People are already thinking about the mid-term break that we have from Friday afternoon onwards. Due to which the mood is upbeat with people having an extra spring in their steps. It is amazing what the incentive of a future break does , even to senior experienced professionals. Today, we have three sessions and a planned two hour one-on-one sessions with your living group mates. Which incidentally, our group is not using - as we all felt that we are open enough with each other !
First session today was on Marketing, where we discussed a case of a marketing led transformation of a company. The case describes how a CEO transformed Burberry from a tired outerwear manufacturer into a stylish luxury brand over five years. She did so by elevating Burberry's stature in the fashion world, updating the brand image and revitalizing the product line. Now they compete with brands like Gucci and Polo Ralph Lauren.
In the case the new CEO tried to span a brand across fashion and lifestyle. There is an inherent risk in doing so, but if managed well can raise the intrigue in customers. In some brands, there is a finite possibility of a brand being hijacked by a group of "undesirable" elements of society, like what happened in the case of Burberry. But was contained primarily to the UK and well managed, so it did not hurt the brand. In the last few years, Digital Marketing is the main focus area, both internally and externally - and is it packaged well and presented.
And they have over 1.6m fans on Facebook and over 50k followers on Twitter ! We had senior representatives from Burberry with us in class today - so they were able to take some questions as well. This concept also makes the cases quite interesting and lively.
Continuing our discussion on Competitive advantage, today in our session on Strategy we discussed the case of "The Economist". Similar to the case of Walmart, the idea is to drive a wider wedge between the customers' "Willingness to Pay (WTP)" and the cost incurred to provide the service - here the Economist increased the WTP in the crowded space of news and analysis. In fact, it is not very clear whether they drove costs down, so to that extent there is similarity to Walmart, but unlike Walmart they are not low cost.
Economist decided to focus on commentaries rather than news; they felt, and probably rightly so, that news is a commodity, and commentaries are more valuable. If we put all these in the strategy framework, it looks like follows:
- Type of advantage : High WTP for commentaries
- Scope of advantage:
- Customer scope: curious readers (formerly rich business people ?)
- Product scope: Core magazine + website (+ smaller, specialized publications + Economic Intelligence Unit)
- Geographic scope: Global coverage, with distribution focused on English speaking nations
- Activities:
- Firm Infrastructure
- Have the trustees, not the CEO, appoint the Editor-in-chief
- Emphasize the global perspective
- Be fiscally conservative, socially progressive
- Integrate online activities closely with print
- Make section managers responsible for online content with help from channel managers
- HR
- Employ 70 writers mostly young and many from Oxford
- Use rotations to develop generalists
- Technology/Product development
- Pay little attention to readers when developing content !
- Editorial
- Emphasize analysis and commentary
- Focus on 500-700 word articles
- Use irreverent tongue-in-cheek style
- Mostly use same content world-wide
- Do not use bylines - no author names in any article
- Use print content as basis for online, with some changes such as daily analysis, author blogs, expert debate etc
- Marketing
- Develop badge brand focused on image of a smart reader; snob appeal
- Charge readers high prices for print and online magazine
- Charge for some online content
Interestingly, during the period 2001-2008, Economist is the only magazine which doubled its subscription base worldwide and significantly increased its print advertising revenue; the comparison is as follows: Forbes, Fortune, HBR had flat or slightly higher circulation; Business Week, Newsweek, Time and US News had decline in circulation. So, the Economist must have done something right !
The question we discussed was whether the Economist should change its strategy now ? If yes, why, if not, why not. Most of the participants felt that there is no need to change the strategy, though the Prof. opined that a change in strategy with more online focus is needed. The bigger question is this: when should you change a successful strategy ?
- A reliance on financial indicators alone is dangerous - because it is a lagging indicator
- What are your firms' leading indicators ?
- Does your strategic analysis indicate that
- the current platform is truly smoldering (meaning: burn sluggishly, without flame and often with much smoke !)
- An alternate advanced position exists or can be created
- And your organization can get there
Most often, organizations and leaders have this tendency to wait too long !
Today was the first of nine classes that we will have on "Building competitive advantage through Operations". These classes are taken by Prof. Ananth Raman. It is about getting extraordinary work from "ordinary" people.
There are three themes related to operations:
- Operational Execution
- Empathy
- Investors
While we will be discussing the last two topics in later sessions, he started of with this dramatic statement:
It will be interesting to debate this with the strategy professors !Excellent execution and mediocre strategy will beat mediocre execution and excellent strategy
We discussed the Toyota Production System (TPS) in detail, including a small video clip of how the system works in a Toyota US factory. The case itself was used as a canvas to discuss Toyota's approach towards productivity and work culture. Some very interesting observations and points which were debated in class:
- Operations excellence can be copied, but only in the long run, and assuming that the leader stays static
- According to Toyota, TPS cannot be copied, unless you copy what is going on in our people's heads
- TPS is not about stopping the production line (by pulling what is called the Andon cord), but about creating a community of scientists; all members of the production line are expected to think and behave like scientists working towards solving a problem.
- With all the recent problems that Toyota had in the US with its braking system, there was debate on why the "andon cord" was not pulled
- Many participants felt (including many Americans) that by asking the CEO of Toyota to come and testify to the US Congress, the US system was using a different benchmark for Toyota as compared to the big US auto makers.
- And the Toyota's CEO's response is a lesson in leadership and humility, under immense social and financial pressure - in my opinion. Here is what he said to the US congress on Feb 23, 2010, "Toyota has, for the past few years, been expanding its business rapidly. Quite frankly, I fear the pace at which we have grown may have been too quick. I would like to point out here that Toyota's priority has traditionally been the following: First; Safety, Second; Quality, and Third; Volume. These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers' voices to make better products has weakened somewhat. We pursued growth over the speed at which we were able to develop our people and our organization, and we should sincerely be mindful of that. I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced".
I was a great end to the day with the uplifting thought that great leaders are also humble.
Went to the Gym to do something different.Attempted "spinning" in the Spinning Studio. I was quite apprehensive of going, but was cajoled by my friend Bart, who is a regular. Spinning is a vigorous indoor cycling exercise, which we do in a coordinated manner, led by an instructor, who guides participants through a series of phases, from warm-up to more challenging phases, to a period of peak effort followed by a cool down. I did this for about 30 min and I was seeing stars after that ! The cool thing about the HBS studio is this : every cycle generates electricity and the group effort feeds the grid. After all the effort, I produced 35 watts of energy, whereas my friend Bart did 130 watts !
One more day and the break begins .. hold on tight. More later ...
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