Learning curves (20 page)

23

“Okay guys, settle down now,” Jay said as Jen, Lara, and Alan filed into the lecture hall the following Monday morning. “I’d like to introduce Dr. Marjorie Pike, who will be talking to you about strategic options and evaluation. Marjorie did her MBA at Henley Management College, and her doctorate at Wharton in the U.S., and she’s been lecturing there for the past five years, so we are very fortunate to have her here with us today. Marjorie, over to you.”

The three of them scurried quickly to find seats as Marjorie slowly and decisively walked to the front. She was a small woman with white skin and black hair pulled into a chignon, and her eyes seemed to pierce each and every person in the room. No one made a sound.

“Options, options, options,” she said thoughtfully. “Do you do an MBA or a marketing qualification? Do you work in the U.K. or the U.S.? Do you buy this house or another—or do you hedge your bets and wait to see how the housing market plays out over the next year or so? Every day, we face options and make decisions. The problem is, most times we make the wrong ones—do you stay for one more drink or go home while you’re ahead? We generally have that last drink and we generally find ourselves regretting it in the morning. And while making a bad decision might be okay if it’s just the wrong toothpaste that you bring home, it’s not okay if you invest billions of dollars of shareholders’ money in the wrong venture. Right?”

Jen nodded glumly. She knew more than she’d ever wanted to about making the wrong decision. Frankly, she felt that she was an expert in the subject.

“So what do you do?” Marjorie was saying. “You have your strengths and weaknesses set out. You’ve identified your threats and opportunities. How do you turn those into options, and how do you decide among them?”

More silence. Then Alan put up his hand.

“Yes?”

“Well,” he said falteringly, “you develop actions that take advantage of opportunities, and others that mitigate the risks.”

“How?”

“Well, if an opportunity is to . . . attract a new customer—type of customer, I mean—then you do research to find out if you’ve got a chance. If it’s viable, I mean. And if a threat is a competitor who’s also, you know, after the same customer, then you have to work harder to make sure he doesn’t get her . . . get them. So, you know, you might do some heavy advertising or something . . .”

He trailed off and Jen looked at him strangely, wondering why he was sounding so gung-ho about all this. She guessed it was just his usual geeky enthusiasm for anything to do with strategy, but even so, he was getting all excited, bobbing up and down in his seat. She stared at him for a second, then lost interest as she found herself thinking about her father again. He’d certainly taken advantage of opportunities. And she’d let him walk all over her. Well, he wasn’t going to get away with it. She wasn’t sure quite yet what she was going to do about that spreadsheet, but she was definitely going to do something. Take it to the police, probably.

“Good. That’s very good,” Marjorie said briskly. “But in this situation you could also decide to consolidate, couldn’t you? Buy up one or two of your competitors or maybe even your suppliers. What if you have more than one opportunity? What if you could enter a new market or rebrand your product for a new audience or focus on increasing your existing market share? What then?”

Alan frowned. “Rebranding,” he said seriously. “I didn’t think of that.” He started scribbling frantically, and Jen rolled her eyes dismissively.

“In a textbook, strategic options are very easy,” Marjorie continued. “You pick a couple of horses, see if they’ll run, and bingo, you can make a decision. In real life it ain’t that easy. In real life it’s messy and complicated and you don’t just have to consider the business imperative; you also have to consider the people and their personalities. One option might be to sell off a loss-making part of the business. But if the managing director set that business up himself and is emotionally attached to it, selling it probably won’t be a viable option. Okay, someone give me an example, a company you’ve already analyzed and that we can look at briefly to highlight the issues.”

She looked around the room searchingly and everyone looked at one another shiftily. Finally someone at the back said the fateful words, “We’ve already done some work on a condom company.”

There were a few sniggers, although subdued ones— somehow Marjorie wasn’t the sort of person anyone fancied their chances with. But she took it in her stride.

“A condom company? Interesting. Okay, then. And presuming that you have all exhausted the humorous elements of a condom’s strengths and weaknesses, what are the possible options for this theoretical company?”

“Sex toys,” someone called out.

“Market penetration,” someone else called out to a quick applause.

“Entering new geographical markets,” shouted another.

“Okay, thank you,” said Marjorie, scribbling them down on the board as people giggled. “So we’re looking at market penetration, new markets, and new products, right? And how do we choose from among these options?”

“Well, it has to be a good fit,” said someone in a deadpan voice. Marjorie chose to ignore the joke.

“Sure, strategic fit. But what does that really mean? You,” she said, pointing at Alan, who immediately sat up straight.

“Well,” he said seriously, “I suppose that you need to align yourself to your brand. Your product, I mean. Align your product to your brand.” He looked slightly flustered. “So, you’d need to change your brand before you could interest a new market, like, you know, sex toys.”

“Right,” said Marjorie uncertainly. “I’d probably look at it the other way around; you look at your brand values and your unique selling point and don’t try moving into a new market if it doesn’t fit. Once you damage your brand, you may not have a company. Of course, nothing is sacrosanct—some companies change their raison d’être successfully, like IBM, who were a manufacturing company and are now more focused on consultancy. But you’ve got to be pretty confident—or desperate—to pull something like that off. So, what else?”

“Viability,” Alan said. “Assessing whether you have the internal capabilities required. If you do, you might be able to . . . adapt your brand.”

“Okay,” said Marjorie, frowning slightly, “give me some examples.”

“Like finding out what the customer wants and then trying to figure out if you’ve got it. What they want, I mean.”

Now Marjorie was looking at Alan strangely.

He reddened and cleared his throat. “I mean, if you want to move into Europe, do you have any infrastructure there?” he said quickly. “Do you speak any European languages? That sort of thing.”

“Great. This is good,” said Marjorie, and Alan sat back, looking relieved. “What I’m trying to get across here is that when you get to the point of options, you might think that you’ve done all the hard work, but the reality is that the work is just about to begin. You need to think through everything, consider the outrageous and the mundane. You need to know what’s going on in your company and out of it—and that includes the quirks of your top team and the politics of the current government. You need to consider whether an option is achievable, whether it’s credible, whether it’s acceptable. What are the risks? Can they be managed? So, back to our condom company. Let’s think about the risks associated with moving into a new market. . . .”

Jen frowned. She certainly needed to assess her own options—she just wasn’t sure that she wanted the help of a business model to do it.

“Options, you say?”

Bill was looking thoughtful.

“Yes. I’ve just been in a strategic options lecture, and I was just wondering how you know which way to go. When you’ve got no idea what to do next.”

Bill stroked his beard, which was now a good two inches long. “You know, I’d like to tell you a little story, if that’s okay with you.”

Jen nodded.

“There was this young dude. World at his feet, just out of business school. And he’s doing the rounds of the consultancy firms, industry, anything and everything, you get me?”

Jen nodded seriously.

“Okay, so he’s talking to these guys and taking his CV around and they’re offering him things—great salaries, perks, his own office, his own car, a mobile phone . . .”

Jen raised her eyebrows.

“So, this is a while back. When mobile phones were still a status symbol.”

Jen shrugged.

“Anyway, he’s in a quandary. Which way to go? What should he do? And so he went for a long walk to clear his head. Tried to work out whether the office was better than the phone, or the salary better than the perks. And as he’s walking, he’s realizing that he’s all caught up in the frippery, the surface details. When what he should be focusing on is what he wants out of life, where he wants to be five, ten years from now. And you know what he realizes?”

Jen shook her head.

“He realizes that he doesn’t want any of it. Doesn’t want the money, the smart suit, or the fancy car. He wants to do something more meaningful. He wants to help people. So he turns right round, goes back to college, and he starts training all over again, this time on life coaching, not business analysis. You see what I’m saying?”

“That you’re not the person to ask about business analysis?”

Bill looked hurt and Jen grinned at him.

“Oh, you’re kidding. Oh, I getcha. Funny. That’s funny! But seriously, what I’m trying to say is that you need to look inside of yourself. There are always options. But they’re here, in your heart, not in your head. Am I right, or am I right? Huh? Huh?” Bill affectionately punched Jen’s arm and she grinned at him.

“I guess you’re right,” she told him, realizing that she had no idea how Bill’s story was meant to help her.

Daniel leaned back in his seat and looked his chairman in the eye. This was crunch time. He was going to convince Robert that cost-cutting and mindless growth wasn’t the way to go. He had plans and innovations that would take this bookseller into the twenty-second century, let alone the twenty-first, and Robert couldn’t fail to be impressed.
Bookselling is an art,
he would say.
It’s not about piling ’em high and selling ’em cheap—it’s about understanding the reader, getting inside their head, meeting their every whim.

He smiled comfortably. The truth was that he felt excited about his job for the first time in months. His lunch with Anita had ignited a spark in him again, got him thinking his ideas were good ones. Now he just had to convince Robert.

“So you see,” he said confidently, “anyone can look at financial efficiencies and trim their costs. But I think the real future for this company is in innovation. We need to get people to love reading, not desperately try and cut prices to entice them into the store. Books aren’t expensive at all when you compare them with films, with other types of entertainment, and they provide hours of pleasure. We need to get inside the minds of our customers and come up with something that will knock their socks off. Get back to what the company is all about—books.”

Robert Brown took his glasses off, cleaned them, and put them back on, then looked at Daniel thoughtfully. “You think the business is all about books?” he asked.

Daniel frowned. Where was Robert going with this? “Yes,” he said simply, his hand reaching involuntarily to smooth his hair down. “Yes, of course it is.”

“I see. It’s just that from where I’m standing, the business is about its shareholders. Creating value for them. Dividends, that sort of thing.”

Daniel looked at him impatiently. What was this, a lesson in business from his chairman? “Absolutely,” he said with a tight smile. “And that’s very important. But we do that through selling books. Get that right, and our shareholders will, I’m sure, be over the moon.”

Robert nodded. “Look, Daniel. You built up a great little bookseller business. Really, you did a tremendous job. But you’re working for us now. We’re a big business. And we expect big profits. As do our shareholders.”

Daniel swallowed, feeling his throat tighten. “You don’t want to hear any of my ideas?” he asked.

“In the short term, as I’ve explained, the board feels that we should stick to what we know. Drive down costs, slash prices, maybe do a few more three-for-the-price-of-two deals. And in the meantime, look for an acquisition. It’s all about market share, Daniel, as the board knows too well.”

“The board or you?” Daniel asked bitterly, turning to look out of the window, taking in the view of London from his office. There was Buckingham Palace and Big Ben, and in the distance he could just see the edge of the London Eye. It was a great view. And it represented everything he’d worked so hard to achieve. He wasn’t sure he could walk away from it.

Robert didn’t say anything.

“You bought my business because of its innovation,” Daniel continued. “Because we were better, faster, and more focused than any other bookseller.”

“We bought it because it was a profitable business, Daniel. And because we saw more profit could be made with the right strategy.”

Daniel took a deep breath in, then let it out slowly.

“Think about it, Mr. Peterson,” Robert said, getting up from the table. “I have every confidence that at your presentation to the board next week you will focus on cost-cutting and price reductions. We want value-add propositions, not harebrained schemes. I hope that my confidence is justified.”

As he left, Daniel turned back to his computer, opened up his presentation, and pressed delete. He was furious. He’d never been so angry. He watched as his hard work disappeared; watched the ideas he’d been so excited about turn to blank pages. And it was only when the phone rang and he reached over to pick it up that he noticed that his hands were shaking.

“Daniel Peterson,” he said gruffly.

“Daniel, it’s Anita. Look, sorry for the short notice, but I wondered if you were free for lunch this afternoon? I was talking to our chief exec about your branding idea and he loved it. Wanted me to get some more details . . .”

“Forget it,” Daniel said despondently. “It isn’t going to happen.”

“But you haven’t even done your presentation yet, have you?”