A Business Technology Place

Long term thinking – right now

“If you don’t have a real stake in the new, then just surviving on the old – even if it is about efficiency – I don’t think is a long-term game.” – Satya Nadella

Is any business safe surviving on “the old”? Managing a product or service that is in decline requires skill. Companies that do it well can use the cash to fund investment in other areas and to support their long term vision. I’ve spent a large portion of my working life in the print industry with declining product sets. The business of print is, and has been, a good business to run. But all products run the full life-cycle. Continuing to focusing on getting more efficient at a specific product or service is like a race to zero when competition is factored in the equation. At some point the financial margins have been squeezed and re-squeezed to a point that it becomes difficult to sustain and support the business for future growth.

How is long term thinking connected to now?Vision

One of the principles of the Toyota Production System (TPS) is to base management decisions on a long term philosophy. That’s easy to agree with, but more difficult to focus on in a business environment that demands quarterly results to shareholders. I’ve had a hard time seeing this principle supported over the years. Just how do I connect long term thinking to the here-and-now?

Inspiration comes when you aren’t looking for it.

This week I had lunch with a few colleagues and the conversation drifted to automobiles. Everyone at the table had a story about a car that was impactful to their lives. Each of our stories shared a common theme; each of us placed the most value on the vehicle that was reliable, required the least maintenance, and lasted well beyond any loan payments. As I reflected on it later, I realized that no one spoke about add-on features, engine sizes, or even gas mileage. The most important thing was reliability, predictability, and service. These are all characteristics of transportation that transcend the offering of an individual vehicle.

So I asked myself, what are the characteristics of my business and workgroup that transcend an individual goal or project? What are those characteristics that define an ability to create new and adapt the old with the changing conditions of the business?

How can I think long term in the now?

Engage with people

Investing in people at work is a long term commitment for both the relationship and the value the employee brings to the organization. When I stress the importance of a weekly one-on-one meeting it is intended to coach, mature, and grow the individual in the values of the company. When I make an objective for employees to seek continuing education, it is an investment in the long term skills of the employee and their ability to contribute to the company in the future.

Stick with the plan

Make long term goals part of the annual goals and objectives process. Sometimes these goals are a continuation of key metrics for more efficient processing. Sometimes these goals are to expand into new markets, launch new products, or improve efficiencies. The point is to make sure the goals align with the long term vision of the organization. This links to my current day activities because the work that I’m doing to satisfy an individual goal should support the long term vision. The work is a building block in moving the organization toward a future goal.

Be persistent

Another principle of TPS is that the right process will produce the right results. I know personally, I don’t accomplish every goal and objective I set for myself or group. But if the goal is aligned to the long term vision, then it shouldn’t be abandoned. Long term thinking ‘in the now’ means I should stay persistent to win the day. I should work through setbacks by rethinking my approach.

Those are three characteristics for long term focus that I see in my day-to-day. How do you push long term thinking into your everyday routine?

Onward and upward!

Photo Credit: C.P. Storm

Would Netflix original content make it through your Shark Tank?

How is Netflix making money on their original content series?

Their latest release, Marco Polo, is reported to have cost $90 million for 10 episodes. At $7.99 a subscriber you can do the math for payback and ROI. But wait. This isn’t the first show Netflix has made costing tens of millions. The popular of House of Cards and Orange is the New Black head-up a rapidly expanding list of Netflix original content. At face value the strategy appears to be a money pit of immense proportions. I’ll admit that the business case was not immediately clear to me.netflix original

Matthew Ball provides an excellent economic review of Netflix original content for the Ivey Business Review. Reading Ball’s analysis you can start to feel Netflix’s business drivers of customer retention, third party licensing costs, and the ability to price subscriptions based on value received. Competition in streaming video services is increasing as more media outlets provide options for content. Netflix struggled with a price increase in the past. Even with the advancement of technology, availability of exclusive content, and increased hours of viewing it will be tough to have significant price increases in the future because competition is growing. Netflix appears to be positioning itself with premium content, but probably can’t afford to have premium prices.

Long term thinking.

Making business decisions for the long term is a good concept to debate. If you’re in a business school, chances are you’ll go long. If you’re in a strategic business meeting, chances are you’ll go short. I’ve experienced both settings. When you talk theory in business school everyone takes the side of keeping the company relevant for years to come. But in a real business, the conversation tends to gravitate towards the next quarterly earnings release, the stock price, the owners tax return, or how to not get sued tomorrow.

Yet, I see the massive cash investment from Netflix as a great example of long term thinking. The payback of the subscription based viewer model comes from attracting and retaining subscribers. Unlike cable TV which had the ability to essentially hold subscribers hostage for years based on the availability of content options, Netflix subscribers are free to go at any time. (Not to mention they don’t use term commitments!) But think about this. The number of traditional pay-for-tv subscribers has started to decline. There’s an oncoming avalanche of “cord cutters” and Netflix is positioning themselves to catch a large percentage of the money shift. They offer services for a fraction of the cost of cable TV and provide an increasing amount of content. All of it commercial-free.

The cost to borrow money is cheap right now. Ryan Bushey, of the Business Insider, points out that Netflix can borrow in the short term to make more on the investment for the long term. Controlling the price in the future is a smart bet. When is the last time the price of content from Hollywood studios went down?

My experience with Netflix original content.

I’m a Netflix subscriber. My first viewing of an original content series prompted this post because it made me think about the business economics as part of my experience. Plus the entire model of watching shows is different on Netflix.

The traditional TV series season lasts for months. Viewers wait a week between episodes. They watch commercials throughout the viewing. So in a 60 minute episode, a viewer may get 45 minutes of entertainment. Netflix releases the entire series of the original content at the same time. It’s Commercial free and available for binge-watching. It’s a different model and fits our instant gratification culture. Oh by the way, if you think about it, this all started with VCR and DVRs. We started recording shows to watch them when we wanted. We could skip commercials. We could watch episodes back-to-back.

My experience? In a word, satisfying. I like to watch content on-demand on my schedule. I don’t typically watch content during the work-week. But I may use content watching on the weekend as a time to “wind down” and relax. I like uninterrupted episodes that allow me to watch past an arbitrary stopping point that keeps me hooked for another week of waiting. The quality has to be there as well. I was satisfied with the plot develop development and level of acting in the series I chose to view.

So in a make-believe setting, would Netflix original content make it through the Shark Tank assuming it was a startup-up looking for seed money? Interesting question. Netflix original content is competing to take away viewers from Shark Tank. But the Sharks tend to like the risks that will pay them royalties month-over-month and that have a realistic chance of succeeding.  So imagine you’re a shark. The question is for you. Netflix is asking $7.99 a month with no monetary return. The return is in the form of exclusive original content. Are you in or out?

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Disclosure: I am a paying Netflix subscriber.

This is my 400th blog post on Merchantstand.com

Velocity

We spent time this week in strategic planning discussions. One challenge is how to separate the vision for the future from the desire to get better at existing services.  That is to separate the transformational changes from the incremental changes. Both are needed.

The factor that sticks out to me in both conversations is velocity. The rate at which a company can change and with what purpose will often dictate the how successful or unsuccessful it is in growing business or even surviving.

Blockbuster comes to mind. In 2004, this home entertainment company had over 9,000 retail store locations. In 2010 the company filed for bankruptcy and in 2013 the last store was closed. Home videos didn’t go away. In fact home videos are more popular than ever. But the format and methods by which consumers receive home videos changed quickly and BlockBuster didn’t react with the velocity to stay relevant in the market.

It’s a mistake that almost every company would have made. Hold on to your bread-and-butter while making small changes to adapt. But in this case, the primary generator of revenue for BlockBuster (retail stores)  became almost unused over the span of just a few years.

So how do we approach strategic planning? Certainly there should be an eye for improvements to the core products and services offered by the company. Look at changes to the environment,markets,supply chain, etc. to determine the strengths, weakness, opportunities, and threats.

But the vision is just as important. Where are we headed and how do we get there? What intentional decisions are made now to keep the company moving in that direction?

Velocity describes more than the speed of change. It also describes what direction a company is moving. So the velocity of change by a company represents both its strategic direction as well as the speed in which it moves to get there.

I do remember this from the grade school playground. When running a race to see who is the fastest one to the finish line, you can’t win by turning around to look behind you. The winner is focused, dedicated, and always moving straight towards the goal. That sounds like a building block for a strategic plan.

Business planning for the simple minded

We plan with good intentions.

Every year business teams go through planning and budgeting for the upcoming year. It’s a time consuming process. Middle and upper management work and rework presentations to present to executive management possibly board members. Budgets are submitted, then slashed, then reworked, and submitted again. Hours upon hours of work.

and then……….business happens.

New clients are signed that need to be on-boarded. Expected sales fall through or don’t materialize. Competitors upgrade their offering and drop their prices. Technology advances in a new direction.

Suddenly all that planning seems like a distant memory. Is anyone looking at the business objectives and roadmap that was planned for the current year nine months ago? My experience is that the plans are often forgotten and overruled by the tactical maneuvers of the current day.

Let’s not over complicate the matter.

Strategic plans are well intentioned. We have to plan to reach a goal or as the saying goes, “If you aim at nothing, you’ll hit it every time.” One way to help soften the risk of changing course due to changing market conditions is to plan smaller for a reduced time horizon. Instead of trying to plan for 12 months of work 15-18 months in advance, try planning six months of work nine months in advance. Don’t set 10 strategic goals, instead set 3-4 strategic goals and so that the organization can begin at the start of the measurement period.

It’s a similar concept to sprints in an agile development methodology for software development. Why not setup sprints for business objectives. Then remain more nimble to change as needed to match market conditions.

For technology teams one bit of advice is to first see the direction of the business (sales, marketing operations) and then align to help support those goals. In this way the plan will represent the core foundation (operations) of the business as well as the growth area (sales).

 

 

 

 

Microsoft’s bold new move with Windows 8

My home is an equal opportunity technology zone.
I use an Ubuntu Linux netbook. My wife uses a Chromebook. The kids have a Mac and an iPad. Then there is the older family PC that provides service for some school jobs and printing. It was using Windows XP until this past weekend when I upgraded it to the pre-release of Windows 8 (didn’t we use to call this Beta?). I had resisted upgrading the machine in the past due to the cost and because the machine is not the primary computing device for any family member.

But this past weekend I decided to upgrade the Windows XP machine to the Windows 8 preview release. Why now? As a technologist I need to stay in-the-know on new technology and I as mentioned, we provide an equal opportunity technology home. So it didn’t seem fair to pick-on Microsoft when the Windows machine was running an OS that is about to be retired from support.

The start page of Windows 8. Tiled application blocks.

The upgrade process.
I downloaded a ISO file from the Microsoft site and then found a free utility to expand the image file onto a thumb drive. At this point I ran the setup file from the thumb drive and followed the prompts. I chose to keep my personal files rather than wiping all files. The upgrade process started and while I didn’t time it, I believe it was around an hour and a half.

(I should note that on my first time through I kicked the power plug out of the back of the PC during the last step of the upgrade. The process didn’t recover, but it did a successful rollback to Windows XP. I had to start over. Doh!)

Windows 8, a bold new move.
My initial thoughts:

First – The OS was built with tablets and touch-screen PCs in mind. As a reminder, I converted an old Windows XP tower to Windows 8, so I recognize this limited me from experiencing the full breadth of features the new OS has to offer. But the move from Microsoft makes sense. Touch screen computing devices are fast becoming the new norm and they should be designing and developing to this.

Second – The start page of Windows 8 is radically different than what Windows users have seen in the past. People resist change and I expect there will be an initial outcry of critics as they adjust to the new look. (Change is hard on people!) The UX of the screen basically follows the growing popularity of application based tiles. Consumers will be used to this because they use it on their phones. But it’s a bold move to change the paradigm of the most used operating system in the world.

The UI of IE 10 included with Windows 8.

Third – Internet Explorer 10 is accessible from the start screen but the UX is again different. I think consumers will welcome this change because the interface is cleaner and free of the clutter of the navigation bars. The address bar is at the bottom of the screen and will auto-hide to give maximum screen real-estate for content.

Fourth – Navigation to different applications was not at first apparent to me. It seems all the magic happens in the lower left and lower right corners of the screen with hidden menus. Again, I recognize the UX was designed with touch-screen in mind. So I know my experience was not the ideal. But I also know that I’m bit more tech savvy than most and many people may struggle with the basic navigation of the new UX.

The good news with this is that the updated design, as with IE 10, removes clutter from the screen and allows more space for the primary application. But I found myself continually dragging to the screen corners to bounce back-and-forth between applications. I sense there is an easier way to navigate, even with the mouse, so it will take time to get use to the new paradigm.

Will Microsoft succeed with this strategy?
Microsoft is fighting a classic battle. On the one hand, they have the most popular OS in the world (by volume). So they get all the things that come with this such as a user base trained in a certain way. On the other hand, the company needs to show some innovative moves or they’ll become less relevant with each passing day.

Ultimately, Microsoft has to make this move. It’s a move to stay relevant with new consumer behaviors encouraged by computing devices that are smaller and more mobile than a traditional PC. It’s not the 1990s any longer and Microsoft is attempting to change to keep up. I like it. It keeps competition strong, which benefits consumers with more choices.