Monday, March 24, 2008

Innovation and Creativity - Follow-up

Judging by the traffic to the earlier Innovation Confusion post I'm not the only one confused...and there's lots of interest in innovation.

Those looking for more insight may want to check out the blog Creativity and Innovation. Their posts, innovation index and attendant insights are quite useful.

Healthcare and the Race for Free

Wired has an interesting article this month called 'Free! Why $0.00 is the Future of Business'. It describes how the internet in particular - thanks to essentially free distribution - has changed the thinking around some pricing and business models. A simple example of these pricing models changing - the demise of subscriptions and fees for on-line versions of newspapers (remember how some papers like the LA Times, New York Times and Wall Street Journal made their on-line versions inaccessible?).

(Note: I have to throw this in. While I'm not nearly as clever as Wired, I actually wrote a post on the race for free called 'Monetizing Data - The Race for Free back in December 2006'. $0.00 pricing IS an intriguing twist/opportunity on some business models.)

Reading the Wired article got me thinking. It's easy to see how advertising has supplanted pricing for some on-line services. But does the race for free, extend beyond the internet? Could it be extended?

I do a lot of work for a Canadian hospital. Hospitals in Canada mostly don't charge for their core services - there isn't a price list. Revenue/funding comes primarily from the government.

Over the past three years, management at this hospital has done their job reducing the fat from the organization. However, demand for their services continues to grow well in excess of their funding. In fact, funding doesn't even match inflation.

I got to wondering if Wired's theory might be applied to the hospital, eg, give hospital services away free to patients (what hospitals already do) and make up the revenue shortfall selling other products/services to other 'customers'.

Hospitals already charge their primary customers for some ancillary services (parking is a big one) but this isn't what I mean. In the free-services/other revenue model the hospital would be selling access to what it has - its customer base; large, skilled workforce, facilities and political clout - to anyone with a need for access to those things.

What about advertising? Advertising is a primary revenue source on the web - give stuff away for free, make revenue from advertisers. Who would advertise in a hospital? Seems to me anyone might want to although some products and services might be inappropriate.

This actually seems like an untapped opportunity for the hospital. It might not be huge - but the number of hospital visitors every year is large - I wonder what the revenue potential might be if every corner of the emergency department was covered in advertising, or the neo-natal unit was sponsored by J&J? What if every bed was like a NASCAR racer? Big logos and stickers all over them?

Who else might want access to what the hospital has? How about medical universities looking for a place to toss their students into hospital reality. What's that worth? The truth is, the hospital has a relationship with a teaching university - but the funding relationship is set by the government - at a rate well below the cost of putting up with learner doctor. It could work. It just doesn't.

Who else? The hospital customer base is probably a good testing environment for everything from new drugs to diapers. Maybe the hospital could renegotiate a bunch of it's supplier costs and turn them into testing revenues. I'm betting not - no question these companies already have their test facilities - but who knows - maybe there's a negotiation opportunity?

Politicians need access to what the hospitals offer. In fact, some of the best new funding comes at election time when politicians and parties want to sooth or cajole voters into their point of view. Maybe the Hospital could develop its political muscle more as a way of attracting even more funding. This is a certain opportunity.

I know I'm missing something here. With a little creativity there's got to be more opportunities. I'm interested in any thoughts from anyone on how else the hospital can give away its services and be rich like those internet companies. Ideas?

Saturday, March 22, 2008

Innovation Confusion

Innovation has been coming up more in the strategy work I'm doing lately....as in, "this organization needs to be more innovative."

Unfortunately, the term innovation doesn't mean much to me.

Clearly it's important. I wouldn't be listening to my Ipod right now if Apple weren't a modern master at innovation.

Fortune's March 17 issue has a couple of articles on Apple. Apple's approach to innovation seems arrogant but effective - don't ask the consumer, just figure out what bugs us (Apple), eg, the cell phone, and build something better.

Compare that approach to Procter & Gamble, also covered in the same issue where 1) "we put the consumer at the center of everything we do", and 2) "we started thinking about innovation in new ways - we started from the premise that it's possible to run an innovation program in much the same way we run a factory".

So, the path is clear. There is no path.

Here are some thoughts for those as confused as I am about the innovation conversation:

> those with a strong desire to be more innovative probably need to clearly define why. What is the goal? The output? Is it a new product? A new process? A new way of managing that leads to more all round creativity?

> innovation is a strategy; is it a better strategy than some other way of achieving the same goal? For example, is innovation a better strategy than training everyone in the organization how to do their jobs better?

> if innovation is the right strategy, what is the plan? Who is in charge? What are the goals? Time frames? Process? Budgets?

For me, this is where the innovation conversation breaks down. In reality. I don't work for Apple or P&G. But the organizations I know, don't have an innovation plan. They haven't allocated budgets. No one is accountable for leading innovation.

Innovation will never happen in these organizations.

Right?

Wrong. I think.

Every organization I'm engaged with is developing either a new product or new approaches to doing whatever it is they do. They're growing and getting better at what they do.

Yes, some have significant challenges that require new and creative solutions. Maybe that requires a focus on innovation. Maybe.

What I am sure about is that all of them are making significant progress addressing what I would consider the basics of success in their business: better definition of corporate priorities and more focus on them; better, more capable managers who can mentor and lead teams; clearer measures and more effective processes for ensuring accountability.

As a result of progressing on these basics are these organization more innovative? Yeah, I think so.

Do they need to put more focus on innovation? No. At least that's not what I'm telling them.

More to come.












Wednesday, March 19, 2008

What I Believe

Ever listen to yourself talk?

I do.

This may sound scary but way too often it's how I figure out what I'm actually thinking or worse, what I really believe in. You'd think/hope I might have that sorted before opening my mouth but apparently that's not always the case.

Today I had lunch with a new business prospect. To be honest, I'd heard most of what I said before, but it was a good refresher on some of the stuff I walk around believing in. Like this:

> I believe in measuring outputs, not inputs. This idea frequently comes up around how hard people are working. How hard people work, including how many hours they put in is an input. What they turn out, regardless of how hard they're working is an output. When employee outputs match corporate output expectations, we have success. As I said today - and have said way too often before - if we achieved success with everybody doing their jobs standing on their heads naked at 4 in the morning - how they did their jobs (the input) is irrelevant.

> I don't believe in ego. Famous quotes from me on ego: "Ego kills opportunity". "Ego will outdo intelligence, everyday of the week". "What an asshole".

> I believe in brutal honesty. The term brutal is a little dramatic and not really what I mean but it makes the point - err on the side of telling the truth, not the varnish. The reason I love brutal honesty is it makes things happen. It eliminates politics and confusion. Someone does a great job - tell them. Same person is doing a crappy job - tell them. A client's business is messed up - tell them. The client is messed up - find a new client. My favourite example of brutal honesty - my firing stories - I've only ever fired one person who didn't shake my hand when I fired them (he knew my track record and didn't do it just to mess me up). Why did all the others? Because long before they were fired and leading up to getting fired, they knew where they stood. I told them. We talked about it. How to fix things. How things were going. If/when firing day arrived it was never a surprise. More people need to try brutal honesty. It's treating adults like adults - and they will respond.

> I believe in beer. More people need to drink. It relieves stress and gets people together. I've known a lot of people who's best ideas came after 2 beer.

>I believe in marketing. Not tech - I hired a well known analyst from Gartner marketing. Real marketing. Dog food marketing. Starting with the consumer. Building a product that meets their needs. Selling it so they get the benefits. I've observed, and it scares me, how few companies actually understand marketing. PROMOTIONS AND SWAG ARE NOT MARKETING. There would be more successful companies if more managers understood the power of true marketing.
(Speaking of marketing, I saw a great tag line - on the side of a transport truck - for a promotions company - it said: "Crap to give away. Stuff to wear". Perfect mission statement. I would have loved to facilitate that work session!)

I'm sure I believe in a lot more but it didn't come up today. Saving it for tomorrow.

Tuesday, March 18, 2008

The Sky IS Falling

Covering the economy and the financial markets is not usually what I do. It takes time, effort and a lack of cynicism over time to stay engaged in following the financial world. You can't walk around thinking it's all just a poorly laid out casino where even the casino workers have trouble remembering the names of the games.

So, it's a bit of a surprise that I find myself saying I saw this one coming. I had good connections on this one. Some of the work I was doing exposed me to some of the casino workers. I saw their fear. I knew they were serious when they said 'we don't how bad it is'. These were players at big, well known casinos - not Bear Sterns, but like Bear Sterns - and originally they were talking about their exposure to asset backed paper - the original bet that started the melt-down we're all in.

The other thing I had exposure to was supposed experts analyzing the situation and ALWAYS being wrong. Knowing they were wrong was easy - month after month they've had to swallow their words from the month before. A nit of a problem that was supposed to be done with by Labour Day just kept getting worse and worse. Ultimately but only recently, the analysis (of I presume really bright people) has given way to what's now dead obvious - we are in a serious mess.

I'm sure there's a need/tendency/instinct in the financial world to be overly optimistic even when things don't look so good. Running around saying the sky is falling is probably a great way to get the sky to actually fall. But come on.

Here's an example. Do you think the US is in recession? If it's not, what do you think the chances are that will go in recession? Right. There's about a 100% chance. Yet, take a look at the BS still going on about a US recession. It's not like we're 'tipping towards it'. It's like we went over the cliff a while ago and are hurtling head long towards a deep, dark valley floor that's not just going to whack those crazy Americans, but everyone else, everywhere else too.

But I digress.

One of the great things when really bright people get smoked with reality, is how good they are at backwards looking analysis of stuff they should have seen in the first place. That 20/20 hindsight thing.

Fortune has a very good article called The End of Wall Street as We Know It on-line right now and probably in the magazine. Overlooking the fact they missed all stuff up til now, the article is an interesting dissection of financial 'powers' and the forces at play that got us where we are now.

A big one - and I've always said this - is performance compensation in the form of huge bonuses. I worked with a guy years ago who always looked for whatever 'goofy behaviour' would be driven from basic and sometimes simple looking decisions.

Well guess what?

Paying CEO's and traders millions and millions of dollars for taking huge risks is going to drive goofy behaviour. And it has. There shouldn't be any surprise that it has blown up. But there is.

Do you think the financial players learn from this? No. Not a hope. They will tighten up. Measure risk differently. Value it more harshly. But with the gazillions of dollars currently going into the system to keep it going, fuel for the next fire is already being pored.

As soon as there's a chance of getting rich again, the same goofy behaviour will take over. And a new set of billion dollar brain surgeons will be born. Just watch.

Tuesday, March 11, 2008

The Consultanator

Hey. I've been working out. It's fabulous. My back is so sore I can't bend over to tie my shoes. My legs are so frigging stiff I have this cool new robot walk. And my arms are so tired I have trouble scrawling my signature. As one of my very sympathetic clients said today "Jim that health thing is going to kill you".

Seriously, I'm pretty sure I'll survive and the truth is I'm enjoying it. I've never been a workout person. Genetically, I've been fortunate enough to stay pretty consistently within my weight category. Almost regardless of what I do. Beer? No problem. Nachos? Bring 'em on. Dessert? Cool. Do you have any cookies?

Of course being a reasonable weight and being the sleek fighting machine I am now are two different things. So I can't walk. I sure look like I should be able to!

So why am I doing it? I don't know. My wife was pushing me. I'd run out of excuses. I'm older and wiser now. Great genes aside, maybe eating nachos and drinking beer won't get me to 100.

So, some observations from a workout novice:

> having a trainer is good. He knows how those fancy looking machines work. He knows how to use them properly. He knows Melissa, the trainer I really wish I was working out with. Oh, and he won't let me quit on some exercise just because I fall on my face after the third push-up

> knowing how to work the machines is good. Hell, they have TV on them! Bring your ipod headphones and hear Elliot Spitzer apologize to his family. Makes you forget how much pain you're in

> picking a gym a little far from home is not so good. That's all you need on those days with 4 feet of snow. Great reason not to go to the gym.

> speedos...what can you say? Bad, bad idea for many men. Do these guys have any shame at all? Can't they see we're already in pain?

> warm towels. The BEST. Makes it all worthwhile.

So give me a couple of years. I'll either be dead or finally able to walk again. It really is great to be in shape!

Saturday, March 8, 2008

Hire Me Someone Good

Every 6 months or so I get together with my friend Martyn.

Martyn's a recruiter. A good one. He started before the tech boom years ago. Built a serious firm. Saw it implode. Started over. Now very successful. Savvy. He's seen a lot. Been through a lot. Not a lot surprises him anymore.

As a consultant/CEO, I've used Martyn over and over to find me great people. He says his sweet spot is tech sales, tech sales management. Good for him. Having a positioning is good. However, I've used him to find marketing people, CFO's, customer service managers, you name it - in everything from not-for-profit through financial services.

Ultimately, the competitive advantage in recruiting is understanding what your client is looking for - a product of listening and client knowledge - and being fearless about reaching out to potential candidates. Martyn is the listener. His staff are the fearless ones, and they're good.

Every time Martyn and I get together, he ultimately regales me with his ugly client stories. Getting stiffed. Clients stealing candidates. Clients lying about what's happening in the business.

In every story, there are underlying themes about some clients and some client mentalities around recruiting - and business in general.

First, there's the notion some clients have that recruiting is some sort of commodity type business that is practiced equally by any/all firms in the business.

Second, that the universe is large and unconnected. That burning bridges and being an asshole doesn't have consequences.

Third, that negotiation is win-lose exercise, where the win-lose on fee is disconnected from the quality of the search.

Finally, that being funded by a VC means you're generally smarter than people with 3x the experience.

My perspective on any/all of these won't be a surprise. They're just dumb. Having a strong relationship with a recruiter is potentially one of the most important business relationships a growth manager can have. These relationships take time to nurture. A few searches. Getting to know how manager and recruiter come to see the same candidates in the same light.

Treating recruiters - and candidates - like commodities will backfire. The search community may seem large, but it's not. Sure there will always be a new firm to take an asshole client, but if you're the Board, do you really want your CEO building the future and sinking your investment on a new supplier every time there's a new search?

Some thoughts on working effectively with a recruiter.

> Have lunch, regularly. Get to know his/her business. Let him/her get to know you/your business. Get to know each other.

> Err on the side of loyalty. Forcing the recruiter to compete on every search will not lead to better quality candidates. It will lead to a semi-disengaged recruiter.

> Don't blow the relationship up over a search that goes wrong. There's valuable learning when mistakes happen. Early on working with Martyn I learned that when I provided the wrong specs, he hired me the wrong person. Good for him. Sucks to be me. Martyn helped me work it out and it's never happened again.

> Tap their expertise. Experienced recruiters like Martyn have seen everything. Negotiating techniques. Employment contracts. Salary levels. Tapping into that during and outside searches can be invaluable.

> Negotiate fee when it makes sense. Like when you're hiring multiple senior positions. But don't grind it every time. Yes, you can leap to a new recruiter who may do something dumb to get your business. Other than that, the recruiting fee model is pretty standard - and your choice needs to be on the quality of the recruiter, not winning a price negotiation.

> Finally, come to terms with how you feel about people/employees, and their impact on your business. My philosophy is simple. It's all about the people. No compromises. Does Google compromise? GE? Microsoft? Measure your recruiter on the basis of one thing - quality of the people you ultimately hire. As long as Martyn keeps delivering people who teach me how to get the job done, we'll be working together for a long time.

Oh, and here's the link to Martyn's site. http://www.mbassett.com/

Wednesday, March 5, 2008

Is the Sky Falling?

Since returning to reality from Australia I can't help but notice an uptick in business conversations about how bad things are in the US and how it will affect Canada. Until now, my observation was that those in the financial services businesses were fully immersed in the issue but other business leaders weren't registering direct concerns. I would say that's changed.

Yesterday I got a copy of a Merrill Lynch (US) analysis that summarizes their view of how bad things are/might be. Keeping in mind that over-reaction might always be a reality in both good times and bad (maybe it is, I don't know), this analysis is starkly negative.

Their view is based on the simple notion that what the US is facing is a credit contraction and that there is little doubt the consumer - up until now the primary engine keeping the US economy afloat - is about to go AWOL. The bottom line impact? As the report says "for global producers who sell $2.3 trillion of goods and services the US, 70% of which is geared to the consumer class, to be forewarned is to be forearmed - find a new customer somewhere else in the world".

Here's some of the thinking on what's happening:

> boomers have spent their adult years using credit, backed by the unstoppable increases in the value of their homes to live beyond their means

> savings have dried up (personal savings rates in the US are close to zero, down from over 10% in 1985)

> boomer retirements, which are just around the corner, were to be funded to a very large extent by home equity

> with house prices going the wrong way now, financial debt exceeds financial assets for many boomers - this is driving severely contracted spending on everything - from mortgage and other financial obligations (debt) - to home renovations and most other discretionary spending (everything but food)

> boomers who can no longer able to count on the value of their homes, will finally start saving for retirement

> with foreclosures, late payments and delinquencies soaring, credit providers are upping the hurdles and severely restricting credit that is available to consumers

> with more savings and less available credit, the drag on the economy will be intense. The author concludes: "we have identified the very serious economic issues that could make this recession much more problematic than previous post-war setbacks". Maybe the sky is falling.

Some numbers from the analysis:

> household liabilities absorb over 50% more of after tax personal income than it did 20 years ago - when interest rates were double what they are now

> the household debt-service ratio is 14.3% close to a record high

> the personal savings rate is .05%, almost a record low

> 1/3 of non-traditional mortgages are already in default

> 39% of people who bought a home in the US last year now find their mortgage is larger than the value of their home

> credit card approval rates have fallen to 32% from 40% a year ago - direct mail solicitations (remember those) to lure new customers are down 16%.

One of the things I've heard some say here is that inflation in the US will be a problem because of the rapid and high prices we're seeing in raw materials like oil and wheat.

This analyst doesn't buy it - having determined that inflation is driven by $ in the end-users pocket. Their belief: "in the absence of of a willing purchaser, higher input prices would simply come out of profit margins at the wholesaling and retailing levels". That makes sense.

I don't know whether the sky is falling or not. I'm not an economist - and frankly its not clear being an economist is much help. However, I do find it logical that the US consumer is in deep dooh dooh. With house prices imploding and credit companies restricting available credit, I don't find it much of a stretch to think that there will be a significant negative impact on business. It will be very interesting to watch what happens over the next year.

Tuesday, March 4, 2008

2007 Board Survey

Just flipping through the 2007 Spencer Stuart Canadian Board Index - Board Trends and Practices at Leading Canadian Companies. The index analyzes the trends at the 100 largest public companies in Canada.

No real surprises in terms of trends - more women, higher fees, fewer stock options - but the numbers themselves are interesting.

> 51% of Boards have at least 2 women directors. That's up from 40% in 2000. Almost 1/4 of female Directors is a Board Chair.

> Top 100 firms held a median of 9 Board meetings in 2007 - unchanged from 2006 and 25% higher than comparable US firms.

> Median total compensation for non-executive directors is $91,612 - up 7% from a year ago - including meeting fees, committee fees and cash value of equity. Almost 20% of top firms give a flat, all inclusive fee to directors.

> It pays to be in mining where median total comp was $160,338. Consumer products and retail were at the other end - $63,00 and $73,000 respectively.

> Since 2002, 40 of the top 100 companies stopped granting stock options to Directors - an 85% decline. Almost every company in the survey provides equity or allows/requires that Directors choose it in lieu of cash.

> Finally, the number of companies that evaluates the Board Chair is at 87% vs 73% last year.

Interesting info. How does your Board compare?







Saturday, March 1, 2008

Dirty Follow-up

Having come to my own conclusions about how Mike Rowe, the Dirty Jobs guy rose to succeed, I might be remiss in not also pointing out he has his own secrets to success. Titled "Seven Dirty Habits of Highly Effluent People", they are:

  1. Never follow your passion, but by all means bring it with you.
  2. Beware of teamwork.
  3. Vomit proudly and whenever necessary.
  4. Be careful, but don't be fooled--safety is never first.
  5. Think about what you are doing--never how.
  6. Ignore advice such as "Work smart, not hard." It's dangerous--and moronic.
  7. Consider quitting.
Experience suggests that there's more truth here than first meets the eye!

Down and Dirty

OK, there's no formula for personal success. But the story of Mike Rowe the Dirty Jobs guy is pretty...funny? Definitely inspiring. Certainly different. Got to give it to the guy he had a vision and made it stick...sometimes/frequently quite literally.

Fast Company has Rowe's story in last month's issue. I read it on the plane to Australia. Very carefully. "THE DIRTIEST MIND IN BUSINESS" is emblazoned across the cover of the magazine. Hey, maybe the 20 year olds beside were clear that Fast Company was a business magazine. Then, again, this part of the story, about Rowe's few minutes of fame hawking dolls on the shopping channel had me laughing out loud and feeling the need for perhaps a bit more discreteness:

Then someone handed Rowe a 2-foot nun doll named Sister Mary Margaret. "If you wound her up, she played 'Climb Every Mountain,' which I thought was hysterical." Rowe had four minutes to kill but ran out of material in 30 seconds, including the time he spent having her spank him with a ruler. Then he tried to crank up her music feature. "I've already announced that she plays music, and I'm squeezing her hand, looking around her neck, but I can't figure it out." When the technical director finally cut away to a display version of the same doll, Rowe, in desperation, turned the little sister upside down in his lap and peeled down her garment. He finally found the crank "in the small of her back, but it's really sort of in her ass." Unfortunately, the technical director cut back to Rowe without warning: "Suddenly, I see myself live on the monitor, with Sister Mary Margaret's face in my crotch, my hand on her ass, and her habit around her neck. And the damn thing is playing 'Climb Every Mountain.'" Rowe froze in horror, then made an unfortunate gesture not suitable for prime time. "It was not good."

Needless to say Rowe survived the debacle and went on to the fame and fortune (who frigging knew?) exposing people to the reality of dirty jobs. As FC puts it:
...for all the bathroom humor, his real curiosity about and respect for his subjects telegraphs a powerful message: There's dignity in hard work, expertise in unexpected places, and deep satisfaction in tackling and finishing a tough job.

Rowe's story - like so many - is inspiring in the old fashioned "maybe if you just keep working at something long enough and hard enough, ultimately something good will come of it". The guy had fun. It's also pretty clear he had a dream, never gave up, worked a hell of a lot of different opportunities, and ultimately - 'got lucky'. It's also clear he's got balls and isn't stupid.

Funny how those qualities always seem to help lucky people.