Archive for April, 2012|Monthly archive page

Don’t sweat the Gen Ys

Many pundits will have you believe that companies will be challenged dealing with the attitudes, habits and demands of the Millennial generation – workers younger than 30 also known as Generation Ys.

These skeptics assert that people under the age of 30 are needy and narcissistic. Generation Ys seek high pay and all the perks but aren’t truly committed to their organization. Though Millennials bridle at being criticized, they can be easily swayed by the next hot thing.  As this large cohort enters the workforce in increasing numbers, can companies afford to put their trust in these worrisome characterizations?

In consulting to dozens of North American firms, I found that Millennials were not that much different from their Gen X and Baby Boomer peers.  Not surprisingly, I became interested in new research from Jennifer Deal out of the Center for Creative Leadership.  Her findings – based on 13,000 online interviews – puncture many of the myths and stereotypes about what is wrong with the Millennial generation.  Highlights of the findings were recently published strategy+business magazine:

Stereotype #1 – Because they were overly indulged as youngsters, Millennials don’t want to be told what to do. As a result, they will be very difficult to manage and motivate.

The reality – This myth is not supported by the data.  In fact, the research shows that Generation Ys are much more willing to defer to authority than Gen Xers and Boomers. One possible explanation for this deference lies in the coaching they received from their parents and teachers growing up.  Millennials learned early on that doing what an authority figure tells them to do is more likely to result in success.  Consequently, they are more inclined to listen to management, if it can yield the same positive results.

For managers – Proactively coach and educate Millennials on the firms’ culture and what is expected of them.  

Stereotype #2 – Because they were overly indulged in their pre-work lives, Generation Ys will lack organizational loyalty. Companies should therefore expect higher turnover and more mercenary-like behavior. 

The reality – The findings showed that Generation Ys have about the same level of organizational fidelity as Boomers and Gen Xers.  This could trace to age-related issues: young people switch jobs more often than older workers.  Another possible explanation could be the recession the Millennials have had bad luck of finding themselves in. More difficult times tend to increase job switching.

For managers – Regularly canvass employees on their needs and attitudes.  Develop and communicate a strong employee value proposition, especially for top performers. 

Sterotype#3 –  Millennials aren’t really that interested in their work, or any work that is not “cool.”  As a result, it will be a challenge to motivate them.

The reality – The data clearly shows that Generation Ys are just as intrinsically motivated as Gen Xers and Boomers.  The negative perceptions– when they do exist – around Millennials may be more easily explained by age or economy-related issues than generational characteristics.  Furthermore, their lack of interest could merely be a function of poorly defined roles or a lack of autonomy.

For managers – Design roles that are stimulating and empowering for all employees.

Stereotype #4 – Millennials are motivated largely by high pay and cool perks, especially a work-life balance. Organizations will suffer financially trying to satisfy these unrealistic desires.

The reality – There is no correlation between Generation Ys and a strong desire for money.  Millennials are as motivated by perks and money as Gen Xers and Boomers.  For that matter, these extrinsic needs do not rank all that high for any group, on average.  The author suggests that the desire for money is more driven by title and role than by generational differences.  As well, lower paid workers (the status of most Millennials) will naturally want more money and perks than people at higher levels in the company.

The issue of work-life balance is one area where Generation Ys diverge from other groups.  According to the research, they are marginally more interested in having a better work-life balance than Boomers and Gen Xers.  This variance is more likely to be a result of life stage factors common to many Millennials (e.g., having young children) than larger generational shifts.  Moreover, they tend to believe that providing a work-life balance is a smart way for a company to get the most productivity from their employees.

For managers – Understand what intrinsic and extrinsic triggers will motivate your workforce as well as each employee.  When the optimal system is designed and implemented, ensure all employees have sufficient visibility into the compensation model and the performance measurement system.

When it comes to managing  Generation Ys, the key is to separate myth from fact, and to focus on creating an organizational culture that supports and motivates all employees regardless of when they were born.  To the Millennial-bashers, thou dost protest too much.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

When business opposites attract

In business as in personal relationships, opposites do attract. Companies possessing different markets, capabilities, technologies and products (MCTP), which on the surface bear little resemblance, can share some “thematic” similarities (i.e. synergies) which can open up intriguing business opportunities.  These opportunities could range from leapfrogging into new markets and preempting competitive threats to leveraging complementary product technology or augmenting internal capabilities.   Very often, thematic similarities are missed by industry experts who view MCTP through traditional analytical frameworks or by the barriers imposed by management systems. To outflank competition, managers would be wise to recalibrate their product and strategic planning methods to include thematic analysis. 

In a recent edition of the MIT Sloan Management Review, Professors Michael Gilbert and Martin Hoegl outlined the importance of a dissimilarity-based planning framework.   According to the authors, most managers implicitly use a conventional taxonomic paradigm to understand their competitive position.  A taxonomic way of thinking looks at the degree by which a company, product or technology is similar (i.e. complementary, congruent or synergistic) based on how many features or characteristics they share in common. Taxonomic similarity underpins many popular management classifications including the Standard Industry Classification (SIC) codes – which defines industry boundaries – and the International Patent Classification system – which categorizes different types of patents.

Many firms understand that they may be overlooking opportunities and threats by only using a taxonomic style of business analysis.  With the help of advanced innovation techniques and cognitive psychology, managers now have a new approach – thematic similarity – to uncover strategic opportunities. Thematic similarity is about how two disparate characteristics functionally interact within the same event to create synergistic value. 

Thematic similarity looks beyond surface taxonomy similarity of with how things do interact to how things could interact. Thematically similar companies, products and technologies tend to be taxonomically dissimilar. For example, GPS technology and automobiles perform different roles but are thematically congruent within the driving experience.   Done properly, thematic analysis can be a powerful tool for addressing customer needs, improving operational performance and enhancing competitive position.     

Understanding MTCP at the thematic level is not always easy.  Most strategists are not trained or encouraged to think thematically.  Compelling opportunities are often hidden and difficult to weave together.  As a result, finding and exploiting thematic opportunities can often take some time. For example, it took smart phone manufacturers (Apple’s iPhone to be exact) 6 years to integrate 2 location-focused technologies, GPS and digital cameras, into their products.

There have been many examples of winning dissimilarity strategies,  two of which include: 

Intel purchases McAfee

Most industry pundits were baffled by chip giant Intel’s 2010 $7.7B acquisition of McAfee, a leader in anti-virus software.  Both firms compete in two dissimilar markets with two different strategies etc. While being taxonomically dissimilar, these firm’s MTCP enjoyed a high level of thematic similarity.  Intel claims that acquiring McAfee will dramatically enhance its presence in the mobile wireless space, a rapidly growing market of internet-connected devices that increasingly is being driven by security concerns and requirements.

Launch of Google Maps for Mobile

At first glance, Google Voice Search and GPS technologies have little in common from a taxonomic perspective.  However, in the context of cell phone usage both these tools provide significant value for someone looking for a Starbucks or checking movie listings in their hometown.  Google understood this thematic similarity and launched Google Maps forMobile in 2008.  This product has enjoyed strong user reviews and has helped boost advertising revenues.

How do you enable thematic thinking in your organization?

1.  Follow your mission and vision

A powerful mission and vision can inspire thematic thinking. If you don’t have one, develop and communicate an inspiring yet pithy credo that focuses on the customer yet places no artificial boundaries around how you serve them.

2.  Unleash the staff

Employees need the time and tools to think thematically.  Highly innovative firms like Google and 3M stipulate that each employee spend a designated amount of their time on blue-sky strategic thinking and problem-solving.   To unlock thematic thinking, companies can leverage proven innovation tools like simulations, brainstorming and thematic-driven training

3.  Bring in new blood

New perspectives can challenge analytical dogma and catalyze thematic analysis.  Institute recruiting policies that actively search outside the industry and foster employee diversity.  Internally, rotate people through different departments – especially sales, service and product development – so they are able to see the business through multiple lenses.

4.  Remove organization barriers

In many cases, management systems, structures and processes reinforce traditional thought patterns and habits. Organizations should look to align thematic approaches with a firm’s incentives, processes, and strategic planning methodologies.  Measures could involve including R&D experts in strategy development, involving external consultants in planning exercises or bringing customers directly into the product development process.

A thematic-based planning framework can deliver breakthrough business strategy and product innovation.  This approach, however, will have important implications on how companies deliver on customer needs, design their internal systems, leverage technology, and pursue M&A deals.  The first phase begins with the leadership team setting ambitious goals, rethinking their business and understanding what their customers truly want.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Supply chain strategy gone wild

When it comes to best practice supply chain strategy, conventional wisdom is shifting.  Historically, companies – particularly automotive, electronics and telecom original equipment manufacturers (OEMs) – have outsourced most of their non-core operations.  Some firms outsource so much of their operations that they do almost nothing themselves except for design and quality control. This approach, however, has not delivered the hoped for benefits. Many supply chain leaders are now rethinking how they craft and manage outsourcing relationships and whether these continue to be aligned with their core business strategy. 

Inspired by the Japanese, virtually every North American OEM aggressively shifted to an outsourced and tiered supply chain so that they could reduce costs, minimize capital and focus on their core competencies.   As part of this strategy, managers reduced the number of suppliers a firm directly deals with; gave these tier 1 suppliers the mandate to design, produce and deliver major components and; off-loaded the responsibility of managing lower tier vendors to their tier 1 suppliers.

These blanket outsourcing deals, according to supply chain experts Thomas Choi and Tom Linton, are problematic.  Costs rarely fall significantly, and will often rise.  Moreover, firms may also experience declining competitiveness due to reduced access to emerging innovations and vital market information.  How does this happen? 

Less control over bill of material costs

When the OEM delegate’s control over a product’s BOM, the total delivered cost of the product (including items like inventory management and logistics) become opaque and difficult to manage.  This lack of visibility makes it difficult for the OEM to leverage further volume discounts and to switch suppliers to get better pricing.

Reduced OEM control can also lead to decreased supplier compliance.  When working with an automotive manufacturer, we discovered that tier 1 suppliers often veered from the approved vendor list (of the companies from which top-tier suppliers are supposed to buy parts and materials) when it served their interests.  This was most common with standardized materials and where they could keep most if not all of the cost savings.  Better management of tier 1 suppliers is possible, but it is a challenging and potentially confrontational exercise.

Restricted access to market and technology information

Paying no attention to lower-tier suppliers who serve multiple industries shut the OEM out of potentially important technology and market developments. For example, without close supplier relationships at the raw material level, companies may miss opportunities to adjust orders and lock in favorable prices as well as gain access to the newest technologies. Tight collaboration with lower tier suppliers has enabled companies like Apple and LG Electronics to incorporate the newest chip designs into their products before their rivals do, and to secure these technologies at advantageous prices.

Tier 1 suppliers should be the conduit of market information and innovation.  However, they often don’t have the inclination or time to monitor the technology landscape below them. Furthermore, tier 1 suppliers may pursue a different strategic agenda than the OEM.  For example, tier 1 suppliers could knowingly withhold market information in order to improve their bargaining position with their customers or to use the information to sell to other business prospects.

There are ways to get more out of your supply chain while reducing risk.  For example:

  1. Retain purchasing and technical control over items that have the most significant impact on the total cost of goods sold.  For many products such as a mobile phone, TV or a PC, a few inputs could make up more than 50% of its total BOM cost. Just a 1% reduction in the price of such items translates into considerable savings.
  2. Get more visibility into your supplier networks. Innovative firms like Apple play close attention to what is going on in their entire supply chain’s R&D pipeline.  Five years ago, Apple understood that HMI (human machine interface) technologies would play a strategic role in future products, so it maintained close relationships with companies in that space. The move paid off.  Apple now has excellent visibility into a sub-system that accounts for more than 40% of the iPad 2’s total cost and is crucial to Apple’s goal of delivering meaningful product differentiation.
  3. Pay close attention to lower tier vendors that serve multiple industries.  Some suppliers, particularly in the technology, services and commodity sectors, provide inputs to multiple industries.  These firms can provide early warning signals around technology, pricing and regulatory changes. To lock-in preferential supply arrangements, our automotive client secured contracts with strategic lower-tier vendors.  The OEM then stipulated that their tier 1 suppliers use those vendors exclusively and execute the strict terms on their behalf.

To drive supply chain performance and reduce risk, firms must optimize their outsourcing partnerships.  Our experience shows that many tier 1 suppliers and their vendors are amenable to closer collaboration if given the chance and presented with tangible business benefits. Where outsourcing ends up being too problematic or inconsistent with long term corporate goals, CEOs may want to consider vertical integration as a more appropriate business strategy.  Many companies have, with impressive results.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Optimize the channel experience

Firms competing in channel-intensive markets are regularly challenged to satisfy finicky and value conscious customers without introducing too much cost and complexity.  All too often, however, a firm’s customer experience and value proposition is compromised by channel partners whose objectives, value proposition and capabilities are strategically incongruent.  For example, we worked with an IT equipment manufacturer whose premium brand image was hurt by the actions of a deep-discounting, low service distributor.  In another case, a leading consumer goods company could not satisfy customer service requirements because one of their retailers was unwilling to invest in new capabilities. 

To maximize customer satisfaction, managers should understand how their channel partners – such as resellers, portals, service providers, installers and retailers – interact with buyers through the entire marketing-purchase-service continuum and then work collaboratively with them to enhance that experience.   

This will not be an easy exercise. Many enterprises have thousands of SKUs, work with hundreds of channel partners and use multiple platforms to sell, communicate and serve customers.  There could easily be over 100,000 different physical and digital touch points between consumers, producers and channel partners.  This hodge-podge can only lead to conflicting, poorly integrated and uncoordinated marketing, channel and service programs resulting in failing customer experiences, overly complex operations and lower margins.

The root cause of this problem lies in misalignments between the structure of the channel and how consumers want to get information, purchase products and receive services.  Channels that are underperforming or based on yesterday’s requirements are often unable to accommodate current market needs let alone deal with growing consumer demands, new product launches and emerging digital technologies.

In reality, consumers no longer separate the channel from the product, service and message — the channel is the product. In the era of buyer engagement, customer acquisition and retention is a lot about effective channel management and design. To truly engage consumers through a multi-channel world, companies must do more outside the confines of the traditional channel marketing function.

Improving the channel’s ‘customer experience’ requires three fundamental changes:  1) an agreed understanding of buyer needs across the entire continuum;  2) a commitment and action from the entire channel to satisfy these needs — not just from the company’s marketing and service departments and;  3) a redefined channel management function that links the organization to a desired and brand-compliant channel customer experience.    

We have helped organizations design and implement new channel management programs that have enhanced customer engagement and reduced operational costs while driving higher revenues and service levels.  Some of these principles include:

Expand the channel role beyond just marketing

To better engage buyers whenever and wherever they relate to a firm’s product, companies must expand the channel management role beyond sales and marketing to include input to and co-ownership of all customer-impacted operational, IT, product and service decisions.    

Bring the channel into organization

To improve performance, firms need to bring a rich understanding of channel requirements into the enterprise.  This can be done by creating internal councils with IT, finance and operational representation.   As well, important channel relationships can be managed through integrated, cross-functional teams with P&L responsibility.

Tweak the channel

A good starting point is to think about the channel experience as customers do – a series of related interactions that, added together, make up a ‘moment of truth’ experiences. This approach will naturally identify areas where the channel can be redesigned and better managed to ensure strategic congruency.  This process will usually trigger a discussion of who internally is in the best position to manage these activities and what resources and capabilities are needed to achieve the new vision.

Get everyone on the same page

Channel engagement (at key touch points) and performance should be regularly measured with some of the same metrics that are used to evaluate brand image, operations or marketing effectiveness. All channel partners should align around these metrics and goals

Anticipate challenges

Optimizing the channel experience will not be easy given the business risks and the organizational implications to partners, employees, processes, technology and strategy.  Change will be doomed if management and the channel:  1) do not have a common understanding of their markets, buyers and value proposition and; 2) do not work collaboratively towards the same goals. If companies and partners don’t make the transition, they run the risk of being overtaken by competitors that have mastered the new era of engagement.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.