Redefining the Playing Field as a Business Strategy

It's a tough business climate right now, especially if you're facing global competition or in a mature industry. Although the economy is still in the middle of a four-year term of growth, consumer spending is slowing, competition is increasing, and many industries are struggling.

But what about companies that are reinventing their slow-growth and hyper-competitive industries? The grocery industry is one example. While traditional grocers such as Safeway and King Soopers are struggling to survive, new-era competitors like Whole Foods and Wild Oats are growing at an astonishing pace. So what gives?

Simply put, instead of running business as usual, these competitors have redefined the rules of their industries. While Safeway has for years focused on the middle-market grocery segment, companies like Wal-Mart have beat them by continuously wringing costs out of their supply chains and passing those savings on to customers. So the traditional grocers can no longer compete on price, given that they have less efficient supply chains and more costly union labor.

Newer grocers such as Whole Foods and Wild Oats, on the other hand, are developing a new industry playing field. Instead of competing on price, they are competing on product differentiation (natural foods), targeting a more profitable segment (affluent baby-boomers), and providing better service (through a satisfied non-union workforce). Whole Foods and Wild Oats are growing at an extremely high rate, while companies like Safeway continue to struggle.

These same trends can be seen in other mature industries. Southwest and JetBlue redefined the stodgy airline industry by providing no frills, good service, and low cost to customers. In music, Apple essentially commoditized music by making it a loss leader for its more profitable iPod MP3 hardware. And they are trying to do the same for television by offering downloads of popular TV shows at a low cost.

In all of these cases, the leaders in the industry are not playing the game the way it has always been played. They are creating their own game.

www.panorama-consulting.com

Everything Changes - Organizational Change Management in IT / ERP Implementations

Organizational change management is one of the most overlooked areas of large IT or ERP implementations. Several published studies cite this oversight as one of the most common causes of IT project failures.

So what does a large IT or business improvement project need to do from an organizational change perspective? Many of the more successful projects will focus on spending more on training, while others may focus more on communicating business changes through a formal communications plan.

A better way to think of organizational change management is as a comprehensive benefits realization program. Instead of thinking of change management in the traditional sense, such as focusing on formalizing communications, training, or organizational design, an alternate approach is to think of it as one of several mechanisms that can be used to drive tangible business value and optimize the potential benefits of the IT or business change you are implementing.

This shift away from using organizational change as a means to an end accomplishes several things. First, and probably most importantly, it focuses your project and business resources on activities that will improve the business from a quantifiable Return on Investment (ROI) perspective. For example, a large consumer products company implementing SAP determined that it was going to achieve most of its tangible business value from three major areas in the business: Finance, Global Purchasing, and IT. So rather than reorganize the entire company's job and work roles as a result of the SAP project, it focused on those three areas where it had identified 80% of the ROI in its business case.

In addition to the tighter focus on ROI, a comprehensive benefits realization approach also focuses on activities that will drive true business value, regardless of whether or not those activities are related to change management. For example, it allows you to discover business processes that are inefficient by measuring process results. By measuring processes against benchmarks and identifying areas with the most room for improvement, a benefits realization approach allows managers to continuously improve results after the IT or business implementation. It focuses attention on measurable continuous improvement rather than conducting change management just for the sake of it.

In other words, it is helpful to treat organizational change as one of many possible enablers of business change rather than a final solution. Focusing on ROI and business value allows you to implement organizational change activities that add tangible value and minimize time and money spent on those that do not.

www.panorama-consulting.com

Merger Integration: Is AT&T / SBC Combo a Case Study in How to Get It Right?

Why is it that most mergers don't work? Depending on which study you read, it is estimated that anywhere from 50-80% of mergers and acquisitions do not deliver the results that companies expect. Reasons for these failures range from cultural mismatches to a lack of post-merger integration of strategies and operations.

One recent merger that may make sense financially is SBC's acquisition of AT&T. Last week, the Wall Street Journal reported that the combined company will rename itself AT&T and focus its strategy on selling bundled video, data, wireless, and phone services over a single network. The company is also going to offer a new form of television with 1,000+ channels and targeted advertising (similar to what Google provides on the internet). This is something that the companies could not have achieved effectively before the merger, and it is a good example of a merged company leveraging its combined strengths and assets to deliver a more ambitious and aggressive business strategy.

Obviously, it is still to be seen whether or not this strategy will work and whether or not this will be enough to reverse AT&T's recent misfortunes. The company estimates that only 23% of its revenue will come from its traditional land-line phone business, so in a sense, this combination and strategy may be more of a game of survival than strategic brilliance. However, it is a good example of what companies often fail to do during their merger integrations: combine business operations, including operational and technical infrastructures, to achieve synergies and economies of scale.

Hopefully they will also get some of the other merger integration critical success factors right along the way, such as integrating corporate cultures, optimizing and streamlining business processes to reduce costs and overlap, and developing an organizational design that more effectively leverages the strengths of the people of the two companies. If they can get most of these things right, chances are that SBC and AT&T shareholders will be better off than before the merger.

Eric Kimberling

www.panorama-consulting.com