Push-Pull Business Management Model: Bridging Transition from World-of-Push to World-of-Pull…

Push-Pull: When ‘pulling’ a  rope, it will follow you anywhere… try to ‘push’ it… the rope goes nowhere…

We are living in an epochal period of transition… bridging two very different types of economies and cultures: Push-Pull. We are transitioning from push economy: that tries to anticipate consumer demand, and then creates a standardized product, and pushes the product into the market and culture, using standard distribution channels and marketing.

In contrast, transitioning to pull economy: that uses open and flexible production platforms with network technologies to coordinate many different entities from disparate regions… Pull economies produce customized products and services that serve localized needs (demand-driven), usually in a rapid manner. Pull networks tend to build their capabilities by leveraging networked partners, providing performance feedback, and sharing best practices among their network participants. The pull phenomenon is not confined to business/online commerce. The spread and common use of the Internet technology is finding pull techniques being applied to many areas, including; social life, entertainment, politics, education, government…

According to John Hagel and John Seely Brown, who run Deloitte’s Centre for Edge Innovation, argue; Western companies have spent the past century perfecting push models of production that allocate resources to areas of expected demand. But in emerging markets, particularly those where the Chinese have a strong influence, a very different pull model often prevails, which is designed to help companies mobilize resources when the need arises. For example; Hong Kong’s Li & Fung or China’s Chingquing Lifan Group can use their huge supply chains to produce fashion items or motorcycles in response to demand. Taiwan’s Quanta and Compel can produce cheap computers and digital cameras for a fashion-conscious digital marketplace.

These pull models fundamentally change the nature of companies. Instead of fixed armies looking for market opportunities; firms become loose networks that are forever reconfiguring themselves in response to a rapidly shifting economic landscape. Such models are not peculiar to emerging markets: Western management gurus have been advocating networks for decades. But according to Hagel and Seely Brown; pull models are far more widespread in emerging countries…

In the articleWhy Leaders Should Practice Pull Management by Tammy Erickson writes:  As we move to business models that depend on people working together in collaboration… on innovation, on individual expertise and craft, on crowds contributing to the whole… we must also move sharply away from our traditional concepts regarding the key responsibilities of senior executives. In other words: You can’t make people do these things– push management.

There is no correlation between traditional push management approaches, i.e., directives, power-based approaches, or even compensation and performance management… and, people’s willingness to be a little more creative, or more enthusiastic, or service oriented with customers, or to ponder challenges they face with greater focus and energy… Today, encouraging a greater number of people to go– just a little bit further– is the essential job of leaders.

Long gone is the time when our primary management challenge was to ensure that workers performed tasks consistently and reliably, using standardized best practices. Now we need pull approaches, geared to encourage individuals to share their ideas more widely and constructively, to push the boundaries of what’s possible further, or to be more collaborative and innovative…

In the article From Push to Pull by John Hagel writes: Push-Pull describes a basic shift in the way we mobilize resources. Organizational success depends upon effective mobilization of resources. Getting the right resources to the right place at the right time makes the difference between desired impact and catastrophe. That is the distinction between push-pull.

Over the past century, institutions have perfected highly efficient approaches to mobilizing resources. These approaches may vary in their details, but they share a common foundation. They are all designed to push resources in advance to areas of highest anticipated need.  In the past decade, we have seen early signs of a new model for mobilizing resources.

Rather than push, this new approach focuses on pull– creating platforms that help people to reach out, find and access appropriate resources when need arises.  Pull-push approaches differ significantly in terms of how they organize and manage resources. Push approaches, typically, use ‘programs’– tightly scripted specifications of activities designed to be invoked by known parties in pre-determined contexts.

Pull approaches, in contrast, tend to be implemented on ‘platforms’ designed to flexibly accommodate diverse providers and consumers of resources. The pull platforms are much more open-ended and designed to evolve based on the learning and changing needs of the participants. Rather than seeking to dictate the actions that people must take, pull models seek to provide people, on the periphery, with the tools and resources (including connections to other people) required to take initiative and creatively address opportunities, as they arise. Pull platforms are designed from the outset to handle exceptions, while push programs treat exceptions as indications of failure.

Push models treat people as passive consumers whose needs can be anticipated and shaped by centralized decision-makers. Pull models treat people as networked creators who are uniquely positioned to transform uncertainty from a problem into an opportunity. For clarity, we’re not using platforms in the literal sense of a tangible foundation, but in a broader, metaphorical sense to describe frameworks for orchestrating a set of resources that can be configured quickly and easily to serve a broad range of needs…

In the article Balancing Push-Pull Strategies by Greg Marmulak writes: Companies often times feel that they must choose between employing a push or pull strategy. For example: Should companies make product available based on their production capacity? Or, should they base it on anticipated consumer demand, which is determined by what their customers have already bought? The former, referred to as a push approach, is the most conventional.

Push planning is, generally, supply driven and is a successful approach when a company owns market share and controls demand for its products (e.g., think Apple and iPad). But for business selling more common-place commodities, failing to incorporate consumer-demand data into the equation can result in many problems… In response to the negative impacts a push environment may have on the supply chain, many companies have adopted a pull strategy. In this environment, the flow of product is dictated by consumer demand, that is; instead of pushing product to store shelves and hoping consumers buy them… control inventory levels by actual consumption using consumer-demand data.

This strategy is especially important when it comes to products for which consumers have a lot of choices. While there are many advantages to the pull approach… there are drawbacks: Chiefly, companies that rely solely on pull are susceptible to forecast inaccuracy… realize that a forecast is simply a guess, since consumer-buying behaviors are not always predictable. Basing a forecast entirely on what products are selling may result in a self-fulfilling prophecy in which the company only plans production based on past performance. In order for pull planning to be successful, it must be based on true demand.

However, that alone can present a major challenge for today’s companies… by pulling inventory into its network, then their distribution can only carry inventory based on what they believe their consumers will purchase. Companies employing a pull only approach may also fail to have the right products in the right place at the right time. However, a potentially viable solution is to combine and balance both push and pull, in the same implementation, which brings out the benefits and minimizes the flaws in each approach…

In the article When Push Comes To Pull: The New Economy and Culture of Networking Technology” by David Bollier writes: A push economy is geared toward mass production, anticipating consumer demand, and routing resources to the right place at the right time, to create standardized and mass-produced products. In contrast, a pull economy is based on open, flexible production platforms that are used to orchestrate a broad range of resources.

Instead of producing standardized products, pull model companies are demand-driven, and assemble products in customized ways that serve specialized or local needs, usually using rapid or on-the fly processes. Pull economies are not just centered on finding creative ways to outsource/offshore jobs away from one place and to the places where labor is cheaper. Successful pull models have encouraged and aided insourcing, where more jobs are created, for instance in the U. S. by foreign sources, than are outsourced.

This is because pull models seek out, not just the cheapest labor, but the best ways to add value to the production networks. So, they can scale too many participants around the world, regardless of local labor costs, to find the best participants needed for specific specialized productions. The social dynamics of pull models are highly centered on creating relationships of– trust, sharing knowledge, and close cooperation among network participants…

Times are changing… so must business models and management styles. The push-pull ground-swell of change stretches throughout the organization, and managers must begin to rethink their general approach to building and managing the business. Through the many decades of the ‘industrial age’, businesses pushed their products and services onto consumers. Where limited product choice was accompanied by considerable marketing hype and that was enough to make the consumer buy: It was a sellers’ market. Now, thanks largely to the ‘information age’, consumers are evolving into customers who can select what they want from a variety of providers: It’s becoming a buyers’ market.

But further changes are afoot. As customers get more… they expect more, especially in terms of; business performance, quality of life, welfare of the planet… Customers are beginning to pull solutions toward them… rather than just taking what is pushed at them. The implications of push-pull on business strategies are enormous. The differences between a business model intended to push products and services to consumers vis-à-vis a model built-in support of customers pulling solutions… are significant.

While many companies will be impacted by this evolving switch from push to pull, few are prepared for the transition. According to ‘John Hagel III’, ‘John Seely Brown’ and ‘Lang Davison’; we’re moving from a ‘world of push’ to a ‘world of pull’. Push programs operate on one key assumption– that it’s possible to forecast future demand. In fact, when demand can be forecasted, we can efficiently push resources to where they will be needed… when they will be needed.

But what happens when forecasting accuracy diminish– as it surely has in these big shifting times? Push programs become bottlenecks… preventing effective responses to unexpected changes in demand. Pull platforms, on the other hand, provide more flexible approach to mobilizing resources. In a world of accelerating change, we no longer can be certain, that we know what we are seeking.

In other words, pull platforms must offer serendipity, and robust search capability. Ultimately, that is the true value of pull– by pulling others to us; it pulls the true potential out of all of us. However, in the end, we will need a blend of both; push-pull to be successful…

Physics tells us there are two methods to move an object; push or pull– and, for each method, there is a best time and place… but, sometimes it’s best to use both methods, simultaneously together, to move an object– faster, farther, bigger, better…  

Labor Unions– Reinventing Labor Unionism for 21st Century: Yesterday Champion–Today’s Underdog… Relevant or Relics…

The world and workplace are changing, and so must we… The role of labor movement is not to reminisce about the old economy, but to represent workers in the new economy. ~John Sweeney

Labor unions have been very successful, for decades, at representing their membership’s interests in the workplace: Resolving conflict with employers, improving working conditions, providing workers with equal pay and equal opportunities… However, labor unions (unions) are not as relevant, today, as they once were.

According to the Federal Bureau of Labor Statistics, private-sector union membership has fallen from a high of around 35% in 1950s to just a fraction under 8% today. Several factors have contributed to decline; increased globalization, improved condition for non-union workers, growing employer and political resistance to private sector unionization…

The tumble has been marked by loss of millions of manufacturing jobs, with more than 3 million going away since 2000 alone. It’s likely to get worse before it gets better, as many major corporations are closing manufacturing plants and shifting more production to countries with cheaper labor. 

For years, most old guard unions have relied on political connections as the tried and true route to power and relevance… this has long meant significant spending by labor unions in support of candidates and officeholders that are union friendly, both nationally and at local levels. But with membership steadily dwindling, many in the labor movement have grumbled for years that unions need to take a fresh approach to their task…

In the article Labor Unions Factor into Profitability & Competitiveness of Enterprise by Jim Romeo writes:  The labor management debate continues, i.e., fair and reasonable wages for workers versus the economic toll for an employer to pay such wages and remain profitable. Wages and benefits are a vital ingredient in the work force planning efforts of any organization that expands, contracts, or develops its geographic position. In fact, labor considerations are an integral part of any work site decision and one that often steers the final decision.

According to ‘Tom Davis’;there are many different factors that go into an organization’s work site selection decision… whether it’s a state’s ‘right-to-work’ law, or perceptions about the ability to remain union free– they are often on the list of factors considered… however, the key decisive factors are much more likely to involve financial incentives; the availability of adequate pool of skilled workers, transportation, and proximity to customers... rather than whether the area is perceived to be anti-union. That being said, over the past decade it seems that states with ‘right to work’ have more success attracting major transplant companies than states that are historically more heavily unionized’.

Unions aren’t going away, but they are certainly on the down-trend for private companies. Public unions– those for federal, state, and local government entities– now account for the majority share of all union members. In fact, 2009 was the first year in U.S. history that public sector union members outnumbered private sector counterparts, says ‘Professor Logan’.

The same was true in 2010. Private-sector union members remain important in certain industries and certain parts of the country, but their numbers are in decline. Unions are desperate– they are spending millions of dollars per year in the political arena alone attempting to influence both legislation and regulation that would make it easier for them to force employees into unions, says ‘Phillip Wilson’.

They are also engaging in costly pro-union corporate campaigns, both in real dollars and in public relations, and that can have a detrimental long-term impact on the viability of a business. The final outcome of this latest chapter in union versus non-union work force’ debate will undoubtedly be significant for U.S. labor and the ability of the companies they work for to compete in today’s global market…

In the article Actually, Americans Do Support Government Union Reform by Emily Ekins writes: Over the past decades, union membership has plummeted from 20.1% in 1982 to 11.8% by 2011. Back in 1982, an ABC News/Washington Post poll found 51% of non-unionized workers wanted to join a union. However, by 2011 a plurality of Americans say they prefer not to be in a union.

A fast-paced, upwardly mobile, and increasingly globalize economy has shown the benefits of non-union membership. Individuals can be compensated for their own work ethic and merit, rather than be tied to the production of their co-workers. Today, only 6.9% of private sector workers are unionized whereas, 37% of public employees are unionized, five times higher than the private sector.

In the private sector, expectations for compensation are adjusted with work performance and economic and social changes; whereas, much of the public sector continued using a collective bargaining model; promising retirement benefits in the form of guaranteed pension payments and using collectivized negotiation over pay and health care benefits. Not only has union membership declined, but so has favorability toward labor unions in general.

Favorability toward labor unions has steadily declined from a high of 75% favorable in October 1953 to 52% in 2011. An August 2011 Gallup poll found 55% of Americans expect unions to become weaker in the future and 67% do not think this is a bad thing. In fact, the same Gallup poll found 42% would like to see labor unions have less influence in the U. S., up from 28% in 2007.

Americans also tend to believe unions have a negative impact on the economy and global competitiveness. Gallup finds a plurality (49%) believe labor unions mostly hurt the U. S. economy in general. Although a significant number (35%) of Americans think labor unions did little to impact the economy in 2011, a plurality (40%) thinks labor unions did more to hurt the economy. Likewise, a plurality (36%) also think labor unions have a negative effect on U.S. companies’ ability to compete globally.

In the article “Reinventing Trade Unionism for the 21st Century by Bill Fletcher Jr., Kate Bronfenbrenner, and Donna Dewitt write: The economic and political changes over the last thirty years, both in U.S. and globally, have resulted in far more hostile environment for labor unions. In this context, contrary to the spirit of Philip Randolph’s notion– that the essence of trade unionism is social uplift; the labor union movement is rarely looked upon, today, as voice of progress and innovation, or is it a consistent ally of progressive social movements.

It’s not just that organized labor declined, as a percentage of the workforce, since 1955; or that it carried out unfocused growth, which has evolved into no growth; or that it emphasized servicing its current members, rather than planting the seeds for future growth. It’s that organized labor looks at itself as separate and apart from the rest of the working class and, for that matter, does not see itself as the champion of workers and their communities, but rather a mechanism for advancing the interests of those it currently represents.

For organized labor, in the U.S., the path away from oblivion must begin with the recognition of the vastly different situation that the working class faces in the early 21st century from what existed even twenty years ago. The current situation necessitates a new approach to strategy, tactics, and fundamentally the vision of labor unionism… Over recent years, it has become fashan the production of new mission statements, but instead, rests on the necessity to rethink the relationship of unions to its; members, employers, and government and communities…

Today’s world of individual employment contracts, performance related pay schemes… and the so-called new workplace; labor unions are often regarded as anachronistic obstacles preventing success of the market economy. As collective voluntary organizations that represent employees in the workplace, it’s argued labor unions no longer serve a useful purpose. While overall membership decline has slowed in recent years, the vast majority of younger workers and new labor market entrants are not joining unions.

The growth in short-term employment contracts, agency labor and other forms of  atypical employment, and the trend among firms to outsource their non-core activities to other firms, have made it increasingly hard for unions to organize and create resilient labor standards across industries. These new realities make it all the more important for unions to reassess their current positions and develop new innovative organizing and bargaining strategies.

According to James Sherk; in today’s knowledge economy, collective representation makes little sense, where many employers want employees with individual insights and abilities… jobs of the future depend on the creativity and skills of individual employees. On the other hand, there are many jobs that require union type representation, in order to; maintain minimum work standards, protect workers from unfairness and mistreatment…

The workplace is changing, which is being brought about by social and economic forces worldwide, such as; globalization, technology, e-commerce, Internet… and this mandates a more enlightened union leadership and policy makers. Unions must begin to realize that unionism, as we know it, will not rebound and that an expanded role for a worker voice in the private sector can occur only if there is adoption and experimentation with new forms of worker representation.

At that point, politicians, business leaders, and organized labor must begin to rally public support for alternative forms of unionism and workplace governance. Absent such a consensus, we are likely to see continued marginalization of unions in the private sector and increasing governmental regulation of labor markets…

The twentieth century will be remembered as a time when millions of working fought for safe workplaces; freedom to organize; end to abusive child labor; health insurance and retirement benefits; earn a decent wage;  and, built the greatest middle class in human history. ~Bill Clinton

Strategic Thinking– Fit, Alignment, Intent, Stretch: Matching an Organization’s Strategic Imperatives– Strategy and Structure…

Today’s business landscape has changed, fundamentally… tomorrow’s environment will be different, but none the less–rich in possibilities for those who are prepared–strategic thinking is the new normal.

Strategic thinking is about focusing on higher level business strategies by finding, and subsequently, developing opportunities to create value. It’s a way to focus on and understand the fundamental drivers of your business and continuously challenge the conventional thinking about those drivers.

Another way to view strategic thinking is brainstorming and applying ‘possibility thinking’ with the goal of developing a direction and ‘strategic’ goals; it’s a way of thinking that has well-defined, and specific purpose, characteristics.

A Wall Street Journal study found that the most sought after executive skill by corporation was strategic thinking, but that few people have that knowledge and skill set… According to Brian Hill; strategic thinking involves making a series of decisions about the actions the company intends to take to become more successful. At the heart of strategic thinking is the ability to anticipate major shifts in the competitive marketplace, identify emerging opportunities, and dealing also with limited resources; money, people, time…

Strategic thinking is a mindset for change and having plans to deal with it… the ability to embrace the total enterprise by; spotting trends, understanding the competitive landscape, visualizing where the business needs to go, and provide leadership into the future. Thinking strategically is about challenging assumptions about the business– why you do what you do— finding and developing unique opportunities to create value, and breakthrough thinking about the future.

However, before strategic thinking; first, there must be a strong foundation of critical thinking– understanding the fundamental drivers that affect your organization and rigorously challenge conventional thinking…

Strategic Fit– is the degree to which an organization is matching its resources and capabilities with its opportunities. The matching takes place through strategy, and it’s vital that the company have the actual resources and capabilities to execute and support the strategy.

Strategic fit is related to the resource-based view of the firm which suggests that the key to profitability is, not only through positioning and industry selection, but rather through internal focus which seeks to utilize the unique characteristics of the company’s resources and capabilities.

Strategic fit can also be used to evaluate specific opportunities; alliances, partnerships, joint ventures, M&A… For example; strategic fit for M&A refers to how well the potential business acquisition fits with the planned strategy of the acquiring company. A survey conducted by ‘Bain & Company’ showed that 94% of interviewed CEO’s considered the strategic fit as vital for the success or failure of an acquisition…

Strategic Alignment– is the process and result of linking business strategy and objectives with business units, functions, and employees– it’s more than just a top down process. Strategic alignment is the positioning of a business function in relation to other functions, such that the arrangement can lead to an optimum relationship between the functions or parts.

With strategic alignment, it’s possible to improve performance results and gain a competitive advantage. Aligning the organization to external environment requires forethought and proactive actions. Aligning employees’ performance to the strategic direction requires leadership and monitoring. Aligning different functions and resources across the organization requires integration and diplomatic handling of personalities on a variety of levels.

Strategic Intent– is the high-level statement of means by which your organization will achieve its vision. It’s a statement of design for creating a desirable future (stated in present terms). According to ‘Vadim Kotelnikov’; Strategic intent– simply put, is your company’s vision of what it wants to achieve in the long-term: Strategy must be a stretch exercise, not a fit exercise.

The strategic intent must convey a significant stretch for the company; sense of direction, discovery, and opportunity that can be communicated as worthwhile to all employees. A strategic intent creates a picture of the customer’s daily life and describes discontinuities and anticipated changes from the world of today. It describes future customer’s needs and success factors required for meeting these needs. To achieve great things, you need ambitious visions… It does not matter that vision cannot be laid out in details, right now… it’s the direction that counts.

Strategic Stretch– is a goal that cannot be achieved with– what is known, today. Strategic stretch pushes the boundaries of what is assumed to be impossible to strive for… Only when you aim for impossible, something that cannot be achieved with existing practices, is there pressure to come up with radical new ideas, instead of just work harder.

According to ‘Frank Buytendijk’; strategic stretch is very much like working with an elastic band. If you only pull it from one side, the other side will move in the same direction. You can only stretch it if you pull from both sides. And the harder you pull in multiple directions at the same time, the more space you create, which is the objective of strategic management.

The metaphor of elastic band is very appropriate because it implies that you can’t stop pulling, otherwise it goes back to its neutral position. It’s the same with strategy; you need to keep working on creating strategic stretch, otherwise, the organization will fall back to average results.

In the article “From Fit to Stretch: Strategy & Structure for Results in Organizations” by Bruce Elkin writes:  Long-term success comes from consistency of effort generated by focused and shared intent throughout the organization: Strategic intent is not just wild ambition.

According to ‘Gary Hamel’; ‘strategic intent encompasses an active management process that includes: Focusing the organization’s attention on essence of winning; motivating people by communicating value of the target; leaving room for individual and team contributions; sustaining enthusiasm by providing new operational definitions as circumstances change; and using ‘intent’ consistently to guide resource allocation.’

Once strategic intent is established resources can be leveraged by focusing them on key goals, acquiring them efficiently, combining one with another to add value, carefully conserving them, and recycling them in the shortest possible time. Hamel is not alone in thinking strategic planning has failed because companies trim ambition to match available resources.

‘Peter Senge’, talking about the importance of maintaining visionary goals, says ‘… the dynamics of eroding goals… lies at the heart of the demise… of many U.S. manufacturing industries….’  Companies who trim ambition find themselves at the mercy of circumstances, and without leverage. Senge draws heavily on the work of ‘Robert Fritz’ who has developed an approach to creating high-level results that bears a remarkable similarity to strategic intent, which Senge says ‘forms the cornerstone to help leaders and managers deal productively with complexity and change.’

In the article “Strategy as Stretch and Leverage by G. Hamel and CK Prahalad write: Global competition is not just product-versus-product or company-versus-company. It’s mindset-versus-mindset. Driven to understand the dynamics of competition, we have learned a lot about what makes one company more successful than another. But to find the ‘root of competitiveness’– to understand why some companies create new forms of competitive advantage, while others watch and follow– we must look at the strategic mindsets.

For many managers, being strategic means pursuing opportunities that fit the company’s resources. This approach is not wrong, but it obscures an approach in which ‘stretch’ supplements ‘fit’, which  means creating chasm between ambition and resource… and where leverage complements the strategic allocation of resources.

Managers at competitive companies can get a bigger-bang-for-the-buck in five basic ways: Concentrate resources around strategic goals; accumulate resources more efficiently; complement one kind of resource with another; conserve resources whenever they can; and recover resources from the market-place as quickly as possible…

In the article Stretch– How Great Companies Grow in Good Times and Bad by Graeme Deans writes:  Only a few companies in the world are able to stretch their business and capabilities along several dimensions simultaneously to achieve growth… Most business build their growth strategy based on solid; operations, organization, and strategic growth initiatives, however, there are places in business where a stretch growth idea might take root. For example, you can  look at your product offerings to see if you have opportunities to stretch your customer base, your customer service levels, or level of convenience and customization you provide.

You might stretch your value chain or business model, your geographic reach, or your partnership and risk-sharing approach to improve growth. You might stretch the way you go-to-market through your distribution channel strategy, or branding. You might look to new technologies to stretch your entire company. Or, you might try to stretch in several directions at once and find the ideal combination of growth ideas that will boost your company to the next level of performance. The path to getting there isn’t flashy or quick, but with flawless execution and unwavering focus, sustainable, superior growth is a goal that any company can reach.

Traditional strategic development is a process that involves auditing a business’ current markets, competitors, resources… followed by strategic formulation and implementation. However, ‘Hamel and Prahalad’ proposed a broader view of strategic formulation, called strategic intent, focusing instead on; business capabilities, collaboration, and innovation to achieve revolutionary improvement.

According toGadi Ben-Yehuda’; organizational decisions in companies that employ strategic intent differ from traditional strategy planning methods: They communicate a supportable goal, establish criterion to measure progress, and create active management processes. For example; Toyota’s hoshin kanri system has successful incorporated the  strategic intent principles.

According to ‘Eton Lawrence’; strategic thinking … is not only critical to the survival of the organization in these times of rapid and accelerating change, but more importantly, can be effectively accommodated within a progressive strategy-making regime to support strategic planning … strategic planning and strategic thinking work in tandem, rather than when strategic planning impedes the flourishing of strategic thinking.

As ‘Jeanne Liedtka’ suggests; strategic thinking is about disrupting alignment to create a view of a preferred future, while strategic planning is about creating alignment and dealing with current realities.

As ‘Loizos Heracleous’ suggests; the purpose of strategic thinking is to discover novel, imaginative strategies which can re-write the rules of the competitive game; and to envision potential futures, significantly different from the present.

Bottom line: The goal for strategic thinking is to develop strategies that align an organization’s future direction (or vision) with the future environment to gain competitive advantage.

Think of strategic thinking as the ‘what you want’ component and strategic planning as the ‘how can I get what I want’ factor.

Crowdfunding or Crowdfrauding: The Real Winners– Entrepenueurs, Startups, Small Business…, or Accountants, Lawyers, Consultants…

Crowdfunding is an emerging way of funding; startups, new ideas, projects… by borrowing funding from a crowd (many people), e.g., family, friends, fans, connections….

Crowdfunding is the collective practice of people using the Internet to network and pool their money for a variety of purposes, including funding an early-stage company. Another aspect of crowdfunding is tied into the ‘Jumpstart Our Business Startups’ (JOBS) Act which allows for a wider pool of smaller investors with fewer regulatory restrictions.

The Act was signed into law on April 5, 2012, and the Securities and Exchange Commission (SEC) has approximately 270 days from the enactment date to set forth specific rules and methods to ensure that funding actually take place. The JOBS Act adds a new equity crowdfunding exemption to the registration requirements of the Federal securities law. In other words, follow the rules and regulations that the SEC and other regulatory agencies hand down, then you will be able to use the Internet to raise money for your company.

Crowdfunding allows; startups, ideas, projects… which do not fit the conventional venture investment pattern to attract funding through the participation of a crowd– you need a crowd (many people) to participate, e.g., family, friends, fans... According to the ‘Daily Crowdsource’; crowdfunding has gone from $32 million market to $123 million market in the past two years. In 2011, crowdfunded businesses and projects raised $102 million on rewards-based platforms, including $85.4 million raised by projects that reached their total funding goal… this signifies 266% increase in the total amount donated and 263% increase in the amount donated to projects that received their full funding.

This explosion is attributed to the increase in the number of projects that are being posted online. More than 31,000 projects sought crowdfunded donations in 2011, up from just under 12,000 in 2010. The ‘Daily Crowdsource’ report says; not only are more projects being launched, but the number of projects achieving their full funding goal is also increasing, indicating the market is becoming more efficient at allocating resources…

In the article “Crowdfunding: What it Means for Investors” by Bill Clark writes: The crowdfunding feature of the JOBS Act will not only impact startups, it will also affect investors. That’s because the law allows almost anyone to invest in a startup, however, there is one catch: In the amended Senate bill, the SEC has 270 days to interpret and issue the rules for the public. That means potential investors may have to wait until 2013 before it’s legal to make an investment.  In about 90 days the ‘Access to Capital for Jobs Creators Act’ should go into effect, allowing companies to tell the public that they are raising capital.

In the past, this type of solicitation was illegal and could exempt the company from raising money privately. Now, startups will be able to solicit their deal, which could mean that more investors will hear about it.  The caveat is that only accredited investors can participate in those deals where the company is soliciting. In other words, this will only apply to investors who fall into the following categories.

  • Your net worth is more than $1 million, excluding your home.
  • You have $200,000 in new income for the last two years and reasonable expectation to make $200,000 in the current year.
  • You have $300,000 in household income for the last two years and reasonable expectation to make $300,000 in the current year.

If you don’t fall into these brackets, then you have several options: 1. Review campaigns on crowdfunding platforms, such as; Kickstarter, Indiegogo, Rockethub… Here, while you can’t make an actual investment in company, you will get something for your contribution. For example, if you invest in a video game you might get a copy of the game. 2. You can sign-up on a startup listing platform, e.g., Angellist, where you can check out startups for potential investment. Or, if you choose to wait until 2013, then as a new investor you will need to fill out a suitability questionnaire which will ensure that you understand the risks associated with investing…

A recent ‘Crowdfunding Industry’ report reveals incredible potential for equity-based crowdfunding, saying: ‘After collecting data from more than 170 crowdfunding platforms (CFPs) and other sources, the results revealed that CFPs raised almost $1.5 billion and successfully funded more than one million campaigns in 2011.

As of April 2012, there were 452 crowdfunding platforms active worldwide; and there will be more than 530 projects by the end of 2012′. The report also found that the crowdfunding market is growing at the rate 63% CAGR (compounded annual growth rate) for total amount funds raised. The report identifies four categories of crowdfunding platforms:

  • Equity-based (for financial return): Platforms grew 114% CAGR, primarily in Europe, and raised largest sums of funds per campaign; over 80% raised $25,000+.
  • Donation-based (motivated by philanthropic or sponsorship incentive): Platforms raised the most funds at $676M, but the slowest-growing at 43% CAGR.
  • Lending-based (P2P, P2B, and social): Platforms represent the second largest category raising $552M, and grew at 78% CAGR faster than donation-based.
  • Reward-based (for non-monetary rewards): Platforms  show very high growth at 524% CAGR, but from a low base of about $1.6M  in 2009.

Surprisingly, it’s the reward-based model that currently accounts for the most amount of money in the crowdfunding industry (79%) at the moment (probably due in large part to Kickstarter’s model for success). Lending-based is currently the category with the smallest share, but that may change with the new crowdfunding bill. One determining factor in the growth of equity-based crowdfunding will be the ability for CFP’s to successfully satisfy SEC rules and become registered, then equity-based crowdfunding offerings are expected to rise exponentially.

Another highlight of report concerned the rate at which fundraising takes place. The popular theory is; the first 25% of funds take longer to rise than the last 25%. However, according to ‘crowdsourcing.org’, it takes approximately 2.84 weeks to raise the first 25%, then 3.18 weeks to raise the last 25%, on average. The lending-based take less time than equity-based or donation-based campaigns. These figures could be important when considering crowdfunding strategies.

In the article Before You Crowdfund, Read This by Mark J. Mihanovic writes: The JOBS Act legislation is sweeping in nature, and it contains various provisions crafted to ease capital raising for privately held companies. The provision that has generated perhaps the most buzz is a new securities exemption that allows companies to raise up to $1,000,000 per year from large numbers of investors through funding portals.

This allows companies  using crowdfund equity financing to greatly expand potential sources of capital. However, crowdfunding comes with some potential pitfalls. So if you are an entrepreneur forming a startup, you will want to map out your near-term and long-term financing strategies before you decide whether to go the more traditional route of friends-family, VC financing, crowdfunding. Here are a few points to keep in mind:

  • The crowdfunding provisions of the JOBS Act legislation include various requirements and complexities that your early-stage company must adhere to, including (a) specified disclosure obligations, (b) rules regarding which funding portals and brokers you can use in crowdfunding financings and (c) per-investor caps on investment amounts, which could prove difficult to navigate. The SEC will announce its regulations within the next several months, and that could have a significant impact on the utility of the crowdfunding option.
  • It could cost you significant time and expense to do the administrative work associated with record-keeping and potential contractual arrangements with large numbers of stockholders. Further, a greater number of stockholders could translate into a greater number of disgruntled stockholders, further translating to more potential stockholder lawsuits. This in turn could lead to, among  other bad things, higher directors liability insurance costs.
  • It might be difficult to obtain venture capital once you have taken a round of crowdfunding, so it’s likely crowdfunding will become an alternative route, rather than a stepping-stone to venture capital financing. In short, if you are considering near-term crowdfunding, be aware that the transaction might foreclose venture capital investment down the road.

In the articleCrowdfunding Mistakes that Can Kill a Campaign by Scott Steinberg writes: The biggest misconception people have about crowdfunding sites is that once they post their project up, things will fall into their laps with little effort. That is not true folks. ‘All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work’.

Here are some fun facts that will help you reach success; 75% of crowdfunding projects use well crafted video to help gain more support, 65% posting users shoot video themselves, and 80% users share post on their Facebook, Twitter, personal blog and other media outlets that will help raise awareness.

Projects with clever and enticing giveaways have 70% higher success rate, and if blogs or large publications pick’s up your post, the project will experience significant boost. There are many ways to success; it just depends on what steps you take, hard work, and a lot of  marketing…

Business startup activity is at its lowest point on record– a point worth paying attention to since, historically, startups have created an average 3 million jobs annually, while existing firms lose 1 million jobs each year. As a ‘Kauffman Foundation’ report puts it: Startups aren’t everything when it comes to job growth. They’re the only thing.

According to the ‘Silicon Valley Watcher’, the latest report on trends in U.S. venture investments shows a massive decline of 40% in seed investments in U.S. startups in the final quarter of 2011, and a much larger drop of 48% for the entire year.  According to Dane Stangler; the U.S. badly needs to encourage a ‘producer’ economy– in which more people create companies and entrepreneurial opportunities– instead of the current ‘consumption economy’.

Proponents of the crowdfunding say that it will increase startup activity, whereas, critics argue that it will create– or exacerbate– a kind of speculative attitude. Also, the concern that lowering the barriers for entrepreneurs… to raise money will also make it easier for fraud artists… to take advantage of individual investors.

For many companies (in particular, those unable to get venture capital whether due to size, business sector, or geography), crowdfunding will make a great deal of sense… although, it’s highly unlikely that crowdfunding will change the game plan for companies that would otherwise be able to secure venture capital financing.

Crowdfunding might just be the answer that will allow for a consistent flow of funds for startups… but, until SEC releases regulations it’s anyone’s guess on the potential impact. In the meantime, a prudent approach for startups, entrepreneurs… and investors, alike, is to sit back and wait until we get a bit more clarity.

The crowdfunding alternative is new, evolving and subject to the securities laws and related liability. As such, you will probably need advisors– accountants, lawyers… to help navigate the regulations, disclosures and ongoing compliance.

Business Gap Analysis… Where Are We Now? Vs. Where Do We Want to Be? : The Delta Required to Achieve Desired Outcome…

Gap analysis is a tool used by businesses for tactical and strategic planning. It’s designed to outline a company’s ‘current position’, the ‘desired future position’, and the gap in between.

Gap Analysis is the process of comparing two things in order to determine the difference or gap that exists between them. Once the gap is understood, the steps required to bridge the gap can be determined. Most often gap analysis is used to compare two different states of something; the ‘current state’ and the ‘future state’. In business and economics, gap analysis is a tool that helps companies compare, ‘actual performance’ with ‘potential performance’.

At its core are two questions: Where are we? and Where do we want to be? According to Michael Asu; the basic reasons for business gaps can be analyzed by asking specific questions, such as: What exactly is the gap? What are the consequences of the gap? What is the timing? Who is responsible? What are the options? What are the costs? … Once all possible gap reasons are known, studied, and the root cause recognized, then suitable actions can be identified to either; remove, fill, or mitigate the gap.

Gap analysis is also called; need-gap analysis, needs analysis, and needs assessment. For example, it would be useful for companies to know the difference between customer expectation and actual customer experience in the delivery of a product/service. As such, gap analysis is used as a tool to narrow the difference between perceptions and reality, thus enhancing customer satisfaction.

Gap analysis is a broad concept, and it’s applicable to many aspect of business where performance improvements are desired, for example; the product quality gap could be measured by the difference between the quality level of products expected by customers and the actual delivered quality level.

Gap analysis can be used to address gaps in many areas, such as; human resource management, security management, energy conversation, competitive position, management skills… the list of applications for gap analysis is endless…

In the article Transform Your Business – Gap Analysis and Gap Planning by Uwe Hook writes: The gaps between what the organization ‘is now’ and ‘is doing’, and where it wants ‘to be’ and ‘to be doing’, expresses the challenge to be tackled by gap analysis and gap planning. Gap planning determines how the gaps are to be closed or reduced. Gaps can be filled by; adding things, eliminating unnecessary things or by changing things.

In planning the analysis, it’s essential to clarify what information is most relevant. This involves specifying intended outcomes, and possible unintended outcomes. When an individual or a group is confronted with a gap between ‘where they are’ and ‘where they most want to be’, they can respond in four different ways; absolution, resolution, solution, and dissolution. Learning and creativity are enhanced more by design (dissolution) than by research (solution), more by research than trial-and-error (resolution), and more by trial-and-error than by doing nothing (absolution). 

The efficiency and effectiveness of gap planning is flexibility and innovation in the selection of gap fillers– consider not only the set of traditional gap fillers, but also those not previously implemented. In the highly competitive world, organizational business design must be creative in developing the vision for the future of the enterprise.

Therefore, the selection of gap fillers must be more a matter of creative design, thinking out of box, rather than business as usual. Gap planning and gap filling is a challenging process– gap fillers are rarely independent and their selection should take into account potential systematic interaction, especially those that might affect the enterprises’ overall performance…

In the article About Gap Analysis by Shane Thornton, writes: Gap analysis is a business assessment tool and method that focuses on the gap between a company’s ‘current performance’ and its ‘desired performance’. Gap analysis evaluates current, actual performance and the necessary improvement efforts to close the gap and reach the desired, future performance. The function of gap analysis is to ask upper management two basic questions about the organization: Where are we now? Where do we want to be in the future?

To make the move towards the future desired state, a company must develop and implement quantifiable and measurable success factors that reflect the difference between success and failure of the organization. If accomplished, a solid critical success factor should establish a competitive advantage over the competition in the marketplace. Gap analysis looks to improve inefficient business processes by optimizing allocation of all resources and inputs.

Many companies are performing below their potential because they either misuse resources or lack the correct investment in technology or capital. Gap analysis highlights these inefficiencies and offers options for improvement. Effective gap analysis should increase an organization’s production and performance, resulting in higher-quality products at a lower total cost.

Gap analysis also measures the amount of time, money and resources needed to fulfill an organization’s potential and reach the desired state. The fundamental requirement of gap analysis is– consistent, proactive, and effective management throughout the planning, implementation, and transformation stages of the analytical process. The planning stage and the extensive research required during this stage is the foundation for successful gap analysis.

Research needs to focus on both internal operations of the organization and external business environment, and provide the necessary knowledge about the current state of internal operations, and information about the external environment, such as; market trends, consumer demands, competition…

Benchmarking is a useful tool companies use to compare themselves to other similar companies. Benchmarking can provide useful information and guidelines, such as;  ‘what is a realistic desired state for their business’... The two most popular types of gap analysis are product gap analysis and market usage gap analysis. Product gap analysis concentrates on internal improvements and growth limitations due to product or service characteristics. Market usage gap analysis focuses on the possibilities of growth by evaluating and comparing current market conditions to potential market conditions…

In the article Gap Analysis Compared to Navigation by Don Schwerzler writes: There are three distinct phases in Gap Analysis:

  • Where Are We? One Side of the Gap! At its simplest, navigation is estimating ‘where you are’ by studying your position relative to known ‘guide-posts’ like the sun and other stars. Gap analysis estimates business performance in much the same way. Developing ‘guide posts’ and building a consensus among the company’s management for their implementation is critical for an effective gap analysis planning process..
  • Where Are We Going? To The Other Side of the Gap! In navigation, we set a course from; ‘where we are’ to ‘where we want to arrive’. In gap analysis, similarly, we set a course from; ‘how things exist now’ to ‘how we want things to exist later’. Once there is an agreement among the key stakeholders on the specific ‘guide posts’– possibly, three to five issues that have impact and need improvement– then, you are ready to chart a new course of action and produce an action plan.
  • Secret Revealed!  Both in navigation and in gap analysis, the secret lies in the fact that both measure a changing situation. So the navigation ‘fix’ or business ‘gap’ that is taken at one point in time does not remain valid forever. The secret to using either effectively is to take another ‘fix’ or ‘gap’ at a later time and to compare them over time; i.e., before-and-after analysis.  Navigation fixes might be every hour or so, whereas, business gap analyses might be every three or six months. Comparing them over time reveals the movement or progress you have made toward ‘the other side of the gap‘ and indicates whether course changes are needed.

Gap analysis is about evaluating and improving business performance. A gap is a space or opening– in management terms it’s the space between; ‘where you are’ and ‘where you want to be’. According to Tom Hawes, the goal of competitive intelligence is to produce actionable intelligence for decision makers. Gap analysis is one of the many competitive intelligence tools you can use to interpret your information about the competitive environment.

A gap is simply the difference between; where you and your competitors are positioned. A positive gap indicates you are in a better position than your rivals, while a negative gap clearly means the reverse– in a worse position.

According to David Ingram; A gap analysis is a formal way to identify areas of business operations that are not meeting desired performance levels; and uncover the changes necessary to improve results in that area. As with any strategic initiative, top management is responsible for initiating a gap analysis planning process, for example; bringing all relevant employees on board, overseeing the process, and making final decisions about the analysis’ outcomes and implications.

Strategic initiatives like a gap analysis can only be fully effective if top management exhibits total commitment to the change effort. Business leaders must act as; champions, communicators, and mediators in times of change. Management must make the gap analysis a prime issue, in their workdays, and must encourage employees, at all levels of the organization, to achieve excellence.

Employees often emulate the behavior of top management. If the leadership shows no real interest in the gap analysis and its implications, managers and employees throughout the company are likely to feel the same way. If the leadership is fired up and passionate about the program, more employees will be on board. A gap analysis can be broken down into specific steps, such as:

  • Identify areas in which performance is lagging– actual performance levels must be measured and specific.
  • Measurable goals for improvement must be set.
  • Identify possible causes for performance lags, as well as opportunities for performance-enhancing changes.
  • Decide which identified areas should be focused on, and implement the changes.

The performance of the target area must be closely monitored over time– looking for ‘change in performance level’, which should shed light on the effectiveness of the program. A gap analysis can be used in time of crises to find solutions for obvious problems; however, the tool has more potential than just being a damage-control technique.

Using a gap analysis on various departments and business units on regular basis can help organizations continually improve the efficiency of their operations while cutting costs and delivering a consistently higher quality product or service…

Gap analysis (also known as need-gap analysis, needs analysis or needs assessment) is an examination of business performance and provides insight into the needs for improvement and helps determine what steps to take to attain business goals.

 

Fame, Fortune, Power, Glory… Leverage Your Strengths-Talents: SWOT Yourself… Become Indispensable…

If you think a weakness can be turned into a strength, I hate to tell you this, but that’s another weakness~ Jack Handy

Strength is the ability to consistently provide near-perfect performance in a specific activity. Talents are naturally recurring patterns of thought, feeling, or behavior that can be productively applied. Talents, knowledge, and skills– along with the time spent practicing, developing your skills, and building your knowledge base– combine to create your strengths.

Most of us have little sense of our talents and strengths. Instead, guided by parents, teachers, managers and psychology’s fascination with pathology, we become experts in our weaknesses and spend our lives trying to repair these flaws, while our strengths lie dormant and neglected. According to Marcus Buckingham, motivational speaker says: Focus on your strengths, not weaknesses.  Buckingham says, focus on identifying one’s strengths at an early age and develop the unique traits that every person possesses. 

However, a  majority of people still think that plugging the weaknesses will help them succeed. People tend to focus not only on their own weaknesses but also on the weaknesses of others, for example; parents dwell on a child’s ‘F’ in algebra rather than praise an ‘A’ in English. In a one-hour job performance review, supervisors spend two minutes discussing strengths and 58 minutes discussing the areas of opportunity or weaknesses with employees. It may sound elementary, but a quick glance around the business world indicates that many companies have yet to grasp this simple concept of putting people’s strengths to use. That’s because the business world– and the world at large– is obsessed with weaknesses and finding ways to fix them.

A recent poll that asked workers whether they felt they could achieve more success through improving on their weaknesses or building on their strengths: 59% picked the former. Most people have the crazy misconception that the way to grow and become the most that you can be– is to ‘fix’ weaknesses. In spending time and energy working on weakness you will come to realize that all you have is strong weaknesses: Weakness is weakness no matter how strong.  Instead, focus as much time, energy and resources on building up your strengths, and learn to manage around your weaknesses…

In the article Strengths or Weaknesses: Which Should You Improve?” by Al at 7P writes: It’s a classic question: should you work on improving your strengths, or should you work on addressing your weaknesses? But, as much as we want to improve our weaknesses to avoid failure and loss, it’s really our strengths that help us win. Being well-rounded might be a good quality to have, but in a competitive situation, the winner is defined by whoever can best achieve a specific goal.

Victory depends on doing certain things extremely well, rather than doing a lot of different things merely at an acceptable level. Great will win over mediocre. People will choose impressive over acceptable. However, Scott H. Young wrote, that there is too much emphasis on strengths, and suggests instead we should focus on things that we are passionate about. Scott’s point is that whatever we are good at may not align with what we are passionate about.

However, Marcus Buckingham addressed such an argument by saying that strengths must include; knowledge, skills, and talent, and true talent (defined as the natural-born abilities) energizes you when you do it, rather than drain you from the effort. Others believe that strength and passion are two independent qualities. Only when strengths align with passion is when you get the fullest experience of the work. Steve Pavlina says that you should work from your strengths but improve on your weaknesses. His argument is based on the importance of having balance in your life. Balance doesn’t mean doing all things equally well, but instead, balance means doing activities in proportion to how much they add value in your life…

What’s a SWOT analysis and why bother? A SWOT analysis is a subjective assessment, which is open to interpretation, e.g.; what one person sees as strength, another may see as a weakness; and, what is an opportunity for one, may be perceived as threat for another.

Both perceptions may be valid. Treat a SWOT analysis as an investigation tool for use in your quest to identify your strengths and weaknesses, and the opportunities and threats that they may create. But along the way, the SWOT process will probably raise more questions than it answers, but that is part of the journey. SWOT stands for:

  • Strengths: Things that you are good at or things that you do well. There are many types of strengths…
  • Weaknesses: Things that you are not so good at or things that you don’t do so well. There are many types of weaknesses…
  • Opportunities: A favorable or advantageous circumstance or combination of circumstances in which you operate that creates a chance to achieve something of value…
  • Threats: An unfavorable or disadvantageous circumstance or combination of circumstances in which you operate that creates potential damage that hurts
    your progress or limits your ability to achieve something of value…

In the article “Improve Strengths, Not Your Weaknesses—huh? by Lotus Leadership Institute writes:  Most people in authority positions have been high achievers throughout their lives, and they continue in the quest to be better. What we hear most often from clients from all sorts of organizations are requests to improve on the things they aren’t good at– to build up what is currently lacking, their weaknesses. While it is certainly important to improve on weaknesses, it’s the opposite practice that might better improve one’s ability to be a great leader.

Are we saying that you should take what you are already good at, and get better at it? The answer is yes. The data from extensive global research in leadership development clearly suggests that its people’s strengths that distinguishes them in an organization: Essentially, being so good at doing certain things that people will forgive or not even think about your weakness. Why does this work?

The most important leadership skills are interrelated. If you are already a good communicator, you can work on being compassionate or improve your ability to resolve conflict; thereby improving other leadership skills and making you an even better communicator.

Think of it this way, if you are good distance runner, you could further improve your ability to run by lifting weights, running short sprints… doing related, complimentary skills that improve your
overall athletic ability and make you an even better runner. You are still focusing on your strength, but improving it by improving other aspects of yourself.

In the article “Know Your Own Strength” by Andy Kanefield writes: Understanding the strengths of people in the organization plays a critical role in organizational performance and success. But knowing strengths, and knowing what to do with that knowledge are two different things. Socrates has suggested that the ‘beginning of wisdom is the definition of terms.’ For our purposes, we will define strengths; as the intersection of what you’re good at with what energizes you. As we know, those who serve in leadership roles often excel at many work tasks.

At the same time, those tasks may drain them of energy they need to focus on strategic business leadership. Just think of the energy expended in creating or poring over the minutia in financial reports. It may energize some leaders, but more often than not, it can be a process that drains leaders. It’s important to know your strengths, but where is your personal intersection of excellence and energy?

Of course, a corollary is to know your weaknesses, but where is the intersection of where you excel and feel drained? What don’t you do well? However, in addition to knowing yourself, you must also know the people on your organizational team. This means three things:

  • Do you know the strengths of the individuals on your team? What is each person’s intersection of excellence and energy?
  • Do you know how those strengths relate to yours? Do your strengths complement those of your key managers?
  • Do you know how the strengths and weaknesses of the people on your team synthesize into team strengths and weaknesses?

Strengths and weaknesses don’t exist naturally, only talents and non-talents exist naturally. It’s only when you rely on a non-talent that you create a weakness for myself. Likewise, if you don’t rely on your talents, they never become strengths. In other words, you are ultimately in control of your strengths and weaknesses.

According to Jay Niblick; you may be born with talents and non-talents, but you are in charge of whether or not those talents and non-talents are used to become strengths or weaknesses. When you allow your success to depend on your talents, you create strengths. When you allow your success to depend on your non-talents, you create weaknesses. Think of talents and non-talents like two boxes. The first box contains a gift (talent) and the second box contains trouble (non-talent) and is marked Pandora’s Box.

Regardless of the contents, however, each box only contains potential. The first box is only potentially good, the second only potentially bad. Nothing happens until you actually open the boxes. The most successful people don’t have any more talent than anyone else, and they are just as flawed and imperfect as the next person. But, they just have fewer weaknesses because they are very aware of their non-talents and they do a damn good job of not depending on them.

According to Paula Durlofsky; a good way to identify your strengths is to ask yourself a series of questions such as: Do I accomplish my goals (small and large) in timely manner, am I curious, do I desire success and achievement, am I compassionate, do I enjoy caring for other people, do I embrace change, can I control my emotions, do I enjoy learning new things, can I accept criticism without being defensive or angry, am I generous and kind? It’s a sign of strength to be aware of your weaknesses, know them, manage them, and accept them. Self-awareness gives us the ability to be fully aware of our strengths, our
inherit talents, and the courage and ability to manage and accept our weaknesses. When this reality is achieved we acquire the necessary insight to reach our maximum potential!

Management’s job is to make the strengths of their people more effective and their weaknesses irrelevant. ~Peter Drucker

Employee Engagement– Its Very Big Deal: Leading Indicator for Work Performance & Critical for Business Outcomes Success…

‘Turned-on’ people figure out how to beat the competition—‘Turned-off’ people only complain about being beaten by the competition. Developing a highly engaged and productive workforce is a non-negotiable requirement.

Employee engagement, or worker engagement, is a business management concept; where an engaged employee is fully involved and enthusiastic about their work, and thus will act in a way that furthers their own and the organization’s interests. Whereas, under engaged or disengaged employees, typically just go through the motions of completing their daily duties with minimum effort, and exhibit little passion or creativity. Employee engagement is essential to succeed in business, yet few organizations define, measure, or manage a sustainable model.

According to ‘The Conference Board’, fewer than half of U.S. workers are satisfied with their jobs, and even more are disengaged. According to ‘Scarlett’, employee engagement is a measurable degree of an employee’s positive or negative emotional attachment to their job, colleagues, and organization that profoundly influences willingness to learn and perform at work’. Engagement is distinctively different from employee satisfaction, motivation, and organizational culture. Let’s be clear.

The terms employee engagement and employee satisfaction are not synonymous.  Employees can be quite satisfied with their job, company, and their place in it, without ever engaging in the work. Think about it. Have you ever had an employee or colleague who was perfectly satisfied to come to work every day where they could happily surf the web, Facebook with their friends, or play computer games? Perhaps that’s a bit extreme, but we all know employees who are satisfied with being left alone in their mediocrity.

Engaged employees, on the other hand, are passionate and alive with the desire to perform well and do so in alignment with the  organization’s strategic objectives. These are the employees for whom you need to create an environment in which they want to engage for the long-term. Research has shown that there is a direct correlation between engaged and disengaged workers and the relative success of the organization…

In the article Management’s Dirty Little Secret by Gary Hamel writes: The ‘Global Workforce Survey’ conducted by Towers Perrin, an HR consultancy; polled more than 90,000 workers in 18 countries and measured the extent of employee engagement. The study findings include: Barely one-fifth (21%) of employees are truly engaged in their work, in the sense that they would ‘go the extra mile’ for their employer. Nearly four out of ten (38%) are mostly or entirely disengaged, while the rest are in the tepid middle.

This data represents a stinging indictment of legacy management practices found in most companies. How do we account for this heedlessness? There are several possible hypotheses, including: Ignorance; Indifference; Impotence. The first hypothesis, ignorance, seems to me unlikely. Anybody who has ever read a Dilbert strip knows that cynicism and passivity are endemic in large organizations.

Only an ostrich could have missed this. The second hypothesis, indifference, has more to recommend. I believe there are many managers who have yet to grasp the essential connection between engagement and financial success. Companies that score high on engagement have better earnings growth and fatter margins than those that do not… Today, no leader can afford to be indifferent to the challenge of engaging employees in the work of creating the future. Engagement may have been optional in the past, but it’s pretty much the whole game today.

What about the third hypothesis, impotence? Surprisingly, 86% of employees in the Towers Perrin study said they loved or liked their job. So what, then, are the culprits? Julie Gebauer, who heads ‘Workforce Effectiveness Practice’ at Towers Perrin, says; Survey data suggests this might be a senior management issue: Only 38% of employees believe that senior management is sincerely interested in employee well-being. Less than 40% say that senior management communicates openly and honestly. Scant 40% of employees believe that senior management communicates the reasons for business decisions, while 44% believe that senior management tries to be visible and accessible. Perhaps most damning of all, less than 50% polled believe that senior management decisions are consistent with their values...

In the report “Social Knows: Employee Engagement Statistics” by Elizabeth Lupfer writes: Here are a few key findings from the report:

  • Lost productivity of actively disengaged employees costs the U.S. economy $370 billions annually. (Gallup)
  • 70% of engaged employees indicate they have a good understanding of how to meet customer needs; only 17% of non-engaged employees say the same. (Wright Management)
  • 78% of engaged employees would recommend their company’s products, against 13% of the disengaged. (Gallup)
  • 67% engaged employees advocate their company or organization against only 3% of the disengaged. (Gallup)
  • 86% of engaged employees say they very often feel happy at work, as against 11% of the disengaged. 45% of the engaged say they get a great deal of their life happiness from work, against 8% of the disengaged. (Gallup)
  • 75% of leaders have no engagement plan or strategy even though 90% say engagement impacts on business success. (ACCOR)

In the article Employee Engagement: Nobody Cares by Edward Muzio writes: Nobody cares:  Well, that’s an overstatement. Some people care. In fact, some organizations are tackling the challenge of employee engagement and getting good results. If you want to cheer up a little, check out Fortune’s ‘100 Best Companies to Work For’ list. But don’t cheer up too much. On the whole, we’re trending the wrong way.

We’ve all heard first-hand horror stories of workplaces filled with inept, apathetic workers who drag everyone else down. In the process, they cripple their whole group’s ability to produce useful output. Clearly, either not enough people care about employee engagement, or not enough people know what to do about it, or both: ‘Both’ is a troubling notion.

Knowledge can lead to interest, and interest can lead to knowledge. But ‘nobody knows and nobody cares’ is a signal flare… It’s an attitude that quickly converts to a pattern of behavior that shuts down information transfer, marginalize improvement efforts and saps every one of the creativity they need to solve problems in today’s complex workplace. I don’t know and I don’t care is like the organizational plague.

So, as we teeter on the edge of epidemic– put your interest and knowledge together and become just a little bit of the antidote.  Here’s how:  First, engage with the engaged. Focus praise, attention, and resources on those employees who are engaged. Second, ask people about their incentives. That doesn’t mean asking people if they wish to get higher pay. It means asking people, beginning with the most engaged, what they find interesting, engaging, or motivating about their job.

Remember, though, the more time you spend interacting with the disgruntled, more likely you are to become that way, too… On the other hand, more time you spend engaging with the engaged, more connected to the work you’re likely to feel, and the less you feed– ‘nobody knows, nobody cares’ mentality…

In the article “Employee Engagement in a Social Media World by Elizabeth Cogswell Baskin writes: In study after study, research shows that employee engagement boosts productivity, cuts costs and builds revenues. Engaged employees do have a significant impact on sales, and that’s one of the primary reasons employee engagement has become a priority for many CEOs.

Many companies rely on intranets and email to reach employees. When you don’t have the benefit of face-to-face interactions, there is nothing better than social media for building community. Good news is that early adopters of social media for employee engagement, such as; IBM, Quicken Loans and Nokia, have found little-to-no issues with their implementations. Quicken Loans launched The Diff, a public-facing blog written by employees… IBM, however, has chosen to keep their social media in-house by starting Blue Twit and Social Blue, their own internal social media networks that mimic Twitter and Facebook. Nokia developed Socialcast, an internal hybrid of Facebook and Twitter.

Also, there is mobile technology for reaching employees… applications for Twitter, Facebook and LinkedIn all enable employees to check-in on company news on their breaks.  Keep in mind that the younger generations of employees don’t place the same sort of boundaries between their work lives and their personal lives. It can feel completely natural for them to get work communications through the same information pipelines they use for their personal interests.

Brands that don’t embrace social media will be missing the boat on the media preferences of many employees.  For forward-looking companies, social media provides rich engagement opportunities to build communities of employees by sharing company news, knowledge transfer and best practices…

According to Alan Schweyer; ‘The Economics of Engagement’ says; disengaged employees are estimated to cost the U.S. economy as much as $350 billion per year in lost productivity… A major opportunity for corporate performance improvement and employee retention lies in engaging the workforce to drive better customer engagement, better revenue, and higher profits.

Schweyer points out that; most leaders and organizations know the difference between a fully engaged worker and one that is marginally engaged or disengaged. The former brim with enthusiasm, they contribute ideas, are optimistic about the company and its future, are seldom absent from work, they typically stay with the organization longer and are among the organization’s most valuable ambassadors.

An analysis by Gallup, of 199 studies, in 152 organizations, 44 industries, and 26 countries; showed that high employee engagement delivers uplift– in business performance numbers: Profitability up 16%, productivity up 18%, customer loyalty up 12%, and quality up an incredible 60%.

In a study by ‘Modern Survey’; number of ‘fully engaged’ employees has dropped to record low 8%, number of ‘under engaged’ employees has risen to record high of 42%, and cumulative total number of employees either ‘under engaged’ or ‘disengaged’ has also reached new record high of 70%. However, total number of employees reporting that they are actively seeking new employment opportunity, elsewhere, is only 21%. 

In summary, although many employees appear to be unhappy or uncommitted they are not actively searching new job opportunity– the down economy may be a factor. Also, while these various studies differ they all have the same basic conclusion: Highly engaged employees outperform their disengaged counterparts by a wide-margin (i.e., 20–28 percentage points).

Finally, there is evidence that companies are responding to employee engagement challenge– by flattening chains of command, providing training for managers and implementing better internal communications…

The type of employee commitment is critical; employees who ‘want to belong’ to the organization are more likely to perform better than those who ‘need to belong’.

Decline of the Publicly-Traded Corporation: Diminishing Value, Excessive Regulations, Viable Alternatives… Return to Private Enterprise…

The number of publicly traded companies in the U. S. continues to fall with a 42% decline from 1997. U.S. publicly traded listings have decreased every single year since 1997 with no rebound at all. ~Edward Kim,

The publicly held corporation– the main engine of economic progress in the U. S. for a century– has outlived its usefulness in many sectors of the economy and is being eclipsed by other more relevant corporate structures. According to Michael C. Jensen; new organizations are emerging, organizations that are corporate in form, but have no public shareholders and not listed or traded on organized stock exchanges.

These organizations use public and private debt, rather than public equity, as their major source of capital. Their primary owners are not households but large institutions and entrepreneurs that designate agents to manage and monitor on their behalf and bind those agents with large equity interests and contracts governing the distribution of cash. Takeovers, corporate breakups, division spin-offs, leveraged buyouts, and going-private are the most visible manifestations of the organizational changes in the economy.

The private organizations are making remarkable gains in operating efficiency, employee productivity, and shareholder value.  Whereas, publicly traded companies are in danger of becoming less important as an organizational structure. The rise of the private-equity industry and proliferation of private markets gives more power to a smaller circle of company founders and experienced investors. Public companies have shown an extraordinary resilience through the century, but there are alternative organizational structures that might be better suited for the new economy…

In the article Eclipse of the Public Corporation by Michael C. Jensen writes:  The forces behind the decline of the publicly traded  corporation differ from industry-to-industry. The decline is real, enduring, and highly productive, however, the current trend does not imply that the publicly traded corporation has no future.

The conventional 20th-century model of corporate governance, consisting of; dispersed public ownership, professional managers without substantial equity holdings; board of directors dominated by management appointed outsiders– remains a viable option in some areas of the economy. Particularly for growth companies whose profitable investment opportunities exceed the cash that they generate internally.

These companies can be found in industries, such as; computers and electronics, biotechnology, pharmaceuticals, and financial services. However, the public corporation is not suitable in industries where long-term growth is slow, or where internal generated funds outstrip the opportunities to invest them profitably, or where downsizing is the most productive long-term strategy.

The publicly traded corporation is a social invention of vast historical importance. Its genius is rooted in its capacity to spread financial risk over the diversified portfolios of millions of individuals and institutions and to allow investors to customize risk to their unique circumstances and predilections. By diversifying risks that would otherwise be borne by owner-entrepreneurs, and by facilitating the creation of a liquid-capital market for exchanging risk, the publicly traded corporation lowered the cost of capital.

However, the widespread waste and inefficiency of the public corporation and its inability to adapt to changing economic circumstances have generated a wave of other organizational innovation over the last 20 years; innovation driven by rebirth of active investors. Active investors are investors who hold large equity or debt positions, sit on boards of directors, monitor and sometimes dismiss management, are involved with the long-term strategic direction of the companies they invest in, and sometimes manage the companies themselves. Active investors are creating a new model of general management.

The model is built around highly leveraged financial structures, pay-for-performance compensation systems, substantial equity ownership by managers and directors, and contracts with owners and creditors that limit both cross-subsidization among business units and the waste of free cash flow. Consistent with modern finance theory, these organizations are not managed to maximize profit but to maximize value, with a strong emphasis on cash flow.

More than any other factor, these organizations are motivating the same people, managing the same resources, to perform more effectively under private ownership than in the publicly traded corporate form.

In the article The Staying Power of Public Corporation” writes: Has the publicly traded  corporation out-lived its usefulness? Michael C. Jensen says; Yes. The institutional shortcomings of the public corporation are so grave, he argued, that it must be considered fatally flawed. There are new better forms for an enterprise, which releases much of the untapped value, as well as, corrects many of the inefficiencies of large public companies.

Alfred Rappaport, a professor and consultant, joins the debate with a rebuttal to Jensen. Rappaport shares many of Jensen’s criticisms of current strategic and financial practices among publicly traded companies, but he does not believe leveraged buyouts and other going-private transactions can replace the public corporation. Rappaport argues that the publicly traded corporation is worth saving: It’s inherently flexible and its self-renewing-properties are fundamental to stability and progress in market-driven economy. These characteristics cannot be duplicated in a transitory organizational structure, such as; a private-equity company…

In the article “The Endangered Public Company by The Economist writes: The number of public companies has fallen dramatically over the past decade– by 38% in the U.S. since 1997 and 48% in Britain. The number of initial public offerings (IPOs) in the U.S. has declined from an average of 311 per year in 1980-2000 to 99 per year in 2001-11. Especially, small companies, those with annual sales of less than $50 million before their IPOs– have been hardest hit. In 1980-2000 an average of 165 small companies undertook IPOs in the U.S.  each year. In 2001-09 that number fell to 30.

The burden of regulation has grown heavier for publicly traded  companies since the collapse of Enron in 2001. Corporate chiefs complain that the combination of fussy regulators and demanding money managers makes it impossible to focus on long-term growth. Shareholders are also angry. Their interests seldom seem to be properly aligned at publicly traded companies with those of the managers, who often waste millions on empire-building and sumptuous perks.

At the same time, alternative corporate forms are flourishing. Once, ‘going public’ was every CEO’s dream; now it is perfectly respectable to ‘go private’. The increase in the number of corporate forms is a good thing: a varied ecosystem is more robust. But there are reasons to worry about the decline of an organizational structure that has spread prosperity for 150 years…

Fewer IPOs mean fewer chances for ordinary people to put their money in growth companies. The rise of private-equity and spread of private markets are returning power to a club of privileged investors. All this argues for a change in thinking– especially among politicians who heap regulations onto publicly traded corporations, blithely assuming that business have no choice but to go public in the long run.

Many firms now go (or stay) private to avoid red tape. The result is that ever more business is conducted in the dark, with rich insiders playing a more powerful role. The publicly traded company has long been the locomotive of capitalism. Governments should not derail it…

In the article Why is the Public Corporation in Eclipse” by Larry Ribstein writes: The publicly traded corporation has stayed dominant through modern business history in part because it has political support. In other words, perhaps we should be asking not why the public corporation is threatened, but why, despite everything, it continues to survive. The answer, I think, is the pseudo-democracy of the publicly traded corporation form. Indeed, this explains at least some of the political hostility to private-equity and hedge funds.

These organizations, which truly serve the residual claimants, are a bit too much ‘shareholder activism’ for the so-called ‘shareholder activists.’ The question is how much longer can the rise of the new corporate forms that are threatening to eclipse the publicly traded corporation be delayed.

Everyone, it seems, wants to be private and, particularly, public corporate CEOs, who are concerned about such things as; compliance overkill, preoccupation with risk aversion, lost opportunity cost, inability to pay-for-performance without outcry from public shareholders, and how publicly traded company directors can’t attend board meetings without bringing their lawyers. 

The public corporation retains its dominance at least in part because of the strong political support for preserving corporate managers as quasi-bureaucrats who are susceptible to demands of activists, e.g., unions, legislators…  I think that the publicly traded corporation may have seen its day, which may seem hard to believe today, when these firms are still so dominant. But mastodons may have felt pretty invulnerable, too, at one point.

During the five decades after Adolf Berle and Gardiner Means published ‘The Modern Corporation and Private Property’ in 1932, their analysis became the dominant doctrine of the U.S. public corporation. Berle and Means did not anticipate an economy dominated by a handful of ever-larger corporations run by an unaccountable managerial class, and inspired scholarship from sociologists (who were convinced they were right) to financial economists (who wanted to prove them wrong) to lawyers (who contemplated the rights and obligations implied by this system).

However, a decade into the twenty-first century the public-traded corporation may have reached its twilight.  According to Jerry Davis; it’s notable that the number of public-traded corporations in the U.S. has been in continuous decline since 1997, and the number of IPOs have not kept pace with number of mergers, bankruptcies, and de-listings. It is also notable that even the most successful public-traded companies no longer create many jobs, within their own boundaries, even though they are creating shareholder value.

So, how did this happen? Where did the publicly traded corporations go? One hypothesis is– meddling politicians and regulators required publicly traded corporations to audit themselves more carefully, disclose more information, vouch for it more rigorously, and staff their boards more thoughtfully, e.g., Sarbanes-Oxley…  For many companies, the cost of complying with these regulatory demands makes it too costly to ‘go public’ in the U.S.– so instead, they either; stay private, or go to a foreign exchange to list shares where regulations are less stringent…

Another hypothesis is– the public corporation is best suited for the organization in the traditional economy, whereas, the new economy has different organizational characteristics. Outside of retail, energy, and a few other industries; today, many new enterprises have relatively few assets and lower employment: However, they do generate huge profitable revenues… So, why go public? Clearly, many entrepreneurs, VC, and other investors are deciding to skip IPO and stay or go private …

When company ownership is separated from management, the latter will inevitably begin to neglect the interests of the former, creating dysfunction within the company. Some maintain that recent events in corporate U.S. may serve to reinforce Smith’s warnings. ~Adam Smith