A report this week announced that the sales of alcohol and lottery tickets have increased. I am not surprised. Historically, the sale of such “vices” have remained steady or increased during down economic cycles. It has long been believed that the sale of chocolate often increases during recessions. This is one trend that is easy to predict by strategists.
Much of the future is often predicted using trend analyzes. It should be noted that the sale of lottery tickets has increased in most of the states that offer the tickets for sale. Another interesting fact is that revenue at casinos has actually decreased – with the assumption that many are willing to spend a few bucks to gamble for a better future, but they are not willing to use gasoline and chance losing more money at a casino. So, while people are gambling, they are mitigating their risks by avoiding casinos.
It appears many are grabbing a beer in one hand and a lottery ticket in the other while waiting for the economy to recover.
On a related note, more people often return to school during down economic times and some colleges and universities are predicting an increase in enrollment for 2009.
Tuesday, December 30, 2008
Saturday, December 27, 2008
REDISTRIBUTION OF WEALTH
For nearly a decade I have advocated the use of strategic alliances and joint ventures for the purpose of creating synergy and innovation. During that same time period many executives have been heavily engaged in pursuing mergers and acquisitions. While this management practice has been beneficial at the corporate level (most of the time) it has resulted in stagnant economies all over the world as M&A’s merely redistribute the wealth.
Alliances and joint ventures are most often formed by two or more organizations who see a strategic opportunity but needs or wants to join forces to take advantage of the unique opportunity – either because it lacks the resources and abilities to pursue the opportunity alone or in order to mitigate risk. Once formed, new products, services or marketplaces often result from the collaborative effort. Thus, synergy is created to generate new revenue or wealth from areas where revenues most likely would not have resulted had the companies acted independently.
Instead, most companies have been engaged in mergers and acquisitions. In many instances (DaimlerChrysler and AOL/Time Warner) the transactions often result in an erosion of shareholder value. In few instances do mergers and acquisitions result in creating new wealth instead of shifting or redistributing funds from one shareholder to another.
In order to not only recover from the current economic downturn, but also strategically prepare for the short- and long-term future of the organizations and the economies in which the companies operate, companies should be forming strategic alliance and joint ventures today. I know the urge to acquire is great, particularly now with so many companies valued so low (and there may be instances where M&A’s can be the right strategic move) but cash flow, stock and other management resources may be better used by forming strategic alliances and joint ventures that are designed to earn new market share as soon as the economy begins to recover.
Alliances and joint ventures are most often formed by two or more organizations who see a strategic opportunity but needs or wants to join forces to take advantage of the unique opportunity – either because it lacks the resources and abilities to pursue the opportunity alone or in order to mitigate risk. Once formed, new products, services or marketplaces often result from the collaborative effort. Thus, synergy is created to generate new revenue or wealth from areas where revenues most likely would not have resulted had the companies acted independently.
Instead, most companies have been engaged in mergers and acquisitions. In many instances (DaimlerChrysler and AOL/Time Warner) the transactions often result in an erosion of shareholder value. In few instances do mergers and acquisitions result in creating new wealth instead of shifting or redistributing funds from one shareholder to another.
In order to not only recover from the current economic downturn, but also strategically prepare for the short- and long-term future of the organizations and the economies in which the companies operate, companies should be forming strategic alliance and joint ventures today. I know the urge to acquire is great, particularly now with so many companies valued so low (and there may be instances where M&A’s can be the right strategic move) but cash flow, stock and other management resources may be better used by forming strategic alliances and joint ventures that are designed to earn new market share as soon as the economy begins to recover.
For the next decade, organizations should be concentrating more on strategic alliances and joint ventures and less on mergers and acquisitions for long-term growth.
Wednesday, December 24, 2008
FAILURE TO PLAN IS A PLAN TO FAIL
Yesterday, a water main broke just outside of Washington, DC stranding motorists for hours as rescue workers removed motorists from their vehicles and utility personnel figured out a way to reach the shut-off valves. You might be surprised to know that water main breaks are a common occurrence in Bethesda, Maryland as well as other communities throughout the United States.
From a strategy point of view, there are several lessons-learned from this man-made wall of water. First, it is becoming more and more evident that the fact that the United States government does not develop a strategic plan is hampering the ability for communities to uniformly and systematically respond to infrastructure needs. While many departments within the government develop their own strategic plan, no government entity creates a systemic strategic plan for the country.
Secondly, because the government agencies fail to plan strategically, the first responders and utility workers are forced to develop contingency and continuity plans in order to react to events that occur as a result of the lack of proactive strategic planning.
Of course, those who follow my HISTOB-PEP™ model realize that strategic decision making often centers around money and who is going to pay for the implementation of a strategic plan. For example, it would cost tens of billions of dollars, if not more, to pay for necessary upgrades to the infrastructure in the United States. Who should pay for those upgrades: Local or county governments? State government? Federal government? Ultimately, it is the taxpayer who would pay for the upgrades, but deciding who should receive the budgeted funds would be a fiscal fight of monumental proportion.
I have long-stated that the United States government needs to design and implement a long-term strategic plan based upon generally accepted objectives and goals that are centered around proactive growth and development, instead of relying on contingency and continuity planning related to responding to situational events.
From a strategy point of view, there are several lessons-learned from this man-made wall of water. First, it is becoming more and more evident that the fact that the United States government does not develop a strategic plan is hampering the ability for communities to uniformly and systematically respond to infrastructure needs. While many departments within the government develop their own strategic plan, no government entity creates a systemic strategic plan for the country.
Secondly, because the government agencies fail to plan strategically, the first responders and utility workers are forced to develop contingency and continuity plans in order to react to events that occur as a result of the lack of proactive strategic planning.
Of course, those who follow my HISTOB-PEP™ model realize that strategic decision making often centers around money and who is going to pay for the implementation of a strategic plan. For example, it would cost tens of billions of dollars, if not more, to pay for necessary upgrades to the infrastructure in the United States. Who should pay for those upgrades: Local or county governments? State government? Federal government? Ultimately, it is the taxpayer who would pay for the upgrades, but deciding who should receive the budgeted funds would be a fiscal fight of monumental proportion.
I have long-stated that the United States government needs to design and implement a long-term strategic plan based upon generally accepted objectives and goals that are centered around proactive growth and development, instead of relying on contingency and continuity planning related to responding to situational events.
Tuesday, December 23, 2008
DIAMOND EYES
Just a short time ago, while flying back to the United States from Singapore and Malaysia, I watched a movie on the plane that was based upon the book Dive by Eto Mori. The movie was about The Mizuki Diving Club and its desire to overcome financial hardship and to have one or more of its divers make the Olympic swim team. In the movie there is a young diver trying to make the team and one of his coaches told him that he had the potential to be great he had Diamond Eyes.
In the movie, this term meant the young diver had the ability to envision the complete dive – all the way through the rotations and entry – and into the water. He had the vision to see his future.
You might be wondering what this has to do with business and strategy. Those who have the ability to see through the issues and the short-term economic cycles and see the business environment in the future with Diamond Eyes will likely be the one who becomes the industry leader.
Are there any examples of individuals how have Diamond Eyes? I’m not sure but I see some examples of individuals who have made some business decisions that may be a result of Diamond Eyes. Warren Buffett quickly determined that the dot com was being drive by non-traditional business practices and not likely to last. He made the strategic decision to not participate in the dot com companies. He proved to be right. Most recently, Jamie Dimon, the CEO of JP Morgan Chase, saw that the sub-prime mortgage industry was about to collapse and he immediately exited that risky line of business – nearly 18 months before the collapse while he could still get a return on the portfolio.
I know it is easy to become engaged in the day-to-day issues facing organizations, particularly if the business is trying to survive; however, those who have Diamond Eyes have a better chance of not only surviving, but becoming a market leader.
If you don’t have someone with Diamond Eyes on your team – find someone.
In the movie, this term meant the young diver had the ability to envision the complete dive – all the way through the rotations and entry – and into the water. He had the vision to see his future.
You might be wondering what this has to do with business and strategy. Those who have the ability to see through the issues and the short-term economic cycles and see the business environment in the future with Diamond Eyes will likely be the one who becomes the industry leader.
Are there any examples of individuals how have Diamond Eyes? I’m not sure but I see some examples of individuals who have made some business decisions that may be a result of Diamond Eyes. Warren Buffett quickly determined that the dot com was being drive by non-traditional business practices and not likely to last. He made the strategic decision to not participate in the dot com companies. He proved to be right. Most recently, Jamie Dimon, the CEO of JP Morgan Chase, saw that the sub-prime mortgage industry was about to collapse and he immediately exited that risky line of business – nearly 18 months before the collapse while he could still get a return on the portfolio.
I know it is easy to become engaged in the day-to-day issues facing organizations, particularly if the business is trying to survive; however, those who have Diamond Eyes have a better chance of not only surviving, but becoming a market leader.
If you don’t have someone with Diamond Eyes on your team – find someone.
Monday, December 22, 2008
INTRODUCTION
In this time of economic uncertainly, there are many opportunities that are available to those organizations that think and plan strategically. The days of completing a 3-5 year strategic plan are quickly diminishing as organizations now see the need to include the last cyclical change into their trend analysis. The Strategy Expert™ is advising clients to plan to the year 2020 to help organizations think innovatively and long-term, through the cyclical ups and downs of the economies.
In addition to the need for longer-term analysis and planning, the process of the executive committee heading off for an annual three-day golf/strategy retreat appears to be over as well.
Great companies are revisiting their strategic plan monthly; good companies, quarterly and companies who are likely to be surpassed by the competition, on a yearly basis.
The initial purpose of this blog is to help integrate the methodology and process of strategic planning with the day’s events.
Note: This blog is provided for general informational purposes only and nothing contained within this blog should be considered professional management advice.
In addition to the need for longer-term analysis and planning, the process of the executive committee heading off for an annual three-day golf/strategy retreat appears to be over as well.
Great companies are revisiting their strategic plan monthly; good companies, quarterly and companies who are likely to be surpassed by the competition, on a yearly basis.
The initial purpose of this blog is to help integrate the methodology and process of strategic planning with the day’s events.
Note: This blog is provided for general informational purposes only and nothing contained within this blog should be considered professional management advice.
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