The Role of Technology in Tactical Execution

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The Role of Technology in Tactical Execution

• Certified Franchise Executive Program
• 40th Annual IFA Convention
• San Diego February 18, 2000

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It makes no difference what your product or
service is. There is no limit to the amount of
quality that can be added to anything. If you
believe in the unlimited ability to improve your
offer, if you behave with total integrity in your
business dealings, then all the rest, market
share, growth and profitability will take care of
itselfTom Peters In Search of Excellence
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Most of Toms heros profiled in his book In
Search of Excellence made it to the business
dustbin in the 90s
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Improvements in technology, speed of
communication, Incumbent Inertia,
de-establishment of corporate structure,
entrepreneurs that dont respect the rules and
the emergence of e-commerce as a tactic made
yesterdays heros todays has-beens.
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We are living in an age of business where the
upstart may hold the edge over the well
established and seemingly entrenched veteran.
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Clayton Christensen refers to this phenomenon as
the impact of Disruptive Technology
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How do you survive in an age of Disruptive
Technology?Tactical Executionbetter
yetTactical Warfare
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Remember the Brits and the HessiansBest armies
in the worldFought by the rulesWore nice bright
uniformsStayed in nice neat linesRemember the
ColonistsUndercapitalized, understaffed, under
armedCouldnt care less about the rulesStood
behind the treesPicked off the Brits and the
Hessians standing in their nice straight - by the
rules - lines
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Weve been through this process forever Maybe
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The ancient Greeks gave us the word -
Stratigiki which means theArt of the
General
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Leverett S. Lyon back in 1926 referred to it as
Marketing Management Marketing management may
be conceived of as the continuous task of
re-planning the marketing activities of business
to meet the constantly changing conditions both
within and without the enterpriseIt took us a
long time to get back to his basics
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By the 50s marketing management had de-evolved
to budgeting and a search for corporate identity
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The 60s brought the age of Long Range or
Forecast Based Planning supported by annual
budgets, corporate goals and bloated strategic
planning teamsAt one point GE had 200 people in
its Strategic Planning Department and they
werent alone
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The theory back in the 60s was that you could
guarantee your future if only you could analyze,
quantify, predict, spin scenarios and work hard
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By the 70s we discovered that the future does
not always live up to the plan and worse - when
the present did not meet our expectations - we
did not have the structure to adjustThe fuel
shortage taught us that
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What caused the problem
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Management by Portfolio or better known as Boston
Consulting Groups Growth Shared Matrix
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The premise wasA conglomeration of diverse
businesses where top management did not need to
understand each businessBusinesses were managed
like a stock portfolio for the overall companys
goodThe growth of the professional planner
whose dominance over operating managers stemmed
from their ability to count, think and produce
reams of well drafted paper
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Enter the 80s

• The emergence of global competition
• The emergence of the low cost entrepreneurial
  competitor who
• Focused on the customer and what they wanted
• Entered the market by initially skimming the
  business nobody wanted much
• Made up the rules to fit the times

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It went like this

• New technology takes the low end of the market
  GM Ford and Chryslers gift to the Japanese
  ignore the low cost, fuel efficient, small car
  market enter Toyota and Datsun
• New market entrant improves quality, maintains
  low cost, innovates products and takes away the
  entrenched companies cash cows. The old days are
  dead. Cadillac failed to capture the up-coming
  Cadillac owners. Where are the Cadillac drivers
  today? theyre parking their Lexus

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How did business react

• We initially stayed with the old rule book
• We looked internally on how to improve the old
  practices
• We followed Peters advice and managed by
  walking around
• We stayed with our traditional market niches
• Eventually we got around to improving quality,
  cutting costs, restructuring the organizational
  bloat.

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But we maintained our focus on old strategic
processes
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What happened

• Incumbent inertia created new opportunities and
  market leaders

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Where was Nestle and Maxwell HouseWhere was
Parker, Sheafer and WatermanWhere was ABC, NBC
and CBSWhere was IBMWhere were all of the
printing franchises, Pitney Bowes, Xerox and
temporary office companiesWhere was the
SearsWhere was the US Post Office
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Changing the Rules

• While the newcomers rewrite the rules, the
  old-timers attend the same conferences, read the
  same literature, and benchmark the same (last
  years) companies Gary Hamel

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If you wait for consumers to tell you what you
want youre likely to be too lateRemember the
VCR and the minivanWho wanted them before they
were introduced?
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Enter the 90s
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• We continued to restructure by cutting costs and
  downsizing
• Customer satisfaction became more dominant
• Speed became a strategy for
• Staying ahead
• Taking advantage of opportunities

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Moving into the next millenniumWhat have we
learned?
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Over the last ten years, which companies took
best advantage of changes in your industry?

• New competitors 38
• My own company 31
• Traditional competitors 26
• Source MCI/Gallup Competition 2000 Survey

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Have the most successful newcomers in your
industry succeeded by

• Executing better 31
• Changing the rules 62
• Source MCI/Gallup Competition 2000 Survey

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Are the strategies of the 4-5 largest competitors
in your industry getting

• More alike 45
• More dissimilar 32
• Neither 21
• Source MCI/Gallup Competition 2000 Survey

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Is there something going onStrategists are
beginning to sing the same song
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To adapt is too dangerous because it means you
are always running behind. You have to find a
way of getting ahead call it vision, call it
mission, call it cause..it is basically taking
responsibility for shaping events Peter
DruckerFear cramps imagination Peter
SengeThe best swordsman in the world does not
need to fear the second best swordsman, but the
man ignorant of swords but knowledgeable about
gun powder Mark Twain
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You gotta kick the system because it wants to be
a bureaucracy Jack Welch Chairman/CEO General
ElectricAmidst all this fundamental
reshuffling, the worst mistake is to see the
future as an extension of the past N.
VenkatramanIts about becoming the architect of
industry transformation. That means creating new
markets, services and products that no one has
yet dreamed of and changing the rules of the game
in some fundamental way in the existing markets
Gary Hamel
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Dont wait for your competitors to slaughter your
cash cows. Do it yourself Lou SternInsanity
is doing the same thing over and over again and
expecting different results Tony RobbinsA
good company, using its wits, can survive
conventional challenges from conventional
competition. But, a new competitor, whose
technology may not even seem respectable at first
will blow you out of the water every time
Clayton Christensen
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Whats the solution

• Open up the process
• Forget about thinking outside the box ignore
  that a box even exists
• Dont confuse strategies with tactics
• E Commerce is a Tactic its not a Strategy

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The problem with classic strategic planners

• They are inside the organization but too consumed
  with creating a product large detailed plan
  that focuses on operating and financial details
  rather than competitive positioning and future
  markets.
• They are not the line managers charged with the
  execution of the strategy and responsible for the
  day to day market realities

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The problem with classic strategic planners

• By necessity they need to justify why their
  predictions did not come to pass and place blame
  rather than seek solutions
• They dont have the on hand market experience
  to recognize change
• They tend to cocoon within their current
  realities the company they work for
• They often lack the passion for real change

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Strategies are crafted rather than calculated

• Its an evolutionary process initial decisions
  and external events must flow together seamlessly
• You must be prepared to learn, experiment, adapt
  and lose the fear of change even if it means
  going into competition with your cash cow
• Strategies must deal with market disruptions
  created by technological and other changes

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The strategic process

• Keep the process focused on the realities of the
  market
• Follow Welchs advice and eliminate the
  abstractions, sterility and top down arrogance

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Lessons from the Jack Welch

• Quotes from Jack Welch Chairman/CEO GE
• The companys atmosphere can be defined by three
  traits
• Boundary-less behavior no limit on creativity
• Speed in everything it does
• Stretch in every target it sets
• You gotta kick the system because it wants to be
  a bureaucracy
• Giving people self-confidence is by far the most
  important thing you can do because they will act.
  
• Self confidence is thinking things through
  thoroughly and having the courage of your
  convictions.

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Jack Welch

• Competition is out there not in here
• Plaque builds up in an organization
• Good indications of success are customer
  satisfaction, employee satisfaction and cash flow
• Have a passion for excellence and hate
  bureaucracy
• Live quality..and drive cost and speed for
  competitive advantage
• Have the confidence to involve everyone
• Create a clear, simple, reality based vision
• See change as opportunity..not threat

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How do we begin?

• First you must open up the process
• Its not a secret and clandestine operation

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The players

• Committed and open senior management
• Interdisciplinary teams of line and staff
  management
• Junior staff who can think creatively
• Near retirement curmudgeons who will tell it
  like it is
• Key customers
• Suppliers
• Third party outside strategic thinkers

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And for franchisorsFranchisees individuals,
multi-unit operators, international partners,
councils and associations
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Strategic thinking has to be inculcated at all
levelsEvery member of the organization must be
trained to think strategically about customers
needs, competitors and competitive advantage
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Entrenched thinking is likely to reside in those
who have been there the longest.Seek out and
listen for new ideas regardless of the messenger
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Create a Change Atmosphere

• Create an environment to share new ideas
• Foster innovation
• Be fearless about change
• Foster an atmosphere of creative tension
• Celebrate it when it comes
• Accept mistakes and move on
• Mobilizes the organization
• Vital for evolving brands and markets

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Empower your system to think strategically

• About your customers
• About your franchisees
• About your competitors
• About your competitive advantage
• About new applications
• About niche opportunities

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Empowerment requires knowledgeIf you want
everyone to have an ownership stake in the change
process, you must expose them to all the
available information Ken Blanchard
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Be prepared to take some risks

• Look at the white spaces those opportunities
  that may not fit the current strategy or skills
  but are potential areas of growth
• Embrace speculation the future moves too
  quickly today

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Understand the real marketDevelop a process for
identifying new competition, new technologies,
new opportunitiesIts likely that your
operations, marketing, finance and management are
too wrapped up in the current game to even notice
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Thinking about your business

• What business are we currently in
• What are our core competencies
• What can we extend those core competencies to do
• How do we and how should we measure success
• Who are our customers
• Who are our competitors customers
• Who will be our customers next year
• How are our customers buying

• What do our customers want
• What can we deliver to them today next week
  next month
• How are we organized
• How should we be organized
• What does our system stand for
• What is our relationship with our franchisees
• What is our relationship with our supplies
• Who are the young turks
• Are we listening to them

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Be wary of best practices

• Following best practices simply allows you to
  catch up to someone else's yesterday
• Be bold in transformation
• Change the rules
• Aggressively seek out the white spaces for new
  products, services, delivery mechanisms
  transform the industry

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Its not simply the numbers

• Today you need to access, retrieve and distribute
  all of the relevant information, human
  experiences, market intelligence, ideas and
  solutions in real time

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Invest in Technology
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Sources of information

• Competition existing and emerging
• Consumers
• Unit management - franchise and owned
• Support personnel - headquarters - field
• Vendors
• The internet
• Outside professionals
• Everywhere and anywhere

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You need to review your current market position

• Product - is market demand changing?
• Are there new applications for your product?
• Pricing - are you positioned correctly?
• Place - are you where your customers are?
• Promotion - is your message current?

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You need to review your competitors' positions

• Are they capitalizing on a market opportunity
  you're missing?
• Has a competitive change created a new
  opportunity?
• Are they pricing competitively?
• Are they located in better areas?
• Are they communicating with the consumer more
  effectively?

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Identify the emerging brands and possible trends
and dont dismiss them
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Define your strategy to deal with existing and
emerging competition If you have corporate
arrogance because of business maturity, size,
current market position and current consumer
preference..it will likely kill you
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Keep the focus on the customer not the process

• Understand how the customer wants to shop
• Understand how the competition is delivering or
  can deliver your product to your customer
• Dont limit who you think the competition is or
  can be

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Remember the lessons from Boston Market
reasonable product - poorly executed the
supermarkets and specialty stores adapted and now
own the meal replacement segment - McD owns
Boston Market
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Deal with the classic 4 Ps its still important

• Price
• Product
• Place
• Promotion

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Look at the possibility of going into competition
with yourself- new concepts- new
tacticsConsider slaughtering the goose that
laid the golden egg while its still fertile
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If the new emerging technologies can provide new
competitors with an advantage over your existing
delivery mechanism watch out for Incumbent
Inertia
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Whats happening with E-commerce
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Were six years into the internet revolution
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The internet is currently accounting for 845
Billion dollars in saleswith short term
projections of over 7 Trillion in the next few
years NBC
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1.2 percent of consumer sales today take place
over the internet Boston Consulting Group
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67 of all online transactions however are never
completed USA TodayPeople are
browsing theyre still not shoppingThe upside
is staggering
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Is it working

• Its too early to tell but - looking at the 1999
  Christmas advertising - many experts predict that
  a shakeout from all of the 4th quarter
  advertising expenditures will be coming soon
• One reason is that there are far too many
  companies for the market to sustain due to the
  low cost of entry
• The low cost of marketing to establish brand
  recognition has not occurred as predicted
• There is a high degree of dissatisfaction by
  consumers in e-commerces ability to fulfill
  orders

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Is it working

• Opportunities for consolidation just as
  occurred in past industrial revolutions - are
  evident
• Few of the companies are making money let alone
  projections
• The hype is happening, as is always the case,
  well in front of the wave of change
• Don Valentine venture capitalist

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Regardless of whether the internet has the far
reaching global social benefits and impact on
capitalism as many have predictedthere are some
truly sustainable results for business
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Sustainable results

• The internet has caused the customer to be in
  control of the purchasing process more now than
  in any time in history
• The emergence of e-commerce and clicks and mortar
• Companies will be forced to make changes in their
  distribution systems and supply chains
• Globalization is here
• The cost of sourcing, manufacturing, and
  distribution of products and services will be
  reduced
• The distribution of wealth is likely to expand
  the gulf between the rich and the poor

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Distance Learning

• There will be a transformation of the education
  process.
• There will be schools without borders
• Cyber universities will emerge select from
  courses given on line by hundreds of universities
  and private educators with degrees issued by
  e-Harvard, e-Yale
• The emergence of Corporate Universities

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While the school (Harvard) sees itself as the 1
school for corporate leaders, the growing trend
is for corporations to train their own in
proprietary corporate universities. Harvard is
in danger of becoming a finishing school for
management consultantsClayton Christensen
Harvard Business School Professor
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The reality of change for franchisors
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For some industries in franchising - coming to an
understanding with your franchisees that
e-commerce has made encroachment concerns based
on current locations not only irrelevant but
dangerous for their future is essential
81
Hotel reservations have shifted from chain
controlled reservation systems to Auto
purchases have shifted from the local dealers to
Book purchases have shifted from Barnes and
Noble to Barnes and Noble is playing catch up
with a company that did not exist ten years
agoSupermarkets are now competing with an
online provider owned by Bechtel a construction
company
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E-Commerce has heightened an awareness that non
franchisors may have a critical advantage over
franchise systems when it comes to meeting future
competition
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Franchising is an inelastic structure

• Non franchised competition both traditional and
  e-commerce are unencumbered by individual
  concerns of encroachment and intra-brand
  competition
• Non franchised companies have the ability to move
  quickly in modifying their systems to meet market
  challenges and opportunities without the
  encumbrances of protracted contract negotiations

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Franchising has inherent limits

• Franchise systems may be limited by contract
  and by relationship issues - to the changes they
  can make to meet new opportunities and challenges
  and therefore risk becoming uncompetitive
• Traditional franchise systems suffer from a
  glass house syndrome where excluded
  participants may be distrustful and therefore
  fearful of change

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For franchisors and franchisees this may require
a rethinking of the franchise relationship If
not it requires a rethinking of the types of
businesses that can be successfully franchisedin
the future
86
It certainly requires a rethinking of proposed
relationship legislation currently being
proposed
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Focus on the customer
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Customize for the customer

• Make sure your selling and servicing match the
  needs of the customer
• Understand what they want, when they want it and
  how they want it
• and deliver it

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(No Transcript)
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The goal is not only to understand what the
customer wants now but to anticipate what they
want next and how they want you to deliver
itCapturing data on consumers and using it is
essential
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A glimpse at one growing customer segment
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The Aging Opportunity

• 2/3 of those who were ever
• 65 or older
• Are alive today
• Ken Dychtwald

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Eighty Five is Getting Younger

• Today there are 3, 684,000 people over 85 years
  old
• Ten years ago there were only 3,000,000

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Were going to live forever

• 62,000 Americans are over 100 years old
• 51,000 women
• 11,000 men
• 1990 only 36,000 over 100
• 28,000 women
• 8,000 men

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Yesterday Today - Tomorrow

• Life expectance
• First 99,000 years 18 years old
• 1900 46 years old
• Today 75 years old
• 2050 90 years old

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Whats senior anyway

• Upper limit 120 130 plus
• Clone parts not people

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What does this mean for business

• The numbers will increase as the baby boomers
  begin to become seniors
• What will they do with 30 40 50 years of
  retirement

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The retiring baby boomers already know how to
buy on the web
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The opportunity

• Someone is going to get rich selling delicious
  healthy food, hearing aids and easy to read, easy
  to open products and packaging Ken Dychtwald

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Using tactics to advance the strategy
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Franchisees

• Understand that franchisees are not fungible -
  different sizes of organizations, different
  positioning on the maturity chain, different
  local conditions, different economic positions
• Have different needs

102
Attracting new franchisees

• Potential franchisees have never been able to be
  attracted to franchisors in a uniform fashion
• Web sites and e-commerce are only part of the mix

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Servicing the franchisee

• Information will improve the ability of
  franchisors to provide services to its
  franchisees at a lower cost at a more rapid pace

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Servicing the franchisee

• Individualized headquarters and field services
• Distance learning for every level of staff
• Improved manual and training programs
• Improved market intelligence
• Improved consumer marketing
• Increased ability to localize consumer offering
• Lower cost of product and distribution
• Reduced inventory
• Partnership in e-commerce potential

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Shortening your route to market

• Company owned chains will have an advantage over
  traditional franchisors if franchisees must
  continually be persuaded to support and invest in
  change
• The solution is to involve your franchisees early
  and continually in the process

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Shortening your route to market

• Keep on top of your industry
• Investigate and make decisions on suggestions
  ASAP
• Test judiciously
• not everything can or should be tested

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Streamline testing where possible

• Take greater risk with company owned units
• Get comfortable with an intelligent approach to
  ready fire aim - readjust
• Work with an empowered franchisee advisory
  committee
• Work with larger, more entrepreneurial
  franchisees
• Set rules for acceptance or rejection of tests

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The brand

• Must still be the central focus of your system
• Must be the rallying point for franchisees, unit
  personnel, field staff, headquarters personnel
  and consumers
• Must be the fabric that transcends the manuals,
  the forms, the written procedures
• Must generate ownership and most important -
  loyalty

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Promoting the brand

• Companies must become promotion ready
• Get your message in front of consumers as often
  as possible
• Stay visible
• Dont allow the customer to discover your
  competitor
• Measure promotions in real time - use flash
  numbers
• Involve your vendor - share information,
  challenge them to replenish and service location

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Respect your people

• People are your most important asset
• Dont cut back
• Train - train - train
• Define and communicate corporate culture
• Make it simple and direct
• Demand buy in

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The organization that will truly excel in the
future will be the organization that discovers
how to tap peoples commitment and capacity to
learn at all levels in an organizationThe
bottom line of systems thinking is leverage
seeing where actions and changes in structure can
lead to significant, enduring improvementsPeter
Senge
112
Streamlining change and management in a franchise
system
113
Top Down?orBottom Up?Theories of Management
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The speed of competitive change in the new
millennium doesnt give you the luxury of
eitherYou need to empower the organization at
every level
115
An empowered organization is one in which
individuals have the knowledge, skill, desire,
and opportunity to personally succeed in a way
that leads to collective organizational
successStephen Covey
116
MSA recently tested the theory that great
franchisors are those whose headquarters
operations function primarily as support
organizations to their system by streamlining and
decentralizing the decision making
processEmpowered OrganizationsWhat we learned
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Headquarters

• Franchisee Advisory Committee
• Active with frequent communication
• Well represented based on size of franchisee
  operations and regional distribution
• Focused on not only improvements to current
  operations (marketing, products, standards, etc)
  but looking at new products, services and markets
• Review of competitive and market intelligence

118
Headquarters

• Franchisees as individuals involved at a
  strategic level
• High level of trust between franchisor and
  franchisee
• Decision making authority while consultative
  remains with franchisor macro system decisions
• Tactical changes communicated quickly and
  effectively throughout organization
• Frequent solicitation of ideas and analysis of
  feedback disseminated quickly

119
Headquarters

• Franchisor pro-active on making changes
• Reporting standards set with requirements
  vigorously enforced
• High degree of senior management involvement and
  buy-in to franchisee involvement
• Collapsed organization structure empowered
  field organization

120
Headquarters

• Significant increase in expenditure on
  relationship marketing to consumers, franchisees,
  staff and suppliers
• system communication
• internet/intranet
• web pages
• e-commerce

121
Standards - Field consultants

• Significant unit operating experience
• Multi-disciplined
• Operations
• Financial
• Training
• Marketing
• Multi-unit management experience
• Great communicators

122
Information provided to field consultants

• Knowledgeable about company planning
• Knowledgeable about franchisee performance
• financial - unit
• financial - accounts payable
• disputes - threatened and actual litigation
• Knowledgeable about expansion criteria
• Knowledgeable about competition

123
Training to field consultants

• Law - retail, industry, ADA, food safety,
  franchisee relationship, franchisee disclosure -
  including UFOC
• Market analysis
• Marketing
• Business analysis - unit performance
• Communications
• Problem solving

124
Scope of authority field consultants

• Required to be pro-active
• Franchisee right to expand - with input
• Relocation rights - with input
• Certification of store personnel or trainers
• Input into approval of new franchisees
• Approval of localized advertising
• Responsible for local communication and
  coordination

125
Limits on authority field consultants

• Authorize new products or services
• Eliminate products or services
• Negotiate royalty modifications
• Negotiate contract modifications
• Select or approve sites - input
• Sell franchises
• Issue default letters

126
Field consultant visits
Based upon current and complete information

• Business consultation
• Profit and loss analysis
• Compliance audits
• Marketing and advertising
• Local vendor relations

• Labor recruiting
• Franchisee training
• Management training
• Staff training
• Communications link
• Market coordination

127
Company owned vs. franchised

• Slightly more use of separate field organization
  - trend shifting
• Field visits identical with change of emphasis
• consultation approach
• management approach
• Standards of operation identical

128
Company owned vs. franchised

• Training for franchised and company owned
  positions provided and standards vary little
• manager
• assistant manager
• staff
• general manager
• Over half have certification program for trainers
• Over half have train the trainer program

129
You shouldnt fear changeYou should only fear
not changing fast enough
130
Michael H. Seid AssociatesStrategic Advice
Guidance Based on Real World Experience

• Michael H. Seid, Managing Director
• 94 Mohegan Drive, West Hartford, CT 06117-1403
• [phone]
• [phone] - Facsimile
• Michaelhseid_at_msn.com
• Kay Marie Ainsley, Managing Director
• 6869 Houghten, Troy, MI 48098
• [phone]
• [phone]
• Kaymarie_at_concentric.net