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Home | WHEN THE BOUGH BREAKS

 Sunday, November 16, 2008

 

WHEN THE BOUGH BREAKS

 

“Setbacks are inevitable. Failure is optional.”

 

The election that made history is now history. It’s nearly two week old. The Democratic Party hasn’t had much time to bask in its victory given the pressing problems facing the country and the world. Instead they are pushing to pursue a fast, smooth and, hopefully, surefooted transition to establish new policies and enact legislation to deal with our most critical problems. The Republican Party has not been idle either. Some members have been licking their wounds from the defeat they suffered at the Polls. But it seems that the many that remain in position are busying themselves with a course of action to redefine (are we talking “repositioning?”) the Republican brand in preparation for the next round of elections. While the bough has broken they are desperate to keep the tree alive and restore it to health.

 

Dealing with failure goes beyond the world of politics. It extends into all walks of life from sports to commerce. The current economic news abounds with companies failing to deliver against expectations for growth. And, as a consequence, stock markets around the world are punishing these companies with some of the lowest P/E (price/earning) multiples in decades. These failures appear to be multiplying and are expected to worsen during this precarious economic climate. The term “bail out” appears to be in vogue as it spreads from geography to geography (U.S., EU and China), industry to industry (financial, housing and automotive) and company to company (AIG, J.P. Morgan and, perhaps, General Motors).

 

Failure has many dimensions. It could be attached to a loss in revenues or even the inability to achieve expectations. Or, it could be more significant as when industries need to be rescued through nationalization or when companies are forced to declare bankruptcy. There are many strategies for dealing with failure. We’ve all experienced one or more over the years since failures are inevitable, if not for your brand then somewhere else within or for your organization. We need to be aware of these practices in order to snatch victory from the jaws of defeat.

 

Common Strategies For Dealing With Failure

 

Perhaps, one of the most common practices is the “Ostrich strategy.” Like the ostrich those experiencing failure bury their heads in the sand, refusing to acknowledge it. They carry on as if nothing transpired. They also attempt to bury any evidence so as not to raise questions about the failure and, perhaps, their part in it. In this instance the emperor is clearly not wearing clothes. And like the ostrich burying one’s head does not make the problem go away nor does it ensure that it does not happen again.

 

A few other practices are highlighted in this next story about “three envelopes.” Perhaps you’ve heard it. The story goes something like this: A young manager was promoted to take over for a seasoned executive who was leaving the company in search of greener pastures. Eager to prove himself in his new position this young manager wanted to tap into the knowledge and experience of the outgoing executive in the week overlap that was to be devoted to effecting an orderly transition. Unfortunately, the outgoing executive never seemed to be available to the young manager. Frustrated, the young manager approached the executive in a panic with a plea to make time to counsel him. The executive told the young manager not to worry. He had everything he needed written out in a series of instructions. Specifically, he had prepared three envelopes for the new manager. The envelopes were numbered from 1 to 3 and were placed in the top drawer of the desk. Each was to be opened sequentially when the young manager found himself in an unfavorable business situation.

 

Well, it was only a matter of a few months after the new manager took his position that his brand began to experience sales, market share and profit declines. The young manager did not know what the problem was or how to go about remedying it. He remembered the three envelopes left by his predecessor. He opened the first and read “Blame it on your predecessor.” Facing senior management he explained that the problem was totally the fault of the strategies and tactics of his predecessor. Senior management listened patiently and reaffirmed their faith in the young manager promising to give him the authority he needed to develop new strategies and tactics and put them into play.

 

But, alas, the declines persisted, growing deeper week by week, month by month. Senior management, growing impatient, summoned the young manager for an update on the situation and a recommended course of action. Again at a loss about what to do the young manager reached back into his desk drawer and pulled out envelope #2. In a clear hand was written,  “reorganize.” The manager pleaded his case to senior management telling them that while he now had appropriate strategies and tactics he did not have the organization to make it happen. He needed to reorganize if his plans were to bear fruit. Senior management again expressed their faith in the new manager and gave him the permission he sought to reorganize the department. Somewhat less patient they demanded that he make it right this time.

 

Unfortunately, the decline steepened following the reorganization. At a total loss as to what to do next the young manager returned to his desk for the third envelope. Hoping beyond hope for a meaningful solution to the business decline he opened envelope #3 and was alarmed to read, “prepare three envelopes.”

 

There are three practices highlighted in this story for dealing with failure. The first, which corresponds to envelope #1, is to play “the blame game.” It’s all about avoiding responsibility for the underwhelming performance of the business. The most frequent target of the blame game is the prevailing economy or industry conditions. (This tune is being played just about everywhere.) In some instances this is the reality. But when competitors continue to grow or, at minimum, steal share to soften their decline on a relative basis one needs to take a serious look at the perceived quality (price value) of their offering to ensure that it is competitive, among other actions. Another target for blame is other functional areas such as sales and product development. This triggers internecine warfare where the parties engaged in this practice dilute their energies by focusing on “passing the hot potato” as opposed to tackling real problems in ways that lead to renewing brand health.

 

The second strategy taken from the second envelope is a derivative of playing the blame game. It’s the reorg, or reorganizing the company. It basically implies that the organization is just not right for what is needed to be successful in the marketplace. It seems that companies are always in the state of reorganizing. No sooner is one organization put in place before a new one is being planned. Oftentimes this is like “rearranging the deck chairs on the Titanic.” The ship is still going down! The problem is that the planning often lacks relevant objectives to improve the output of the organization. Moreover, reorgs are typically designed by consultants who lack the operational experience of running organizations. These reorgs are complicated by “silo thinking” among managers desiring to preserve their autonomy and bolster the role of their functional area. This situation is worsened by the absence of a clear chain of management that demands accountability.

 

The third strategy is musical chairs. This is about moving on before the walls come tumbling down, or blame can be attributed to you. New managers and the company are left with a turkey, and we’re not referring to a Thanksgiving turkey either! It’s get out while the getting is good. Afterall, no one wants to be the last one to turn-off the lights. One would think that this provides the best opportunity for the organization since a fresh mind and independent point of view is brought-in to handle the problem. But organizational dynamics, the press for an immediate solution, general confusion regarding the underlying causes of the decline and desire to create distance from the failure can sabotage the best of intensions to get at the heart of the matter.

 

Each of the aforementioned strategies are dysfunctional.

 

Failures Need Not Be Nor Final

 

But failure doesn’t have to be the end of the world. Just as a forest fire can set the stage for new, more vibrant life and growth so can business failure create new opportunities and lead to greater success. The talented Woody Allen once stated that he feared that he had not failed. He felt that a lack of failure suggested that one was not getting out of one’s comfort zone and taking risks. If you are not failing you are not growing. It seems, in so many instances, that real change does not occur without failure or, at the very least, crisis that threatens failure.

 

This is not an invitation to go out and fail. That would be a pretty dumb thing to do. Failures need to be checked and halted or they can lead to crippling an organization, tarnish its brands, dislocate its people and sink careers.  Importantly, they need to be analyzed to determine the wealth of learnings to avoid repeating or further deepening these same failures. They provide valuable lessons for the successful management of the business.

 

The key is what can we learn from failure to ensure success.

 

BOATS & HELICOPTERS:

 

1. Immunize your brand against failure: Don’t wait for the bough to break. Set-backs

    are inevitable. Failure is optional.

 

Plan for success but prepare for failure – One needs to be prepared for failure in order to recognize its early stages before it carries the business too far down the slippery slope of decline. This starts with being very clear about what you expect, at minimum, on a monthly basis. It also includes understanding the causal factors and establishing SMART (Specific, Measurable, Achievable, Relevant and Timebound) objectives for them. Develop plans to achieve your objectives. Monitor the results against expectations and take action as appropriate. Know what you will do if you fail to achieve your expectations. Be on top of the situation or the situation will get on top of you and crush the business under the weight of ignorance. Being on top of the situation will enable you to check or halt an occasional dip, or beginning of a decline, from becoming a failure.

Pro-sition as opposed to reposition the brand – Repositioning is reacting to problems. Usually brands tend to undertake repositioning after they have gone comatose. There is a poor probability of success, particularly in those instances where there is little understanding of what really needs to be done and/or management doesn’t commit the necessary resources (in funding, personnel and time) needed to give success a chance. Pro-sitioning stands for “proactive positioning.” It is responsive rather than reactive. It leads versus trails. It works to raise and extend the life cycle of the brand. For more on pro-sitioning click here.

 

2. Snatch victory from the jaws of failure - Regardless, of whether you experience a setback or a failure, undertake a rigorous analysis to get at the causal factors and remedy them.

 

  • Inspect what you expect – Identify the deviation as it is occurring as opposed to after it has occurred.

 

  • Make it a team effort - Pull together a multi-functional team to determine the causes for the deviation. Seek collaboration since each functional representative will have a piece of the puzzle. Your job is to create a mosaic from these pieces so all have a clear picture of the problem and its causes.

 

  • Employ intellectual rigor – At one of our former companies whenever we conducted an analysis of research results we had to state that the “conclusions are consistent with the findings and have the concurrence of marketing research.” This was a quality process designed to ensure intellectual rigor and integrity. Conclusions were derived consistent with the findings of the data. We need to conduct a thoughtful, rigorous analysis of the problems and their causes. Additionally, this process ensured we collaborated with those who had essential technical expertise and could add-value in enhancing understanding.

 

  • Seek independent counsel – It is important to be objective. Sometimes we are too close to the problem to really see or understand it. The viewpoint of our customers’ or even sales personnel could prove helpful in seeing the problem and its causes more objectively.

 

  • Plan strategically – This is less about tactical setbacks than it is about fundamental or structural issues such as strategy. Although the aforementioned steps will serve for tactical and strategic setbacks. At this stage it is important to plan strategically to insure structural elements such as positioning, pricing and messaging are strategically appropriate.

 

  • Develop indicated actions – Determine what actions need to be taken to regain success and brand health. Importantly, develop options for subsequent customer assessment.

 

  • Dialogue and adapt – This is about gaining relevant feedback to determine if the indicated actions work before committing to them on a broadscale basis. We need to know whether the indicated actions will achieve the intended results before launching them. (It is most interesting to observe that governments are instituting solutions to deal with the emerging global recession without a clear understanding of their impact. For example, federal funds are being made available to banks so they can make credit available to fuel the economy. Yet some bankers have contemplated using the funds to purchase other banks. This action is not expected to lead to the intended behavior of making credit available to those companies that need it in order to stimulate growth.) This “dialogue and adapt” action step can be undertaken through marketing research and/or adaptive experiments on a controlled, local level. Track, analyze and identify indicated actions.

 

Knowing the business is not about spouting facts. It is about understanding causal relationships to identify when problems are emerging and opportunities are unfolding. It is also about being able to develop options based upon an in-depth understanding that will lead to predictably managing the business. This will enable us to check declines and avoid failures.

 

Richard Czerniawski & Mike Maloney

 


Richard Czerniawski


430 Abbotsford Road

Kenilworth, Illinois 60043

tel 847.256.8820 fax 847.256.8847


reply to Richard:

rdczerniawski@cs.com or

richardcz@bdn-intl.com

 

 

Mike Maloney


1506 West 13th

Austin, Texas 78703

tel 512.236.0971 fax 512.236.0972


reply to Mike:

mikewmaloney@cs.com or

mikemaloney@bdn-intl.com

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