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Planning for Rapid Growth and Economic Uncertainty

Online Retail Logistics Conference 18-19 November 2014

Charles E. CrouchLecturer in e-Business & Digital MarketingChisholm Institute

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Images: BBC

Several years ago science historian James Burke hosted a TV show on the BBC, Connections, an Alternative View of Change, discussing the history of science, invention and accompanying changes.

Images: Wikipedia, C. Crouch

For example: The invention of the stirrup in China let people sit securely on horses. Mounted cavalry led to heavily armored knights on massive horses with accompanying squires and attendants. Supporting these knights required major changes to agriculture, estates and towns, leading to centralized commerce.

However, for centuries the rate

of change was slow.

1978! 1979!

Image: BBC

In the last episode of Connections, James Burke discussed change itself, noting that “The ease with which information can spread is critical to the rate at which change occurs.”

But this episode was televised in 1979!

Photos: Wikipedia, Twentieth Century Fox

This was the world in 1979:

The Apple II was a hot computer.

The Internet did not exist. Several universitiesand government labs were connected by something called the ARPANET.

Mobile phones were still a decade away.

Social Media?What’s that?

Photos: Microsoft, iStockPhoto

Today we are overwhelmed by change. Let’s look at a few things you can do to address the challenge of continuous change.

Strategy as Simple Rules

Image: iStockPhoto

Photos: TheOldMotor.com, C. Crouch

When business was simple, one could afford complex strategies

Now complex business needs to simplify

Establish Position

Leverage Resources

Simple Rules

Strategy TypesThe classic view often taught in school. A unique position is exploited in the market.

Photos: C. Crouch

A newer approach in which differentiating resources are used across separate markets

Knowing when to act, seizing fleeting opportunities

Adapted from: Kathleen Eisenhart & Donald Sull, “Strategy as Simple Rules”, Harvard Business Review, 2001

Simple Rules StrategyQuickly recognize positive/negative situations in the marketplace.

Act accordingly.

Military forces have used a simple rules strategy for years by publishing clear, brief Rules of Engagement to tell troops how to act.

3 Approaches ComparedPosition Resources Simple Rules

Competitive Advantage

Unique, valuable position

Unique, valuable resources

Unique, simple rules &

processes

Works Best

Well-structured slowly

changing markets

Well-structured moderately

changing, markets

Ambiguous rapidly changing

markets

RiskHard to alter position as

markets change

Slow to build new resources

as markets change

Hesitant to take promising opportunities

Source: K. Eisenhart & D. Sull, “Strategy as Simple Rules”, Harvard Business Review, 2001

Establish Position

Leverage Resources

Simple Rules

TAXI

Both the Established Position and Leveraged Resources Strategies are under attack today by nimbler, digital-based companies. But having a Simple Rules strategy is one way to adapt.

Maximum 75 employees1.

Smaller companiesGrowth phase

Cheaper

Technology skills75% must be engineers2.

✔

✔

Some years ago Cisco was acquiring small companies at the rate one per week. They

used a set of simple rules to quickly decide which companies to investigate farther.

In Silicon Valley, Mergers Must Meet the Toothbrush TestBy DAVID GELLES AUGUST 17, 2014 9:22 PM

When deciding whether Google should spend millions in acquiring a new company, Larry Page, asks whether the acquisition passes the toothbrush test:

Is it something you will use once or twice a day,and does it make your life better?

http://dealbook.nytimes.com/2014/08/17/in-silicon-valley-mergers-must-meet-the-toothbrush-test

Quickly evaluating potential opportunities is still a vital skill today.

Tall Timber Café

Photo: Eddie Jim, goodfood.com.auSource: Fiona Smith, Australian Financial Review, 25 Oct 14

Steve Rowley, co-owner of the Tall Timber Café in Melbourne, Australia was asked by a customer for some old coffee grounds to use as a scrub for cellulite. Did he just give the customer the grounds…?

No, he built a product and started a business. After18 months FrankBody.com is now selling one pack per minute and shipping to countries around the world.

Business Processes

Photo: C. Crouch

Companies can apply this same idea of Simple Rules to their internal business processes.

Social Media?

Photo: C. Crouch

For example, social media is acommon marketing tool today,but many companies make mistakes using it.

Social MediaPolicy

To provide guidance, many organizations prepare a social media policy (probably because their lawyers or HR told them to). They instruct everyone to read the policy, but how many people actually use it?Could “simple rules” make this easier?

Source: Air Force Public Affairs Agency, Emerging Technology Division, 2009

Respond to online blogs

Flow chart

Easy to use

The US Air Force has a one-page policy/flow chart showing how to respond to online blogs.

Which makes more sense? A heavy document no one reads or a light page everyone can use?

Think Lean

Photo: AngMoKoi, Wikipedia

The Lean Startup movement is popular now as entrepreneurs around the world start their own businesses.

Build Test

Feed

back

Feed

back

FeedbackGatherRequire- cents

Releaseto

Market

Customers

Customer Development

Lean startup began in the software industry where the classic model involved customers at the start, but then ignored them until the final product was delivered. Steve Blank popularized “customer development” which involved customer feedback at all stages in the software development process.

‣ Blank’s Customer Development

‣ Agile Software processes

‣ Toyota Lean Production

Lean: efficient resource use

Especially Time

Agile development uses collaboration and continuous improvement to evolve requirements and solutions.Lean production focuses on reducing waste to improve customer value.

Eric Ries combined Steve Blank’s customer development ideas with agile software development and Toyota’s lean production into the Lean Startup

Business Idea Development

Frontload

Time

Classic

Lean

Classic development loads lots of resources at the front end of a project.

Lean methods run many small trials to continually improve as the project progresses

The Lean Startup idea has proved so useful that a whole ecosystem has evolved.

Thinking LeanDetermine best plan

Identify riskiest parts

Test these first

Small experiments

Build Something

No One Wants

You can use lean startup methods in your own organization. The biggest risk is building something no one wants or uses, so find this out early, rather than at the end.

Photo: iStockPhoto

Source: Botsman, R. “Sharing’s Not Just for Startups” Boss Magazine, Oct 2014

Staff at Marriott hotels noticed people wandering through their lobbies, looking for places to meet and work for short periods. Also, Marriott had loads of underused conference rooms.

Meeting Space: by the hour

They decided to test a new service, renting conference rooms by the hour. One risk was the expense of building a room reservation system. Another was no one would want to use the service.

Photo: Marriott

To reduce these risks they partnered with LiquidSpace to run the booking system and had a trial run at hotels in Washington DC and San Francisco, places where people were used to working remotely.

http://www.workspaces.marriott.com

The test was successful and todayWork[Space] on Demand is operating at over 400 hotels and reaching a new customer base of local lawyers, consultants and independents.

Pascale Helyar-Moray

I wanted to be able to create jewelry exactly

as I wanted it.

StyleRocks is an online Australian company offering customized jewelry.

The owner started StyleRocks when she was home with children and frustrated

she could not get out to shop.

The company provides different options to customize each piece. They offer a free resizing service

for rings but noticed many people still got this wrong.

The website offered a sizing guide which had to be printed, cut, pulled to fit and measured.

3D Ring Printing

Check sizing

Credit on purchase

More committed

Alternatively, customers can order a test ring made on a 3D printer.

This program has recently launched as a test to see how

the market reacts.

The design files for the rings were already at hand, and an outside service prints the 3D rings, reducing the cost of this trial.

Takeaways

Photo: C. Crouch

Today we live in a whack-a-mole world where new products, competitors, services and customers pop up at any time.

Video: YouTube

Simple Rules

Can you simplify your own rules and processes to make them easier to use when conditions change - and they will!

Photo: ad:tech/dmg events

Think Lean

Experiment with new ideas, see what works for you, then do more of them.

Photo: C. Crouch

Assignment

1. What complex process

can I replace with a

simple rule?

2. That new idea I have.

How can I try simple

experiments to test it?

I am a teacher. Now it’s your turn.

Here is your assignment.

Questions?

Charles E. Crouchcharles.crouch@mac.com

+61 447 413 070 CharlesECrouch

Photo: iStockPhoto

Planning for Rapid Growth and Economic Uncertainty

Online Retail Logistics Conference 18-19 November 2014

Charles E. CrouchLecturer in e-Business & Digital MarketingChisholm Institute

CC by 4.0

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