Hello everyone! This is Monday Morning 8 a.m., a weekly newsletter where we distill the insights from all of the distractions, articles, and emails that you receive in your inbox every day. In this newsletter, we’re going to focus on four major themes from last week’s news.
To listen to the audio version of this newsletter, search for “Strategy Skills” in any podcast app.
Nikkei Asia reported that Bangladesh’s output per citizen is now equal to the output per citizen in neighboring India. For a long time, few thought Bangladesh would develop anything close to a macroeconomic policy that would lift the population out of poverty. It’s a significant achievement—not just for Bangladesh but for other countries that are trying to follow that same path. What makes Bangladesh unusual is that a large part of their strategy was bringing women into the workforce and building infrastructure and policies to support a burgeoning textile industry.
But why does this matter?
Imagine there is a family from China who has just arrived in New York. Neither of the parents have university degrees. They both work at a restaurant, and they have four kids to raise. The parents pay their bills, but they only spend money on things that will increase their ability to make money in the future. So, they’re not taking any trips to Disneyland. Instead, they’re investing money in things like education, tutoring, books and library visits.
If you continue to invest disposable income in things that increase your standard of living, your productivity will go up—the amount of output you produce in terms of dollar value will be more than the input to produce that output. A question we ask clients in our one-on-one coaching programs is: Are you more productive?
People usually say, “Yeah, I completed more tasks today.” But productivity is whether you are creating more value for the time you work. A better question I ask clients is: How will you spend your money to create more money? That’s what you have to think about.
When I was a partner, I did a lot of work with state-owned companies. I traveled to parts of the world that had recently become democracies. Sometimes those democracies inherit strong state institutions run by the military. Usually, these countries mismanage those assets. Instead of increasing productivity, they decrease it.
Our new book Mavis is about productivity strategy. Most people think productivity is all about operations, which is all about time and speed. But productivity is about output value, divided by input costs. FIRMSconsulting Insiders who also arranged for access (add on) to our Advanced Knowledge Management System will be able to see slides that show how a typical company would run an operation strategy and implementation program to increase productivity.
China has halted the $37 billion floatation of the ANT group, citing major issues around compliance and governance. China is also in the news because it might block the $40 billion Nvidia semiconductor deal. And, of course, you know that China and the United States are involved in some tussles over trade, which is now extending to the way China invests in chips.
So, what’s the deep insight about China?
The Financial Times has an article about BMW’s profits, and they were much better than anyone expected. The CEO of BMW said this is mostly because their largest market, China, had a much faster and sustainable turnaround than most people had expected. I think there’s a strategic issue here that many companies are not seeing. China is a large market, and it’s a market we don’t understand.
When I speak to clients, I often ask: “Who is the most popular pop singer in the world? What is the most popular food in the world?” People tell me it’s Beyonce, it’s pizza, and so on. But the reality is, for us in the West, we don’t know who the most popular pop singer in the world is because that person is probably Chinese. The most popular food in the world is probably something in China, which we don’t know about. We don’t know much about the most important economy in the world.
Why is this important?
The Financial Times had an article sometime back about German tunnel boring equipment companies. Their biggest market was China, and those German companies were happy because they were doing a lot of business there and sales were up. But over the last few years, Chinese competitors have entered the market and have displaced German companies.
BMW is a fantastic brand—so are Mercedes and Tesla. But at some point, there will be a homegrown, Chinese version of them. China is not going to be the second biggest—and maybe one day the world’s largest—economy by only consuming products from other countries.
The question I ask CEOs and clients in our coaching program is: “What are you doing for your company today to prepare for Asian competitors?” They are coming. It’s not a question of if. You have to lay the foundation today, even if it happens 10 years from now.
It’s not the rise of China. It’s the rise of competition from China that’s going to displace your product or service. It’s normal—that’s the way capitalism works. Competitors arise, and that forces you to do things differently. Imagine what will happen when those Chinese competitors arise and start moving outside of their core markets.
If you’re a FIRMSconsulting Insider and you want to understand how a company can analyze a position where its core market is failing, we have a program about a national post office that faces tremendous competition from Amazon, FedEx and UPS while its core courier and freight units experience declining business. Our study shows how to manage that.
The Financial Times had a story about the recent rankings of MBA programs. Let’s look at what these rankings mean from a strategy, productivity and national pride perspective. While these MBA programs don’t produce all of the leaders in industry, they do produce people who play a substantial role in influencing the corporate world—whether at a CEO level, board level, executive level or management level. If you look at Fortune 500 CEOs, a large percentage completed some kind of business training.
Think about this: Asia is growing very rapidly—not just the far East around Vietnam, Thailand and China, but large parts of Asia and Africa are growing rapidly. If you project that growth over the next 30 years, these are going to be important economies in the world. When China appeared on the scene in the ‘90s, people wrote them off. Thirty years later, they are an important part of the international business community.
Here’s my question: If MBA programs are producing the leaders of the corporate world in the West, and if our growth is slower than Asian economies, how good are our MBA programs? Do we need to rethink the way we teach business? MBA programs are producing significant individuals in business, and Western economies have been posting single-digit growth rates—or in some cases, negative growth rates—while Asian economies produce double-digit growth rates. I don’t want to say what’s right or wrong, but that is the reality. If, collectively, all these MBA programs are leading to this outcome then, collectively, how good are our MBA programs?
There’s another piece in Nikkei Asia about Singapore’s response to COVID-19. They’ve made it harder for foreigners to obtain work visas, which is a natural response. Singapore has done a great job of managing their diversity to keep an open society, but there have been complaints that they’re tightening things too much to hire locals.
People who live there probably have more rights to talk about this than I do, but I want to point out something. If you look at great revivals in countries—like the revival of Russia and Peter the Great, or the revival of Japan and the Meiji Restoration—all of it involved going out and finding skills that didn’t already exist in that country.
When Peter the Great realized that Russia was far behind the European nations in terms of warfare and iron manufacturing, he went to Scandinavian nations and hired the best people at making these alloys so he could outfit his armies and bring knowhow into Russia.
When Japan was trying to rebuild itself, it used Germany as a blueprint. Much of Japan’s strategy—how to set up the administrative structure, the army—came from studying Germany.
The barometer of success is always collective. We all want to progress, and we all want to be successful, but sometimes you have to bring in external skills if you don’t have the capacity to develop it—or if you don’t have the capacity to develop it in sufficient time with acceptable costs.
Changing Business Models
The fourth theme is the pain of changing business models. There are a lot of articles about companies that are going through painful changes. Volkswagen has announced a multi-billion dollar plan to go all electric. We know the story about Quibi, the short-form streaming service that did not build the following it wanted and had to shut down. These articles show that changing a business model is extremely painful.
I’ll give you an analogy for this. Imagine you get up one morning, and you talk to your wife or husband, and you don’t get the response you’re used to getting. They’re ignoring you. You think it’s an anomaly. You go to the office, you come back, and they’re not there. They didn’t tell you they were going somewhere. It’s not that they’re divorcing you—they just changed. In a manner of speaking, in your marriage, your primary market is your spouse. You do things to make that market happy, but what happens if the market changes?
A change in the business model is like that. As a business, you do things for your customers, but they don’t respond to you. And you don’t know what is happening. You can give your customers many different products, services and prices. But there are so many options out there that you just don’t have enough money, time and resources to figure it all out. You are stuck—just like when your spouse doesn’t respond, you don’t know what to do, and there is a level of paralysis. Every company that’s ever failed will tell you they had a plan, but they still failed.
What distinguishes a successful plan from an unsuccessful plan?
We all have personal business models. Whether or not you know it and are cultivating it, you have a skill to offer. Maybe you’re a tax accountant. Let’s say you work for KPMG, which is a good firm, and they agree to pay you a fixed, monthly amount for the work you do. The question is, are you happy with that business model? Are you happy with the service you’re offering? Are you happy with your remuneration? Do you really understand your market—your manager, your company and your clients? Do you understand what the best pricing is? Can you change your business model?
You need to think carefully about your business model in life. It’s not just that Volkswagen needs to change its business model, or the European Space Administration. (There is a great piece from Financial Times about how they’re losing business to space exploration under Elon Musk.) Do you have funding to change as a person? Do you have a plan to try new things? The difficulty of implementing anything is complex.
Finally, I want to wrap up today’s Monday Morning 8 a.m. by leaving you with some important thoughts. This is advice I give to one-on-one case coaching clients, and you can see them on our website—people like Peter, Richard, Tatiana, Amrit and Andrew. The first thing I tell people when they’re thinking about personal strategy in life or in business is that a trend is your friend.
When I was a partner, I’d work with young, bright analysts and business associates. Many of them were looking for this very deep insight that would change the world. What I wanted was for them to tell me what the trend is. It’s one thing to know what the trend is, but it’s another thing to know how to make money from the trend. Yet, you need to ride the right trend first. That’s the starting point.
An example of this is cloud computing. Many companies saw the trend—Amazon wasn’t the first. Microsoft and Google saw it. Even for companies that saw that trend, they’re struggling because how do you win once you know what the trend is? It’s a market dominated by Amazon and Microsoft. Even if you recognize what the trend is, you need to know how to compete.
If you’re an FC Insider, you can watch our programs about Tatiana and the luxury brand startup. If you’re an FC Insider with access to our Advanced Knowledge Management System, you can see slides on how to segment markets. Once you know what the trend is for your market, you need to position yourself for that. I see a lot of instances where people look for insights, but they don’t ask themselves a very basic question: What is the trend going to be, and what are we going to do to benefit from the trend?
The final piece of advice is about leadership. I recently spoke to a female client in a coaching program who is pregnant. So, obviously, I told her congratulations, but her reaction was unusual because she was sad about it. She wondered whether it would affect her career—she manages a division of 300 people. My advice to her was that the company is not worried about whether or not she’s pregnant—they’re worried about her ability to manage it. And if she manages it, everything’s going to be fine.
Your manager wants you to manage your pregnancy so that it’s no disruption to the business. No disruption doesn’t mean that you need to come into the office every day. No disruption to the business means that the outcomes you would have achieved by doing 10 tasks don’t change. But the way you do those 10 tasks can change. Now, she took that advice, and she stayed at home two days out of the week, and of course COVID came along, which made it much easier for her to do that.
When you go through anything in your life, always remember that nobody wants to talk about your problem, in this case her pregnancy, because they don’t have time. What they want for you is to manage it. If you are facing a change in your life that forces you to stop operating in a traditional way, that’s okay, provided you can get the job done. No disruption to the business does not mean things don’t have to change. You can work from home if it suits you, you can work part time if it suits you—provided the company is still getting the value they expect from you as contractually agreed by all parties. Remember that you can do whatever is best for you. You don’t have to look at what other people are doing. It’s your career, it’s your life. You need to manage it. You can be a leader, but you don’t have to fit the stereotype of what a typical leader is.
Educational Sci-Fi Novel on Productivity Strategy: Mavis
We’ve released a new educational novel called Mavis. Mavis reads as a dystopian sci-fi thriller. But, ultimately, it is a novel about productivity strategy.
If you want to understand productivity, you should read Mavis, which is now available on Amazon. We also released The Strategy Journal (Amazon #1 bestseller), which guides readers, step-by-step, to understand the problem, develop a structure, develop hypotheses, design the tests for the hypotheses, track daily and weekly tasks, plan the message for your team and manager, manage the project, guide you through critical update meetings, calculate the benefits case to convince your colleagues and start the pilot implementation of your recommendations.
Both books are available on Amazon! If you end up reading Mavis, loving it, and supporting it with the review on Goodreads (and Amazon reviews are, of course, very much appreciated), email a link to [email protected], and we will include you when we send out a gift to our most loyal readers, which is one-month access to the accompanying course. If you end up reading The Strategy Journal, loving it, and supporting it with a review on Goodreads (and Amazon reviews are, of course, very much appreciated), email a link to [email protected] as well, and we will include you when we send out a gift to our most loyal readers, which is one-month access to a different accompanying course.
FC Insider and Other Updates
To help FC Insiders with challenges presented by COVID-19, we accelerated the release of all episodes for Competitive Strategy with Kevin P. Coyne program (new episodes released include the main episodes 17-44, Kevin’s bio and Q&As 11-23). We also launched a new 21 days program How to Develop an Effective Proposal. For case interviews training we released episodes 37 and 38 of TCO IV with Sizan (for new Premium members and FC Insiders). And from free resources we released a number of podcasts/videos on YouTube and our iTunes channels, including the interview with the former CEO of Dunkin’ Donuts, Robert Rosenberg.
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Have a great week,
Kris & the rest of FIRMSconsulting team
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