I want to make everyone aware of an upcoming radio show that we are doing this Friday at 4pm PST with one of the most interesting business authors I have spoken with in a while.

His name is James Hemerling and his book is called GLOBALITY: Competing with Everyone from Everywhere for Everything. Hemerling states that the old global business model (centralized, top-down, process-driven, with influence running from West to East) will recede, perhaps vanish. It is inadequate for a world in which every global company is forced to compete: in every market, with everyone, from everywhere, all the time, for resources and market share.Unlike developed-market leaders, emerging-market challengers have evolved new management and governance structures that are ideally suited to this new competitive landscape. In addition, it has enabled them to undercut, outthink, outwork, out-innovate, and generally outfox some of the biggest, most powerful names in global industry. What are these upstart challengers doing? How are they winning?Imagine companies that:

• Innovate at the rate of one new product development every 12 hours.
• Give up the notion of “headquarters” in a drive toward global expansion.
• Do away with titles and committees in an effort to improve staff development.
• Expand into 50 countries by satisfying global demand that no one else could see – at the lowest, cheapest end of the market.
• Hire thousands of people to staff assembly lines, instead of automating, to be more efficient, flexible, and profitable.
• Achieve such high efficiency that they can give away 60% of their services and still make a profit.
• Retrain workers by the tens of thousands to build a world-class capability, in less than a decade.

Again, listen to my interview with James Hemerling this Friday at 4pm PST. Just go towww.markdeo.com and turn-up the sound. Its that easy!

I was reading the Wall Street Journal recently and I stumbled across a statistic that I thought was interesting if not disconcerting. A recent survey they conducted indicated that more than 100 Fortune 500 CEOs confess that they are, at best, only able to realize 50% of their growth potential in the firms they lead.

Now I began think, if it’s that hard for the country’s top CEOs to achieve growth how must it be for the rest of us?Certainly this is quite a performance gap. Why is it so difficult to overcome the barriers of growth? It seems these same CEOs are successful in bringing about efficiencies, reducing costs, reengineering business processes. Shouldn’t these things translate into corporate growth?I say NO, absolutely not! In fact these are the very things that may PREVENT consistent, long-term growth of any organization large or small. In fact evidence of this is visible wherever we look.Consider the global leaders of the Dow Jones Industrial Average. There is no economic indicator that is more synonymous with growth in this country than the DOW.Let’s look at four of the most rock solid companies operating in completely different industries all of whom are flagship components of the DOW: Proctor & Gamble, IBM, Coca-Cola and Disney.The giants of growth and success, right? WRONG.What do you see when you look at these leaders? STAGNATION!Hey I don’t mind telling you I have stock in all three of these companies and over the years I’ve done OK, but I’m talking about GROWTH.Proctor & Gamble considered to be the world’ leader in product marketing and brand management grew at a rate of only 2.4% between 1997 and 2002. This is far slower than the growth of our economy. IBM engineered the most successful turnaround of any market leader and prospered during the tech boom and bust.Yet they grew less than P&G’s 2.4% rate for the same period. Despite the fact Coke is one of the largest equity holdings of the legendary Warren Buffett, they grew at a rate of only 3.3% for the same period. And finally Walt would roll over in his grave if he knew that his Disney had grown at a rate of only 0.7% for the same period.Some may say well these are old companies Mark institutions really. Or they’re past their heyday or it’s been an uncertain economic environment as of late or any other of a host of excuses. But I believe there are some very good reasons that the powerhouses of our economy are slowing and unable to get back into a growth mode. This is relevant to small business because most small businesses pattern their growth strategy after the big boys and this is often why they just don’t grow!You see most of these larger concerns have tremendous momentum, top-of-the-mind awareness and consumer equity. Yet these organizations have sustained their market position without growing by alternately downsizing/cutting costs and latching onto some new technological fad and riding it out for a time. This is not consistent, sustainable but rather growth in short bursts.Graeme Deans and Fritz Kroeger in their book, “Stretch! – How Great Companies Grow in Good and Bad Times,” talk about the secret to long-term, sustainable growth. They say, there is no secret it is the result of implementing a growth strategy in four areas of the business: operations, organization, strategy and stretch.1. Operations – This represents getting your operation in order, targeting dramatic improvements in internal processes such as product development, sourcing, quality, delivery, customer service, sales and pricing.2. Organization – This represents finding the optimal organizational structure, culture issues, compensation, rewards and incentives, value chain reconfiguration and business unit accountability.3. Strategy – Take a fresh, holistic look at the company’s strategy and be willing to make wholesale changes. This may involve a higher risk tolerance.4. Stretch – This refers to expanding the company’s frontiers culturally, economically, geographically and strategically. Often times this involves breaking down old barriers and paradigms of doing business. This might include perhaps addressing new markets, customer bases, product categories.All of these elements can be applied to a small business as well as a large. Great companies find a way to grow regardless of the economy. They focus on innovation and calculable risk. Don’t let the economy or trends in your industry get in the way of your companies growth. Put together your own Stretch plan and start growing. Because remember if you’re not growing you’re actually shrinking.I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mdeo@sbanetwork.org.Mark Deo

There is a revolution in business today. The old way of doing things is passing into the dark mist of history. It used to be that you… created a product or service that was needed or desired, obtained sufficient financing, recruited a great team, cranked-up your marketing machine and eventually you could grow to become a leader in your industry. That is until some smarter competitor produced a superior performing widget, secured better financing, stole some of your people or out-marketed you, thereby knocking you off your high horse.

Not anymore! 

Don’t believe me? Consider this. Yesterday, Bill Ford, president of Ford Motor Company said: “The business model that sustained us for decades is no longer sufficient to maintain profitability.” Think about that for a minute. Here is the son of one of the “fathers of the industrial revolution” telling us that their business model no longer works! That’s kind of heavy. 

Product marketing, recruitment and financing are no longer the “sacred cows” of business success. 

Product Marketing
Just because a product or service is “better” in no way guarantees its success in the market. In fact our friend Seth Godin, author and marketing guru says in his book, The Purple Cow, “Very good products and services are very bad!” Why? Because while we are focusing on how marvelous our products have become, the market has changed and often so radically that your nifty little product has not only lost demand, it has quite likely become irrelevant! Marketers today must focus on creating the NEXT generation of products and services before their first generation ever hits the street. But often times we fall madly in love with our product line. This is a surefire approach to getting our clients to fall “out of love” with our company. Faster product and service turnover is a requirement of success in this blinding fast, whim sensitive culture.

Traditional Financing
While every enterprise must have some kind of basic financial foundation, today traditional financing is less important that ever before in history. Consider some of the recent start-ups that have grown into multi-million or billion dollar ventures with little or no traditional financing:

• Skype started with less that $10,000 in capital and recently sold to E-bay for 2.6 billion.
• Airborne Health with only18 employees, posted $150 million in sales for 4673% growth in the last 3 years.
• Digital Lifestyle Outfitters, makers of i-pod accessories reached $84 million in sales after having been in business only 26 months!

All of these companies took risks. They were funded by immediate and astronomically growth not by a bunch of bankers with purse-strings and their greedy hands in every pie. I believe that self-funding ventures will become the standard for business growth in the future. Traditional financing and budgeting leads to waste. Like the old guard concept of, “it’s in the budget, then we need to spend it or they will cut the budget next year.” This is the kind of thinking that has created the 10 trillion dollar economic deficit that our generation faces.

Recruitment
Building a world class corporate team has always been the aim of every great company. Ford Motor Company, for years had one of the lowest employee turnovers in their industry. For decades loyal workers toiled for “mother company” in plants all over the Midwest. That is until the auto industry began to enter the world of collaboration and business alliances. Give a high five to the Japanese for this move. Today it would be difficult to count how many different automotive companies take part in the design and manufacturing of most Japanese automobiles. In fact many of those cars are designed and made in collaboration with competitors. That’s right competitors actually cooperating.

If this is so effective for the global auto maker why would it not work for small organizations like yours and mine? Because of FEAR! Many are afraid that their competitors will learn too much about us and use it to “beat us on the street.” Many are afraid that our best EMPLOYEES will learn too much and defect to the competition. How foolish. When you think about it. What was stopping them from doing that very thing in the first place? Nothing at all. 

I remember people laughing at me 3 years ago when I said on live radio that our corporate world is dying and that in less than a decade over 70% of the workforce will be free agents. This is now very obviously happening.

The watchwords of sustained growth in business today has been transformed from better product marketing, recruitment and financing to collaboration, risk-taking and blind fast product turnover.

Do you think your business can continue do things the same way that you have in the past? 

Bill Ford doesn’t think he can! 

I wonder, how will you? 

Have a great week!

I will never forget the first time I went to Japan on business. I shudder to think that it was almost 20 years ago. I was excited as you can imagine. So excited in fact I forgot to get a travel visa. Sad, but true. I had to drive my car like a maniac to the Japanese embassy in Downtown Los Angeles and get the visa stamp on my passport then drive like a nut-head back to the airport where, unbelievably, I made my flight with just minutes to spare. 

Never the less when I arrived I was greeted by Mr. Uyama. He was friendly but rather stoic. I would learn much from him in the ensuing years but he said something that I will always remember. He said, “Mark,” in his excellent but slightly broken English. “There is one thing that we just cannot do under any circumstances. I hate this more than anything. That is compromise. We must NEVER compromise.” He spat out the word like it was the most disgusting, vulgar action on the planet. I was shocked. I had always thought that compromise was good.I came to find out that what Mr. Uyama meant is that we wouldn’t just give up on an initiative without exhaustive due diligence. This makes sense. But what I also found out was that this could be a pretty inflexible strategy. Despite our best efforts and careful planning we may, as leaders, find ourselves facing circumstances in which the path ahead is far from clear. At times we have to resort to improvisation and creativity to find the best possible solution. Often times looking for the solution is the very thing that stands in the way of resolution. In fact, we should more often than not spend more time and effort examining the causes of the problem.Separating symptoms from causes is often times more art than science. It is critical that we understand the difference between a symptom that accompanies a circumstance and the root cause of a problem. This requires careful investigation and study. There is a relatively easy way to determine the difference between symptoms and causes. When we change the “cause” the problem, ceases to exist permanently. When we change a “symptom” chances are the problem will return. At times we can use compromise to root out the difference.In his book, “Leading Quietly,” Joseph Badaracco talks about how we can use compromise to allow the best solution to rise to the surface and to do so in a way that reduces risk. Compromise, not in the sense of immoral decision making like we’ve seen as of late with companies like Enron. As leaders we should do the right thing, not half of it. I am speaking rather about the kind of compromise that occurs in fruitful negotiation. This kind of compromise is rooted in ethical, well-informed decision-making. Fair compromise often rests on a leader’s ability to motivate participants to see circumstances from a unique perspective. They present a new line of vision which redefines the problem in a different light and leads to a mutually beneficial compromise.In many circumstances compromise is the beginning of wisdom in resolving difficult problems. King Solomon of the Bible was said to be the wisest man that ever lived. One day he had to decide which of two women was the true mother of a child. Both of the women claimed that the child was theirs and they came to Solomon for his wise judgment. They didn’t have blood tests in those days and he had no way to determine which one was the true mother. So the king proposed a horrific alternative: “Cut the baby in two and give one half to each women.” Of course the true mother cried out at this terrible proposition and gave the baby up to the imposter. This told Solomon all he needed to know and he reunited the child with her real mother.Solomon was a powerful king. He could have “faked it” and guessed which was the real mother. But he would know it was fake and many others would suspect as much. Eventually this would undermine his authority and the system of justice in the land. He could have looked for some technicality or taken the child from both women which would have separated a family and perpetrated a greater injustice. But Solomon was truly a wise man. He went beyond the legal issues to the issues of the heart. As a result one women demonstrated her love and devotion and the other her bitterness and envy.Are you facing a difficult decision? Does the road ahead look kind of murky? Think about how you can use ethical compromise to root out the cause of the problem and watch the solution rise to the surface.

A famous Chinese proverb reads, “An inch of time cannot be bought with an inch of gold.”

Few would argue that “time” is our most valuable commodity. No amount of money can allow us to purchase a 25th hour in a day or even turn the clocks back one minute. That being said, we need to make the most of our time. I guess that’s why people run to and fro, traveling from place to place, faster and faster. They want to jam as much as possible into those 24 hours and increase their chances of financial success. Oftentimes people analyze how they are spending their time to discover their R.O.T. (Return on Time). That’s right – it’s kind of like R.O.I. (Return on Investment.) After all, you have to make every minute count! There’s no time for activities that fail to produce a monetary return. 

This weekly business report is usually about things that we can do to improve our performance and create a positive financial impact. Certainly, time management is one of them and we have discussed it before. Yet I would like to present something that does not involve managing our time.

The last thing I want to do is pontificate with a “holier than thou” attitude. Unfortunately, that’s the way this might come off to some, so let me set the record straight right from the start- I am the worst offender.

I know there are many people who are reading this that have given to charities this year. God knows we’ve had plenty of cause to give with hurricanes, tsunamis, earthquakes and floods! I’m talking, however, about a different kind of “giving.” I’m talking about, “giving back.” That is using your talents and abilities to help other to prosper and grow. Now this might fly in the face of the “manage-every-second-jam-as-much-into-a-day-as-possible” mentality yet I have found that an amazing thing happens when we give our time while expecting nothing in return – we literally reap ten times, fifty times or even a hundred times the benefit. I can’t tell you how many times this has happened to me. 
Yet giving back involves a certain amount of giving up. You may give up an hour or two a week, or a Saturday, or perhaps a weekend or even some vacation time. Regardless, when we do this we access some kind of power that creates an eventual, reciprocal benefit for ourselves. Call it karma, the power of God or just a force of natural.

The photo you see is of myself (I’m the OLD GUY!) with the board members of the American Marketing Association at California State University – Long Beach. I spent a few hours with their chapter of about 60 members and practiced some of the Rules of Attraction. Not only was this a very enjoyable and rewarding experience but it was gratifying for me to help these young people learn the practicalities of marketing. 

I want to take a moment to encourage you to use the 4th Rule of Attraction: “Give without Selling.” When you do, I guarantee that it will return to you in multiples. You just might find it to be the best investment of time that you make all year!

Last week I talked about my concept of “heartshare.” Marketshare is about getting more clients; mindshare is about getting them to remember us. Heartshare is about becoming more influential by creating extraordinary customer experiences. We do this by leveraging our intangibles. One of the intangibles that we can leverage is innovation. The most productive innovation involves revolutionizing processes that create greater customer satisfaction, rather than merely product improvement.

Tired of reading already? Click here- LISTEN TO THIS ARTICLE.
Breakthrough Innovation
Innovation has become a mandatory objective for all businesses rather than the optional advantage it once was. Innovation offers numerous benefits that can help to win market share and mind share. True innovation also allows us to capture a greater share of heart:

Innovation:

• Increases market share by overstepping the competition.
• Increases mind share by making our products and services more memorable and attractive.
• Increases heart share by achieving greater efficiency and a smoother customer experience.

Levels of Innovation
Like anything else, there are different levels at which we can innovate. Over the years, I have identified four levels of innovation: Standard, Specialized, Extraordinary, and Breakthrough Innovation. What I do not address here are companies that are operating with a zero level of innovation. God help you if you are in this category. You need to move and move FAST to start developing an innovation strategy immediately. It behooves all of us to look at how we can innovate to win greater share of market mind and heart. Let’s look at how we can accomplish this.

Standard Innovation
The first level of innovation (Standard Innovation) merely allows us to keep pace with the changes in our industry. I like to call this survival innovation. At this level, companies innovate their products and services only enough to survive. This is a kind of reactive rather than proactive innovation. These organizations are merely reacting to the competition’s innovations. I guess you can say they’re just keeping up with the Joneses. This is the level at which most organizations are performing.

Specialized Innovation
The next level of innovation traveling up the continuum is “specialized innovation.” This typically occurs when an organization adapts their product or service to a specific marketplace or subgroup. For example, when I was in the consumer electronics business I did some consulting for a company called Bogen. They manufactured PA systems (public address systems). When this market went south, they literally saved their company from extinction by innovating all of the internal elements of their business to the marine marketplace. This was a very small but profitable and virtually untapped subgroup. The production, technical, and service innovations were relatively minor to accomplish this. Bogen quickly captured nearly 100% market share and mind share among the marine subgroup. Most importantly, they snagged a good deal of heart share since all of the other amplifier manufacturers had ignored the marine dealers and distributors.

Extraordinary Innovation
Just as it sounds, this innovation is out of the ordinary. This is where organizations can leverage their uniqueness in any combination of the processes to deliver a level of innovation that their competitors are not currently offering. Let me tell you about a client that we’ve worked with that has built some astounding innovation into their production and service guarantee. The company is Pelican Products. Their claim… “You break it. We replace it. Forever.” This is not marketing hype. The company manufactures cases and flashlights that are virtually indestructible. The product is sold to the military, law enforcement, fire, and emergency agencies. This guarantee is unmatched in their industry and their competitors are stymied by their ability to continue to offer this year after year. Even more amazing, Pelican tells me their return rate is less than 1%! How do they do this? By innovating the guarantee right into the product. How big is the market for industrial cases and flashlights? The company will do almost $100,000,000 this year. It helps to have massive heart share.

Breakthrough Innovation
Breakthrough innovation occurs when an organization makes a revolutionary advancement in one or more of the innovation processes. In this case, a company will deliver a level of innovation that their competitors are NOT EVEN CAPABLE of offering. Many times these organizations literally create monopolies that admittedly have a half-life, yet permit them to rapidly capture huge market, mind, and heart share almost instantly. Can you say Microsoft? 

What level of innovation are you achieving in your own business? What can you do to CREATE innovation? If you’re not at the “breakthrough level” in every area, don’t despair, you’re not alone. On the contrary, if you are achieving breakthrough innovation in even a SINGLE category, you are rather unique. 

In fact, I’m willing to offer a special gift to the reader with the most innovative breakthrough (an advance copy of our Attract More Business Program – valued at $499). Just email a description of your innovation and we will announce the winner on the Small Business Hour on 97.1 FM as well as in the Business Update.

Next week we will talk about the areas of innovation and the four steps to CREATING innovation. We will look at how we can innovate our sales approach, management strategy, marketing communications, products, services, production, systems, processes, and even the culture of our organizations.

“Sometimes you have to do the wrong thing at the right time.” -Robert Varkonyi , 2002 Word Series of Poker Champion

“All in,” he declared, time and time again, pushing his entire stack of chips to the center of the table. If he guessed wrong, he would be eliminated, but if he guessed right, he would double his stake at the table.
One-by-one the professionals went down to the amateur, surrendering their chips to his ever growing stack. He entered the final table at the tournament with the fewest chips of anyone, and pulled off the biggest upset in poker history, winning the coveted platinum bracelet at the 2002 World Series of Poker.
His play throughout the tournament was risky, going heads-up with former champions and challenging them at their own game
“Who is this guy?” – the other players at the final table must have thought. And those are the thoughts of earlier players he knocked out, such as former champion Phil Helmuth who stated, “If Robert Varkonyi wins, I’ll shave my head.”
And win he did, becoming one of the most improbable World Series of Poker Champions ever, and picking up a two million dollar prize for his trouble.How did an amateur player beat professionals who have been living and breathing poker for their entire adult lives?
Luck, you say? That’s what most would think.
While an outside observer might say that poker is all luck, any experienced player or fan will tell you this is not the case. Over the course of a week long tournament the luck will even out amongst the players. The one who wins will be the player who best plays the cards they are dealt.
The truth is that what won Varkonyi the title was his bold play and willingness to take a risk.
Surely this is a lesson for all of us entrepreneurs.
Do you sometimes feel outgunned, out financed, and outmanned?We can increase our chances of success as by doing specific things. When you think about it there are aspects of our business that we may not be able to change very easily. These include location, ability to locate needed employees, financing or additional initiatives. These can all be very costly and time consuming. What we must do, however, is most effectively play the cards that we have been dealt. We must accept those things that are fixed (much as a poker player must accept the cards they have in their hand), and figure out what the best “play” is with them. We can compensate by capitalizing on our strengths. This could be viral campaigns, networking, creative marketing, collaborative partnerships with other businesses, perhaps sourcing interns from local colleges and so on. The action will vary with the “hand” you’ve been dealt.
You must also pick and choose where you decide to wage your battles. In poker you can fold on hands that you know are losers so that you apply your chips towards hands that you have a better chance of winning. This strategy can be applied to your business as well. Perhaps going to a tradeshow isn’t the best move, or if you’ve never been, maybe it’s worth trying. Selling only through distributors? Maybe adding a direct sales channel will be a good idea. Or if you only sell direct, resellers may be the way to go. These will vary from business to business and situation to situation, but you must decide where to spend your resources of time, money, and opportunity so that they give you the highest probability of success.
The game of poker appeals to me as a business consultant because there are many parallels with the world of business. You can’t change the cards that you’re dealt but you need to make the best of them. Often times, playing it safe isn’t necessarily playing it smart – even in cautious times.
As is the mantra of Brian Tracy, author of “Create Your Own Future,” you make your own luck. Those people we view as being lucky are people who did things to increase the chances that they would be able to take advantage of the opportunities that present themselves.
Go out and create some luck for yourself, as Mark Deo likes to say, “It’s about increasing the chances of success while decreasing the probability of failure.” Figure out what the best play is based on the chips and cards you have, and make them work for you.
Don’t be afraid of risk. To not take a risk is to risk being ignored. “Destiny is not a matter of chance, it is a matter of choice. It’s not a thing to be waited for, it’s a thing to be achieved.” Let’s go from a “risk aversion” business culture to a risk sharing and reward innovation culture.
In short, risk-taking is as much a part of good management as smart product development, effective marketing and strong leadership.
I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mdeo@sbanetwork.org
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