Maybe you’ve been successfully brainwashed and just don’t know it. How would you? … Find the transcript of this podcast at http://www.steverrobbins.com/articles/groupthink-brainwashing-politics.htm.

You can hear a recording here:
http://www.talkshoe.com/talkshoe/web/tscmd/tc/18410

Click on episode 4.

Enjoy!

On a recent birthday I was looking back at the strategies that my friends from high school and college and I employed to get where we are today. We assumed that success would bring happiness, and as far I can tell, we were wrong. It turns out that the two are separate, even though marketers would have us believe otherwise…

Click here to read the entire Happy or Successful podcast as an article.

I’m starting to think so. They’re pretty cool. They let you share yourself and your life with your friends. You find out more about them, they find out more about you, you swap cool stuff. Life is good.

And therein lies the problem. Life is so good that everyone is saying, “Gee, let’s start a social networking sites.” So more start. Then the originals come up with cool ideas, plug-ins, upload-your-address-books, etc. so everyone will stay on those original sites. They make it really easy for all their members to invite still more members.

The Commons here is any given member’s free time to spend doing social networking. At this point, I’m on Friendster, Facebook, LinkedIn, MySpace, and some “friends” have uploaded my name to Plaxo and Cardscan, who are now clamoring for attention.

The problem is that I enjoy social networking, but six sites? Give me a break. I’m lucky to have 10 minutes a day for these sites. Unlike many of my 21st century counterparts, I like doing things in the real world(*), which limits my online time.

Sadly, I’m now at the point where I ignore many new friend requests. I ignore it when my friends send me a “vampire bite” or electronically “chest thump” me. It would be fun to play, but there’s just too much coming at once. Picking and choosing is a necessity.

As more and more players decide that building community is the way to go, people will either ignore new communities or will have to devote less and less time to more and more communities … thus making those communities more shallow and less satisfying.

Where will it end? I’m curious to find out. My guess is that over time, we’ll have a couple of major social networking sites. The smaller sites will die off, and a few specialized communities will stick around. But which will vanish and which will survive? If you’re smart enough to figure that one out, give me a clue so I can buy stock today.

(*) How ironic is this for a kid whose social life was exclusively online until age 16, in an era when no one was online, so I was endlessly teased about it.

I’d like to share with you a LinkedIn exchange I had on the topic of whether Being Nice is a good business strategy. You can find the transcript in my article, Is “nice” good business or just wishful thinking?

You’d think we would know. But I’ve seen executive teams discuss in all seriousness what the lever does on a piece of machinery. That’s about as non-strategic as it gets. In fact, a general rule is that if you read it in a manual, it’s quite likely not strategic.

What is strategic is when you’re doing something that changes the structure of the business in some basic way. Paint a machine lever red? Not strategic. Decide to outsource manufacturing to China? Strategic, because it changes who you hire, how you manage them, and what they’re capable of achieving. You punt your machines and take on eager young managers who speak Mandarin.

This is the first kind of strategic impact: changing organization structure. This includes outsourcing, selecting vendors (since what you can do now becomes expanded and limited by what they can do), mergers and acquisitions, changing the org chart, going public, and hiring and firing people who will in turn make strategic decisions.

Or consider an entrepreneurial client who insists on answering the phones himself. He’s done it since founding the business 20 years ago and prides himself on knowing everything that’s going on. But now that the company gets a hundred phone calls a day, he decides to install an automated attendant, freeing himself to do other things. This is an example of “business process reengineering,” which is a fancy way of saying “doing things differently.” Changing how a business does something is strategic because different hows give the business different capabilities. If your product is produced on a machine that turns out 100 widgets a day, then you simply can’t bid on a job that wants 500 units by tomorrow. If you can rearrange your factory processes and produce 5,000 units a day, whole new markets open up.

Speaking of markets, choosing the markets to compete in, what to sell, and how to price are all strategic decisions. After all, those decisions determine who you’ll hire, how you set up your org structure, and how you’ll deliver your product or service.

The American Express web site lists 20+ cards. I called a friend in Amex’s strategy group to help me understand the difference between the “Platinum Business” and the “Business Platinum” cards. He said, “I work in strategy. I don’t really know our product lines.” A strategy group that doesn’t know the products? I don’t know what they do, but it seems awfully dangerous to be making organization structure and process decisions without even knowing what your customers are buying.

Everything we’ve discussed so far is cross-functional; they can involve changes that affect many parts of a business. Though it’s possible to make strategic decisions in one area of a company without involving other areas, that’s a dangerous game. If our marketing department starts competing in a new market that cares about delivery time, but doesn’t tell our shipping folks, they can set the company up for failure.

Don’t make the same mistake. Learn when your decisions are strategic. That means decisions about org structure, process–the HOW–, cross-functional decisions, and the marketing decisions of what to sell and who to sell them to.

If you want to learn more about strategy, my very favorite book is Co-opetition by Adam Brandenburger and Barry Nalebuff. I also liked Geoff Moore’s “Crossing the Chasm.” Both books are circa mid-90s. There are 83,416 other business books that will teach you some kind of strategic thinking. I’m not sure the specific strategic approach is very important (though consulting firms will make big bucks telling you otherwise); to me, the value comes from learning to think at a strategic level consistently and integrate strategic thinking into your daily running of the business.

Resources

Co-opetition by Adam Brandenburger and Barry Nalebuff.

Crossing the Chasm by Geoffrey Moore.

Often, it’s the difference between success and bankruptcy.

Before we begin, let’s use clear language. I won’t say “income” because different people mean different things by that word. I’ll say “revenue” to mean money that comes in from selling a product or service.

Imagine two kids who want to start a lemonade stand. They plan to charge 50 cents per cup. If they sell 100 cups, they will make 100 times 50 cents, or $50 of revenue. Of course, they know it takes money to make money. They figure each cup costs 13 cents to make: 10 cents for ingredients, and 3 cents to pay protection money to the neighborhood bully. Their expenses will be 13 cents times 100 cups, or $13. They will have revenue of $50, expenses of $13, and their profit–revenue minus expenses–is $37.

Profit is the money left once expenses are paid. Some people think business owners can take profit to the bank. If only! Profit is used to pay for any new equipment or materials needed for the business to grow. And unless you buy a politician or two, you pay taxes out of profits as well. (Sometimes, profit is given as “pre-tax profit” and “after-tax profit,” so you know what the business produced on its own.) Only after paying for growth and taxes do owners get to take money home.

Our kids are ready to go! They needn’t buy equipment or pay taxes, so they’re eager to start their business and bank their $37.

But wait! If only this story were so simple. There’s a dastardly twist!

On the very first day, the kids go to the store to buy lemons … only to find out neither of them has any allowance money left. The store won’t loan them the lemons, so they can’t even get started. They’re out of business before they begin, thanks to cash flow.

Cash flow refers to _when_ a business needs money. Often, businesses spend money on salary, utility bills, and lemons before they bring in any revenue. By plotting out when cash will come in and when it needs to be paid out, a business can identify when it needs cash on hand, and can do what it takes to make the cash available.

Companies often take out loans to survive until revenue comes in. If our kids must pay the grocery store $5 for lemons today in order to make $50 by selling lemonade this weekend, they can ask Mom or Dad for a loan, to be paid back once the lemonade sales come pouring in. They borrow $5 today, make and sell their lemonade, and then pay back the loan next week.

What about the protection money for the bullies?, you ask. Well, the bullies are kind, generous people who understand cash flow. They’re willing to let our entrepreneurs pay after the revenues come in, avoiding a cash flow crunch.

Cash flow and profit don’t always match up.

A company can be profitable and still go bankrupt from cash flow problems. If they must pay for materials in January but don’t get paid by their customers until June, they need a loan to survive until June. If they don’t get that loan–even if they have _guaranteed_ sales in June–then they will go out of business. Sometimes customers themselves will pay in advance, effectively giving an interest-free loan to a company to help cover cash flow.

A company can have great cash flow, but not be profitable. Amazon.com raised so much money by selling stock in the mid-1990s, that they had $2,000,000,000 in the bank. Every year, they spent more money than they made, so their yearly profit was negative. But because they had so much money saved up, they could afford to make up the difference out of their bank account. The big stock market cash inflows made up for the continual losses. Only after a decade did Amazon actually start making a profit as a company, so they now have good cash flow _and_ are profitable.

So remember: profit is how much money you have left after you get your income and pay your expenses. Cash flow is when you actually get and pay the cash. In the long-term, you must eventually get profitable or find someone like stock investors to keep giving you cash to make up for your losses. In the short-term, even if you’re profitable, you survive or fail based on whether you have cash to pay the bills. That’s why they say Cash Flow is King.

CIOs have popped up everywhere in the last 15 years. But what does a CIO do? Here’s my take. First, CIOs say “No” to advances in technology. Techies love toys. They do. It’s how they’re wired. They’ll want the latest and greatest, believing New means Better. The Chief Information Officer’s job is to push back. New technology doesn’t necessarily make things easier or cheaper; sometimes new technology doesn’t even work. The CIO must insure new technology will really make things things more efficient.

Bay Banks in Boston used Windows 3.1 all the way into the late 90s—years after Windows 95 and 98 arrived. Why? Because there was no business reason to upgrade. Everything worked on Windows 3.1. By the late 90s, their IT expense was a third the industry average! They just didn’t spend on new technology without a business case. When it made business sense, however, they would upgrade in an instant.

The CIO also insures financial responsibility. Just because something saves money doesn’t mean you buy a new one each year. Imagine a car with greater gas than your current car. If you bought that new car for an extra $5,000.00, you must drive it enough so you actually get the $5,000.00 savings. If you replace it yearly, you never get enough savings to justify the purchase.

The CIO must keep tech purchases making business sense:

• There must be a business case for purchases.
• The technology must be around long enough to realize the savings.

The second CIO responsibility is linking technology to internal strategy. Some businesses compete because they’re good at executing. Fedex and Wal-Mart are great at logistics. They move stuff around quickly, efficiently and accurately. Technology helps track the logistics. That’s an internal capability that technology improves. A CIO scans the tech trends to find ways technology can improve internal operations. They are looking mainly for strategic efficiencies; they aren’t looking for tech solutions to everything. They are helping develop new capabilities that translate into business success.

The CIO’s third responsibility is linking technology to external offerings and strategy. Some technology lets you offer a new product or service. When the web arrived, companies could easily let customers order over the web. The CIO should be looking out for ways technology can create new offerings for or new ways of reaching customers. For instance, The Limited lets customers try out clothes in different combinations and colors before they order. Their information folks saw what the technology could do and said, “we can use that to give our customers a better experience.”

The fourth CIO responsibility is forecasting how technology will competition. This is hard, and it’s the most valuable thing a CIO can do. For example, the web made people think, “Traditional bookstores are a dying breed.” If you were a bookstore whose CIO saw it coming, you could adapt to compete on something other than price. My local bookstore doesn’t sell books. Well, they do sell books, but they really sell community. With book readings, discussion groups, recommendations, and a little cafe, it’s more like a neighborhood salon than a bookstore. They realized technology changes the book business, but they can attract customers with community. Books are just their excuse for bringing in cash.

Or consider music companies, fighting desperately for Digital Rights laws that help them avoid facing reality: they think their value is making and distributing music. But technology has made that a commodity. Like the buggy whip makers, it’s time for music companies to adapt or die. Producing and printing CD doesn’t add value any more. A strategic music company CIO would have spotted the trend and had music companies shifting their strategy long ago. They still add significant value.(1), just not in their traditional areas. A CIO should have kick-started the search years ago.

So to recap, a CIO has four duties:

• Saying No to technology that doesn’t have a business rationale.
• Linking technology to internal strategic capabilities.
• Linking technology to external strategic products and services.
• Forecasting how technology will change competition, and adapting the business so it continues to thrive.

I hope you found this useful and I would welcome the feedback and opinions on what you think a Chief Information Officer should do.

(1) Did I mention I’m available as a consultant?
back

A: Not at all, though people confuse them all the time. In most businesses, marketing and sales are very different.

Sales is when you’re face-to-face with a customer, convincing a person to buy your product.

Marketing is the collection of decisions you make about the market that leads to successful sales.

Marketing is the planning part of sales. Marketing chooses the products to make, identifies who to sell to, what customers want, and who competitors are. Then, marketing figures out how to distinguish the product from the competition by choosing where the product is sold, its price, packaging, advertising messages, and where the ads run. This is called “positioning” the product.

Consider McDonalds. McDonalds sells food, or at least a food-like substance. They target families with kids, to get the whole family to come eat. They offer Happy Meals and playgrounds. Their locations are chosen for convenience. They distinguish themselves based on consistency of menu and food. You can walk into any McDonalds anywhere and know the Big Mac tastes pretty much the same (yum). They advertise using Ronald McDonald. All those decisions are marketing decisions.

Burger King competes with McDonalds and also sells food that’s the same everywhere, with locations chosen for convenience. They also target families with kids, use cartoon characters in their ads, and have a consistent menu. So other than the food, how do we tell them apart? Burger King positions themselves as different from McDonalds by letting you eat according to your individual taste. While McDonald’s says, “eat here and you always get the same thing,” Burger King says “have it your way.” That positioning is a marketing decision. Of course, the irony is that even if you have it your way, “your way” is chosen from a menu as limited as McDonalds. The difference is in the marketing message, not in the product itself.

Once the marketing decisions are made, sales people take those decisions and march into the world to sell the products and services, using the messages marketing chooses. With our fast food example, sales happens at the counter. The person taking your order might suggest a specific item. They don’t make any of the marketing decisions, but they are given a menu and they help you choose specific items. Like any good salespeople, they try to get you to buy more by asking, “would you like fries with that?”

Another example is Casio watch company. They sell watches to average consumers. Their position is selling cheap timepieces, with many different models, so you can get almost any capability you want. Rolex, on the other hand, sells to very wealthy customers. They don’t have as many models or as much capability as Casio, and their watches cost thousands of dollars. Rolex, however, doesn’t position themselves as a watch. Rolex says, “I’m a symbol of wealth, status, and taste.” Rich people buy Rolexes as a status symbol, while the rest of us buy Casios to tell time. Both watches are often sold in showrooms by salespeople. What seem to be two similar products, sold through retail stores, are positioned as very, very different products.

The one place sales and marketing may merge is in direct mail. When a company sells their product by sending junk mail or spam, the decision of what points to make during the sales process becomes the very text of the letter you so happily receive in your inbox. But even here, marketing and sales can be separate. The company can choose the product features they want to highlight to their customers, and then hire someone to write the actual sales letter that tries to persuade the buyer to buy.

Let’s consider one last example. Imagine you are GoGet’Em game company. Your big toy this year is Little Suzie’s Dollhouse of Horror. You want to sell it at ToyMart. You create a front window display for each ToyMart store to use, featuring headless dolls and a guilloitine. You hope Peter Parent will see the display and choose the Dollhouse of Horror as a birthday present for Little Tommy. You have made several marketing decisions: You decided which toy to produce, the Dollhouse of Horror. Your know a Dollhouse of Horror will appeal to little boys, and you design a window display little boys will like, hoping it will convince shoppers to buy. All of that is marketing. You are choosing a product you think your market (little boys) will prefer over competing products. You decided to distribute through toy stores, rather than direct mail. And you designed a display to influence the market at a distance. You still have selling to do, but not to Peter Parent.

Can you guess who you’re selling to?

You are selling to the buyers at ToyMart. Your salespeople visit ToyMart and must sell to ToyMart, convincing the buyers that you have done the best job at predicting what little boys will want, and they should carry the Dollhouse and use your window display. Marketing is the decisions about what, who, and how to get the product to market. Selling is persuading someone–the ToyMart buyer–to pay money for the product.

I hope you’ve appreciated this discussion of marketing and sales.

At my first job, a 20-person computer company, the CEO sat in his glass-walled office while the rest of us busted our butts creating the product. I used to look at him and wonder, “What does a CEO do?”

Now that I coach CEOs, I know. Sadly, many of them don’t.

Many people confuse a CEO’s responsibilities with duties. A CEO is responsible for everything that happens in a company, even making sure the trash gets emptied. But if a CEO did nothing but empty the trash, we would say they were doing a poor job. We might decide to fire them, hire a janitor, and take the rest of what we were paying them and use it to buy snacks for the lunchroom.

A CEO’s duties are what the CEO actually does. Some things, they can have other people do. For example, the CEO probably hires a janitor to take out the trash, leaving them free to do more CEO-like things. And that’s where we find there are four duties that the CEO can’t delegate, either because of legal reasons, organizational reasons, or leadership reasons.

A CEO’s first duty is setting strategy. Strategy tells the company what business they’re in and how they plan to make money doing it. When Bill Gates decided Microsoft would make software, instead of being a dry-cleaning company, that was a strategic decision (although some people would say he took us to the cleaners anyway). When a CEO is sloppy with strategy, you end up with companies getting into all kinds of silly businesses, like steel companies buying chains of lingerie stores. When a CEO is good with strategy, everyone in the company knows what business they’re in.

Which brings us to the CEO’s next duty: building the senior team. All the executives report to the CEO, so it’s the CEO’s job to hire, fire, and manage the executives. From coaching CEOs, I would say this is the most important skill of all. When a CEO hires an excellent senior team, that team can keep the company running. That team can–and often does–even set strategy, though it’s the CEO who has the final “go-no-go” decision on strategy.

The CEO’s third duty is setting the culture of a company. Some CEOs encourage people to work together, treat each other with respect, and make the company a nice place to work. Other CEOs encourage competition, back-stabbing, and playing favorites. It’s not always a conscious decision, though. CEOs set culture by being role models. People watch them closely for cues. As children, we watched our parents. As adults, we watch our CEOs. The Vice-Chairman of a Fortune 500 company once told me that the most important tool he had was modeling the behavior he wanted.

A CEO’s final duty is capital allocation, a fancy way of saying “spending money.” Since the CEO signs the checks, they choose the projects that live and die. This is also why they can’t delegate strategy, because the projects that get money are the ones that determine the strategy.

To recap, a CEO is responsible for everything. But even though they are responsible for everything, they only have four duties that can’t be delegated. First is setting the company’s strategy. Second is hiring, firing, and leading the executive team. Third is setting the culture of the company. And last is writing the checks and allocating capital.

I hope you’ve found this a useful overview of a CEO’s job. For more details, visit http://www.SteverRobbins.com/articles/ceojob.htm.

(The player embedded in my web page may have trouble playing this segment, so you may wish to download and play the mp3 file.)