Small Goes Big with the Right Product Idea… Be Intrapreneurial

By Peter Klinge, Jr.

The right product idea(s) can transform any company, even in a mature one, into new exciting directions and possibilities. To be intrapreneurial is to reinvent and leverage your own ideas and to align an organization’s people to find new markets and deliver innovative products.

Handstands, a small Utah company, was founded in 1983 on the simple idea of making and selling mouse pads for the growing desktop computer market.

But by the early 2000s the market was mature and the future not too bright. The simple product idea at its peak created sales of about $10MM. The company today which is now owned by a division of Energizer boasts sales of more than $100MM as the leading provider of auto air freshener products.

Chris Anderson, the recent CEO of Handstands, told the story of how by 2002 the company needed to think about new product ideas and markets. They assessed what they did well in making products and maintaining important distribution relationships with good retail partners.

He references how the once entrepreneurial company of mouse pads became intrapreneurial to figure out how to reinvent itself. Few entrepreneurs can shift gears to leave the original product behind but Handstands was different. In his October, 2016 talk at ACG Utah Chris spoke about identifying under served markets to create and build consumable products.

Handstands, as a relatively small Utah company, didn’t have the product development or marketing resources of a much larger consumer packaged goods players such as P&G. Yet they were able to 10 x the business’ revenue in the last 15 years by identifying, and trying new products with new markets.

The company’s co-founders enjoyed satisfactory success with the making of mouse pads and dust covers for PCs. For many years the PC category- especially the desktop market- was growing rapidly and Handstands kept increasing its penetration.

However, in time their market was declining; further they realized that there was very little repeat business. Unfortunately, once people had a mouse pad they didn’t replace them too frequently.

Opportunity came as Handstands observed that car Air Fresheners was a small category with only 2 real products available. One was the well-known paper tree and the other was a licensed product with the Sponge Bob character. The company thought they could use their knowledge of plastics and process intellectual property to offer a differentiated and branded consumable product. This combined with expertise in channel relationships gave the company a chance to merchandise their products.

A key customer target insight was that most of the available products were geared only to appeal to men. Handstands set out to borrow ideas from studying household air freshener products. The company identified that there was a women’s market opportunity. Product preferences for auto air fresheners that would appeal to women buyers/users did not exist.

The company created an array of consumable air freshener products targeted to women buyers in channels where women would likely shop. Today Handstands enjoys a significant consumable business with their own branded products that lead the car air freshener/novelty market segment. Brands included are Bahama & Co, Refresh Your Car, Driven by Fresh, and California Scents. In addition to auto air fresheners the company continues to innovate with new products and acquisitions that include brands in cleaning and conditioning, and anti bacterial wipes.

Moreover, today Handstands is recognized by major retail chains as a category segment expert in evaluating what auto care products will sell well e.g. identifying for Target which product might be a better seller on their shelves.

By 2016 Handstands achieved leadership status as the # 1 auto air freshener in both revenue and unit sales in a billion dollar category. Energizer Holdings purchased Handstands for a reported $340MM in the spring of 2016.

In summary the keys of success can be seen as:

  • Product development is a pathway to innovation, category leadership, and more revenue and profit;
  • Even an under resourced small company can find new product and revenue streams;
  • Identify under served markets that are below the radar of the big companies. Most major packaged goods companies today don’t want to market brands or be in categories that are smaller than a billion in annual revenue.
  • Build repeat revenue through consumable product brands based on good quality, differentiated products, and develop category leadership to become an influencer with key retail buyers;
  • Business success through reinventing a company or its products can be just as rewarding, and perhaps more sustainable than one product only entrepreneurial endeavors.
  • Be intrapreneurial to constantly evaluate your market, customer, and product position, and consider new revenue pathways to maintain a leadership position.

If your company is seeking ways to reach the next stage of growth, please contact Peter Klinge.

Peter Klinge, Jr.

Peter Klinge, Jr.

C-level exec, revenue, marketing, & international business growth advisor

 

Posted in Brand Marketing, Client Case Studies, Consumer Marketing, Critical Thinking, Decision making, Management Leadership, Retail | Tagged , , , , , , , , , , , , , | Leave a comment

Critical Business Trends the Stock Market is Showing Us… Even IF we don’t Invest

The stock market or capital markets (banks, finance companies) at times show indications of where business and economic trends are heading. They make investments, some say bets, in types of businesses they believe will provide a good return on their capital.

Many business owners are pretty well invested in their own company; therefore, typically they pay little attention or do not invest in the stock market. However, it’s important to observe the major industry shifts that identify a new set of companies as the world’s most valuable.  This affects any business in a global economy.

Specifically, the S&P 500 lists digital or technology platform companies as more valuable than companies with physical, tangible assets.  Why is this noteworthy? Well, increasingly it is the newer digital enabled powered companies that banks and investors will allocate capital to. Companies that can provide tools and services, and means of communication to people in connected networks are the new, valued assets.

Long time companies that own property, plant and equipment such as Exxon, GE, or Citigroup (think lots of bank branches) are supplanted by companies that didn’t exist in the 1990s such as Facebook (1.7 billion users) , and Google.

Among the 5 most valuable companies today only 3 were public companies in the 1990s (Microsoft- founded in the 1970s) Amazon (a mid 90s start up), and Apple ( almost done for in 1997). More on this is available in a Knowledge@ Wharton article entitled, Finding a Better Way to Value Companies in the Digital World, published 8/30/16.

What can be learned from this change? I think regardless of company type or size there’s significant value in a business’ digital assets. This might include at the top of that list customer information or related sales data.

Additionally, new trends are forming in significant ways. They offer both opportunity and challenge as our current business is disrupted. Quickly adapting new models becomes necessary.

  • There’s value in ideas, and in connecting users. The sharing economy, for example, Uber, AirBnB (private homes for hotel, short term use), or connected users for a sharing community (LinkedIn, Facebook)
  • U.S. financial markets are incredibly nimble and adaptive in realizing opportunities to finance new and innovative business models. In less than 20 years we’re seeing major shifts in what are our most valuable companies centered on ideas and connected networks vs. capital intensive, asset laden companies.
  • Companies that incorporate and shift mental thinking and discipline to an openness to new business models that integrate a capacity to develop the intellectual property of ideas will thrive. For example:
    • Next time you see an Enterprise Car commercial notice how they’ve incorporate ride and car sharing as part of their service offer.
    • Microsoft and IBM are offering sophisticated cloud services and no longer sell software in a physical box, or sell hardware as core to their business.
    • Wal Mart will continue to push their retail business online with acquisitions of ecommerce companies to complement their logistics, distribution, and retail expertise (brick and mortar). Amazon will augment their online store mega mall with new means of delivery (Amazon drones), and distribution centers around the world.
  • One business will not necessarily replace another. If a company is adaptive to embrace and develop technology and digital assets as core to their business, they will be more attractive to growth capital (i.e. debt, equity), and be more productive and efficient in serving their customers and markets.

As capital markets reward idea companies with increasing valuations the incentives are in place for entrepreneurs and business leaders to continue to develop new businesses and markets not previously conceived. Imagine, perhaps with a mix of excitement and dread, what innovations on the horizon we will see in the not too distant future.

Digital business models will push the frontiers of software developments that will drive AI (artificial intelligence), robotics, bio chemistry, material sciences, or innovations in information management-decision making. New discoveries and opportunities will be elevated and accelerated in myriad ways.

One last thought regarding the rapid changes we will see and the anxiety this will engender with some people. I just finished America 1900. This is a PBS American Experience video produced in 1998. I was struck by how the video topics of the year 1900 touched on some of the same themes, ideas, issues and concerns with the economy, society, foreign affairs, and the incredible new inventions and their effect on society as we see in 2016.

If we’re open to possibility, and willing to adjust to new situations most of us will thrive as our ancestors did a 100 years ago.

About the author. Peter Klinge works to help owners of private companies execute strategies and plans to achieve their desired growth potential.

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Why Whole Foods is in a Pickle

Why Whole Foods is in a Pickle…

Whole Foods finds itself in a situation common to businesses across wide ranging categories. The dilemma or pickle for Whole Foods in grocery speak isn’t unusual for large companies.

Category leaders as they mature often lose the perception and status of being the innovative leaders attracting new cadres of customers they once enjoyed. New becomes old…; the demographics change. New consumers enter the market, the business becomes complacent, they fail to update their brand and execute on their mission; worse they fail to recognize market changes. The original insights they developed into a great business abandon them. Their instincts are off.

The business is now huge, slow to move. Competitors have mimicked their original marketing positioning and now consumers new and old no longer see the business relevance. It becomes a price game. Let’s lower the price to reverse sales declines. This doesn’t work, and the opposite occurs accelerating brand and sales erosion.

Recent public announcements by Whole Foods indicate the company is hurt by all and more of these headwinds. Highlights:

• Expanded new stores into current WF markets- creating saturation and cannibalization of established stores. Same store sales are decelerating. In the most recent quarter ending 7/5/15 same store sales growth were 1.3%, slower than the previous 2 quarters of 3.6 Q2, and 4.5% Q1. Source NYT 7/29/15. The sales growth decline is worsening a trend since 2014 when sales growth then declined from 8% to 4%.
• Customer complaints about how some stores look shabby, quality, service, and pricing indicate poor execution;
• Large scale organic food distribution, with an accepted price premium, is what WF created to lead the grocery industry but is NOW mimicked by smaller regional and local players delivering same. Among others this includes Sprouts Farmers Marker, Trader Joe’s. Organic is no longer unique but mainstream. Wal Mart with its expertise in logistics and distribution is delivering organic items; Safe Way, and Krogers are rushing in products. According to the Wall Street Journal sales of organic and natural foods combined reached $48 billion in 2012, up 8 times over 1998 sales of $6B. Yet organic food in 2012 accounted for just 4% of total U.S. food sales.
Brand dilution- WF store count growth combined with an imminent launch of smaller store formats of a 365 retail brand risk bifurcating the brand image and resources. The point of 365 as stated by WF is to introduce young urban consumers setting up new households to a less expensive offering than WF regular.
Efforts at price promotions predictably have done nothing to stem the sales weakness. Price promotions that sell the same proposition of value at a discount tend to erode the brand promise.

If a business doesn’t take care of execution to deliver on the promise of a consumer benefit, it serves only to offer the public something mediocre for less.

In the long run no one will buy mediocrity.

So that’s the situation Whole Foods finds itself in…There’s a bright spot. If management takes on the challenge of transforming the business and reasserting category leadership, it’s quite possible it can grow again.

Rather than trying to reduce prices to attract customers, and diluting their brand by opening a second line of stores they may consider the opposite. That is re-energizing the chain by refocusing their efforts on their mission and executing on what they do best i.e. presentation of quality organic and natural foods of the highest standards. With the category of natural/organic still only at 4% of total U.S food sales, and total sales growing at 8x since the ’90s it appears the category is getting only bigger. Whole Foods doesn’t have the category to itself any longer but the overall pie is much larger and the growth prospects are never better.

There’s good precedent for revitalizing a brand and its business.

A few years ago, Starbucks found itself in a similar position. Premium retail brand, category leader. Opened too many stores; merchandised too many products beyond the core of coffee related beverages and accompaniments. They too invited competitors of all sorts; small, regional and even McDonald’s McCafe through their massive store counts. Starbucks innovated and led the coffee retail business, but made missteps in the early 2000s.

Starbuck’s management took its eye off execution of a consistent experience, and service quality. The founder stepped back into the run the company, simplified the store offerings, apologized publicly to consumers, instituted a re-training of all store personnel, and got back to the basics of providing a great experience around coffee and inventive combinations, that are delivered by well trained knowledgeable baristas in a comfortable café. AND they established benefits programs such as education and healthcare to take care of the of most important stakeholder and face to the customer– Starbucks employees.

John Mackey, co- CEO and a founder of Whole Foods, may delight consumers and investors again. According to an extensive article in Fortune 9/1/15 Mackey is giving deep thought to Conscious Capitalism. The notion is that enterprises with passion and purpose outperform. An outgrowth of this thinking is the idea of blending Nonprofit with Profit through foundation work that tie Whole Foods to its communities: Whole Cities, Whole Kids, and Whole Planet. This thinking extends to compensation and the relationship of executive pay to average wages/salaries of employees.

These efforts enhance Whole Foods brand credibility for innovation and advances its evolution in presenting new ideas about food and community that resonates with its core consumer base. This is consistent with Whole Foods founding heritage and helps the company find new pathways for product and service ideas to build growth.

Successful revenue growth is about value and NOT price. Whole Foods various stakeholders need to appreciate this as core to Whole Foods’ existence. The company’s ability to communicate and demonstrate tangible examples in practice will determine its success in executing upon Mackey’s vision. It will also require Mackey to do a good job positioning a long view of Whole Foods to shareholders so as not to be distracted by quarterly revenue/profit pressures. This tempts management to try too hard to reverse financial performance with price discounts, and ill advised brand diversification strategies a la 365.

It will be interesting to follow Whole Foods news as it goes forward to address its current challenges.

For more more growth ideas you can use check view our blog at Klinge Associates.

Sources for this article in addition to links embedded above:
http://topics.nytimes.com/top/news/business/companies/whole_foods_market_inc/index.html

http://www.latimes.com/business/la-fi-whole-foods-365-20150730-story.html

http://www.bloomberg.com/news/articles/2015-01-29/in-shift-whole-foods-to-compete-with-price-cuts-loyalty-app

Posted in Brand Marketing, CEO and C-suite, Client Case Studies, Consumer Marketing, Critical Thinking, Retail, Sales Management | Tagged , , , , , , , , , , , , , , , | 1 Comment

Apple Watch but which one? Looks like none…

apple-watch imagesOn a July, 2015 visit to Apple’s Chicago store on Michigan Avenue, the “magnificent mile”, I was excited to look at the Apple Watch. But then I pretty quickly became confused, and walked away with none on my wrist.

Two large tables displaying the watch (es) were offered. There were dozens being merchandised. Lots of shoppers were looking at the watches. I didn’t see anybody leave the store with one. I had to think about why I came away somewhat disappointed.

Unlike past Apple launches iMac, iPod, iPhone, iPad; the Apple Watch merchandising looked more like a conventional jewelry case, than the presentation of something inventive, special, and iconic from Apple. I was confused, and the explanations from the usually informative Apple staff didn’t help me understand much better.

Here’s the marketing dilemma Apple is presenting the consumer. Now follow me… there are 114 watch variants to choose from. To be fair these variations are presented across 3 tiers:

  • Apple Watch Sport: 10 models priced $349 to 399
  • Apple Watch: 20 models $549 to 599
  • Apple Watch Edition: 8 models from $10,000 to $20,000

So the majority of us will kick out the ‘show off’ Edition tier from consideration. I also couldn’t see why an Apple Watch at as much as $20k would be in the same or above price range of a fine Swiss watch when it doesn’t appear to look or function much differently from the Apple Watches in the lower price tiers.

Comparing the 1st 2 tiers wasn’t much more helpful in improving my understanding of the selections. I leaned into the counter to study the watches. They are attractive in various colors and bands, and the screen displays are pretty.

But still I couldn’t see the benefits between the Sport and mid tier line, and the sales clerks were not able to help me either. There are other aspects about the watch that are problematic such as that for it to fully function well with all of its applications the wearer needs to carry and pair the watch with an iPhone.

The real problem is that Apple launched too many watches at once. This is a break from what worked so well for Apple in past introductions. In previous launches the consumer was presented with iPhone, iPad, etc. with a few variants in terms of storage, etc. Then in subsequent extensions, launches spaced at 6 and 12 month intervals, the market sees other versions with upgrades, sizes, etc.

This approach enabled Apple to successfully display, and merchandise the product in simple, elegant and beautiful ways to help focus the consumer on the category breakthroughs that Apple was inventing. The consumer choices and explanations were simpler. Remember a thousand songs in your pocket for the iPod, or iPhone’s beautiful touch screen that no other phone conceived? There were clear benefits on a fulfilled promise that were easy to communicate.

Before I went to the store my awareness of the Apple Watch was quite high, and so was my purchase consideration. I thought from what I had read before my store visit that the retailing was going to be similar to how Apple introduced previous products, i.e., essentially one device platform that highlights key innovations not seen in the category before, and perhaps a couple of variations.

Instead, I felt the pricing strategy and display of “good, better, best” to match their tiers was conventional, gimmicky retail marketing unbecoming of Apple.

Before I wrote this I read an article from Al Ries, noted author on marketing and consumer positioning. His article in Ad Age “Does the Watch on Tim Cook’s Watch Measure up to Steve Jobs’ Standards?” is a good read.

As to the watch technology and quality view of Mr. Ries’ standards question I frankly never got to this point in my consideration of the Apple Watch. I was so distracted by the marketing that I never thought too much about the product merits. Mr. Ries makes various points about the marketing problems, and how Apple diverted from its playbook for marketing launches. One of the points he makes is about the name itself, Apple Watch, which does nothing to set Apple apart from the watch category.

There’s certainly brand power in the Apple name to drive sales. Apple at this stage of its brand strength can sell anything to consumers and generate buzz and sales. Something as a brand a company does not want to be toying with or be seen as manipulative of consumer brand loyalty.

However, it will be interesting to see how Apple Watch sales build and sustain over time. Unlike the iPhone it’s difficult to see how Apple will build on the watch category since it appears they launched all they had in introducing so many watches all at once.

I expect we’ll see changes in the marketing approach of the watch. In future launches Apple will need to be more careful in the marketing so that consumers don’t become confused, or worse, wary of what Apple is selling.

For more articles follow me on LI and on my Growth Ideas blog.

Thanks for reading

Peter Klinge, Jr.

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One Family Business over 3 centuries- The Story of Klotzli Knives

One family controlling a business into its 6th generation defies almost all the odds. Typically few family owned businesses succeed or exist beyond the third generation.

Hans Peter Klotzli says ” it’s very difficult; we’ve had very challenging times”… when asked about the ingredient to successfully sustain a family owned business into the 6th Generation. The family has been making and retailing knives since 1848.

Hans Peter Klotzli

Klotzli Knives of Bern, Switzerland, is a particular craftsman of quality, precision knives, cutlery; and you might say all fine items with a sharp edge.

Klotzli Designed and Manufactured Knives

To talk with Mr. Klotzli, the 60 something owner who represents the 5th generation, the passion and pride for the fineness of the family made brand of knives draws parallels to the famed watchmakers across Switzerland.

I was in Bern on holiday with my family. As we’ve done before for other family members we were on a search for the classic Swiss Army knife to give to my son. We happened into Mr. Klotzli’s store to search for the well recognized Victorinox knife.

Our initial retail experience looked problematic. We couldn’t get the retail salesperson to understand that we wanted my son’s initials engraved in a particular way. Somewhat disappointed we left, sans knife, to break for lunch. We returned an hour later determined to better explain our needs for the knife. We sorted the purchase out when I noticed a small brochure under the counter glass. This was a history overview of the Kotzli family business.

I recognized the current family owner in the store. We had a great conversation. He described how in 1991 he almost lost the family business. A terrible recession, dollar weaknesses along with a sharp decline of sales in the U.S. market put the family on the brink. A loan from his mother helped the Klotzli family over a critical few months helped give time to cut costs and change the business.

He then showed us a variety of beautifully made knives of all sorts that bear the Klotzli brand. I admit knowing very little about knives except for the Swiss Army knife. In a brief time he demonstrated the balance and the particular sounds the knives make on opening and closing. Each knife has a unique handle or materials to hold and cover the knife blade. I could easily appreciate the fineness and how precious these particular knives compare to Victorinox, and the many cheaper brands his retail store is forced to carry.

Like a quality watch, or pen each knife had a particular use or personal quality of design and aesthetic to appeal to its owner.

The way he talked about his product and craft inspired a desire to own one of his knives.

He added that it’s very hard to cultivate interest among the next generation to learn and take over the business. He explained he was always interested and by age 8 had made his first knife. Later he worked at Victorinox for 4 years making knives before joining and then taking over the family’s business. Two of his children recently joined the business to lead the next generation. Unfortunately, at present none know the trade of developing and making knives.

Some observations:

  • Even a small business is exposed to global shifts and risks;
  • Train the family and non family staff to tell the family business story of Why the business exists;
  • Define customer service in terms of the family’s values for hospitality;
  • Constantly be on the watch for new people to recruit for the next generation of talent and develop- family or non family;
  • Figure out how best to transition the business, and what’s best for your ownership, and the legacy you may want to pass on;
  • Allow time for the transition. Perhaps 2 to 4 years to properly organize the business, and to develop the next generation.

Not everyone cares about their family legacy so they may decide they don’t want to bother. On the other hand I can tell you from this experience that my impression of the store completely changed for the better. His story makes for a much better retail and brand experience that differs from the usual tourist shops along the Bern street just selling another Swiss Army knife. A better experience translates to a business with better sales.

Even though our purchase was modest I learned something about being a master craftsman and the effect that has on the value of a brand. My awareness and consideration of Klotzli is now high, and I will look for their products for future purchase.

KKnives Sep 2014

Family Legacy of 6 Generations

They have a good website to display their brand products along with others.

Peter Klinge works to help owners of private companies execute strategies and plans to achieve their desired growth potential. In addition to Klinge associates he is also the founder and President of Providence Partners International, Inc.

Posted in Biography, Brand Marketing, CEO and C-suite, Client Case Studies, Consumer Marketing, Family business, Generational Succession, Management Leadership, Retail, Sales Management | Tagged , , , , , , | Leave a comment

How to Align ‘Why’ to Growth Outcomes

By Peter Klinge, Jr. of KLINGE associates

The following outlines principles for how to Align the Why of your business to Growth Outcomes.

Informed by experience this shows how to develop strategy and a plan that is aligned with a company’s leadership and organization to achieve higher levels of business success.

I recently led workshops for C-level executives and owners from early stage to established mid market companies. I noted the consistent level of uncertainty about the Why, What and How in their business. I credit Simon Sinek’s 2009 book Start With Why to get me thinking again about the simplicity of leadership and communication around the central idea of a business purpose.

Most executive/owners are heads down working hard on their business. Typically, they are good at ticking off how good their people are, and the company’s financial performance.

Ask why their business exists, and they’ll talk about what they sell… mmm?

There’s nothing special about selling something- everybody does. At some point the company loses how they describe and communicate Why they are in business and what sustains them and their people.

The business becomes uninspired and stale. Products and services are unremarkable. Sales people become confused about how to present the company. Sales sag and profits fall. People become a cost.

The reasons are many as to why leaders lose the sense of a company’s purpose. Much of this is affected by changing marketplace and economic dynamics. Part of this is that questions related to Why, Vision, Mission, even goal setting, appear to be an abstraction. Many of these business leaders are so occupied in the daily operational tactics that it seems a luxury of time and resources to look up and envision even the next several months.

However, it is essential to be able to communicate to people: employees, customers, and other stakeholders the Why or Purpose of your business. That is if you want them to follow your leadership and deliver consistent performance.

Here are some ideas we worked on in a series of workshops that offer a framework and concrete help that we’ll review in three sections. The Exhibit A Graphic below helps to illustrate these principles:

First>

  1. All Businesses Exist for a Reason. They started for a reason, and it wasn’t about selling something. Often the reason was fueled by a passion, the desire to solve a serious problem, or by observation of a market need. The corollaries to this are:
    1. A business Only continues to exist and Thrive if they maintain a Reason to continue;
    2. They are consistently Asking and are Able to Answer Why or Purpose.

Take as an exercise an observation of companies you might admire, or those you once admired that have faltered. Consider what made them great, and why others seemed to fall away. Look beyond the numbers to consider what they say and deliver through their people, and what is reflected in their offerings.

2nd>

Why or Purpose is the outline of the company’s strategy and plan. I describe this as a balance between:

  1. Vision & Pragmatism: the road you set for the general direction balanced with milestones to stay on the path along the way.
  2. Organizational balance that is to embrace point 1 via Leadership and Teamwork is necessary to drive execution of the plan.

If a company cannot articulate point 1 and communicate concisely and effectively to address the organization, then little progress will be made. The ability to define the strategy in this way creates:

  • Clarity
  • Focus
  • Progress
  • Roles

This approach to strategy and planning can help the organization more effectively to execute.

3rd >

This leads to the third and final concept of the framework: Alignment of Why/Strategy to desired Business Outcomes. For illustration purposes we’ll address Sustainable Revenue as an outcome:

  • Value Proposition– of what a company has to offer is derived from the clarity of the Vision;
  • Ideal Customer– helps focus efforts on who is right as well as not right for what the company offers;
  • Success Factors, i.e., the few that will drive the business;
  • Accountability track progress and align roles back to Leadership and Teamwork to meet performance expectations.

There are certainly outcomes besides Revenue to which these principles will apply equally well.  These might include outcomes for product, distribution, customer service levels or people development, preparation for business transitions and events, etc.

Exhibit A below shows how these principles interrelate and help you organize your strategy to outcomes with priorities for execution.

Summary points:

  • Define Why You Exist So that you maintain a Purpose
  • Align to a Strategy & Plan
  • Tie to Defined Business Outcomes
  • Remain Consistent to Why and question this periodically to adjust the organization’s thinking

Related subject content:

Peter Klinge is an adviser and interim executive for business owners and their companies. He and his associates support companies by helping to fulfill their desired potential. This in effect is Why we exist… to help companies grow….

EXHIBIT A

 

 

 

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Popular Klinge Associates 2018 LI posts-Tweets : Consumer Beverage bubbles not rising

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People is the Business

By: Peter Klinge, Jr. Growth Executive

People is the business. Without people there is no developed economic society. People are what create, innovate, and drive business.

Sounds pretty simple, perhaps to many not particularly interesting.

This article presents three ideas or principles you can use as considerations for your organization. Regardless of company size or stage, whether a start up with a handful of employees or a Fortune 100 company the principles and uses are similar.

  • Purpose
  • Diversity of thought and perspective
  • Compensation and wealth creation

The premise for these three principles is that in an age where technology seems to change our lives at a constantly accelerating pace the people element is too often set aside. Replaced by apps, smart phones, algorithms, and robots productivity versus employee engagement has become the most important metric. How people create or engage their customers is deemphasized.

How often are we pushed insistently by companies to use virtual assistance, chats, or site FAQs to resolve problems instead of speaking to someone live? In many cases a phone number is no longer listed for customer support.

Organization, culture, and values are subordinated into talk of SaaS and arcane tech terms.

Modern approaches to organizational development necessitate a different way of thinking about how we work, communicate, and collaborate. Technology should facilitate, not supplant human team interaction, and therefore be a catalyst for increasing contact and the sharing of ideas.

Here is a greater explanation of the principles to help you develop your people and organization:

Purpose: why does your business exist, for its employees/their families, and various stakeholders? Without purpose there is a lack of meaning to why people show up to the office or log on to remote access.

Diversity of thought and perspective: Welcome ideas, encourage persuasive communication through dialogue. A genuine openness to varying perspectives is essential to consistently delivering on great ideas of purpose. Today there’s over reliance on identity politics as a means for recruiting “diversity”. Any leader of a company trying to develop the best ideas from their team to benefit customers and society understands that it’s diversity of thought that matters equally if not more important than an identity. Such thinking around gender, race, creed, color, religion can lead to incorrect assumptions and unintended biases

Compensation and wealth creation:  Employers should relate the first 2 points Purpose and Diversity as a means to enhance employee engagement and replace the emphasis on productivity. Increased engagement will yield better outcomes: revenue, profitability , customer satisfaction, as well as productivity. But another should be emphasized and that is the opportunity for increased wealth for employees and positive contributions to families, communities, and societies as a whole. Measure outcomes from engagement as an opportunity to increase pay and profit participation.

Further the increases and advancement of employee compensations and wealth through  talent development of  people in their employ to grow the economic opportunity of individuals. Productivity can’t be simply measured in terms of greater output. But should also be in wage growth commensurate with profitability. If it means shifting work and training programs to more knowledge based skills then employers should develop such training ideas to benefit their people. Our society and economy cannot sustain itself with out consumers who can pay for goods and services IF wages and profitability remain imbalanced over long periods.

Employers and educators should collaborate to stimulate the love of learning and a desire for people to always want to learn. To acquire new knowledge, skills, ways to adapt.

An example of these principles applied is represented in a company I recently visited. You may have seen this posted on LinkedIn in February, 2018. I thought sharing my observations of that visit in the context of the above is a helpful illustration to you business owners and leaders.

People…. remember great business is about PEOPLE…  I visited a promising software (SaaS) company in Park City, UT. Yes… I know business and a ski resort town seem a contradiction…. But wait …. Ana and Bassam Salem founded what promises to be a great company (if that’s what the team wants) ….

AtlasRTX I expected our conversation to be about business and financial models, something about algorithms, etc. etc. Indeed in my 2 hours there we never talked about the product. We talked about PEOPLE. In the whole of my time there I met the entire 8+ person team and we just talked about all kind of things.

They were genuinely interested in the idea that we get to know each other; backgrounds, perspectives, life experiences. I found this so refreshing…

It impressed upon me the importance that with all the tech we have and talk about in business and life our purpose and potential is essentially about PEOPLE. The Atlas RTX team impressed upon me the thought that this group could make any business work that they collectively set their mind to… I hope the reality of my impression is fulfilled. Now I want to visit again to talk about what they actually do and how they do it 🙂

About Peter Klinge, Jr.  Peter is a growth executive: roles as revenue executive, advisor to owners and boards, and project coach committed to helping small to mid size companies sort out their growth plans and ability to execute.

 

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Once the Monarchs of Mobile- Demise of Nokia and Motorola

They were the undisputed leaders of all cellular handset communications. But how did Motorola and Nokia get dethroned in such stunning fashion? The introduction of the iPhone in 2007, followed closely by the emergence of Samsung rapidly inflicted mortal wounds on both brands. After decades of dominance their businesses evaporated in a short few years.

Google for Motorola, and Microsoft for Nokia, failed at attempts to revive both brands. There’s a Nokia brand somewhere out in the wilderness, and all Motorola is good for is some IP.

Lenovo acquired Motorola Mobility from Google in October, 2014. The Lenovo CEO vowed to restore the brand to greatness. A 1/17/17 WSJ article does a good job of analyzing the missteps of Lenovo in trying to integrate Motorola into an existing handset business. The article is credible in explaining issues with different cultures, business situations, etc.

Lenovo was confident in their Motorola acquisition. After all they were successful in acquiring and integrating the IBM PC business in 2005. They succeeded in reconciling a U.S. centric leadership with Chinese management.

These points are valid but I think in the case of both Nokia and Motorola the brands simply got tired, even exhausted, and the people who built the brands either exited or became complacent. The boldness that once brought these brands at the head of an explosive mobile world diminished.

It’s not even about the brands missing the smart phone shift. Nokia had its versions even before Apple came on the scene, and tried valiantly to market their smart phones while they were still well ahead. To no avail.

Once Apple’s iPhone redefined the design and technology usage of the phone in a way that tapped into the growing momentum of the Apple ecosystem and avid brand loyalty the shift to new leaders was inevitable. Moreover, today global penetration of handsets is high and growth is slowing so the space is smaller to maintain multiple brands.

I’m not sure today there’s room for too many profitable brands not named Samsung or Apple, or really anything Motorola or Nokia could have done differently to reverse their circumstances.  The mobile carriers have strengthened their consumer relationship dominance by partnering with Samsung and Apple which limits new entrant possibilities.

Nokia and Motorola were bright brands from the 90’s that defined the way we communicate today. But they tired and could not survive the creative destruction wrought by newer, prettier, better designs and technologies.

What will we say about Apple and Samsung mobility 10 years from now? Why are they not susceptible to the same vulnerabilities of their predecessors?

They are. And for both companies mobile phones aren’t all they do.

The launch of the highly touted but explosive Samsung Galaxy 7  in 2016 is a result of heated competition to beat Apple. This effort backfired on Samsung. Now Apple has breathing room. In the near term the appetite for any aggressive market launches of new products is tempered. But will this lead to a complacency that affects the established brands’ leads? Will the major players be overtaken by other rivals- known and unknown?

Peter Klinge, Jr. is a growth executive who pays attention to business and market trends that affect companies large and small. He focuses on helping companies identify profitable, revenue development opportunities.

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Club of Super Rich, Super Vote Public Companies

Tech companies generate much excitement around their potential to “change the world” and the riches the investors hope to gain from the promise of an IPO. Facebook, Google, Twitter, and now the buzz of Snapchat or Snap Inc. as it will become known.

For all the excitement of public offerings what is less known to the average investor is how the founders structure the sale of shares to the public. Although not exclusive to tech companies, the companies mentioned above enable the founders to maintain the majority voting control while selling most of their share ownership to the public.

Thus the founders and managers become super rich, and maintain control through a super voting structure that keeps them at the heads of the companies into perpetuity. Public shareholders then have little to no influence over management, the board, governance, or direction of the company.

The most recent example, as reported by Wall Street Journal 1/17/17, is that Snap will offer shares in its messaging app Snapchat to the public. The super sweet deal contemplated is that the two founders will have 70% voting control despite holding just 45% of the shares. Bankers are said to believe Snap’s IPO will be valued between $20 and $25 billion.

Apparently, this arrangement is more common than people might think. WSJ reports that the Murdoch family uses different classes of stocks to control News Corp. A Fortune magazine story published 2/1/17 provides some useful information on control vs non-control businesses that are public, i.e. family or founders control the votes. According to the Fortune story performance is a mixed bag of results. Warren Buffet’s control of Berkshire Hathway performs well while the Redstone family control over Viacom which owns CBS has been tumultuous.

Google after its 2004 IPO, kept 60% of the voting control with the founders, executive team, and board of directors. In 2014 Google issued a new structure that changed stock classes between voting and non voting. This is intended to avoid founder-management voting control dilution as the company, now called Alphabet, issues more stock to the public in the future.

Here are the statistics the WSJ, 1/17/17 article provides:

  • Between 2012 and 2016, 19% of U.S. tech firms went public with dual-class structures; 2x the share over the prior 5 year period.
  • 2016: 21% of tech firms went public with dual-class structures, down from 37% in ’15.
  • By contrast about 11% of non-tech, U.S. – listed IPOs used dual class structures in in 2015 and 2016

These dual class structures apparently do not meet with too many legal challenges. On the other hand, it seems perverse that founders and boards can award themselves voting shares while the public from whom they are raising the bulk of the company’s capital are not able to have any say in the business.

It’s a great deal for founders and management that they can keep  control over the company and therefore the investments of a retail investor or pensioner without having to put a proportional amount of their own capital in the business.

Super Rich and in Super Control… what could be better than that?

Whether this is fair or not is a judgment each investor needs to decide for themselves. The key is whether the public is actually aware and informed about the implications of these voting/non-voting classes of shares. If they are, then they can they decide whether the shares offered are worth what people in the company want investors to buy them for.

It seems to me that if founders are going to raise a majority of a company’s capital from the investing public then its reasonable that founders, the executive team, and early investors should benefit from the IPO. But it’s another matter that post IPO the original company stakeholders should continue to benefit indefinitely by virtue of their having started the company regardless of how the company performs. When incentives are no longer aligned, then shareholder interests are of no or little consequence to management.

The new public company can behave as independently as a privately owned company. The difference now of course is that the founders raised massive amounts of capital to do as they wish for what they believe is best for the company, yet no longer have their capital at risk or sweat equity involved.

If people are unaware that they are investing in such arrangements then this is unfair and should raise shareholder protests. Companies must be transparent in disclosing their intent to impose such super voting positions. Unfortunately, most people get caught up in the excitement of the latest darling tech company. Investors become greedy with anticipation. Greed can hurt.

Peter Klinge, Jr. is a growth executive who works primarily with privately owned small to mid size companies.

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The Greatness of the Valiant Heart- Seabiscuit and Humanity

Over the recent holiday break our family enjoyed viewing and reading the story of Seabiscuit. The subject book by Laura Hillenbrand is an inspiring story with its central character being an underestimated, troublesome, feisty, and unappreciated horse.

The main characters of this story overcome all sorts of circumstances. The horse is lost and so is its owner, trainer, and jockey. Their three different paths find purpose together in this amazing horse Seabiscuit. The owner was a calvary officer, bicycle mechanic turned car mechanic then an auto dealer magnate in California. The trainer was an old West cowboy who had been around horses his whole life. The rider was a Canadian whose family saw severe hardship that forced him to leave his family to make his own way as a young teen. Indeed, even the author Hillenbrand has had to contend with chronic fatigue syndrome since her second year of college.

Ms. Hillenbrand’s empathy is evident as she reveals each of the characters’ vulnerabilities and the times people lived. She describes the difficulties encountered during the 1930s depression, and how life’s challenges affected the principals and the life story of Seabiscuit.

We journey with the author as she describes the settings of the great horse races, and a still young turn of the 20th century United States, the growth of cities across the country, and the advent of the automobile that will soon supplant the role of the horse in private transportation.

A team of people helped a mysterious horse realize its greatness, and in so doing help people and even society find solace and a measure of healing. Because in Seabiscuit we all saw something of our humanity that was valiant, courageous, full of heart and potential, and of course finding something to love.

Peter Klinge, Jr. is growth executive who evaluates people, and organizational development to help companies gain profitable, revenue opportunities.

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Purpose and Profit: Conscious Capitalism

After a previous LI post I published, Why Whole Foods is in a Pickle, I learned about Whole Foods interest in Conscious Capitalism.

Most business people I’ve ever worked with or for are fairly conscious of balancing the welfare of the business and the welfare of its people and other stakeholders. Without engaged employees and supportive investors there’s no business, and conversely, if the business cannot thrive to be sustainable, then there’s no enterprise to sustain a community.

At present, there’s so much policy discussion about the role of business and government regarding who is best to manage the economy for citizens. Much of the current rhetoric is not objective, and fails to see the constant experimentation and innovation that is ongoing in the marketplace.

Even a fairly mundane business such as grocery challenges itself to find relevance across a wide spectrum of communities. In the Whole Foods situation they’ve lost their way; sales and profits are down. There’s a lot of questions by investors about the future direction of the company. Customers have been disappointed.

John Mackey, co- CEO and a founder of Whole Foods, may delight consumers and investors again. According to an extensive article in Fortune 9/1/15 Mackey is giving deep thought to Conscious Capitalism. The notion is that enterprises with passion and purpose outperform. An outgrowth of this thinking is the idea of blending Nonprofit with Profit through foundation work that tie Whole Foods to its communities: Whole Cities, Whole Kids, and Whole Planet. This thinking extends to compensation and the relationship of executive pay to average wages/salaries of employees.

These efforts enhance Whole Foods brand credibility for innovation and advances its evolution in presenting new ideas about food and community that resonates with its core consumer base. This is consistent with Whole Foods founding heritage and helps the company find new pathways for product and service ideas to build growth.

Successful revenue growth is about value… NOT price. Whole Foods various stakeholders need to appreciate this as core to Whole Foods’ existence. The company’s ability to communicate and demonstrate tangible examples in practice will determine its success in executing upon Mackey’s vision. It will also require Mackey to do a good job positioning a long view of Whole Foods to shareholders so as not to be distracted by quarterly revenue/profit pressures. This tempts management to try too hard to reverse financial performance with price discounts, and ill advised brand diversification strategies a la 365.

It will be interesting to follow Whole Foods news as it goes forward to address its current challenges.

For more more growth ideas you can use view our blog at Klinge Associates.

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The High Price of Mediocrity

Mediocre is the impression given by too much emphasis on price.

Business leaders too often use price and other related promotions that discount their products and services as a short term fix to bring customers back, and/or as a means to introduce new customers to the franchise. But the long term impression created by such tactics are negative and difficult to recover from, especially, when a low inflation environment makes it difficult to ever increase prices.

Price becomes a crutch to compensate for poor execution.

In the long run people don’t buy mediocrity. If you get something you think is so so for less then it isn’t really a value. You’re sure to lose customers, and profitability.

Execution of quality, service, experience, and product trumps all else. If a customer is delighted with your offer, price is never the issue.

The aggressive deal promotions of Jos. Bank, acquired by Men’s Wearhouse, was recently satirized in this Saturday Night Live Sketch entitled “Quantity Guaranteed”. An embarrassing portrayal of a long time brand that tries too hard to woo customers on price, and instead drives a perception of mediocre quality.

Jos. Bank’s CEO Doug Ewert, who is leading a turn around of the company, says:

“There’s a fair amount of evidence out there that there aren’t enough customers who want to buy four suits at a time or want to buy that quantity to get a deal,” he said. “Taking away the unnatural quantity discounts will lead to more healthy transactions. Instead of a guy buying four suits and then we don’t hear from him for quite a while, we can sell him a suit and shirts and ties and maybe some shoes.”

Promotions, including price offers, need to adhere to an understanding of what draws consumer behavior to your brand franchise.

Calibrate promotions to deliver value, e.g., buy this item and try this related product for a bit more. Understand if as a business you’re trying to get a new user to try your offer, or are you attempting to stimulate among loyal users greater frequency of usage/consumption, or induce consumers to try a new product, e.g., ‘ if you like this product, you might also like this from us…’

These are examples of strategies that will direct the types of tactics to employ to profitably grow your business. Price discounts should be the last tactic to use; especially if your execution and product is faltering and your brand is ho hum to the consumer.

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