Business Stories

There’s Always Competition

July 6, 2023 By Nagesh Belludi Leave a Comment

There’s always competition, even if you’re introducing an industry-first solution. Let the following case studies serve as a cautionary tale.

Consider launching a new upmarket coffee shop in a bustling location. You might assume that establishing it in a neighborhood without other fine-coffee purveyors guarantees success, but competition still exists. Your intended clientele is already brewing their own top-notch coffee at home or patiently waiting to satisfy their caffeine cravings at work. By introducing your shop, you’re challenging their comfortable routine of enjoying coffee in their pajamas or at their work desks.

Don’t imagine the iPod didn’t face competition when it first launched. In fact, it faced a significant challenge from multiple fronts. Not only did it have to compete with other MP3 players, which were arguably less convenient, but it also had to outdo the storage capacity and convenience of CDs and the variety of radio stations. However, the iPod proved to be a game-changer with its ground-breaking 1.8-inch hard drive, a revolution in music-listening technology. With that iconic click wheel, you could shuffle through songs and switch from classical to heavy metal in the blink of an eye. And let’s not forget how cool it was to play with!

Back in the day, Southwest Airlines started with just three routes in Texas and no big-shot airlines to compete with. They had to convince folks that flying was better than hitting the road in their trusty jalopy. They hyped up the time-saving factor and ensured passengers knew they could still chow down on some grub at home. They also showered their passengers with free booze and had flight attendants rocking hot pants and go-go boots.

When Spirit Airlines decided to focus heavily on the Visiting Friends and Relatives (VFR) Market in Latin America, it had to compete against other high-priced airlines and face a new and challenging competitor. As technology advanced, Hispanic and Latino Americans could video-chat with their loved ones instead of splurging on expensive flights. Why bother with the hassle of international travel when you could easily catch up with your family while lounging in your jammies and munching on some Cheetos?

Remember, competition is everywhere—focus not just on direct competition but also on changing consumer preferences and hidden alternatives. You can’t just create customers out of thin air. Your product or service has to be compelling enough to make people choose you over your competition. You must offer something dramatically better, faster, cheaper, more powerful, or cooler than your established competitors.

Mise En Place Your Life: How This Culinary Concept Can Boost Your Productivity

May 24, 2023 By Nagesh Belludi Leave a Comment

“Mise en place” may sound like a highfalutin term, but it is a French phrase that means “set in place.” In the culinary world, it refers to the practice of preparing all ingredients and equipment in advance of cooking. This means tasks such as chopping vegetables, measuring ingredients, preheating ovens, and organizing equipment are taken care of before cooking begins. The benefit of this preparation is that cooks can concentrate entirely on cooking during service, free from the need to stop and gather or prepare ingredients. Mise en place is an essential aspect of professional cooking and symbolizes a well-organized and efficient kitchen.

When it comes to exceptional cooking, chefs take their craft seriously. Mise en place isn’t just a time-saving technique; it’s a way of life. Messing with it is like kicking a hornet’s nest, as Anthony Bourdain, the culinary world’s travel documentarian, underscored in his bestselling book, Kitchen Confidential (2000): “Mise en place is the religion of all good line cooks.” Everything from their station to their tools, supplies, and backups should be arranged with military precision, and disturbing this sacred set-up is like throwing the universe off balance. Things can quickly spiral out of control, and anyone in the restaurant is advised not to mess with a line cook’s “meez” unless they want to face their wrath!

The same concept can be applied to any project or task. Pre-planning and careful preparation reduce the risk of interruptions and distractions. Take time to plan ahead, gather the necessary resources, and know your goal before starting. Keep the mundane concerns from keeping you focused on the job you’re there to do.

Think of it as a personal mise en place. Sit down and plan out what you need to succeed, including the necessary skills, resources, and people. Doing so allows you to channel your full attention to the task at hand, avoiding distractions and increasing your overall effectiveness.

Decoy Effect: The Sneaky Sales Trick That Turns Shoppers into Spenders

May 23, 2023 By Nagesh Belludi Leave a Comment

Imagine yourself at the movie theater, deciding whether to buy a small popcorn for $5 or a large popcorn for $8. You’re wondering if the extra popcorn is worth the extra money, so you consider the small size. Suddenly, the cashier offers you medium popcorn for $7.50, and you buy it instead of the small one.

However, the medium popcorn is a lure—a true distraction. By introducing it, the theater has made the large popcorn seem like a better value and the small popcorn seem less attractive. This is a classic marketing strategy known as the Decoy Effect, which aims to influence your decision-making.

In essence, the Decoy Effect presents you with two options and then adds a third option designed to make one of the original options more appealing. This can sway your decision-making and lead you to choose the more expensive option.

Studies have shown that framing can influence our decisions, as a well-designed decoy can shift opinions by up to 40%. One well-known example of the decoy effect in action is from The Economist, the influential weekly international news and business publication. Behavioral economist Dan Ariely’s book Predictably Irrational (2008) describes how the magazine offered a digital subscription for $59, a print subscription for $125, and a combined print and online subscription for the same price of $125. The print-only subscription was clearly a decoy, designed to make the combined subscription seem like a better value, and it worked; the presence of the decoy significantly increased the uptake of the combined subscription.

While psychologists are still debating the exact reasons for this cognitive bias, one theory suggests that the decoy provides a straightforward justification for a decision that might otherwise seem arbitrary.

Idea for Impact: If you run a business, you too can use the decoy effect to steer consumers towards certain purchasing decisions that benefit your bottom line. By strategically adding a decoy product to your offerings, you can provide perceived value for your customers while boosting your profits.

Don’t Outsource a Strategic Component of Your Business

May 11, 2023 By Nagesh Belludi Leave a Comment

The prescription eyeglasses retailer Warby Parker was launched by four drinking buddies at the Wharton School of the University of Pennsylvania. The founders intended to disrupt a high-profit margin industry by taking out the intermediary.

Selling prescription eyeglasses online (Warby Parker mostly sells via brick-and-mortar today) would also defy skeptics who preferred to see certain things—shoes, diamond rings, cars—in person and were disinclined to get them online. Warby Parker’s incumbent competitors, 39DollarGlasses.com and EyeBuyDirect.com, had sloppy websites. A crucial part of Warby Parker’s startup plan was to start a user-friendly website where shoppers could upload a photograph of themselves and try on glasses virtually.

At first, the founders outsourced the website, resulting in disastrous consequences. In an interview with Fortune magazine (1-Jun-2019,) co-founder & co-CEO David Gilboa reflected on the pitfalls of outsourcing critical business components:

None of us [the founders] was qualified to build the website, so we solicited proposals and got a handful of bids from agencies. We chose the cheapest option, but a few months in, we realized it was a mistake. Their execution wasn’t what they promised. So we ended up firing them.

Now we develop most of the technology we use in-house to ensure we maintain as much control over the customer experience as possible. We’ve developed our website and both of our apps internally.

Idea for Impact: Don’t outsource what you’re supposed to do best.

Outsourcing a core function may give you a short-term uplift, but you’ll fail to create the core expertise within your company. That’s necessary to build a sustainable competitive advantage. The vendor just isn’t as invested in your success.

Building know-how internally is more challenging, but it’ll pay off in the long run. Sure, you may need to tap an outsourced hire for specialized expertise that you lack. But concentrate on developing your core functions in-house. In fact, be as micro-managey as possible in the early days.

Leverage outside help for bookkeeping, legal, and everything else that doesn’t generate a competitive advantage.

It Takes Luck as Much as Talent

April 24, 2023 By Nagesh Belludi Leave a Comment

In The Frontiers of Management (1986,) Peter Drucker writes about how Thomas J. Watson, Sr. emerged as a pioneer in the development of accounting and computing equipment:

Twice in the 1930s [Thomas J. Watson, Sr.] personally was on the verge of bankruptcy. What saved him and spurred IBM sales during the Depression were two New Deal laws: the Social Security Act in 1935 and the Wage-Hours Act of 1937–38. They mandated records of wages paid, hours worked, and overtime earned by employees, in a form in which the employer could not tamper with the records. Overnight they created markets for the tabulating machines and time clocks that Thomas Watson, Sr., had been trying for long years to sell with only moderate success.

Idea for Impact: It’s hard for people who pride themselves on their extraordinary skills to accept that they’re just as lucky as they’re smart.

Luck is primarily the result of identifying opportunities and taking appropriate action. Watson could capitalize on the newly created need for business machines because he had worked in the field for decades. And he gave this kind of luck much credit without feeling that doing so devalued his talent and hard work.

The Greatest Trick a Marketer Can Pull

February 21, 2023 By Nagesh Belludi Leave a Comment

The greatest trick a marketer can pull is making you think it’s not marketing.

Take Southwest Airlines, for example, which has consumers persuaded that it’s got the lowest fares. That was true in the ’70s when the airline spurred demand by keeping costs down and offering low fares. But being able to preserve that “lost cost-airline” aura into its sixth decade is commendable, especially with its bloated cost structures.

How about Hallmark, which contrived no end of commercially driven, proclaimed ‘holidays’ (sweetest day? clergy appreciation day?) to guilt people into buying overpriced greeting cards for no discernible reason? Emotional inflation at its finest: “While we’re honored that people so closely link the Hallmark name with celebrations and special occasions, we can’t take credit for creating holidays.”

“Fly the Aircraft First”

December 29, 2022 By Nagesh Belludi Leave a Comment

Today is the 50th anniversary of the Flight 401 disaster. I’ve previously cited how the crew of the ill-fated Eastern Airlines Lockheed L-1011 got so single-mindedly preoccupied with tackling a nose landing gear indicator light malfunction that they didn’t pay attention to the fact that their airliner was descending gradually into the Florida Everglades.

In summary, the pilots were too distracted to fly the aircraft. Human factors, specifically cognitive impairments, can precipitate distractions away from vital tasks.

The incident led to a breakthrough called Crew Resource Management (CRM.) This “human nature innovation” actively orients pilots to prioritize tasks in order of operational safety. The adage “Aviate, Navigate, and Communicate (A-N-C)” reinforces the ‘fly the aircraft first’behaviors until they’re internalized and become routine.

The top priority—always—is to aviate. That means fly the airplane by using the flight controls and flight instruments to direct the airplane’s attitude, airspeed, and altitude. Rounding out those top priorities are figuring out where you are and where you’re going (Navigate,) and, as appropriate, talking to ATC or someone outside the airplane (Communicate.) However, it doesn’t matter if we’re navigating and communicating perfectly if we lose control of the aircraft and crash. A-N-C seems simple to follow, but it’s easy to forget when you get busy or distracted in the cockpit.

Idea for Impact: “Fly the aircraft first.” Know when to set aside the seemingly important things to accomplish the more vital ones.

And the Theranos Board Walks Away Scot-Free

November 19, 2022 By Nagesh Belludi Leave a Comment

Theranos’s Elizabeth Holmes has finally been sentenced to over 11 years in prison. Too bad our corporate law is too narrow to attribute some criminal liability to the company’s board of directors. Such luminaries as former Secretaries of State George Shultz and Henry Kissinger, Marine Corps General James Mattis, and former Secretary of Defense William Perry, once famously portrayed as “the single most accomplished board in U.S. corporate history,” should be partly culpable for Holmes’s malfeasance.

When Holmes explained away her underlying technology as “a chemistry performed so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which is translated into a result, which is then reviewed by certified laboratory personnel,” all the board had to do was demand, “Show me.” Determining how a device or service works—exists even—as purported, is the essential obligation of a board member. A truly engaged overseer may have preserved $945 million in investors’ capital and kept a naïve, immoral, and feckless entrepreneur from bullying the press, intimidating her employees, and gambling with the patients’ lives. (Read WSJ reporter John Carreyrou’s excellent chronicle, Bad Blood (2018; my summary.))

The board individually and collectively failed in their responsibilities as trustees of investors’ interests. Undoubtedly drafted as trophy directors to reinforce the company’s standing such as it was, not for any knowledge of blood testing, they now walk away with nothing more than a blot on their illustrated careers.

Lessons from the Japanese Decision-Making Process

November 10, 2022 By Nagesh Belludi Leave a Comment

Japanese firms traditionally use the ringi seido (“request for approval system”) to make critical decisions. A proposal is circulated to appropriate people, advancing from lower to higher ranks. As the proposal works through the management layers before landing at the top, each participant puts their stamp (the hanko) on the document.

This collective consensus process allows for a greater number of reasonable alternatives to be considered and for the risk to be spread. Although it may be slow, the implementation is faster once the decision is made. (Since the early ’90s, Toyota has followed a “three-stamp movement,” restricting the number of people needing to approve a proposal to three.)

Unlike consensus management in the west, the ringi system is often used to appease factions in an institution. Given the Japanese norms (nemawashi) of social structure and intercultural communication, everybody tends to be very diplomatic when giving an opinion. A decision isn’t made if unanimity isn’t reached.

Books in Brief: ‘Flying Blind’ and the Crisis at Boeing

September 24, 2022 By Nagesh Belludi Leave a Comment

Bloomberg investigative journalist Peter Robison’s thoroughly researched Flying Blind: The 737 MAX Tragedy and the Fall of Boeing (2022) offers noteworthy lessons about corporate responsibility and leadership problem-solving.

In a nutshell, starting in the late 1990s, Boeing shifted from a company run by engineers who emphasized product integrity to one run by MBA-types who prized shareholder value over long-term product planning. Inspired by General Electric’s Jack Welch, the company embraced cost-cutting, outsourcing, financial engineering, union-busting, and co-opting regulators. These miscalculated strategies culminated in the 737 MAX disasters and disgraceful corporate responses.

Recommendation: Read Peter Robison’s Flying Blind, but be wary of the author’s broad-brush political biases, which, I found, sidetracked from the storyline. The internal organizational tensions that led to corporate deception and the fateful consequences of federal regulators’ consigning design approvals to Boeing are particularly interesting.

Key Takeaway: Negligent engineering to minimize costs and adhere to a delivery schedule is a symptom of ethical blight.

« Previous Page

Business Stories

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Idea for Impact: Don’t outsource what you’re supposed to do best.

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?

Wondering what to read next?