Please pardon me in advance for some shameless self-promotion!!

Our firm – Pebble Creek Partners - has added a new partner, and I couldn’t be more excited.  Tom Riek and I worked together at Waste Management in the late ’90’s.   We participated in a number of exciting initiatives and I think we made a difference – all while having  fun, despite long hours and lots of pressure.  

Tom went on to have a string of great career successes,  including starting, growing, and sometimes even selling  recycling businesses. You can read all about Tom here and here. 

We went our seperate ways and lost touch for a few years, but eventually we reconnected (via LinkedIn, of course!).  Once we got together and talked, we realized that Pebble Creek Partners offered a great opportunity for Tom to do what he does best – help organizations grow and become more profitable.  Plus, we would get a chance to work together again, and capture some of that magic from those fun days of the past.

We will continue to focus on environmental, transportation, and Cleantech industries.  But Tom also brings a unique perspective and skill set to recycling, “green” initiatives, and how companies can not just talk about the very hot issue of sustainability  – but do something about it.  He’s going to start blogging in this space on those very topics.

I love our firm because we help interesting clients get better in unique and exciting ways, and I get to work with really smart, fun people…. and  Tom fits that description perfectly.

I was talking with some friends about the fact that digital video recorders  (like TiVo ) have completely changed the TV viewing habits of those who have them.  The ability to record shows so easily and then watch them at your convenience, coupled with the ability to fast forward though the parts you don’t like – means many users no longer watch any “live” television. 

Experts call the technology time shifting, and it’s certainly not new.  In fact, old school technology like voice mail and e-mail have allowed us to time-shift much of our communications on a daily basis.  RSS feed readers allow us to accumulate our favorite web site news and blogs and conveniently hold them until we have time to read them.  Even social media sites like Twitter, Facebook, and LinkedIn give us the ability to communicate with vast members of our friends and business network on mutually convenient terms.   

I wonder, however, if we haven’t taken some of this time shifting a little too far.  I sense that it has gotten very easy for people to avoid real-time, live contact.  I’m getting a lot more voice messages after hours – when people know I’m less likely to answer the phone.  I spend too much time in ”conversations” using e-mail.  After about the 4th or 5th e-mail exchange with someone, I wonder how much time and typing we could have saved if we had just called each other.  To prove how absurd it’s gotten, I recently had a lunch meeting participant send a Twitter update telling me (and the rest of the Twitter universe) that they would be late for our lunch!

All this time shifting technology is great, and I am convinced it has made communications more efficient.  But efficient communication is not always effective communication.  No matter what the technology, we are human beings and there will never be a substitute for the nuances of live communication.  In fact, I would suggest that the further away we get from being face-to-face, the more chance for the message to be lost.  The answer?  Use the right tool for the job.  There is a time and a place for each of the methods - but convenience should not always be the highest priority.  

If you find yourself using the technology to avoid live communication, put the “remote control” down and communicate in real-time.  There is no substitute.

As a long-suffering Chicago Cubs fan, I am very familiar with giving up on the current season, and looking forward with optimism to a new one.  The phrase “…wait ’til next year” has become an annual ritual for Cub fans, as the team hasn’t been to a World Series since 1945, and hasn’t won it for over 100 years!!

Unfortunately, “giving up on the season” is happening at a lot of businesses right now. 2009 has not been a good year for most organizations, and many employees have a substantial part of their compensation tied to company and individual financial results,  particularly positions like sales.

Challenging economic times trap an organization into a vicious cycle towards the end of the year as employees know they will not earn very much from these performance bonuses, and begin focusing on a reset of the targets at the beginning of the next year.  For businesses just coming out of a very tough period - or even struggling to survive - this “coasting” can’t come at a worse time!!  In addition, the lack of a bonus award removes an incentive for key employees to stay with the organization until the actual payouts early the following year.  This, at a time where the economy seems to be thawing and hiring is starting up again.

So how do you get your people to focus on the 4th quarter ? …. updated incentives!  Here are a few ideas: 

• Implement a special 4th quarter bonus program:  Create new 3 month targets and a special one-time incentive payout for reaching them (just make sure not to double up on existing sales achieved).  This can be a very effective approach to getting people to focus on the final three months in order to recoup some of their lost incentive pay.
• Revise the targets:  The real time to do this would have been in June, but it may not be too late to salvage the 4th quarter.  Just make sure the payments as a result of this change will be ”self-funding” based on the potentially increased sales, and be careful to stress the one-time nature of these programs.
• Start the new year early:  There is no law that says you cannot start a “new year” with new targets.  You need to be careful of the overlap of two bonus programs, but those details can be worked out.

Unlike the Cubs who are finished for this season, it’s just too early for your business to give up on 2009.  Get creative, and get people motivated to finish the year up strong.  You really can’t afford to ” …wait ’til next year”.

Last Friday, Chicago lost its bid  to host the 2016 Summer Olympic Games . It was a huge disappointment to the city, and a large group of people who dedicated vast amounts of money and effort the past few years to try to win the difficult Olympic bid process.  In the aftermath of the crushing defeat (surprisingly, in the first round of eliminations) there has been a lot of speculation on the reasons.  The analysis  has focused on the global “politics” of the process ,  as many of the pundits believe the loss had little to do with the actual quality of Chicago’s bid.

In this case, Chicago may have been a victim of politics, but this situation has brought back vivid memories of the important business defeats I have been involved in.  In the aftermath of these losses, the people involved were angry and they often placed the blame everywhere but inside the organization.  Unfortunately, we usually missed an opportunity to learn from the situation.  Let’s be honest…. bids are lost, customers leave, and businesses falter for very specific - and often avoidable - reasons.  If I had collected a dollar every time someone blamed irrational competitors, a flawed selection process, or the ”politics” within the customer’s  organization, I might be able to attend these 2016 Olympics in Rio.

Big, disappointing losses are exactly the time to reflect on what really happened, and make the changes necessary as indicated by the loss.  When you lose business because of price, is it really because your competitor is desperate and irrational - or is your cost structure out of line?  When a long-time customer leaves you for another vendor, are they showing an incredible lack of loyalty – or did you lose track of what they really want or need?  When you lose in a bid situation, is it because of the politics within the selection committee - or did you miss the mark with your proposal? 

We learn more from our failures than from our successes. Although I don’t think Chicago will try to get the Olympics again anytime soon, the rest of us can learn from a big loss.  The next time your business suffers a crushing defeat, don’t allow the organization to blame everyone else… and don’t waste the opportunity.  Get the team together, examine the situation and figure out what actually happened.  You’ll have a chance to address the problems and move on to the next battle… and you might not get blindsided again.

I spent time recently with two entrepeneurs that run a very successful, but complicated business.  They have multiple locations across a number of states and their industry is as competitive as it gets.  These guys are smart and energetic, they have hired good people, and they have a great strategy.  But I don’t think those things are the key to their success.  I think it’s the passion they have for the business and how that passion rubs off on their employees. 

In our time together, we didn’t spend a lot of time on small talk about sports, or our families, or even politics. (…maybe we spent a little time on those topics).  We talked about their business, and in these discussions the guys were animated, excited, proud, humble, worried, confident – the whole range of emotions.  More impressively, their passion has rubbed off on the people around them.  I’m not sure I met anyone at any of their locations who didn’t seem excited about what is going on in the company.  It wasn’t fake – it was real.

Many years ago, I participated in a “culture shaping” excercise given by the firm Senn Delaney.  The firm is still going strong, and in their promotional material they capture the essence of what I saw in my recent visit:

“Cultures become ingrained over time as a response to the style and actions of influential leaders. An organization’s culture plays a significant role in its ability to successfully execute strategic plans. Successful leaders shape their cultures instead of allowing their cultures to shape the company”

We have all seen it ….. the employees that make up organizations take on the personality of their leaders.  Leaders that hide in their offices and dictate rules through emails end up with department silos that don’t cooperate with each other.  Tyrants end up with employees that hide bad news.  Bureaucrats end up with slow moving processes and work-arounds.  Indecisive leaders cause gridlock and are frustrated by lots of unfinished projects. 

I realize that as organizations get larger, the culture issue gets more complicated.  I also know the company I visited and the two passionate guys that run it have challenges and issues.  But a solid culture - taking its cue from the style and actions of its leaders – will help organizations power through the issues and keep moving forward.

How does your style and that of your leadership team impact your organization’s culture?

We often tell clients that pricing  their products and services is as much art, as it is science.  The delicate balance between pricing based on a company’s costs versus pricing based on markets and the competition is complicated, and it’s extremely important to get it right.  I had three interesting experiences recently that made me realize that it’s also critical to understand how pricing decisions make your customers and clients feel and how that impacts your brand.

I made the plunge and bought a cellular broadband device (a Sprint MiFi  - it’s awesome!) for on-the-road internet access and office internet back-up.  This means I can finally get rid of my dial-up service subscription which I’ve used for internet back-up purposes.  When I called to cancel the service, they offered me progressively better deals to keep the dial-up – to the point where I could have kept the service for less than $2 each month…”forever”!  It’s obvious how difficult the dial-up business must be these days and the progressively reduced pricing made them sound very desperate.  At $2 bucks a month, how long can “forever” really be?

In the second example, I decided to let one of my gym memberships lapse (I need as many trips, to as many gyms as I can get!)  as I was put off by the crazy price increase they slapped on for the upcoming year.  Within two days of the expiration, I received an email offering a membership renewal… at my old rate.  How did this make me feel? …. like good standing members are being duped at renewal time, and that made me pretty angry.  What kind of message does that send about the organization and how it feels about its customers?

The third example is as much about branding, as it is about pricing.  I am a car guy, and a lover of all things Ferrari.  Ferrari is a manufacturer of amazing automobiles that evoke an image and feeling like no other car in the world.  Lately, however, Ferrari has also become a global brand icon, and the famous prancing horse logo has found its way on thousands of products including  baby clothes  , bicycles, Barbie dolls , cigars, legos, and other products… ad nauseum.  Ferrari also has exclusive licensing deals with top clothing manufacturers who create high end and very expensive shoes, shirts, jackets, etc.  I stopped at an outlet mall a few weeks ago and wondered into one of these clothing manufacturer’s stores to find a “bargain bin” of officially licensed Ferrari clothing.  I suppose Ferrari has little control of the pricing and distribution once the product is out in the market, but does a discount bin in an outlet mall full of once-very-expensive branded merchandise make sense for a company that sells $300,000 cars? 

It’s hard enough to come up with a pricing strategy that balances the need to make a profit with what the market will embrace.  When a business is making that critical decision, they also cannot forget about how the customers will feel about the way in which the products and services are priced, and ultimately how that impacts the brand.  It’s more important than you might think.

I am sometimes embarrassed to admit that I have a large bookcase in my office completely filled with nothing but business related books.  I tell myself it’s ok because I consult with companies for a living – but I can’t be sure it doesn’t make me a little too one-dimensional at parties.  A large number of these books are focused on great companies, and the lessons we can learn from them.  Unfortunately, when viewed in retrospect, a lot of these books come to the same conclusions, and many of the companies profiled have fleeting success.

What got me thinking about this was my attendance at an event a few weeks ago where  the authors of two recently published books made presentations and discussed the methodology they used to learn about great companies.  I bought both books (… of course) and have finished one of them – “Driven” (it is really good).  In both presentations, the authors ”gently” trashed Jim Collins’s huge bestselling book “Good to Great” (it is really good too).  Both authors talked about Collins’s flawed performance criteria and the fact that so many of the companies he profiled in the book are now struggling.  Their pointed criticism seemed funny and ironic to me, because I can almost guarantee that the books they just published will appear flawed in a similar way when scrutinized a few years from now. 

Long-term, sustained success for a large publically traded companies is not just difficult, but almost impossible. (Public companies are almost always used in these books, because their performance is measured consistently and it’s readily available).  Markets change - technology changes - management changes - and macro-economic forces impact companies and industries differently over time.  Companies come and go – just look at the history of the Dow Jones Industrial Average over the years.  Of course, the failure rates for private companies is even more dramatic – particularly when you include small businesses. The truth is, sustained business success is just incredibly difficult, and any point-in-time snapshot of today’s great companies is bound to look silly in retrospect.

Can we learn from the currently successful companies? Absolutely.  Are those companies and the lessons learned from them timeless? No way.  Just keep that in mind when reading one of the continuous stream of these books.   

____________________

A little bonus….. Because of the vast number of these books that I have accumulated (and given away) over the years, I have learned the secret to writing a business book focused on great companies. So with my tongue planted firmly in my cheek,  I am about to share the recipe right here on the Pebble Creek Partners’ blog! :

Start with multiple authors – including an academic from a prestigious business school and a seasoned business consultant plus a business journalist from a major newspaper or magazine (someone has to actually write the book).

Using free graduate student talent from the B-school, develop a database of the performance of thousands of companies over the past decade – more if you want to sound really authoritative.  Be sure to select a few unique performance metrics to differentiate your results from all the other formulaic books.

Select the top performing companies and “study” them to determine why they are better than the others. Interviews and visits make things sound much more legitimate. Use “strategy”, “execution”, and “management talent” as this makes for good reading and advice.  Always avoid “a great market”, “favorable economic factors”, “lousy competitors”, and “luck” to explain success.

Develop a list of between 8 and 12 characteristics (the chapters of the book) and expound on them. It always helps to close each chapter with a summary list or two so readers of your book can copy it and pass it around at management meetings to impress their peers.

Come up with a catchy title; get a few quotes for the back cover; and publish.  Then go on a brief book tour to business meetings around the country; trash the prior books; and wait for the checks to roll in.

 …. You’re welcome!!!

Innovation is one of those terms that consultants and business journalists throw around with abandon. It seems to have a magic property that starts revolutionary organizations and transforms mundane companies into market leaders.  There are countless books, seminars, web sites, and advisors holding out the promise of growth and success if companies can become innovative with their products or in their markets. 

Unfortunately, innovation will not lead to business success without focused execution, and a market ready for the new and improved product or service. 

Today, there are countless organizations developing innovative products, processes, and business models, but they languish because of poor planning, a lack of resources, and/or a market not ready, or willing to buy the product or service.   It’s scary to think how many great ideas have been squashed by the economic meltdown we have been experiencing.  The people that put on the seminars may disagree, but great ideas will not ensure commercial success.  It is people, processes, resources, and a willing market - combined with a great idea - that will bring commercial success.

I was reminded of this fact this past weekend while attending the Auburn Cord Duesenberg Festival in Auburn, Indiana.  Errett Lobban “E. L.” Cord was one of the most fascinating industrialists of the 20th century.  He founded the Cord Corporation in 1929 as a holding company for over 150 companies he controlled, including the Auburn Automobile Company, which built the Auburn, Cord and Duesenberg Automobiles.  

Cord’s greatest legacy may be for the brief two year run of the Cord 810/812 in 1936 and 1937.  Today it is considered one of the most beautiful and innovative cars ever built and those that remain are treasured around the world.  It introduced many technical innovations considered commonplace today.  Unfortunately, because of a lack of money and a time constraint to show the car at the 1935 New York Auto Show, the car was rushed into production and suffered numerous mechanical difficulties.  (Classic car restorers have fixed the flaws in most of the remaining  cars and many now run better than when they came out of the factory).  The car was wildly popular with the show-going public and the press, but in the end, a lack of execution and a leery market conspired against the success of the Cord.  Production of the amazing Cord ceased after just 2 years and only about 3,000 were produced.

The lesson: as the economy slowly recovers and businesses get back to innovating, it’s important to not get caught up in all the hype.  In the end, it’s not just innovation that leads to success – it’s great execution and a market that will pay for what you are selling.

My good friends over at the Ephor Group in Houston - Garry Meier and Charles Bedard – recently sent out a newsletter with a great perspective on ”Using Consultants and Advisors“.  They point out that Private Equity groups often use this “operating partner” model to help their portfolio companies - but their points are just as relevant to small to midsized companies. 

In my last blog post, I talked about how the improvement in the economy will present a challenge to companies that have spent the last 12 months rationalizing their headcount in response to declining sales.  As the business comes back, these lean organizations will need to add resources incrementally, or risk eating up all the profits from this new business, at the time they can least afford to.  This is a perfect opportunity for the judicious use of consultants until the business can support full-time employees again.

More important, however, is the need to continue to address issues that plagued many companies before the recession – and still need attention today.  As the Ephor guys point out:

“While not the first thought, especially when a business is cash constrained, outside advice and counsel is often required to combat root-cause issues that are multi-pronged across an organization”.

Most businesses spent the last 12 months in survival mode, but many know that there are still some fundamental issues to address regarding their revenue models, compensations schemes, marketing strategies…. the list goes on.  

Fall is the traditional time of year when companies plan for the next year often through budgeting and strategic planning efforts.  If you are a small to mid-sized business owner, now is the time to spend some time considering how to use proven, experienced, and unbiased assistance through the use of consultants and trusted advisors as the economy – and your business – picks up again.

If you own or run a small business you can surely relate to the character in Greek mythology – Sisyphus.  As a punishment from the gods, Sisyphus was compelled to roll a huge rock up a steep hill - but before he could reach the top of the hill, the rock would always roll back down again, forcing him to begin again.

The last 12 months have been hell for small businesses.   Sales started to drop last fall as it seemed like everyone panicked about the economy at the same time.  Most organizations have been forced to slash costs, including eliminating employees and reducing salaries and benefits for those remaining.  Credit has been hard to come by the past year, and existing relationships with lenders have often been strained.  Growth plans have been shelved and some companies have even changed their business model as they fight to survive.  Compounding the stress has been the talk of higher taxes and benefit costs in the future.  It’s not hard for small business owners to sympathize with our ancient friend.

But wait! don’t go reaching for that DVD version of “The Secret” in order to gin up some positive thoughts. (no… I’m not putting up a link to “The Secret”… you would be better served reading ancient mythology).  If you believe the experts, the worst of the storm is over, and  my un-scientific conversations with small business owners would point to the same conclusion.

If it’s true, it means a whole new set of concerns – and opportunities – for small businesses that have cut staff to the bone and now need to get ready for the rebound.  As I talked about in a prior post, those remaining employees are weary and getting them to work harder as the business picks up again is not an option.  Small business owners need to be as resourceful on the rebound as they were when things were at the worst.

Here are a few of the things we are telling small business clients about the challenges ahead:

• Make sure you are taking care of your existing employees.  If you cut hours, pay, and benefits in the past months to survive - reinstate them before adding any new resources.
• Use consultants initially before adding permanent staff.  You can pay as you go, and get the expertise/horsepower you need quickly.
• Understand how your customers/clients needs are changing - they are going through these same issues.
• Stay focused on what is important to grow the business again.  Some of the projects you ended when cutting back should stay dead. 

Sisyphus was destined to roll that rock up the hill for eternity.  Small business owners have the opportunity to get focused and get out from under it.  Start planning now.