Think of Future Changes and Improve Your Supply Chain

A robust and efficient supply chain is foundation to a successful business as it provides a competitive advantage. There are many supply chains that are engineered by best minds in world to capitalize labor-arbitrage opportunities in low-cost regions such as China, India, and Mexico. Uncertainties in today’s world are potential problems for most of the supply chains and these uncertainties put most of the supply chains at a vulnerable position in future. At this point the question arises whether most of global supply chains are able to handle the unfavorable event that can take place due to rapidly changing world. The answer to this question is that many global supply chains are not very well equipped to cope up with the events that may take place in future.

Low-cost manufacturing regions definitely provide immediate advantage to business; however future changes in relative attractiveness of manufacturing regions due to ability to produce larger volume at an economical price may put businesses at risk and leave them dangerously exposed. The factors such as turbulent trade, capital inflows and political/policy changes represent perennial threats to supply chain and most of the times possess even greater threat in developing countries. Although there are factors (rising wealth, emergence of credible suppliers in developing countries) that gives confidence to global firms, yet it will take a significant amount to time for these changes to take effect in completion.

To manage future risks of supply chain companies are adapting two fold strategies. First, companies are “splintering” their supply chain into small, nimble chains where firms are better prepared for higher level of uncertainties. Second, firms are treating their supply chains as hedge by reconfiguring their manufacturing process to withstand a range of future outcomes. The gravity of better managing the supply chain risk can easily be assessed by the statement made by Jin Owens, CEO of Caterpillar “the competitor that is best at managing the supply chain is probably going to be the most successful competitor over time. It is a condition of success.”

Presently most of global supply chains face two fold challenges: (i) uncertain world that has a huge potential to affect the businesses. For example, financial crisis and recessions can dramatically amplify perennial source of supply chain uncertainty – trade and capital inflow. Rising wealth in developing countries is increasing their appetite for more resources (energy, raw material such as steel, iron, and commodities), which is affecting the prices at global level that makes it trickier to configure supply chain assets. Growing worries about environmental regulations will have their own effects on the future of supply chain. Last but not least, growth in developing countries (raising labor cost and depletion of resources) contributes towards the volatility of foreign currency market and in turn has potential to affect future supply chain. (ii) Rising complexity arising due to increasing requirement of the firm’s customers and increasing income level in developing countries that will no longer be manufacturing hubs but also potential customers.

Optimizing the supply chain for all customers and all circumstances is almost impossible and extremely challenging. However, to meet these challenges few forward-looking companies are preparing themselves in two ways. (i) Splintering their supply chain into smaller and more flexible ones (while these supply chains may use the existing channels as the old one, they can be configured to use information more efficiently to cope up with future complexity) and (ii) treat the supply chain as dynamic hedge i.e. make the supply chains more dynamic by consistently looking at future (5 to 10 years ahead) and reconfiguring the supply chain as needed.

By splintering monolithic supply chains into smaller and nimble ones companies can tame the future uncertainties & complexity, save money and better serve their customers. For example assume a company (Comp-A) that has most of its manufacturing in China and is headquartered in North America (with a very small presence) to stay close to its majority of customers. In this situation, increase in volatility of customer demand coupled with product portfolio proliferation (increasing number of SKUs) will put very high strain on Comp-A’s supply chain. This situation may lead to forecasting and service-related problems that may dissatisfy key customers.

This situation is difficult to manage but with some analysis can easily be handled.  To take care of this problem Comp-A should examine its product portfolio along two dimensions: the volatility of demand for each SKU sold and overall volume of SKU produced. After analyzing the situation Comp-A may split its legacy supply chain (one size fits all) into 3 to 4 distinct splinters. For high-volume & relatively stable demand (in most of situations less than 10-20% SKUs that represents majority of revenue) Comp-A can keep manufacturing in China (low cost). High or low volume & high volatile demand should be kept in North America and low-volume & low volatile demand can be divided between North America and Mexico.

By keeping manufacturing of low or high-volume with high volatile demand in North America (USA) Comp-A can serve customers with a very short lead time, which in turn avoid any lost sale. This way Comp-A is no longer required to predict the demand, instead it can manufacture directly to customer order. Other advantage of splintering the supply chain comes from better forecast for high-volume stable demand product as these forecasts will be free of noise generated due to volatile demand products.

Decision on the number of splinter is a tricky one and requires a closer look at the way company uses its supply chain assets to manufacture and distribute its products and strategic goals company has for those products & customers. The requirement seems obvious but it needs some thinking. A good starting point could be analysis of volatility of customer demand for a particular product line against historical production volume then compare it with total cost incurred for different locations. This analysis can provide rough estimate of speed-versus-cost trade-offs and may potentially suggest potential locations of supply chain splinters. The word of caution is that companies must be very careful about these broad analyses and check these against their customer needs.

Other benefit of splintering the supply chain originates from the fact that operational assets can be focused on the tasks they are best equipped to handle. The small size of splinters offers great advantage from flexibility point of view, where senior management may become capable of implementing the improvements that were not possible due to sheer size of traditional supply chain.

Splintered supply chains offers maximum advantage only if they are viewed as a dynamic process. For example, managers will have to assess hypothetical scenarios such as what would happen if crude oil price become $90 instead of $75, what will happen if labor wages in China go up by 20% and so on. The bottom line is that companies should try to design their portfolio of manufacturing and supplier network to minimize the total landed-cost risk under variety of situations. The goal is to identify a robust and stable manufacturing and sourcing point – even if it is not the lowest cost today.

Making these changes are not easy as making any change in a company’s supply chain has its effects throughout the organization because these changes require high level of cooperation and information sharing throughout the organization.

Change is becoming a necessity in today’s uncertain world and to stay ahead in the game companies must learn how to adapt to these changes. Thinking of future and making changes to their supply changes can help companies to survive and maintain their global competitive position because condition for survival is not being strongest, it the adaptability to changes.

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 To learn more about this please refer “Building the supply chain of the future”, McKinsey Quarterly.

Things to be Aware of While Preparing Resume & Cover Letter for Consulting

As all of us know “job search is a job in itself”, so starting to prepare your resume is zeroth step. Keeping this in mind I decided to compile a document, containing the information about things to keep in mind during preparation of your resume and in particular resume for consulting firms.

The bottom line is -

(i) Make life easy for recruiter as they hardly have 30 second per resume during initial assessment.

(ii) Resume should be (a) Concise, (b) Result Oriented and (c) Clearly Presented.

(iii) Resume should be marketable i.e. it should have content and should be visually appealing.

The firm’s outlook - Your resume is their first impression of you as a potential future consultant and it have a primary purpose

a. To determine if you deserve an interview?

b. If you are interested in consulting, and specifically in their firm?

c. If you have experience in the industry of their current client?

d. How soon they will be able to staff you?

One page resume – Is important at most of the consulting firms. This has been stressed million times in millions of articles. The gravity of this situation can be assessed by the following statement: “If you can’t reduce your resume to 1 page, I immediately think you are unable to tell the important from the trivial, which is a death sentence for a consultant”[1].

Skill-based resumes – NOT GOOD. Consultants don’t have good opinion about skill based resume instead they prefer result based resume as evident by following: “I’m always suspicious when I see a
skills-based resume. I feel like I have to make a leap of faith. I prefer to see experience that illustrates skills I’m looking for” and “I hate reading skills-resumes”1.

Formatting & Listing – You can choose variety of formats but be careful while listing your accomplishments. It is desirable to follow following format to list resume items:

a. Education

b. Experience: (i) Reverse chronological order (ii) Bullet-points and key takeaways, not dense prose (iii) Active, rather than passive, voice and (iv) Use buzzwords & industry jargon with caution

c. Other: (i) “Activities,” “Additional,” or “Personal” (ii) Avoid clichés such as travel, reading, running, etc.

d. Use numbers where appropriate to describe your accomplishments: and Avoid vague qualitative terms: “large” “many”

e. Present two or three strengths and back them up with experience & achievement. You need Not necessary to be a jack-of-all-trades

f. State your accomplishments objectively and avoid dramatic, self-congratulatory language

Resume Mistakes – Given below are few common mistakes that you should be careful about.

a. Objective statement at the top

b. Job descriptions rather than results

c. Weak verbs to describe accomplishments

d. Listing experiences where you are unable to recall the details

e. Political or religious viewpoints

f. Any spelling or grammatical errors. Consultants are notoriously detail-oriented

Cover Letter –

a. Should introduce a resume

b. Should have personalized explanation of interest in consulting and the particular firm

c. Is more important when resume submitted directly, rather than on-campus recruiting

d. Shows if the candidate can write clearly & concisely?

e. Should be able to convey professionalism & enthusiasm

f. Should be able to address potential concerns of the recruiter

Cover Letter –

a. Should have position to which you are applying

b. Should indicate primary reason for your interest in consulting and specific role at the firm

c. Should contain concise overview of 1 or 2 qualifications that make you a compelling candidate. These could be accomplishments that are not explicitly included in your resume

d. Availability (graduation date)

e. Logical next steps. Could be a brief telephone conversation

Cover Letter Personalization – Try to personalize your cover letter (whenever possible) and

a. Address the cover letter to a recruiter or consultant by name. Typically, different recruiters for undergraduates, MBAs, and advanced-degree candidates

b. Tell that person who referred you or how you obtained their contact information

c. Recruiters are more willing to review your credentials if you were referred by a respected coworker

Cover Letter & Due Diligence – This is a time consuming step but everyone believes it is very important. Try to address

a. What initiated your interest in the firm? (i) Industry or functional practice specialty (ii) An article or book written by a consultant (iii) An informational interview

b. WetFeet and Vault both publish books aimed to provide an insider’s perspective on consulting and investment banking firms

Cover Letter Mistakes[2] – This is a time consuming step but everyone believes it is very important. Try to address

a. Reiterating your entire resume in prose. Remember resume and cover letter are complementary

b. Sending an impersonal form letter. Recruiter will interpret this as lack of interest

c. Addressing your letter “Dear Sir or Madam” or “To Whom it May Concern”. Find out the name of the recruiter and their title

d. Excessive length. Busy recruiter will end up skimming it

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[1] Killer Consulting Resumes! (WetFeet Insider Guide).

[2] Note: This document was prepared with the help of UIUC’s Illinois Consulting Club professional development information power point presentation.

Marketing in Today’s World

Marketing (management) is a process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and/or services to create exchanges that satisfy individual and organizational goals.[1] There are three main processes through which marketing practices might pass as organization evolves. (i) Entrepreneurial Marketing is a process where individuals realize an opportunity and perform personal one-on-one campaign to gain attention; (ii) Formulated Marketing is the next process of entrepreneurial marketing that occurs when small companies achieve success; (iii) Intrepreneuiral Marketing is the attribute of marketing that is associated with large companies.

There are 10 main types of entities that establish the scope for marketing: (i) Goods, (ii) Services, (iii) Experience, (iv) Events, (v) Person, (vi) Place, (vii) Properties (real: real state, financial: stock & bonds), (viii) Organizations, (ix) Information and (x) Ideas. Marketers are responsible for demand management, in which they have to manage negative demand (avoidance of product), no demand (lack of awareness or interest), latent demand (a strong need that cannot be satisfied with existing product), declining demand (lower demand), Irregular demand (demand varying by situation i.e. season, month, week, day etc), full demand (a satisfying level of demand), overfull demand (more demand that can be handled), and unwholesome demand (demand for unhealthy or dangerous products).

It is desired to ask the right questions for a successful marketing campaign. Among many question few are: (i) How can we spot and choose the right market segment? How can we differentiate our offerings? How should we respond to our customers who press for lower prices? How can we compete against our lower-price & lower-cost rivals? How far can we go on in customizing our offerings for each customer? How can we grow our business? How can we build stronger brand? How can we reduce cost of customer acquisition and keep customer loyal? How can we tell which customer are more important? How can we measure payback from marketing campaign? How can we increase sales-force productivity? How can we manage channel conflicts? How can we get other departments to be more customers oriented?

Market segmentation is very important step of the marketing management process. Market segments can be identified by examining demographic, psychographic and behavioral differences among buyers. After this firm’s target segment is the one whose need can be met in a superior fashion.

Today’s market is very different from that of traditional (physical) market place. In modern era market has split into marketplace (shopping in store) and marketspace (digital i.e. internet). Marketplace and marketspace are all part of metamarket (a concept proposed by Mohan Sawhney) that can be described as “a cluster of complementary product and services that are closely related in the minds of customers but are spread across a divers set of industries”.

One of the core concepts of marketing is marketers (someone who is seeking a response i.e. attention, a purchase, a vote or a donation) and prospects (from whom marketers are seeking the response).

Need, wants and demands are three important things about which a marketer should be very clear about. Need describe basic human requirements; want is next step of need if a specific object (type) is required to satisfy the need; and demand are wants for specific products backed by an ability to pay. Needs are not created, instead they preexist. Marketers have no control over need but are able to influence wants.

A product is an offering that can satisfy a need or want (10 items specified above that scope the market). A brand is an offering from a known source. Brand carries many associations that constitute the brand image.

Value and satisfaction is a measure of success of a product offerings i.e. a product will be successful if it delivers value and satisfaction to the target buyers. The winning product is the one that delivers most value at lowest cost. Value = (Benefits/Cost) = [(Functional Benefits + Emotional Benefits)/ (Monetary Cost + Time Cost + Energy Cost + Psychic Cost)].

Exchange involves obtaining a desired product from someone by offering something in return. Exchange is a value creating process as it leaves both the parties better off. Exchange is a process rather than an event. Transaction is the next process of exchange once agreement is reached. Note that transaction is different than transfer.

To reach a target market, marketers use 3 kinds of marketing channels: communication channel (to deliver and receive message form target buyers), distribution channel (to display or deliver physical product to buyer or user), and selling channel (to affect transection with potential buyers).

Marketing environment gives very useful information about the domain where firms operate. Overall marketing environment consists of task environment (includes immediate actors involving in producing, distributing and promoting the offerings) and broad environment (that is a combination of demographic, economic, natural, technological, political-legal & socio-cultural environment). It is necessary to track environmental trends & changes as these contain forces that can have major impact on the actors of task environment.

Marketing mix is set of marketing tools that are used by firms to pursue its marketing objectives in the target market. These tools help marketers to elicit the desired response from their target markets. Marketing mix decisions must be made to influence the trade channel as well as final customers. Seller’s 4 Ps (i) Product, (ii) Price, (iii) Place, (iv) Promotion vs. customer’s 4 Cs (i) Customer Solution, (ii) Customer Cost, (iii) Convenience, (iv) Communication. Winning companies are those that meet customer wants economically and conveniently with effective communication.

Marketing management is a conscious effort to achieve desired outcome with the target market and these efforts should be carried out under well-thought-out philosophy of efficient, effective and socially responsible marketing. Given below are five competing concepts under which firms conduct their marketing activities:

Marketing concept:

The production concept holds that consumer prefer products that are widely available and inexpensive. Managers following this concept focus on achieving high production efficiency, low cost and mass distribution. The product concept holds that consumer favors those products that offer most quality, performance, and/or innovative features. Managers following this concept focus on making superior product and improving them over time assuming that consumer will appreciate their efforts (Product oriented companies design their products with little to NO input from their customers: one has to be careful that product concept does not become marketing myopia). The selling concept holds that consumers and business if left alone will not buy enough of organization’s products. The organization, must, therefore takes an aggressive step to sell its product to consumers and businesses. Selling concept is most popular with unsought goods such as insurance, funeral plots as well as in non-profit organizations such as for raising money. The marketing concept holds the promise for the company to become more effective than its competitor in creating, delivering, and communicating customer value to its target market. Selling focus on the needs of seller and marketing focuses on the need of the buyer. Four prominent pillars of marketing concept are (i) target market, (ii) customer need, (iii) integrated marketing, and (iv) profitability.

Customer Needs:

To better serve a target market one needs to clearly identify customer needs that can mainly be distinguished by five kinds: (i) stated need (ii) real need (iii) unstated need (iv) delight needs and (v) secret needs.

There are three types of marketing that need clear distinction. Responsive marketing fulfill stated need, anticipative need look at need of consumer and try to gauge future of the need; creative need is to produce solutions that are not desired by consumer but can be appreciated if company provides them.

Integrated marketing is a concept that originates if all the departments together try to satisfy customer need.

“Societal marketing concept holds that organization’s task is to determine the needs, wants, and interest of the target markets and to deliver the desired satisfaction more effectively and efficiently than competitor in a way that preserve or enhances the consumer’s and society’s well-being”.

Companies Respond to Changes:

Companies address the changes in market in a number of ways. Few are presented below:

- Reengineering: Functional departments reorganization by key processes.

- Outsourcing: Make few and buy more.

- E-commerce: Internet business.

- Benchmarking: Adapt best processes of the industry instead of internally improving own process.

- Alliances: Partner with firms instead of trying to win everything alone.

- Partner-suppliers: Use of few reliable suppliers and develop close relationships.

- Market-centered: Organize by market segment instead of organizing by product.

- Global and local: Be both global and local.

- Decentralized: Encourage more “entrepreneurial way” than managing from top.

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[1] Dictionary of marketing terms, 2^nd ed. Peter D. Benettee

Growth as a Process: Innovative Organic Growth Process at GE

Inorganic growth is an act where companies expend their business (sales) by increasing their output and business reach due to acquisition, mergers and takeovers. Whereas Organic growth is an act by which companies increase their customer base, output per customer, sales, or any combination of above by investing, improving and utilizing their own resources and capabilities. Inorganic growth is a faster process to grow as opposed to organic growth that is relatively slower process compared to inorganic growth.

 

General Electric (GE), under the leadership of Jack Welch, set an example to the inorganic growth. Welch created a formidable tool kit and mind-set to maintain bottom-line discipline while fueling top-line growth majorly through geographical expansion and acquisition. Jeffrey R. Immelt who succeeded GE after Welch, became the catalyst for organic growth. Under Immelt’s leadership GE is expending its ability to deliver by adding new capabilities to its operating thoroughness. Taking over GE after Welch, Immelt spearheaded “Growht as a Process”, a process that fuels GE’s ability to generate consistent organic growth. “Growth as a Process” includes six capabilities (i) Technology, (ii) Customers, (iii) Globalization, (iv) Commercial Excellence, (v) Innovation and (vi) Growth Leaders. A detailed definition of above characteristics is provided below:

 

Great Technology: Have the best product, content and services

 

Customers: Using process excellence to satisfy customers and drive growth

 

Globalization: Create opportunities everywhere and expend in developing global market

 

Commercial excellence: Develop world class sales and marketing talent, and demonstrate the company value. Even company has a wonderful differentiated product one has to be creative and skilled to obtain the right price.

 

Innovation: Generate new ideas and develop capabilities to make them reality. Ideas are very important for customer satisfaction as well as innovation of new product/services.

 

Growth leaders: Inspire and develop people who know how to help customers and company to grow.

 

It all starts from the verbalization of thoughts: where does company want to go? Once this is decided think of: how to achieve the above? In order to achieve consistent desired organic growth Immelt says “I make sure we fund for leadership. We’ve gotten out of business where funding for leadership couldn’t get good results”. Immelt’s process makes it very clear that company needs a very good marketing team to get desired price (Experienced Commercial Leadership).

 

Immelt also talks about strategic acquisition, where he says to thinks about what do you want to target and determine how far or close you are to the target? If you are far, then find other targets that are closer to the desired target and can assist you to fill the gap. While speaking about enterprise selling, Immelt emphasizes on cross training that can play a significant role. Many companies struggle with enterprise selling as the incentives of different departments in the company are not well aligned. Cross training of marketing and sales team make them capable of provide complete solution during enterprise selling.

 

Growth, organic or inorganic, always demands (and recommended) for setting up tangible goals. It should be formulated in a very clear and understandable way i.e. If we want to increase our revenue by 100% in 3 years, we would spend $ amount to achieve tangible difference in product portfolio”.

Clear communication, data keeping and product customization are the keys to achieve consistent growth. Any change has to be clearly translated to those who are affected by it. First, to the people those have maximum impact of the proposed change. Data keeping is important. It is essential to better serve customers and very important for push marketing. Every market is different and product customization is a challenge that needs to be overcome by innovation. Local product development is hard due to following three different reasons: (i) Different people, (ii) Different funding and (iii) It (the product) need to be better at adaptable and low-cost manufacturing.

 

Organic growth is highly dependent on high employee retention. Longer the people are in a position better is the domain knowledge as people with deeper domain knowledge can make good decision and good decision will catalyze the organic growth. Employees staying at the organization for long time become growth leaders. There are five main characteristics for growth leaders: (i) External focus, (ii) Imagination and creativity, (iii) Decisiveness and clear thinking, (iv) Inclusiveness and (v) Deep domain expertise.

 

Above five points are the drivers for employee development and in turn organization development. If an employee is lacking in some area then he/she has to improve upon that by picking one of the five points (are called as red points and everyone has to work on at least on red all the times).

By using above approach GE is breaking the barriers of organic growth and is organically growing at a rate of ~8% i.e. approximately 3 times the GDP growth. The question is what will come next? How sustainable will this growth be in future?

Do Brainsteering NOT Brainstorming for Better Results

Brainstorming, an act that is conducted by all organizations those are in the process of improving their structure to better serve their customers and improve their efficiency. Brainstorming sessions carry a significant cost associated with them, thus in order to get maximum benefits from those sessions it is desirable to have a clearly defined agenda(s) and a pool of better/targeted questions pertaining to agenda(s).

Traditional brainstorming where all are encouraged to “Get creative”, and “Think outside the box”, presents its challenges. In traditional brainstorming sessions, some attendees remain stone-faced throughout the session, some participate sporadically and some vociferously dominate the session by their pet ideas. Ideas come along but due to the lack of structure, no one (or few) idea gets pursued and most of the ideas fall in to the well of ambiguity. At the end of the session, every one leaves with a very hazy impression of next process.

There is a way to improve this process by leveraging participant’s ability to think and work on creative problem-solving approach. An approach called brainsteering, developed by Kevin P. Coyne and Shawn T. Coyne, delivers superior result than traditional brainstorming. However, brainsteering requires much more preparation than traditional brainstorming but shows better and targeted results. Coyne & Coyne presents their approach in 7 steps that can be very helpful for better brainstorming.

First step of the process is to know and be very clear about the decision making criteria of your organization. Thinking outside the box is not necessarily the best way to approach brainsteering process as companies/organizations are themselves constrained in a box of policies, resources and past decisions. Thus in order to steer creative thinking among brainsteerign participants, manages have to be well aware of the real criteria that organization will follow to make decision about a proposed ide/solution. It is a better idea to collaborate with senior managers and form highly specific (2 or 3) and tailored need to meet the immediate needs.

Second step of this process is to ask the right questions targeted towards the agreed upon problem/need. Traditional, loosely structured brainstorming process (i.e. go for quantity) is inferior approach than well structured (i.e. go for quality) approach . Asking right question can provide a helpful platform for idea generation. Right questions should be identified using two characteristics (i) they should force participants to take a new and unfamiliar perspective on the problem, as this will steer their thinking process ; (ii) they should be able to limit the conceptual space (range of solutions) without restricting the thought process that may force a particular answer or outcome.

Third step is to choose the right people who can answer the questions you are asking. As obvious it sounds, it is not what occurs in companies/organizations while picking up brainstorming teams. Traditionally organizational chart plays bigger role than the actual fit of the person who is capable of answering the relevant question.

Fourth step is to divide & conquer i.e. avoid holding continuous and rambling discussion for extended time in a big group. The best way is to form groups of 3 to 5, given them a question and ask them to spend ~30 min to come up with some answers/scenarios. Groups should not be larger than 5 as norm in larger groups is to stay quite. Assignment of people in groups should be done very carefully i.e. it is necessary to isolate “idea crushers” into their own subgroups. “Idea crushers” are very well suited for the workshop but intentionally or not, hinder others to suggest good ideas. “Idea crushers” comes in three varieties (i) bosses, (ii) big mouths and (iii) subject matter experts. People are hesitant to speak an unproven idea in front of their boss, big mouths take air time, and subject matter experts tends to be biased (sometimes) and may become intimidating to others. A group of above three “idea crushers” will still be productive as they will eventually speak and will come up with something. Also, take proper care of assigning the relevant question to relevant group (i.e. group that is capable of answering that question).

Fifth step is clearly conveying what you are trying to accomplish (before breaking the participants into subgroups). Convey that groups will be isolated and for half an hour they will only be discussing on question. Also, be careful that no other idea from any other source, no matter how good it is, should be mentioned. Any out of the scope idea should be written down and should be shared later to save time. Make the subgroups aware that any 30 minute discussion may only generate 2 to 3 worthy ideas. First 5 minutes of any brainsteering process may look very similar to that of traditional brain storming as people will try to test their pet ideas or will come up with some new superficial ones, but participants should persevere as this will eventually bring up some good ideas.

Sixth step is to wrap it up. At this point, question arise how to choose winning idea? Instead of asking group to vote/choose the winning ides (as everyone in the group may not have clear understanding of the constrained the organization function in), every group should be asked to narrow down their list of 15 ideas to top few (may be 2 or 3). Announce, to the group, the process of choosing the winning ides among to 10-15 ideas, also make the group aware that whey and how will they hear about the winning ideas.

Seventh step is to follow up quickly to see maximum affect. Decision and follow up activities should be quick and thorough. The acceptance or rejection of ideas should be conveyed the participants and reasons for acceptance or rejection should be respectfully explained.

Strategy is a Coherent Action Backed by an Argument

A good strategy always looks simple and obvious in retrospect. However, it does not originate with a tool, matrix, triangle or a fill-in-the-blank exercise. Instead, it (a good strategy) originates when a capable leader identifies one or two critical issues (pertaining to the situation) that can increase the effectiveness of efforts by channeling the efforts and resources in the right direction. A good strategy not only leads us towards a goal or vision, but also acknowledges the challenges we face and also demonstrations an approach to overcome these challenges.

Bad strategy (a term coined in 2007 by Prof. Richard Rumelt) ignores the power of choice and tries to accommodate hosts of conflicting demands and interests. A bad strategy hides its failure by using the language of broad goals, vision and values. Although, all the above mentioned words are important individually, yet they are not substitute for the hard work done for good strategy. Prof. Richard Rumelt, has condensed promises of bad strategy in four points which are (i) the failure to face challenge, (ii) mistaking goals for strategy, (iii) bad strategic objectives and (iv) fluff (fuzzy).

“A strategy is a way through difficulty, an approach to overcome a difficulty or a response to a challenge.” If there is an ambiguity about the challenge i.e. if you cannot define the challenge it is almost impossible to evaluate the quality of a strategy. In this case you will not be able to reject a bad strategy or make amendments to a good one. The gist is that if you fail to recognize and analyze the hindrance, you don’t have a strategy. Instead, you have a collection of impractical (stretched) goals that you wish to achieve.

While making strategy for goals one has to initially realize the key strength areas where the company can get leverage i.e. one has to ask what are our key strengths and points of leverage in our company. When a leader is asking for last push in order to achieve a goal, it is his responsibility to provide strategic direction for the effectiveness of the push.

Strategic objectives should be clearly defined and they should not be mistaken with a long list of things to do. Strategy to achieve desired goal should be feasible, if strategic objectives are as difficult as that of the original challenge then strategic objective is not clear and add no value. Good strategy focuses most of the efforts and energy to one or very few critical points. The objectives set by good strategy have a high chance of success given existing resources and competencies.

Fluff is a restatement of the obvious coated with buzzwords that falsely show pretense as expertise. There are two main origins of bad strategy: (i) the inability to choose & (ii) template-style planning.

Strategy involves focus that leads to choice that means letting go some goals for others. In the absence of this type of hard work, we will end up with a weak strategy.

Basic underlying of a good strategy:

(i) A diagnosis: an explanation of the nature of the challenge i.e. identifying that certain aspect of the problem is more critical than others.

(ii) A guiding policy: the overall approach chosen to overcome the obstacle identified in diagnosis.

(iii) Coherent actions: coordinated effort to support the accomplishment of guiding principle.

“Strategy is a coherent action backed by an argument”. Core of strategy “discover crucial factor in a situation and design a way to coordinate and focus action to deal with them”.

Quotation (Jack Welch): “We have found that by reaching for what appears to be impossible, we often actually do the impossible.” This says that Welch believes in Stretched Goals but he also says “If you don’t have competitive advantage, don’t compete.”

Is College a Waste of Time?

Recently I read an article by Dale J. Stephens is a 19-year-old entrepreneur leading UnCollege, a social movement supporting self-directed higher education and building RadMatter, a platform to demonstrate talent. His opinion about the higher education is that in majority of cases it is not worth it and he strongly believe that higher education is broken and college is a waste of time. (please see link for full article:

http://articles.cnn.com/2011-06-03/opinion/stephens.college_1_student-loan-debt-college-graduates-richard-arum?_s=PM:OPINION )

I do not agree with Dale J. Stephens’s belief that higher education is broken. I would like to compare higher education with a very long highway which has some segments that are broken but other than those segments, the whole road is in good condition and the road (higher education) provides a suitable conduit for fast track movement.

I don’t agree that failure is punished, instead it reminds us a very important real life marketing lesson that in order to remain competitive our product should be of superior quality. Education always provides a learning opportunity, but it is highly dependent on an individual that how would one like to take it.

College equips us with the skills rather than frameworks. College (education) prepares us with skills that we should use to be creative rather than use those skills as framework, try to fit every problem in those frame works and blame the system for its inefficiency.

I disagree that learning by doing is the best way, instead learning by smartly doing is the best way to turn constant iteration into true innovation and education provides one with the skill sets to perform a task smartly.

Newell Company: Corporate Strategy

Group Member: Alex Fridman, John Chuang, Jeff Marker, Yan Wu, Deepak Pandey

Disclaimer: This case was done by my group and me and the analysis indicates our understanding of this case.

Use the Corporate Strategy Triangle to evaluate Newell’s corporate strategy. Do you think this corporate strategy is effective?

Newell’s goal is to increase its sales and profitability by offering a comprehensive range of products and reliable service to the mass retail channel. Newell has chosen to develop its product line through key acquisitions, rather than internal organic growth. The strategy succeeds based on their two pronged approach of following an established acquisition process (Newellization) and ensuring corporate continuity across the division to support its performance in the market. This strategy helps Newell successfully diversify their portfolio of products for mass retailers (Exhibit #1).

Newell’s key resources and capabilities are tailored around the company’s needs for growth and their customers need for diversity and efficient distribution. The company’s product range (21 product lines) and depth (good, better, best) creates huge incentive for retailers to stock product from only one supplier. Their logistics operation with nearly 100% first-pass line fill and expanding global presence help the company improve and expand with their customers (mass-merchandisers). The process of “Newellization” is a valuable resource to the company by which Newell acquire, convert, and integrate a new acquisition (products) into their existing product lines within a short lead time. This process provides them an opportunity to gain additional market share in key distribution channels. The company’s emphasis on firms (with high brand awareness and a low cost structure) after Newellization creates an offering in the market which is difficult to imitate (Exhibit #2).

As part of Newell’s corporate strategy all acquisitions are performed at the corporate level. As part of Newell’s control system, potential target firms undergo an intense screening process and must become at par with company’s existing performance criteria (market share, COGS, SG&A expense, and projected operating margin) after the Newellization process. As part of company’s control strategy, although corporate tightly controls the finances, yet it allows brand and division president autonomy to guide the performance of the business. The structure and the system of the firm (the central financial, sales and ordering, manufacturing, and HR systems, performance review, bracket meetings) creates consistent and predictable brands that help Newell maintain its competitive advantage.

For the success of their corporate strategy, corporate office does a good job of seamless linking of its structure, system & processes (SSP) with its businesses and resources. For example, Newell uses a formalized training process in order to link corporate vision to the values and resources at the division level. The company ensures that they obtain candidates that are best suited to exceed expectation in their demanding environment by using a rigorous selection process in which only one out of ten candidates is selected. In addition, the company provides Newell University to instill company values and strategies in employees. This coherence allows managers to establish a brand image for their product, meet performance and delivery expectations while adhering to the overall company goal of increasing sales and profitability.

Newell’s strategic success is evidenced by its financial performance thus far. Newell’s businesses are separated into three divisions: Hardware, Home-Furnishings, Office Products/Housewares. These businesses comprise 46%, 28%, 26% of the company’s revenue respectively. While deviation most likely exists for COGS amongst companies, Newell tries to maintain COGS and SG&A at ~67.5% and 14.5% of net revenue for the entire division (Exhibit #3). Their ability to control costs at the division level has lead to consistent growth and profitability, returning ~ 9% net income as a percentage of sales. This has been one of the critical reasons that their 10 year average return to its investors was 13% above the industry average. Considering that Newell focuses on growth via expansion, the acquired firms that have contributed to this growth integrated seamlessly within the overall company through the process.

Do you think Newell’s acquisition of Calphalon creates value? How?

The addition of Calphalon to Newell’s Housewares division creates value for Newell by extending its reach into the non-mass merchandise market. This approach allows Newell to offer a premium product with strong brand recognition without cannibalizing existing cookware at mass retailers. By acquiring a company that has core competencies in the high end retail segment, Newell is branching out into non-saturated markets where products haven’t reached critical mass. While most of Newell’s product offerings are utilitarian, Calphalon’s cookware products are considered to be an emotional purchase for the premium end user. Calphalon caters to these end users by deploying a skilled sales force, offering product demonstrations, and conducting product training to the distribution channels. Newell can look to leverage this capability across its divisions to differentiate its product portfolio and protect its market share from low cost competitors.

Newell can apply its capabilities of “Newellization” to control Calphalon’s increasing COGS and high SG&A (36%) expenses. At the same time they can maintain the target firm’s internal competencies that make the brand appealing to the premium end user (Exhibit #4). 

Although we believe that Calphalon acquisition will create value to Newell, it potentially can present considerable challenges. There is a delicate balance between “Newellization” and protecting the integrity of the Calphalon brand. The typical approach to “Newellization” has been one of absorption. Newell keeps the brand name of the target firm and discards the existing people and processes. Calphalon has built its brand equity, in large part, because of the efforts of its sales force and its focus on educating retailers and end users on the product. If taken too far, “Newellization” may erode Calphalon’s premium service and destroy the barrier of entry for premium competitors at high end retailers.

Do you think Newell’s acquisition of Rubbermaid creates value? How?

Rubbermaid fits within Newell’s criteria for acquisition. Rubbermaid has strong brand equity with significant shelf space at mass retailers but has inefficiency within its operations. The rising costs of resin contributed COGS 73% as a percentage of sales in 2007, coupled with logistics and service problems, have diminished Rubbermaid’s potential profits (Exhibit #3). For 1992-1994 Rubbermaid’s performance i.e. COGS (~67%) and SG&A (~17%) was in line with Newell’s COGS and SG&A during the same period, ~67.5% and ~15.5% respectively. Newell can leverage its operational and financial systems and synergies of the existing brands to improve Rubbermaid deteriorating position. By controlling Rubbermaid’s costs, Newell could potentially return the company to ~9%-11% net income as a percentage of sales. In addition, acquiring Rubbermaid will value Newell over the $10 billion market cap. The increased market capitalization will serve to counter the increasing market power of the volume retailers as they try to erode Newell’s margins.

Rubbermaid fits well with Newell’s two pronged corporate strategy, however, the $5 billion acquisition costs looks to be overvalued according to financial forecasts post-“Newellization” (Exhibit #3). The net present value of future cash flows of Rubbermaid at time of acquisition is approximately $2.2 billion, less than half of the actual acquisition price. This makes any kind of potential value creation irrelevant since Newell would need to overcome the market premium in terms of either future savings or increased growth. What Rubbermaid does possess pre-acquisition is $2.49B in working capital and only $377M in total debt which may make it a more appealing acquisition target and may justify the price premium (Exhibit #5).

The degree to which this acquisition adds value depends on Newell’s ability to absorb Rubbermaid into its existing corporate structure. The sheer size of Rubbermaid (75% of Newell’s revenue in 1997) points to a longer “Newellization” process than the standard 6 month period. If the “Newellization” process drags out, Newell will be forced to invest more of its time and resources into integrating Rubbermaid. This may leave less time to focus on new acquisitions. There is also a strong chance that absorbing Rubbermaid is the incorrect approach to integration. Newell will need to work with the majority Rubbermaid’s existing workforce and management team, there are simply too many to replace. In addition, Rubbermaid’s excellence in new product development adds value to Newell. If Newell were to absorb Rubbermaid, it could risk alienating the new work force and destroy the processes that promote new product development. Overall, we will recommend an extreme caution before we can say about the potential value added by Rubbermaid to Newell.

Do you think Newell’s corporate strategy would work in 2011? If yes, why? If not, what would you change?

NO. We believe Newell will have hard time with their strategy if they don’t review it very carefully. While Newell’s value proposition to the mass retailer (a diverse product portfolio and reliable delivery) should be as effective in 2011 as it was in 1997, a change in the economy and the shift to mass retailers is a cause for concern. Retailers such as Walmart, with an 11.3% (Exhibit #6) market share in 2009, have emerged to dominate the landscape in the US. With end users increasingly looking to mass retailers for a variety of product needs, Newell’s focus on dominating shelf space through the offering of non-seasonal tiered products may allow it to see a corresponding increase in sales, but expose it to price pressure. This is not what Newell wants because Newell prides itself on quality products with quality service at a quality price.

While Newell’s strategy to cater to a growing distribution channel should increase revenue, it also exposes the firm to more risk in 2011. As mass-retailers have shifted to a low cost model, it will become increasingly difficult for Newell to maintain their target margins and returns to investors. The continued market growth of mass retailers allows them to place downward pressure on the price of goods. Newell’s value proposition to retailers does not insulate them from this pressure. If Newell is unable, or unwilling, to lower its price, mass retailers will simply fill their product and delivery needs from their increasing pool of potential suppliers. Newell’s decision to work strictly with suppliers limits its bargaining power in this situation. In order to survive under this model, Newell will have to change its approach from differentiator to that of a cost leader. However, it may be difficult for Newell to compete with other cost leaders in the industry. Newell operates over 21 distinct product divisions, each with its own management team. Though it has a reputation for operational efficiency, Newell may be unable to match the cost structure of firms operating with less overhead and fewer product lines.

In order to limit the power of mass retailers, Newell should look to develop a pull strategy similar to that of its new acquisition, Calphalon. A pull strategy would force Newell to retain the brands that end users value and divest those that do not. Though the approach is different, it does not represent a major shift in the way Newell markets itself to the mass retailers. By maintaining a portfolio of products valued by the end user, Newell is providing value to the mass retailer in the form of increased sales and customer traffic. This approach has the benefit of being difficult for the competition to imitate. By differentiating itself from the low cost players, Newell will have more bargaining power to keep mass retailers from pushing down on prices (Exhibit #7).

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 Historically, Newell has maintained COGS and SG&A 68% and 14.5% respectively, of net sales.