CEO Travis Kalanick and executive leadership’s ongoing poor behavior, sexual harassment issues, and overall immature actions have provided an opening for competitor Lyft and ongoing backlash from the public and customers. After months of ongoing issues, Kalanick finally resigned on June 21 due to ongoing pressure from investors and Uber’s lagging performance. Sun Tzu noted five areas that weaken leaders. These will result in decline as seen by Uber and Kalanick.

  1. Recklessness
  2. Cowardice
  3. Hasty temper
  4. Sensitive to shame
  5. Too close to his men

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The waging war section notes the danger of protracted campaigns. In terms of military actions, protracted campaigns waste resources, destroy morale, and are doomed to failure. Military examples of doomed protracted campaigns were the Vietnam War and the current Afghanistan War. Within business prolonged campaigns can result in devastating financial situations and potential bankruptcy. For example, the famous Honda-Yamaha War of the 1980s resulted in heavy losses and large stockpiles of inventories for Yamaha as the company could not maintain the sustained and ferocious pace against the stronger and more aggressive Honda.

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The attack by stratagem section is famous for the importance of knowing your enemy and yourself to win battles. A key for any military or business is a strong understanding of the market environment, customers, competitors, the internal organization, etc. A painful lesson for the U.S. is the limited understanding of the results of invading Iraq and the aftermath of all combatants. Similarly in business, U.S. auto manufacturers ignored the Japanese auto manufacturers as they slowly built market share through a deep understanding of customers and improved product quality. The Japanese auto manufacturers are now experiencing a similar fate from Korean and soon-to-be Chinese competitors.

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Another business example is Southwest Airlines. The company clearly understood the large airlines and their business models. Southwest realized key advantages to compete against the incumbents were lower prices and faster turnaround of planes. Operating in smaller markets, using one model of airplane, and relentlessly training crews, the company was able to out-flank the incumbents with lower prices and quick turnarounds to attract short distant business travelers.

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Sun Tzu focused heavily on the importance on understanding weak and strong points. Attacking an enemy that is stronger head-on, is a sure way to lose. You must avoid attacking a stronger opponent directly. It is better to hit the flanks or rear of a stronger opponent. Wal-Mart is an example within business for avoiding strengths and attacking weaknesses. Wal-Mart avoided large towns and major retailers like K-Mart, Sears, and Woolworth. The company focused on small, rural towns to build strength, resources, and customer loyalty. It was not until the company had the size and resources to properly attack the large national brands that they entered major markets and successfully defeated the incumbents.

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The terrain section is critical for armies as the need to understand where and how to attack or engage an enemy is vital for military success. Dependent on the terrain will determine an army’s approach and use of resources, etc. Within business, the terrain is physical and mental. The physical market environment of retail stores, online presence, or geographic locations. The mental side is in the consumer’s mind. Understanding what consumers need, want, and which companies they feel are market leaders, etc. Business leaders need to understand the physical and mental market terrains.

The use of spies section focuses on deception. Deception is critical in military and business. A classic example was during the planning for the Normandy invasion in WWII. Hitler was focused on General Patton and had his spies watching him closely. The allied forces convinced Patton to stay in England to deceive the Germans that his army was planning to invade Calais, not Normandy. The allies built dummy aircraft, airfields, and buildings. In addition, false messages were continually sent and the use of double-agents to mislead the Germans on the actual invasion site. This deception caused the Germans to spread out their forces and not focus on Normandy, mainly focusing on Calais resulting in a critical victory for the Allies.

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Any business leader must become familiar with The Art of War. A leader needs to develop an agile organization similar to the shuai-jan snake. Organizations need to act like the shuai-jan; when the tail is attacked the head strikes, when the head is attacked, the tail is attacks, when the body is attacked, the head and tail strike. Proper planning and a deep and thorough knowledge of yourself, your competitors, customers, and the market environment is critical for long-term success. The learnings from Sun Tzu are critical for military and business success.

Sun Tzu focused on the importance of defeating the enemy before battle. He noted that planning and proper use of information and tactics can lead to victory with minimal conflict, the ultimate goal for victory. During the Iraqi War in 1991 (Operation Desert Storm), General Schwarzkopf and his U.S. forces used maneuver strategy (based heavily on Sun Tzu’s teachings) to invade Iraq. The allies bombed Iraqi forces for six weeks, and then the Marines engaged the Republican Guard, deceiving the Iraqis that this was the main attack. This feint allowed the allies to conduct a land invasion with minimal casualties and a complete defeat of the Iraqi army in approximately 100 hours.

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Similarly, General MacArthur surprised the North Koreans by invading Korea via Inchon through the hazardous mud flats in 1950. MacArthur’s detailed planning and knowledge of the environment resulted in a fast and unexpected victory with minimal casualties. Similarly to the Iraqi War, the allies used aerial bombings to weaken and distract the Koreans, then landed in the most unexpected location.

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A similar use of defeating an enemy without battle is Polaris Industries dominating the off-road four-wheel vehicle segment against the incumbent Japanese manufacturers (Honda, Kawasaki, Suzuki, and Yamaha). Polaris found a white-space in the U.S. powersports industry that the Japanese were avoiding. Customers wanted high speed, long wheel travel suspension vehicles. The conservative Japanese avoided the high-speed off-road market due to fears of the U.S. government intervening. Polaris took the risk resulting in decades of strong growth, share price moving from under $20 to over $100, and approximately 70% market share.

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The goal of business success is to put the organization beyond the possibility of defeat and then wait for an opportunity to defeat the enemy. Business is not war. In war, it is typically one opponent against another, involving killing, in a relatively short time period. In business, there are typically multiple competitors, no one gets physically hurt, and the battles continue for long periods of time – the same main competitors battling one another. Study Sun Tzu’s The Art of War and apply the learning to differentiate your organization and dominate you market.

The Looming Crisis for the Auto and Powersport Industries

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In a recent AutoNews article by Jennifer Vuong, the author interviewed Steve Kalafer who owns eight automotive dealerships in New Jersey. Kalafer discussed the current state of the automotive industry and issues he has experienced over the past 41 years. Key areas of concern Kalafer noted was the increasing amount of original equipment manufacturer (OEM) incentives and subprime loans.

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Incentives are the discounts OEMs provide to move unsold vehicles. Most of us are familiar with incentives through OEM advertising. Manufacturer advertising is mostly focused on communicating how much money off the sticker price you can expect, rather than the benefit of buying their products. The last tactic to use in marketing is now the first, throw money at it, rather than creatively develop programs to sell the product. The root cause of the problem is overproduction due to poor planning and over-exuberance of the OEMs building an increasing number of factories around the world.

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In addition to the growing inventories, past-due loans are increasing. Lenders have gone back to using subprime loans to move large numbers of units. These subprime loans have propped-up the record setting sales over the past several years through approving less qualified applicants. The lessons learned from the mid-2000s have been forgotten. The historic crash of 2008 is a distant memory that is probably coming back to bite everyone again.

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As talk of a looming recession increases, manufacturers need to scale back inventories and take control of subprime loans. The longer these two issues are ignored, the worse it will be. As in 2008-2009, the amount of incentives needed to move excessive inventories eliminated any profits and resulted in several companies declaring bankruptcy, closing factories, laying off thousands, and taking years to recover. It is a vicious cycle that seems to be soon to repeat itself.

The reliance on incentives is also a key selling strategy within the powersports industry (e.g., motorcycles, all-terrain vehicles); especially with Japanese OEMs. Consumers and dealers have been trained to wait for incentives as OEMs continue to overproduce vehicles that are not aligned with the market. The Japanese manufacturers have created a lack of brand differentiation and struggle for profits. As Chinese manufacturers are slowly improving quality, Japanese incumbents have a very difficult future as they continue to hold onto legacy business models and lack of innovation (not to mention a dwindling future of Baby Boomer consumers). Keep the factories humming is the mantra. Then throw money at the waiting masses.

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Auto and powersport manufacturers have to wake up. The changing market trends are resulting in less people driving (and riding), the growth of the share economy, and higher levels of infotainment and other technology needs that make self-transportation less-and-less a requirement.

Manufacturers need to change. They need to focus on creative innovations that align with customer needs. It is critical to scale back and ignore Wall Street. This is easy to say; as poor Mark Fields (ex CEO of Ford) can attest when profits are strong you still lose your job if your share price is not moving. Mary Barra, CEO of GM is now under the same type of pressure.

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Manufacturers are destroying themselves – margins and brand. They have opened Pandora’s Box which might take years of excessive pain to close but they must buck-up and take the pain now. Discounting is not a long-term strategy. Brand building, creative marketing, and great products are what create long-term customer loyalty and strong margins. In addition, planners, marketers, and engineers need to get out of the office and talk to dealers and customers. Not just once in a while, but at least 50% of the time. This cannot be done by research firms. Employees must do this themselves. Innovation and strategy are internal requirements. It is time to understand what is going on in the real-world and slowly cut-off the IV from consumers and dealers. Take the pain now, for a long and healthy future.

Reference

http://www.autonews.com/article/20170619/RETAIL07/170619824/

Polaris – An 800-lb Gorilla

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Polaris Industries (Polaris) designs and manufacturers off-road four-wheel vehicles, snowmobiles, and on-road motorcycles. Founded in 1954 and headquartered in Roseau, Minnesota, Polaris is a leader in the U.S. off-road powersports market. Polaris has close to 80% market share in many four-wheel off-road product segments. With sales of approximately $4.5 billion and net income over $200 million, the company has experienced incredible growth over the past 20 years.

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So how did a relatively small company in northern Minnesota crush the Japanese incumbents (Honda, Kawasaki, Suzuki, and Yamaha) in the U.S. powersports market? They attacked the Japanese weaknesses and invaded an open space with continuous product innovations. The Japanese weakness was a decade’s long fear of U.S. government intervention in the off-road market and crippling slow decision-making, and employees who would not challenge leadership. Three key historic moments provided Polaris with a great opportunity to grow into a 800-pound gorilla.

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In the 1980s, the U.S. government imposed tariffs on on-road motorcycles with engine displacement over 700cc. The rebirth of Harley Davidson drove the tariff. Coming off a disastrous ownership by American Machine and Foundry (AMF), the new Harley owners needed time to reinvent the company and improve quality. The Harley owners petitioned the U.S. government that the Japanese had an unfair advantage and were selling cruiser motorcycles below cost. The U.S. government stepped in courtesy of Reagan and imposed tariffs on the Japanese. At a time when the Japanese had 80% market share, this hit the Japanese hard. Large displacement cruisers were a source of strong growth and profitability, and the Japanese dominated due to a favorable exchange rate and high quality. Then the three-wheel all-terrain vehicle (ATV) fiasco hit.

AMF

The Japanese original equipment manufacturers (OEM) created the three-wheel ATV market in the late 1960s. After years of consumer injuries, lawsuits, and government investigations, the U.S. government stepped in and in the late 1980s banned importation and sale of three-wheeled off-road vehicles. This hit the Japanese OEMs hard, though they quickly were moving to four-wheel ATVs. This “scar” still haunts the memory of Japanese boardrooms today, as many current Japanese OEM leaders were engineers during this time.

Honda ATC

The next hit was the introduction of the Yamaha Rhino four-wheel side-by-side vehicle line of products in the late 1990s. After years of injuries and lawsuits, Yamaha spent millions of dollar in legal battles. The U.S. government did not formally step in, but pressured Yamaha to stop selling the Rhinos. The Japanese are very conservative and extremely wary of the U.S. government stepping in again and banning four-wheel off-road vehicles at a time of high growth. Fear and conservatism is not the formula for long-term growth.

The off-road four-wheel vehicle manufacturers realized there was a strong customer need for a high-speed, high-performance vehicle. Many customers were modifying Yamaha Rhinos with higher engine and suspension performance. The desire for an affordable, high quality vehicle was obvious. The bosses in Japan did not want any part of another off-road deathblow and avoided high speed like the plague. Marching orders were very clear; the Japanese was not entering this market. Cue the door opening for Polaris.

Rhino

Polaris decided this was too good to ignore. Attacking two key Japanese weaknesses, fear of the U.S. government and slow product development speed, Polaris attacked. Introducing high-speed, high-suspension travel vehicles with sporty styling, Polaris gave customers exactly what they desired. Though the quality was sub-par compared to the Japanese (and still is), customers did not care. The excitement of an affordable vehicle (compared to custom-built desert vehicles (e.g., sand rails) costing upwards of $100,000) with great styling and performance created an all-new product segment. Sales took off.

Polaris understood these customers extremely well. In addition, constant product updates and new model introductions created a business model the Japanese could not (and would not) challenge. Thousands of hours spent in Japanese boardrooms arguing and pleading to enter this segment and gain share and huge profits, were for naught. The U.S. product planners and Japanese engineers were overruled, time and time again.

Not only were customers buying these vehicles by the tens of thousands, they were spending thousands of dollars per vehicle in accessories to customize the vehicles. The money was pouring in. Polaris went from a share price of under $20 in 2007 to over $120 in 2015. As the money poured in, Polaris went on a buying spree of multiple electric vehicle (EV) companies, outdoor clothing companies, and many other firms to build a strong foundation for long-term growth. In addition, the new models of higher performance kept being developed and introduced. Further outpacing the Japanese.

Though many injuries and lawsuits persist, the U.S. government has ignored this segment of the industry. The Japanese OEMs, just like the economy in Japan, wasted two decades due to inactivity. The Japanese ignored ongoing customer and dealership requests for a Japanese sport vehicle (i.e., high quality) to compete against the Polaris Ranger and RZR models. Polaris stayed on the gas.

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Ongoing product updates, improved quality, and industry-leading accessory development created a powerhouse. Polaris attacked obvious weaknesses and did not let up The Japanese avoided risk resulting in minimal growth, lack of profitability, and the crushing effect of the 2008 economic collapse, resulting in almost a 50% volume decrease within 24 months. All the Japanese had were ongoing incremental changes to their bread-and-butter, motorcycles and scooters. Can the Japanese fight Polaris?

Sure, they have all the pieces to create a winning puzzle. Experienced engineers, world-class manufacturing and supply chains, and high brand value. The problem is the Japanese themselves. The lack of leadership and slow decision-making cannot compete with Polaris. After years of poor profitability, resources are slim.

Yamaha is trying to fight Polaris with the new YXZ1000R. Unfortunately, Yamaha equipped the vehicle with a manual-shift transmission resulting in poor initial acceptance (who the hell even knows how to shift anymore?). There are rumors of Honda introducing a sport vehicle and customers keep begging Kawasaki to develop a sport model with the Ninja H2 supercharged engine, we will have to wait and see.

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As the Japanese keep talking, Polaris keeps moving ahead. The Japanese might be too late for this party. In addition, Polaris must address their poor quality, design, and manufacturing to maintain growth. They have the money and resources to do it. The question is can they stay focused and keep Wall Street happy. We will have to wait and see.

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This story demonstrates how strategy and innovation can create amazing growth. Polaris focused on the Japanese weaknesses and innovated constantly to keep customers excited. The Japanese kept to the status quo, would not learn or move on from past problems (i.e., the scars never healed), and lost all the battles. Who will win the war? Especially when the market might have or will soon peak, time will tell.

The Mongols and Economic Innovation

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When people talk about Genghis Khan and the Mongols, the discussion typically focuses on the Mongols reputation as a ragtag band of nomadic warriors raping and pillaging across Asia and Europe. The reputation of the Mongols as ferocious killers have spurred countless stories of terror and destruction. Unfortunately, most of these stories were fiction. Interestingly, the Mongols were an amazing propaganda machine and created most of these false narratives to create fear and terror to ensure enemies surrendered before a fight was needed.

Beyond the Mongols legendary success as fearsome warriors, they were also amazing economic innovators. Genghis Khan was the masterful strategist and tactician, who created the Mongol empire. Khubilai Khan, his grandson, was the society builder. Khubilai Khan’s innovations have such direct influence on modern society it is amazing that it happened almost 1,000 years ago.

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In Jack Weatherford’s excellent book Genghis Khan and the Making of the Modern World, he shows in detail the innovations that Khubilai Khan implemented across the globe. Yes, that was Khan’s strength, not just great ideas, but the ability to implement them across multiple cultures and ethnic groups. It is mind-blowing how many “modern” innovations Khan developed in the 1200s.

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Khan’s strength was in organizing large number of people across the globe. Some of the societal innovations Khan enacted were the parole system, laws concerning bankruptcy, and even the first credit card. He also attempted to develop the first single alphabet and the use of a global paper currency.

The Mongols moved from military conquerors to the world’s first commercial powerhouse. They setup up trading routes across the world levering new technologies and goods. They were the first to understand the efficiencies of water transportation (compared to overland) and became great merchants. Moving goods quicker and for less money than their counterparts.

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They would take common items from one country, introduce them into other countries, and develop a new market for the new commodity. For example, the Mongols expanded the use of playing cards around the globe as a compact, light, easily transported game compared to more cumbersome games like chess or other board games. The demand for playing cards out-performed the Mongols very successful market of scripture. Yes, the Mongols were making huge profits selling various religious items across the globe. Whatever the markets needed, they would provide.

In terms of education, Khan strove to wipe out illiteracy and expand the arts. He created some of the first public schools and worked hard to promote universal education across all classes. Khan was a strong supporter of the arts, and provided large resources to encourage writers and actors to practice their craft. His patronage of the arts was critical to expand learning and improve overall society.

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The Mongols incorporated medical experts from all regions to expand knowledge and create new markets. They sold Chinese pharmaceuticals in the Middle East and brought Muslim surgeons to Asia. They quickly dominated the textile markets and replaced parchment with paper for better record keeping. In addition, the Mongols developed some of the first calendar systems. They tracked and documented moon phases, lunar and solar eclipses, and developed the twelve-year animal cycle. They also setup the first observatories. With all the science and research the Mongols encouraged, they setup key mathematic centers, and introduced the use of zero, negative numbers, and algebra in China.

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In this time of lean business models. The Mongols were the first to build → measure → learn. When their naval fleets were destroyed during the invasion of Japan, they realized the weakness in their ship designs, regrouped, and came back with better designs. The Mongols continually experimented in both military and societal issues. They constantly focused on learning and improving.

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Khan also ensured a mixture of ethnicities in all layers of government. He knew that having a variety of perspectives, cultures, and religions created a powerful government. Unlike today with the current wave of nationalism, Khan knew the importance of looking outside your ethnic group to ensure long-term growth. Bringing experts from all areas of the empire ensured the Mongols would continue to dominate both militarily and economically.

One of the lasting and most successful innovations for the Mongols were agriculture. They introduced various types of crops, trees, plants, and animals across the globe. For example, when Persia experienced problems due to erosion and poor soils, the Mongols imported various seeds from China to improve production in the Middle East. They also brought crops from the Middle East to Asia. For example, the Mongols planted huge orchards of lemon trees in China. The Mongols continually brought new goods from one area to another, expanding their reach and opening up new markets for various goods.

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As Weatherford notes, they searched for what worked best, and when they found it, they spread it to other countries. They truly created the first universal culture and world system. Weatherford showed how the European Renaissance was driven by the Mongols, not the Greeks or Romans. Pickup his book and take a trip back in time. The innovations militarily and economically are staggering. Weatherford’s detailed research and simple writing style make this a great read.

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