Are HP’s Board and New CEO Headed in Right Direction?

 

Updated – Dec. 31, 2011

Not to be gauche, but it wouldn’t be surprising if Harry S. Truman were perplexed by the judgment and performance of the board of directors at the world’s biggest-selling tech company. That being the Hewlett-Packard board of directors over the past decade.

Indeed, many people might be wondering if the company might be better-served if the board adopted the former president’s famous mantra, “The buck stops here.” Because the question is, have they acted like it?

It’s unfortunate – the tech company has a rich heritage. That’s not to conclude that the board has ruined the company, because in 2010 it had an enviable $126 billion in sales. It employs 326,000 workers.

But HP has lost more than half its market value. Meantime, the board doesn’t appear to understand the Link between Financial Performance and Succession Planning.

Questions have once again recently risen over the board decisions and strategies, while many analysts approve of recent developments.  The storied company plans to continue with its strategy of cloud-based services and enterprise software solutions.

Based on past developments, HP fans, and I’m one of them, might wonder about HP’s long-term strategic planning.

Consider:

1. The board hired Carly Fiorina as CEO in 1999. Her performance proved to be unsuccessful, as she apparently didn’t understand a basic principle about mergers (If Mergers & Acquisitions Tempt You, Consult HR Pros). She persuaded the board to force a merger with Compaq – despite all kinds of red flags. At the time, as a media columnist for Belo Web sites, I wrote it would never work because the cultures of the two companies were vastly dissimilar. My predictions proved to be accurate. The merger resulted in the layoff of 17,000 talented people and HP’s financial picture worsened. She was fired in 2005.
2. Soon, the board’s chair, Patricia Dunn, hired firms that used illegal methods to try to stop leaks of proprietary HP information to reporters. 
3. Mark Hurd was hired to run the company. While he did have some success, many analysts believed HP suffered from his lack of vision and poor judgment leading to his forced resignation – over sexual harassment of a marketing consultant, who was actually an actress, and his inconsistent expense-account reports. 
4. They hired a CEO, Léo Apotheker, who made his own controversial decisions, including plans to change the company’s mission – from world-class hardware to software and cloud computing. Some board members voted to hire him without even meeting him. Mr. Apotheker’s actions prompted declining shares and a shareholder lawsuit. 
5. The board hurriedly hired a new CEO, Meg Whitman, who had joined the board after she lost to Jerry Brown, Jr. in running for California governor. As head of eBay, she was successful but known for questionable acquisitions. You might recall her 2005 purchase of Skype for $4.1 billion, but eBay ultimately sold it for $2.75 billion four years later. 
6. Ms. Whitman recently said she supports Mr. Apotheker’s decisions, including the proposed$10.3 billion purchase of commercial software-maker Autonomy, but she will not forego HP’s hardware business. The latter is ostensibly is one the most logical public decisions to come from her office. 
7. Ms. Whitman’s first announcement that her priority will be to get HP strong financially. But again, HP’s finances were hampered by negative Wall Street reactions to Mr. Apotheker’s actions, which she mostly supports. So how can she achieve such goals, especially since she doesn’t have any enterprise experience?

Ms. Whitman knows she has to make some strategic decisions about hardware, as the company initially indicated it might jettison its PC division. HP’s biggest customers balked at buying PCs until they got clarity on HP’s plans. Savvy consumers were probably hesitant, too. That was my thought when I spotted some flashy HP notebook computers in recent visits to retail stores. Fortunately, HP decided to stay in the notebook computer business.

Following weak sales, Ms. Whitman’s predecessor stopped marketing smartphones and tablets with webOS software, an HP product. She also needs to waive her magic wand in combating the popularity of iPads and smartphones to use the Internet.

Meantime, HP has other complicated matters to solve, including what to do about its services business, its slim profit margins in servers, and slower sales in printers. The latter two might very well be approaching the end of their product life cycle.

Ms. Whitman also promises to get more teamwork and cohesiveness out of her management team. That’d be a good move, too.

Before making any rash irreversible decisions, Ms. Whitman needs to conduct an in-depth SWOT analysis – of strengths, weaknesses, opportunities and threats – followed by a strategic action plan to anticipate emerging trends and capitalize on them. A sophisticated look to the future is prescribed here.

Let’s hope Ms. Whitman comes up with better strategies and communication than she did in her failed gubernatorial campaign and questionable acquisitions at eBay. She also has to be successful working with a board that’s made so many anemic decisions.

HP is a fine company and deserves a better future than its performance of the last decade.

From the Coach’s Corner, here is a related link: Leadership, HR, Marketing Lessons from HP’s Executive Turmoil.

“One of the biggest responsibilities of management is to look after the corporate DNA.”

- Andrew Rolfe

 

Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complementary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

 

Business Management Lessons from Yahoo’s Demise

 

Updated Feb. 7, 2012

From a management perspective at the board level, Yahoo is starting to make the right moves. Chairman Roy Bostock, the chair for four years, and three long-serving board members have resigned. This follows the resignation of co-founder Jerry Yang after the search giant hired a new CEO, former PayPal executive Scott Thompson.

Why are the moves positive?

You might recall Yahoo missed a chance to sell to Microsoft for $47.5 million in May 2008. Do the math. This would have meant $33 per share. At this writing, Yahoo’s stock is trading at $15.82.

Other negative headlines: The public catfight between deposed Yahoo CEO Carol Bartz and the board. After her termination, she refused to resign from the board.

Certainly, published reports show Ms. Bartz failed to demonstrate quality leadership in terms of the company’s performance and her personal style of communication. Thirty-two months of valuable time was lost during her tenure. That’s a big sales-opportunity cost.

Despite whatever skills Ms. Bartz seemed to possess to get the top job after previously working at Sun Microsystems and Autodesk, they weren’t apparent in her nearly three years at Yahoo.

True, she successfully addressed financial and organizational issues.

But she didn’t seem to show an adequate grasp of the big picture – to understand the company, its marketplace challenges and solutions. The company’s heritage advertising platform has been backsliding. Too, I have to wonder if the vaunted Yahoo Finance platform has suffered in reputation. It’s been a favorite for those who want to check stock prices.

During her reign, Yahoo’s stock price was at stagnant levels. It’s worth noting that Yahoo’s share price immediately jumped 6 percent when she was terminated. That’s indication she didn’t have friends on Wall Street, either. It might have been advantageous for her to read the book, “How Win Friends and Influence People.”

But, of course, Yahoo was sliding before she took the reins.

Yahoo was once the No. 1 search engine, but since the 1990s it failed to stem the rising tide from competitors Google and Facebook. The board ostensibly didn’t understand the link between financial performance and succession planning.

Yahoo has seemed to be standing still. It hasn’t evolved, or re-engineered its focus like all companies must do. It needs to look fresh and innovative with compelling products and services. In other words, it needs a vision.

In a nutshell, to regain its 1990’s stature, Yahoo must accomplish three salient goals:

1. Hire a chief executive officer who acts like one – productive interpersonal skills, who understands the big picture for Yahoo to successfully compete. Hopefully, Mr. Thompson will meet the challenge.
2. Short-term, the search giant should become relevant in the minds of Internet users, especially among younger demographics. With its significant stake with a Chinese partner, Alibaba Group, fence-mending is indicated.
3. Long-term, Yahoo needs to develop a strategic action plan for a successful business model.

My hope is that Yahoo is again successful. If not, a merger might be in the works.

From the Coach’s Corner, it would seem Yahoo is left holding the bag without adequate leadership. Consider these resource links:

Management Strategies for a Successful Turnaround

Is Carol Bartz Using the Right Leadership Approach

Hottest Tactics to Beat Your Competitors

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

 

How’s Your Strategic Planning for the Next 12 Months?

Strategic planning suggestions that work for nonprofits and businesses

 

Dec. 18, 2010

 

With the nation’s CEOs now being their most optimistic since 2006, published reports indicate they anticipate higher sales, investing more in their firms and hiring employees in 2011. This coincides with the Business Roundtable’s economic outlet index improving to 101. It climbed to 102 in 2006.

The CEOs optimism includes these probabilities:

• 45 percent will increase hiring
• 80 percent forecast higher sales the first half of 2011

That’s heady stuff for Americans suffering from high employment – 9.5 percent or worse for 16 consecutive months. This economic downturn has had the most damaging impact on employment rolls since 1948.

So, are you ready to compete? Is your company like many that need to rethink their strategic plans? For them, cash flow has become a problem. Some have grown too fast. Others have fallen short in due diligence. Many failed to plan for a roller coaster ride. No matter the reason, as a result, many are cutting muscle in human resources and marketing.

History shows the organizations that keep pressing forward do better in the short term and dramatically increase market share as the economy improves. In a recession, successful companies know employees are a key asset and they stay on the attack in marketing. In this way, they’ll maintain market share and develop opportunities for growth at the expense of their competitors.

And, instead of waiting for a transforming event to rescue them, successful companies don’t miss opportunities to grow. They recognize opportunities and seize them by launching and periodically fine-tuning their strategic plans.

Do you know when should you create a new strategic plan?

Here are the five reasons to create a new one:

1. When your company is new.
2. If you’re looking for breakthrough results.
3. If your firm is failing in cash flow or customer satisfaction.
4. If you have a limited budget in choosing options.
5. If you need to set short and long-term goals.

Here are some tips in strategic-planning basics:

Schedule blue sky sessions to make a plan. Ask lots of questions, such as: What are your financial goals? What are your biggest challenges? What is the desired footwork? What will be the required investments? Develop a vision of what you want to achieve and then draw your road map of how you can make that vision a reality.

Make choices based on your return on investment. Some opportunities are positive, but some aren’t. Record and analyze how you spend your time and money. Determine your ROI on each before moving ahead. Not every idea is a good opportunity.

Acknowledge that perfection is not attainable. Procrastination results if you’re looking for perfection. Don’t be afraid to act.

Brace yourself to stretch your comfort zone. Remember the definition of insanity: “If you keep doing the same thing time after time, but you’re expecting new results, then…”

Be assertive – make a commitment. Once you make a decision, don’t engage in self-doubt.

Here’s an example provided by one of the world’s great entertainers:

As a youngster growing up in Palm Springs, one of my neighbors was Bob Hope, who passed away in 2003. So I was especially motivated to interview his grandson, Zachary, regarding the comedian’s business philosophy.

He confirmed his multi-millionaire comedian grandfather wasn’t joking when he used to say to his family and associates: “Get it done.” He said it was the comedian’s most-used phrase.

In summary, here are the basic components of a strategic plan:

• Mission. This is where you reason why your firm exists and where you list the contribution of your principal players along with your core values and priorities.
• Strengths and weaknesses. Evaluate your resources, including your employees’ skills and facilities. 
• Opportunities and threats. List factors, such as changes in technology, employees’ abilities, available resources to help you achieve your mission.
• Forecast your capabilities. Anticipate any upcoming budget, resources and personnel changes before you forecast opportunities.
• Goals and objectives. Remember that goals need to be specific, measurable and developed by consensus of all principals. Then, outline your tactics to achieve your goals.
• Implementation. As you carry out your tasks, continue to evaluate the results and fine-tune your plan as necessary.

From the Coach’s Corner, for more on planning, see this site’s Planning pages. Meantime, don’t give up and as Mr. Hope used to say, “Get it done!”

How to Win Your Major Marketing Campaign

 

In major marketing campaigns – in business or politics – there’s nothing more frustrating than losing. But a lack of funds or a small war chest is not the salient reason for defeat. It isn’t necessarily how much you spend.

There are many reasons for marketing failure of a campaign.

Here are 14 of the more important reasons:

1. Inadequate analysis of strengths, weaknesses, opportunities and threats
2. Drawing incorrect conclusions from the analysis (leading to ineffective overall strategic planning)
3. Unrealistic budgeting
4. Ineffective testing of ideas and messaging
5. Arrogance – over confidence
6. Poor coordination with centers of influence
7. Not developing effective teamwork and communication among stakeholders
8. Targeting the wrong market
9. Lack of job descriptions – who will do what and when?
10. Wrong people in many key positions
11. Poor positioning in attributes and benefit statements
12. Ineffective allocation of promotional funds – wrong mediums preventing top-of-mind awareness in customers, or voters
13. Unproductive evaluation of the campaign and return on investment
14. Unsuccessful responses to negative surprises and failure to capitalize on opportunities

Two basic rules include: “Know thyself” and “Know thy audience.”

Not to over-simplify, in essence, the key is to properly plan but only after you perform a strategic analysis.

Identify your centers of influence and strategic partners, quantify your goals, make a budget, identify your target audience, test your messaging, implement your plan, create a positive image, create a call for action, continually evaluate your progress, and respond to challenges and create opportunities.

No detail is too small: In collateral, from colors to font choices, or in developing centers of influence for the multiplier effect. But don’t get paralysis from analysis.

Plan your campaign to reach each person in your target audience with a positive message for a minimum of five times. That’s the magic number for optimal results. And be consistent to develop trust.

Remember the difference between marketing and advertising, and developing the right message.  Broadcast advertising is all about frequency, reach and cost per thousand. Internet advertising is concerned about cpm, pay-per-click, pay-per-lead, and cost-per-action. Yes, despite what you’ve heard about social media, TV, especially, TV news remains the most powerful of mediums. Radio is still strong. But marketing is not simply creating a radio, TV or Internet advertisement or harnessing social networking tools. Advertising is merely one component of marketing.

Marketing pertains to the big picture. Marketing is the understanding of your target audience for the cost-effective process of selling the right product or service at the right time and at the right price. It’s a systematic development, coordination and implementation of a myriad of initiatives – proactive events to establish a dialogue – not just a bunch of advertisements.

Social media

Make certain to orchestrate and synergize your advertising with public relations, videos, word-of-mouth and social media. Thanks to the new Digital Age, consumers are in charge. Set up a dialogue, not a monologue.

For example, if you’re targeting young adults or teenagers, it’s sad to say, but they are getting their “news” from their social media.

Your communication plan should contain timelines. Press kits are helpful, but in this green age, they are not necessary. Regarding relationships with journalists, here’s a hint: Reporters like to deal with experts. So portray yourself as one.

Choose wisely. Insert and distribute effective videos and provide the right motives for people to share. The right content has to be presented in right place.

Follow the trends to see how to get the most attention. For example, Digg.com can be helpful but remember it’s mostly a young audience – big on tech and off-the-wall stories.

Just like reporters, every generation likes experts and stories. Storytelling holds great power for you. So tell a good story, write a good headline, deliver on your promises, and cite outside participants for proof in your claims.

Value perceptions

In marketing, whether its products or political candidates, people base their buying-decisions on emotion.

To keep things simple, the following explanations refer to business but are applicable or transferrable to politics.

About 18 percent of people – blue-collar and professionals, alike – will only buy your products and services at the cheapest cost in the marketplace.

The most-valued prospects are the people who are affected by their five value perceptions – motivating them to positively respond to your call-for-action.

The five perceptions and their percentage of importance in decision-making:

Employees, Spokespersons – 52 percent. The key characteristics are integrity, judgment, friendliness and knowledge.

Remember, about 70 percent of your customers will buy elsewhere because they feel they’re being taken for granted. And customers normally will not tell you why they switched to your competitor.

Image of the organization – 15 percent. They are concerned about the image of your company in the community. Cause-related marketing is a big plus in forging a positive image. So is cleanliness and good organization.

Quality of Product or Service Utility – 13 percent. The customer is asking the question – “What will this do for me?”

Convenience –12 percent. Customers like easy accessibility to do business with you. That includes your Web site, telephoning you, and the convenience of patronizing your business. 

Price – 8 percent. Price is important, but it’s the least concern among the five value-motivating perceptions.

Seven marketing elements

Once you understand what motivates the customer to buy, there are seven steps you must take for creating a happy buying environment. Fear is a great motivator. But Americans are tired of negativity. Yes, the marketing process goes a lot easier if you can make buying fun.

For marketing in a downturn or not, every PR or advertising message should – as much as possible –contain these seven elements:

1. FEE. This is an acronym for establishing a common ground for a foundation using the principles of event and empathy. Every purchase is an event in the life of a customer – no matter how big or small.  It also helps to show concern about the welfare of the customer.
2. Research/focus groups on attitudes. Use tools to get the prospect to open up.
3. Agreement on Need. Get the prospects to agree on their need to buy a product or service.
4. Generic Value Proposition or Benefit Statement. Here’s where you explain your value proposition. Remember the difference between features vs. benefits to answer the basic marketing questions, such as the acronym, WIIFM , “What’s in it for me?” or “So What?”)
5. Fill Prospect’s Need. Depending on your audience, use more specific benefit statements.
6. Commitment – Ask for the order using a non-threatening, closed-ended question.
7. Seal the Deal. This final step has three components –

• Use the magic words:  “Thank you.”
• Prevent buyer’s remorse – remind the customer of benefits they’re receiving
• Look for an opportunity to provide the person with unexpected, perceived added value without hurting your bottom line.

How to overcome objections: If you’re at a meeting and encounter an objection, be careful with your response. Always empathize. Your first statement should be a note of empathy even if you disagree.

If you don’t know how to answer the person, explain you need more information and will get back to them later ASAP: “How about if I call you at 4?”

If you do know how to respond and in order to overcome an objection, it’s still important to use empathy.

Here are the three steps to overcoming objections:

1. Get the prospect to restate his/her concern. Then repeat the person’s words:  “If I understand you correctly, you feel…?”
2. Empathize:  “I can see how you feel that way”…or “You know, someone said the same thing last week.”
3. Overcome the objection with facts.  (Then recap the seven steps.)

After you’ve won, best-practices also call for follow-up and laying a foundation for an infrastructure that promotes long-term success.

From the Coach’s Corner, do you want a fun look back at the top 100 advertising campaigns of all time?

Here are the top 100 campaigns: http://adage.com/century/campaigns.html

How to Create Luck and Fly High with Profits

 

Despite higher costs and a weak economy, some businesses are lucky in increasing profits. Often, it’s a result of success from competing in a zero sum marketplace. Companies survive and gain market share when their competitors fail. But that’s often because successful firms know how to create luck.

Fear is a factor when companies underperform.

But fear is also an acronym: FEAR, frantic effort to avoid responsibility. Fear is often the reason why people fail to perform.

Consider these typical situations:

• Do you let fear lead to paralysis from too much analysis?
• Do you give away your power when you encounter rude customers?
• Do you allow rejection in sales presentations to get you down?
• Do you idly sit as public officials create policies that harm your economic and political freedoms?

To create profits with strategic planning in a competitive marketplace and business adversity, here’s how to eliminate fear and create luck:

Create balance with an analysis and strategic plan. Don’t go overboard in planning, but look at your role in capitalizing on your strengths and weaknesses and identify opportunities and threats. Your best plans can go awry but you can minimize any challenges with the right amount of reflection for the performance of both you and your business, and execute with courage.

So, my question is how’s your strategic planning for the next 12 months?

Invest in your education. Learn from others how they deal with uncertainty in business. I’ve had literally thousands of telephone conversations with great mentors. That’s right, just a few personal meetings and countless telephone calls.

I love the business philosophy of “Rich Dad, Poor Dad” author Robert Kiyosaki. Perhaps he’s been justly criticized for some of his investment approaches, but his anecdotal lessons are inspirational. For example, his ideas on networking are insightful and he’s got an unusual take on the Golden Rule: “He who has the gold makes the rules.”

Focus on marketing and sales simultaneously. Marketing is vital in creating a brand image. That might include public relations, a Web site, online prominence in social media and trade shows. Sales includes prospect and customer contact. Here are more tips to get strong results from your marketing plan.

If time and budget issues are taxing and you don’t have the right staff, consider alternatives:

To make a productive sales call, good marketing materials are an asset. And marketing results are stronger if your salespeople are effective. But sales and marketing usually requires two different skill sets. So consider a part-time independent contractor for marketing and commission pay for results-oriented salespeople.

Remember sales require an “inside job.” If you’re selling value, and speaking and acting with conviction, you’re destined to attract the right customers.

Create opportunities with partnerships and centers of influence. Develop relationships with influential people or groups and ask them for referrals. Look for ways to reciprocate. Rotary Clubs and chambers of commerce are good places to look for people who can be instrumental. They’ll help when you need it the most. I got my first two consulting gigs after being laid-off as a newscaster, and started meeting businesspeople over coffee. Using football as examples, here are nine steps for strategic alliance success.

Create great PR. My favorite PR example is my second client, the Utah State Fair, which was part of state government. After leaving the airwaves as a newscaster, I was hired in a 1988 Utah recession to get a $2 million state appropriation for repairing deteriorated historic buildings. At the time, asking for $2 million would be like asking for $65 million today adjusted for inflation. Legislators had been ignoring the fair and even rescinded funds they appropriated the prior year.

Effective marketing is both public and private. Following the lead of every dignitary who visits Salt Lake City, I advised my client to make a call on Mormon Church officials. Officially, the church didn’t influence public policy, but as a relative newcomer to Utah, I realized the head of the church was Ezra Taft Benson, who had been Secretary of Agriculture under President Eisenhower. Soon, a Mormon-owned newspaper published the headline: “Our Crumbling Fairgrounds.”

We scheduled events nearly every day, for example:

We took horse-drawn carriages to the state capitol “to take lawmakers for a ride.” Every newspaper published pictures with the caption, “Utah State Fair takes lawmakers for a ride.” (Actually, the veteran lawmakers ignored our invitations but the rookie lawmakers eagerly climbed into the carriages. But after the old-timers saw extensive pictures of the rookies, they eagerly cooperated on other PR efforts.) We hand-delivered bouquets of flowers donated by a grower to the morning DJs at the top 10 radio stations on Valentine’s Day to entice them to “Love a Fair.” During lunch that day, we delivered bouquets and messages to every state legislator and capitol employee.

The result: $2 million. (The following year lawmakers appropriated another $1 million without even being asked.)

We promptly issued a press release detailing how the appropriation was efficiently being invested so lawmakers wouldn’t change their minds again. If you need PR, but don’t have a budget? Here’s how to leverage the news media.

Cost-effective Internet options. Advantages in online marketing include: 1. Low overhead. 2. An opportunity to list a mega selection. 3. The Web is a great equalizer in competition. 4. International trade keeps getting bigger – remember you have the ability to sell outside the U.S.

A good barometer for advertising trends is national politics and how political candidates influence voters. Broadcast yourself. Check out YouTube. You’ll see an endless potpourri of video sales pitches.

Blog, publish or use online E-newsletters as options. Create effective press releases for your local media and don’t forget inserting them on the Internet.

There are numerous local e-marketing opportunities from Yahoo local listings to Craigslist. But if you want to reach prospects who are good citizens with positive cash flow, my preference is a good local media Web site. Here’s more on how small businesses can capitalize on cyber strategies for profit.

Face adversity with courage and detachment. Many great strategies will trigger vindictive opposition. The competition in Utah for legislative funding was intense. We were victims of dirty tricks by other special interest groups. But we had fun and ran the race without ever looking over our shoulders.

Stay focused like Ichiro. Practicing good habits makes for good performance. Respect your opponents. Be defensive — like Ichiro – with your prospects and customers – do not take them for granted. When businesses lose customers, my research shows 70 percent of the time it’s because their customers feel taken for granted.

Good luck with your strategies for creating luck to fly high with profits!

From the Coach’s Corner, don’t ignore your employees as opportunities for growth.

Pay your employees well. Be as generous as possible. Recognize them publicly. Employees are often more productive when they have a life – or job flexibility.

Treat your productive workers like you would a good customer, such as baseball or football tickets, nice dinners or their birthday off with pay.

Enhance organizational moral by making certain employees are best-suited for their responsibilities.

Look for opportunities to create a culture of personal growth. You’ll inspire loyalty and minimize turnover, which is a profit-destroyer.

So don’t forget your profit drivers – here’s how and why to partner with your employees.

Recruit employees on the four A’s of Hiring:

1. Attitude — look for positive attitude. Will they go the extra mile and create opportunities to blog about your company on the Internet?
2. Appearance — make certain they inspire confidence with a professional appearance.
3. Ability — make sure they have talent.
4. Angle — research their empathy skills – will they work well with peers and understand your customers’ angle or point-of-view? Do they know how to say thank you  – instead of the boring phrase, “have a nice day.” Do they how to prevent buyer’s remorse with customers?

“Luck is what happens when preparation meets opportunity.”

-Seneca

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Boeing, Airbus Rivalry – Lessons in Strategic Planning

 

Updated June 30, 2010

A major ruling against Airbus by the World Trade Organization (WTO) adds new intrigue to the Boeing-Airbus competition.  The WTO ruled that Airbus has received illegal subsidies for four decades. Litigation has been ongoing for six years.

But Airbus vows to fight the ruling as it tries to land even more government funding from the European Union for its new A350 jet, which will compete against Boeing’s 777 and 787. Airbus also predicts Boeing will receive a similar adverse ruling from the WTO this summer.

So the plot in the rivalry continues to thicken. Businesses can learn valuable lessons from the Boeing-Airbus competition. In terms of strategic planning, it has been quite a roller-coaster ride with no end in sight.

Have both sides done enough strategic homework? Should major manufacturers rely on government funding?

Here’s some more history to consider:

In July, 2006, I recall writing a column suggesting that Boeing should not break out the champagne to celebrate even though Airbus was faltering. My sense was that investors would have been impressed if Boeing employees continued to act with poise and assurance – as though they expected to win sales orders – unlike many of the flamboyant Airbus stakeholders. Their behavior was reminiscent of immature athletes taunting opponents on a football field.

Airbus sales had dropped by more than 50 percent during the first six months of 2006 compared to 2007. The company was behind schedule in landing more than 250 sales, which were needed to capitalize on its $13 billion design and production investment.

Airbus was reeling from a buyers’ strike for several reasons:

• Delivery delays in the A-380, a super jumbo jet
• A class-action lawsuit and the threat of more litigation accusing management of hiding problems
• Astronomical fuel costs
• In-fighting by French and German executives at the parent company, EADS
• A management shakeup at Airbus

All these developments occurred before the deadly Airbus A-310 accident in Russia that killed the crew and scores of passengers. Yes, Airbus appeared rather vulnerable.

Since the 2006 column, the cost of jet fuel and the worldwide recession took a toll on air travel and cargo services, which adversely affected both airline manufacturers.

For example, Dubai-based Emirates airline stopped its using its Airbus 380s on flights to New York and replaced them with the smaller Boeing 777.

Meanwhile, Boeing lost its sales throne in suffering from fewer orders while still pinning its hopes on its new 787. But the Dreamliner’s production has been postponed five times. The first delivery is now forecast for Q4 in 2010 – at best, a two-year delay for the aircraft. In other words, it is the most-expensive and delayed aircraft in Boeing’s rich history.

Other Boeing challenges:

• The estimated $35 billion Air Force tanker-bid process after initially losing to Airbus
• Allegations of illegal subsidies on both sides before the World Trade Organization
• Whether to locate a second 787 assembly line outside of Washington state
• Progress of the 747-8 jumbo jet
• Production cuts because airlines are postponing jet deliveries, cutting back on new purchases and canceling orders

On the other hand, Boeing originally strategized that its highly efficient 787 Dreamliner would prove to be popular with airlines. Airbus apparently didn’t factor whether airports worldwide would want to construct longer runways for landings and takeoffs to accommodate its huge A-380. Not to mention the increasing costs for jet fuel.

Add to the competitive mix – Aviation Industry Corp. of China (AVIC) – a competitor for Airbus and Boeing. AVIC is restructuring again as a single company. It will be listed on the Hong Kong stock exchange with about $22 billion in assets. As China’s largest aircraft manufacturer, it also has one-fifth of Comac, Commercial Aircraft Corp. of China. In 2016, Comac plans a 150-seat jet for the marketplace.

So, it would be intriguing to peek at the strategic plans of Boeing and Airbus to see if they did a thorough forecast of all these developments. The positive and negative events illustrate how important it is to thoroughly explore all contingencies. That includes funding. The controversy over government funding has unnecessarily cost both sides valuable resources.

And how can a smaller business capitalize on the Boeing-Airbus case study, and maximize performance with strategic planning?

Strategic planning starts with a SWOT analysis: Analyzing your internal strengths, weaknesses along with your external opportunities and threats.

The basic categories to be evaluated in your internal operation should include:

1. Management
2. Product/Services
3. Customer Service
4. Human Resources (including likelihood of employee strikes)
5. Marketing
6. Operations
7. Technology
8. Security
9. Financial
10. Viewpoints of your customers

Externally, you’ll want to assess these factors:

Socio-cultural – including demographic movements, the aging baby-boomer demographic, consumer tastes, population shifts, and the trend toward healthy lifestyles.

Economic developments – consider interest rates, inflation, fluctuations in currencies, and stock market trends.

Technology – including information technology, privacy concerns, production and the Internet.

Politics – issues such as federal, state and local levels in both taxes and regulatory issues.

Industry competition – obviously, you’ll need to develop a strong awareness about your competitors.

Customer profiles – analyze your target customers’ changing characteristics, wants, and needs. Determine what you want to target in average age, income, gender, and marital status. Evaluate their buying preferences and how they feel about your industry.

Once the SWOT analysis has been completed, you can develop and implement your strategic plan.

However, many small business owners and managers fail to properly budget time for strategic planning and they fail to capitalize on the expertise of their employees. After all, employees deal with customers every day.

Involving your employees will improve their character and morale. It will also promote teamwork, which will motivate employees to higher performance. So don’t overlook their experiences and instincts, and be sure to obtain their support.

In fact, every stakeholder – from employees to customers – should be part of the comment process to help develop and implement your action plan. Identify the leaders and best thinkers in your company to help you. It will enable you to plan using your vision with goals for entering new markets and introducing new services or products, and to obtain efficiencies by developing strategies for quality.

Consider other “dos and don’ts” of strategic planning.

Dos:

• Assign a strong personality to administer the process
• Develop benchmarks for performance and results
• Anticipate how the strategic planning changes will affect your employees, processes, and culture
• Publicize the strategic plan early on and regularly
• Monitor the plan’s progress and make changes when necessary
• Reward the positive behavior of supportive employees and take appropriate action against those who fail to participate productively in the process

 Don’ts:

• Don’t permit a lackadaisical attitude and employees’ resistance to change
• Don’t allow poor follow-through on initiatives

Finally, do not obsess about looking over your shoulder. Consider the teachings of author/consultant Seena Sharp on competitive intelligence, “Competitive Intelligence Advantage: How to Minimize Risk, Avoid Surprises, and Grow Your Business in a Changing World,” (Wiley and Sons).

She recommends not focusing heavily on your competition. Here’s a link to my column: Hottest Tactics to Beat Your Competitors.

From the Coach’s Corner, for an analysis on the lessons from UAL’s six strategic-planning woes, see: Losses Show Why United Airlines Needs Strategic Plan

Sports Offers Lessons on Strategic Management and Planning

 

Lessons from sports – strategies by legendary Yankee manager Casey Stengel and outstanding football coach Bill Walsh – serve as great metaphors for business success via innovation and strategic management.

Stengel was quite the innovator and taught us wonderful lessons about human resources, especially the tactic known as platooning in baseball when he managed the Yankees for three decades starting in the 1940s. He is the only Major League manager to win five consecutive World Series and he won seven championships from1949 to 1958. Stengel and his influence were as well-known as his legendary players, including slugger Mickey Mantle.

Stengel said it best: “Finding good players is easy. Getting them to play as a team is another story.”

Stengel, perhaps unknowingly, provided another insight about management strategy: “If we’re going to win the pennant, we’ve got to start thinking we’re not as good as we think we are.”

Innovation is also a lesson from Walsh, the visionary Hall of Fame football coach, who guided the San Francisco 49ers to three Super Bowl titles.

Two of Walsh’s keys to success:

1. Daily, he relentlessly assessed his team and personal-coaching performances.
2. He knew talent and he was close with his players, but he was clinically objective. Walsh knew when his players were through in their careers. For the overall good of the 49ers, he’d rather see a player retire too early instead of waiting too long to hang up the uniform.

There was a motivational benefit to his innovative approach: His players were aware of his philosophy and played more efficiently to keep their jobs.

Innovation in Business

Troubled companies need strategic solutions:

• Changing their risk-averse culture
• Developing a more efficient HR program
• Implementing strategies to get-to-know their customers
• Establishing benchmarks and tying them to salesperson/sales management performance
• Developing a leadership program
• Hiring better communicators and innovators

That means hiring a Casey Stengel or a Bill Walsh for strategic thinking, a state-of-the-art human resources program, and strong marketing focus.

Textbook on Strategic Management

Executives might read a college textbook, “Strategic Management: An Integrated Approach,” by University of Washington’s Dr. Charles W. L. Hill and Texas A&M University’s Dr. Gareth R. Jones.

Just as consumers like one-stop shopping at Costco or Fred Meyer, the book is a good source for learning a host of business solutions.

Its 647-pages are full of case studies of well-known businesses on customer satisfaction, efficiency, innovation and quality. In fact, dozens of authors have cited the book for solutions. They range from developing trends in performance and competitive advantage to business strategy and technology.

For example, the authors wrote:

“The major components of the strategic management process are defining the mission and major goals of the organization; analyzing the external and internal environments of the organization; choosing a business model and strategies that align or fit an organization’s strengths and weaknesses with external environmental opportunities and threats; and adopting organizational structures and control systems to implement the organization’s chosen strategy.”

Do you capitalize on your organizational wisdom where your proverbial tires meet the road? If not, talk with your customers and lower-level workers.

“A revision of the concept suggests that strategy can emerge from deep within an organization in the absence of formal plans as lower-level managers respond to unpredicted situations,” wrote the authors.

“Strategic planning often fails because executives do not plan for uncertainty and because ivory tower planners lose touch with operating realities,” they pointed out.

Key question for management

My sense is that strategic management often fails because companies fail to successfully answer one basic question: Are the right managers in place?

Many organizations fail to reach their potential because they’re guilty of ignoring The Peter Principle. That’s the theory first introduced by Lawrence Peter, who received his doctorate from Washington State University in 1963.

In 1968, Dr. Peter wrote his book, “The Peter Principle,” in which he theorizes: “In a hierarchy every employee tends to rise to his level of incompetence.”

Consider your own career: How many times have you worked for incompetent bosses?

Just because an employee is adequate in one capacity, does not mean the person is competent at a higher level. Often, companies will promote salespeople into management without adequate education or training.

In essence, violation of The Peter Principle leads to the downfall of organizations.

As Biz Coach, I regularly hear complaints about poor management. As a business-performance consultant, I’ve seen it many times in both the private and public sector.

The temporary solution in medium to large organizations is what Peter calls “lateral arabesque.” That means moving the incompetent employee laterally to another position to prevent further damage to the organization.

The long-term solution is two-fold: Hire the right people and conduct tactical performance reviews to lay a foundation for up-to-date strategic management.

Stengel and Walsh would be impressed.

From the Coach’s Corner, here are related resource links:

Overcoming Obstacles for Business Turnaround — 13 Steps

9 Dos and Don’ts for Best Decision-making

RIM Provides 9 Lessons in Best Turnaround Strategies

“If you don’t know where you are going, you will wind up somewhere else.”

-Yogi Bera

 

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?