Thursday, May 14, 2009

Strategic Planning - Better Business Models, part 2

Business models work because they work for customers – and coincidentally, for your company. Self-deception here can lead companies to optimistically adopt a business model that fails because it was designed for the supplying company rather than for the customer. Time and again, I see business models that are broken not because the starting point for their design is what the supplier wants – rather than what the customer wants. One of the key reasons that specialty and commodity strategies are more often successful when they are distinct from each other is that the concept of specialty and commodity limits suppliers to ONE facet of their own desires – and then subjects the business model to a wide range of the customer’s desires.

The quintessential example of failure on this point is one of the oldest ways to create a scam – sell someone on the idea that they can get lots of money, quickly, without special skills or hard work. Sometimes these scams are simple (the Nigerian 401 scam), while sometimes they are grand and complex (Bernie Madoff and Enron come to mind). The fundamental nature of free market capitalism – that it is an engine of creative destruction – means that ANY business model that requires little work, skill, risk or time will be destroyed as quickly as competitors figure it out. Incidentally, if you think through the implications of each of these advantages (little work, little skill, little risk and little time), it becomes quite clear that business models built on top of genuine strategic competency are the only ones that have a long-term chance of success.

Bookmark and Share

Tuesday, May 05, 2009

Strategic Planning for Acquisitions - Team Composition

When you are evaluating an acquisition, who should be on your team? As a general rule, you should attempt to include anyone who has primary responsibility for an area affected by the acquisition. For example, if operations will be affected (and they almost always are), you will want to include the VP of Operations. Obviously, there are a few other areas that are always - or almost always - affected by an acquisition, which means that most (if not all) companies will also want the CEO, the CFO and the VP of Sales involved. If you have a VP of marketing with a strategic level of responsibility, he or she would also be a good addition to the team. In many companies, you will also want to consider including the heads of IT, Human Resources, and Technology/Engineering - depending on your industry, and the ability of the person in question to think strategically about the acquisition.

I'd be curious to hear if there are people you have included in acquisition teams in the past that aren't listed here. Do you have any experiences (good or bad) that might suggest ways you should consider team composition? Let me know!