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Wednesday, December 31, 2014

MANAGEMENT STRATEGY SPECIAL.................... The Truth about Breakthrough Strategies

The Truth about 

Breakthrough Strategies

Ford, Apple, Netflix, Starbucks, and Google struck gold with these breakthrough strategies, and changed the game in their respective industries:
  • Offer a standard, mass-produced automobile
  • Turn a personal computer into a “digital hub” for consumers
  • Rent movies through a monthly, direct mail subscription service
  • Create a “third place” between office and home to enjoy high-quality coffee drinks
  • Organize the world’s information and make it universally accessible and useful
Although each strategy is distinctive, they share a few common characteristics that tell us how breakthrough strategies really come to be.
First, they start with flashes of insight prompted by working on big problems. For example, Henry Ford had the idea to move the cars, not workers, down an assembly line, while struggling with how to make the automobile more affordable. Netflix founder Reed Hastings asked himself, “Why can’t you sell movies like Amazon sells books?” while fuming over the fees he had incurred from his late return of Apollo 13 to Blockbuster.
But where do such novel ideas actually come from? Is it from the muses, as the ancient Greeks would have thought? Is it from genius? Is it from the creative side of one’s brain, as Roger Sperry, winner of the 1981 Nobel Prize for his left brain/right brain research, might have said? Or is it from a brainstorming session in a tricked-out conference room with creativity-enhancing furniture, colors, and lighting?
In fact, research tells us that innovative strategies are sparked by “precedents” from unexpected places that seem to offer at least a partial solution to the challenge you have in mind. For example, before they founded Google, Larry Page and Sergey Brin were working on how to make the Web more useful for e-commerce. But Page was also working on the Stanford Digital Libraries Project, and realized that you could rank Web pages the way scholars are ranked by their annual number of citations. Howard Schultz was noodling on how to raise people’s demand for high-quality coffee when he was inspired by observing Italians from all walks of life enjoying espresso at their local watering holes. Ford’s idea for the moving assembly line originated in meatpacking plants, where butchers disassembled carcasses moving past them along an overhead trolley.
Then things get really fascinating, because breakthrough strategies always involve “creative combination.” For example, to help make the Macintosh a digital hub for consumers, Jobs created the iPod by combining visual cues from Braun’s T3 pocket radio; a 1.8-inch 5GB hard drive from Toshiba; the navigation features of the Bang & Olufsen BeoCom 6000 wireless telephone; capacitance technology invented in 1910 for the scroll wheel; the programming code from SoundJam MP (a popular MP3 player app), and his Pixar experience, where he learned about negotiating with the music industry for the right to sell songs individually. Ford added to his idea for a moving assembly line by adopting profit sharing for frontline workers—which John Stuart Mills had written about in his popular book published in 1848, Principles of Political Economy. Ford’s famous dictum, that you can have any color you want as long as it’s black, was the result of discovering that black paint dried faster than any other color—thus allowing the assembly line to move faster. And his network of dealer franchises emulated Singer Manufacturing’s move to cover the country with third-party resellers because it could not afford a national sales force to hawk its innovative sewing machines. Similarly, Page and Brin brought together data mining, page ranking, and search-linked ad selling technologies in creating Google, and Hastings combined Amazon’s book-selling approach with the gym membership fee model to build Netflix.
Finally, people—not companies—create breakthrough strategies. Breakthroughs go against the grain of accepted wisdom, and markets and organizations are powerful immune systems that throw up multiple barriers to turning new ideas into commercial reality. It takes a person who believes enough in the strategy to be willing to fight an organization or the broader market for however long it takes to make it happen. Remember that Howard Schultz was not the original founder of Starbucks. He was just an employee of the company, then a roasting and packing business, when he was sent to Italy to scout out the equipment used there for roasting and grinding coffee. Upon his return, he shared his idea—to create an Italian-style espresso bar that would drive demand for Starbucks’s high-quality coffee—with the founders, who promptly turned him down. So he quit to start his own business. Then, when the founders decided to sell, Schultz bought the company, and the rest is history.
So what does all this tell us about breakthrough strategies? They rarely come from the typical strategic planning effort. Nor do they typically result from the common practice of generating and evaluating strategic options. And they certainly aren’t inspired in a traditional board offsite, executive retreat, or brainstorming session. Instead, they start with individuals working on big, specific challenges who find novel ideas in unexpected places, creatively combine them into innovative strategies, and personally take those strategies to fruition—against all odds.
Of course, breakthrough strategies like these—that shape or redefine their industries—are rare. In your everyday life, you are more likely to encounter the fashionable strategies that come in and out of vogue: strategies that transcend any one company, industry, and region with their broad reach and popularity.

Ken Favaro is a senior partner with Strategy& based in New York. He leads the firm’s work in enterprise strategy and finance.

HEALTH SPECIAL..................... 5 Ways To Combat Stress With A Mental Makeover

5 Ways To Combat Stress With A Mental Makeover

If you had an extra few hours in your day, how would you spend them?
Chances are we'd use them to do more: Do more work, do more activities with our family, do more items on our bucket lists. We're wired to want to "do it all" -- and as a result, we burn out quickly.
So how do we tackle this problem? According to Scott Eblin, Overworked and Overwhelmed: The Mindfulness Alternative, our burnout solution comes from not just adjusting our schedules, but our attitudes.
After being diagnosed with MS in 2009, Eblin decided he needed to revamp his own outlook in order to tackle life with the vigor and enthusiasm it deserves. Below, he offers tips on how to give yourself your own mental makeover -- and how it can help you relieve stress in the process.
Get moving.

Exercise does more than just improve our fitness -- it has amazing mental health benefits as well. Eblin recommends prioritizing some sort of physical activity. And just a little bit goes a long way. "Do some sort of mindful movement every day," Eblin told The Huffington Post. "Whether thats five minutes of stretching, going for a walk ... or even doing yoga."
The catch? "You need to do this preferably without your phone," Eblin said. Taking a break from your digital devices can help reset your focus and make you more productive -- skills you'll certainly need if you're going to fight the mental burnout that comes with work.
Create a calming routine.

In order to stop stress from taking over our entire day, we need to be aware of when our anxious thoughts start. Have a go-to, relaxing trick -- like focusing on your breathing or using a calm-inducing smartphone app -- when your thoughts begin to spiral, Eblin says. "This will give the brain a break from primary tasks," he explained. "It also clears out the chatter in our minds. The average person has something like 70,000 thoughts a day, so it's very easy to get overwhelmed with all the chatter."
Tap into your listening skills.

Giving your full attention to someone seems like a given when you're in a conversation, but Eblin says it's a habit we rarely practice. Listening -- without an agenda, he notes -- is a great way to cultivate mindfulness, which can help lower your mental stress.
Bonus: It's also great for your social bonds. "It's amazing how connected people get when we just listen," he said. "Too often in life we're not present for each other because there are too many distractions. Listening helps you and your relationships." And that means a clearer mind.
Ask the big questions.

In order to reframe your thoughts, you need to think about what you really want out of life, Eblin explains. This includes asking yourself questions like, "Why am I here?" "How am I when I'm at my best?" "What are the routines I have in my life that make it more likely to bring out my best self?"
"Taking time for reflection helps you reconnect with yourself," he said. "Our thoughts control our feelings. This prompts us to take actions that are useful and productive ... that's a big part of giving yourself a mental makeover."
Lay out your goals.

Once your ask yourself these questions, Eblin recommends writing out your answers. That way, you're able to review it whenever you feel off track. "Having all of that on one piece of paper can be incredibly powerful," he said. "From a mental makeover standpoint, having this reference point makes it so you don't have to keep thinking about it. By breaking it down, you're getting closer to the outcomes that you're looking for."
When it comes down to it, Eblin stresses that in order to make a change to your outlook, you have to take the process in stride. "Sometimes you can't see progress you're making, but all of a sudden you're doing it -- baby steps are still steps forward," he said. "Giving yourself a mental makeover is all about being aware and being intentional about making a change."

Lindsay Holmes l

INDIA/ FUTURE SPECIAL..................... India’s tech opportunity: Transforming work, empowering people

India’s tech opportunity: Transforming work, empowering people

Millions of Indians hope for a better future, with well-paying jobs and a decent standard of living. To meet these aspirations, the country needs broad-based economic growth and more effective public services. Technology can play an important role in enabling the growth India needs. The spread of digital technologies, as well as advances in energy and genomics, can raise the productivity of business and agriculture, redefine how services such as healthcare and education are delivered, and contribute to higher living standards for millions of Indians by raising education levels and improving healthcare outcomes.

A dozen empowering technologies

A new McKinsey Global Institute (MGI) report identifies a dozen technologies, ranging from the mobile Internet to cloud computing to advanced genomics, which could have a combined economic impact of $550 billion to $1 trillion a year in 2025. The selection of the 12 technologies for India was based on a similar process established by MGI’s earlier work on disruptive technologies. For India, we used additional criteria to identify the technologies that would have a direct impact on the country’s economic and social challenges in the coming decade. As a result, we include technologies such as electronic payments, which are well established in other parts of the world but not well developed in India. By 2025, however, electronic payments could help 300 million Indians join the country’s financial system.

We group the 12 technologies into three areas: digitizing life and work, smart physical systems, and energy technologies:
  • digitizing life and work—the mobile Internet, the cloud, the automation of knowledge work, digital payments, and verifiable digital identity
  • smart physical systems—the Internet of Things, intelligent transportation and distribution systems, advanced geographic information systems (GIS), and next-generation genomics
  • energy—unconventional oil and gas (horizontal drilling and hydraulic fracturing), renewable energy, and advanced energy storage
Each of these technologies has the potential for rapid adoption in India between now and 2025
To assess the potential impact of the 12 technologies on the economy of India and the lives of its people, we sized more than 40 applications in six sectors of the economy: financial services, education and skills, healthcare, agriculture and food, energy, and infrastructure. In the case of the government sector, we analyzed the potential contribution of e-governance initiatives, such as open data and data-driven planning and other smart city applications, but did not estimate their economic impact. Often, these technologies are used in combination, providing a greater impact than any one of them alone. For example, Internet of Things sensors in medical devices can be used together with the mobile Internet and intelligent systems (the automation of knowledge work) hosted on the cloud to monitor patients with chronic diseases remotely and to alert medical workers automatically when the system detects a potentially dangerous situation.
The total impact of the sized applications could amount to $240 billion to $500 billion a year by 2025. Given the contributions of these sectors to India’s GDP, we estimate that across the entire economy, the 12 technologies could have a combined economic impact of $550 billion to $1 trillion by 2025.
  • Financial services.
  • The applications we size could have an economic value of $32 billion to $140 billion a year by 2025. That value arises from improved productivity and higher incomes for citizens using financial services and from lower costs and reduced leakage in government transfers and payments. As many as 300 million Indians could gain access to banking services and raise their incomes by 5 to 30 percent thanks to better access to credit and the ability to save and make remittances.
  • Education and skills.
  • We estimate that remote learning, massive open online courses (MOOCs), and other digital systems could have an economic impact of $60 billion to $90 billion a year by 2025 thanks to higher productivity among a larger number of skilled workers. India could have about 24 million more high-school and college-educated workers and 18 million to 33 million more vocationally trained workers by 2025 as a result of digitization in the education sector.
  • Healthcare.
  • Disruptive technologies could transform the delivery of public health by 2025 through remote health services and digitally enabled healthcare workers, who can tap expert systems to conduct basic protocols via smartphones and the mobile Internet. By 2025, the total economic impact could be $25 billion to $65 billion a year, including $15 billion that could be saved through systems to reduce the problem of counterfeit drugs. Some 400 million of India’s poor could get access to better care through technologies that bring medical expertise to modestly skilled health workers in remote areas.
  • Agriculture and food.
  • Technology applications could create $45 billion to $80 billion a year in additional value in the sector. More than half of that would come from hybrid and genetically modified crops, precision farming (using sensors and GIS-based soil, weather, and water data to guide farming decisions), and mobile Internet–based farm-extension and market-information services. Electronic payments and other digital systems, for example, could reduce leakage in the public food-distribution system, and the use of real-time market data and other information tools would cut postharvest food losses. These improvements could raise the incomes of as many as 100 million farmers and bring better nutrition to 300 million to 400 million consumers.
  • Energy.
  • Collectively, the technology applications we size in energy could have an economic value of $50 billion to $95 billion a year by 2025, including the impact of the carbon emissions avoided. The largest benefit would come from smart metering, which could save $15 billion to $20 billion a year by 2025 in reduced transmission losses. Unconventional-oil and -gas development might generate value of $10 billion a year by 2025.
  • Infrastructure.
  • India has a widely acknowledged infrastructure deficit that successive governments have attempted to address. Smart highway systems and electronic tolling can reduce road-travel times by 10 to 15 percent. Radio-frequency identification (RFID) tags and other tracking technologies can raise the efficiency of ports and warehouses by 50 percent. Sensors could help reduce water-system leakage by 15 to 20 percent. In construction, modern methods such as the use of pre-cast parts and project-management systems could help save $12 billion to $18 billion a year in costs by 2025 and help India build ten million affordable homes. Together, infrastructure technologies can contribute $30 billion to $45 billion a year in value by 2025.
  • Government services.
  • India has made a good start with its national e-governance plan, but it can take additional steps to capture the full potential of technology over the next decade. Reengineering core government processes to simplify them and integrating multiple services on technology platforms are important next steps. Government can also help new businesses and business models prosper through its open-data initiatives. In addition, it can help accelerate the build-out of fiber-optic backbones, which will be critical for spreading the mobile Internet—itself the foundation for many applications in other sectors of the economy.
To capture the full potential value of these technologies, India will need to address barriers such as its limited telecom infrastructure and a lack of computer literacy among Indians. In addition, policy makers can create an environment in which these technologies flourish by adopting appropriate regulations that protect the rights of citizens and by helping to foster an environment for innovation. Government can encourage the growth of tech industries and applications by supporting efforts to create standards and can help entrepreneurs scale up ideas into major companies through reforms to regulatory systems. Finally, India can raise its investment in research and development, which in 2010 was 0.87 percent of GDP, compared with 1.7 percent in China and 3.36 percent in South Korea.

byNoshir Kaka, Anu Madgavkar, James Manyika, Jacques Bughin, and Pradeep Parameswaran

STARTUP SPECIAL ......................10 reasons why most startups fail to scale

10 reasons why most startups fail to scale

Starting a venture, may be easy, but scaling it is the most difficult part. Statistically an overwhelming majority of startups shuts shop because they fail to scale up. Some of the top reasons why a startup faces problems when scaling is listed below.
1) I am the first one
Every great idea needs to be thoroughly researched. Most founders think their idea is unique and solves a very real business problem. That, however, is mostly not the case, as unique and groundbreaking ideas are far and few in between. It is highly likely that someone else has already thought of your great idea and that it is already operational. A thorough research will also throw light on several issues like market size, willingness to pay for it, barriers to entry, competition and investor interest.

We are techies:
Startups in the technology domain often comprise of people with similar skill sets. Two or more techies with great coding skills often get together to work on an idea. While this may be great when overcoming a technology problem, lack of understanding of other key areas like marketing, finance and management can spell doom. A startup needs founders whose skill sets are complementary and not similar. This also reduces conflict within the founding team as each member handles a specific area.

We can do it part-time:
Founders often make the mistake of working on their startup part time. A startup needs considerable amount of time and effort and a founder would not be able to do justice by working on it part time. There are very few startups in the world that have been successful when founders have not devoted their full time to the venture. Keeping a day job when researching an idea makes sense, but once a founder has taken the plunge to startup, it has to be in full earnest.

Fear of funds:
One of the most vital ingredients to scale is access to capital and funds. Once a startup has shown proof of concept and established its go to market, it needs funds to scale and grow. However, fundraising is very time consuming and tedious and more often than not you will have founders getting immersed in the process at the cost of day to day operations of the venture. If the startup has more than one founder, only one should be involved in the funding process while others should keep their focus on the venture. Receiving funding is not the only panacea to all startup issues. At the same time it is very important to know the objective of the funds and to what use it will be put to.

What if I fail:
Every idea needs to be tweaked and changed after starting up. Founders often fail to clearly anticipate market dynamics and end up making make faulty assumptions. Many a times startups need to pivot to become relevant and perform better. However, most startups prefer to maintain status quo and do not even think of change if it means tweaking their core idea. It is important to understand that even very successful companies have felt the need to align their business and a startup that is open to try things differently adapt better in business.

    6) I checked with my friend: A startup that has been started because friends loved the idea may find the going tough. A handful of friends, who may be biased in their views and opinions, cannot be the sole reason to startup. It goes back to my first point that talks of a thorough market research. Nothing can beat a thorough market research and friends should only be the first option to bouncing your idea - not the only. Most startups fail because they don't have a real user community to give feedback. Create focus groups among the target audience and test out what they think of your idea.

    How will I make money:
    At the end of the day every business and every startup wants to make money and every founder wants to know the route to make it happen. While monetization is key to success of any startup, monetization should not overshadow the problem being solved. A real solution to genuine problem drives automatic monetization. For example Watsapp as a platform is hugely popular with over billion dollars in valuation, but still has not come up with a clear cut monetization angle. A startup should concentrate on creating the best value for its customers, money will follow soon.

    I need a big office:
    While most startup bootstrap from their home, they want to graduate to a big office as soon as they make some money. While an office may prove to be beneficial, it is not absolutely necessary. Startups need to be frugal and accelerators and incubators can also double up as a good office. Beyond them, there are plenty of coworking spaces today that can provide economical options. A startup should capitalize of its early successes and plan out its finances, taking into account rainy days.

    I want to launch big:
    An old adage says learn to walk before you learn to run. Every launch and subsequent scaling up needs to be gradual. It is important to test the idea and refine your solution before you reach out to global or a larger user base. There will always be teething issues when launching a service and product and this needs be sorted before scaling to a larger audience. Customer experience is one of the key factors for success and when scaling rapidly there is every chance you may end up having irate customers. Gradual scaling ensures your systems and processes are in place to provide the best experience.

    I can do it alone:
    Last but not the least, while most startups start with one or two founders it is important to identify like minded team to scale and successfully bootstrap your venture. A startup needs a team that believes in the founders' vision and is willing to go the extra mile to ensure the success of the venture.

By Ashish Mittal16 Dec, 2014(Ashish Mittal is founder and Chief mentor, Turning Ideas, focused on helping multiple startups in mobile, social and cloud domain. He was instrumental in starting Google Enterprise business in India and worked for Microsoft, Oracle and IBM.)

Gadget Review: Why HP Stream 11 is worth every rupee

Gadget Review: Why HP Stream 11 is worth every rupee

The HP Stream is a Rs 12,600 (approx) full-Windows laptop, and it's surprisingly good. A pokey little guy with a colourful finish, a 720p screen, a dual-core Intel Bay Trail processor, and 2GB of RAM.

There have always been cheap Windows laptops, but this Windows laptop is super cheap. At Rs 12,600 (approx), the HP Stream
11 doesn't cost a rupee more than the cheapest Chromebooks currently available. This dirt-cheap laptop isn't handicapped by a web-browser based OS or the need for a constant internet connection. Windows 8 gives you access more programs than a Chromebook ever could. That is, as long as the processor can keep up.

At this price, you will be hard pressed to complain about aesthetics. More important than looks is build quality, and the HP Stream 11 is a solid little tyke. It's got a slightly squishy but completely typable keyboard. There's virtually no flex to the Stream 11's keyboard tray, even if you're pushing on the frame deliberately hard. The solid feel holds up elsewhere. The hinge isn't flimsy, as it can be on a lot of laptops in this price range.

It's not all sunshine and roses though — the screen is an obvious place where corners were cut. The matte 1366 x 768 display is pretty rough. It hashat 'bad matte screen' rainbow effect that makes whites look distorted. Web browsing, sure. Movie watching? Not if you can avoid it.

That's just the screen's fault though; the Stream's bottomfacing speakers are surprisingly competent. With the volume turned all the way up they can be almost uncomfortably loud, and while the quality is nothing to write home about, they aren't tinny or distorted. Not bad for Rs 12,600 (approx).

The touchpad, unfortunately, isn't such a pleasant surprise. It's serviceable and not quite good. In addition, the Stream's also got a USB 2.0 port, a USB 3.0 port, and an SD card reader. All the bare essentials, unless you're that guy who's still keeping the optical disc companies in business.

The big work-draw for most people is going to be Office. Not only can the HP Stream 11 run classics like Word and Excel (and run them well — surprisingly silky smooth performance here) it also comes with Office 365 Personal for a year. That includes musthaves Word, Excel, PowerPoint, and Outlook among others, and includes 1TB of OneDrive storage. Those full, robust applications beat the hell out of being stuck with Google Docs like you are on a Chromebook.

On the web-browsing side, the HP Stream 11 is a little more competent than your average Chromebook, which is to say it can handle its fair share of tabs. The catch is that you pay for that performance in battery life.

Should you buy it? The
The HP Stream 11 is not a powerful machine, obviously, but it's worth every rupee of its price. The Stream is not a great option for watching or looking at pretty things, and it will never ever be able to last a whole work day. But if neither of those things are a problem for you, the Stream is a damn good bargain.

By Gizmodo | 17 Dec, 2014

ONLINE E-COMMERCE SPECIAL......................... How to win in online grocery: Advice from a pioneer

How to win in online grocery: Advice from a pioneer

Christian Wanner, cofounder of one of Europe’s first and largest online grocery stores, talks about what works, what doesn’t, and what will change in food retailing as e-commerce continues to heat up.

In most global markets, online grocery is just beginning to show promise. The expanding online offerings of retailers such as Tesco and Ahold in Europe, as well as FreshDirect and AmazonFresh in the United States, are making news. Services such as “click and collect” or “buy online, pick up in store” appear to be gaining traction with consumers.1 To some, it may seem like early days for online grocery, but Christian Wanner has been at it since 1997—back when a web page could take 20 seconds or more to load, the typical household had no Internet connection, and most consumers were not yet comfortable with the idea of buying things online. That year, Wanner cofounded, Switzerland’s first online grocery store. LeShop is now part of the Swiss retail cooperative Migros and has been profitable since 2011.
Wanner served as LeShop’s CEO from 2000 until 2013. He remains on LeShop’s board and is a senior adviser to McKinsey. In January, McKinsey’s Enrique García López, along with Rémi Said and Khiloni Westphely, spoke with Wanner about his views on multichannel retail, the best operational models for online grocery, mistakes chief marketing officers make, and the power of mobile devices.
McKinsey: LeShop is a success story, but it’s one of only a few so far in online grocery. Why should grocers get into e-commerce at all?

Christian Wanner: Food retailers can’t afford not to take e-commerce seriously in the long run. The cynics will say, “Even after 15 years of e-commerce in food retailing, we’re talking about at best 3 to 5 percent market share, compared with 50 percent in travel or 35 percent in electronics in mature markets.” To this, I would have two replies: first, it’s true that shopping habits in grocery change at a slower pace than in other categories—but, given much lower margins in grocery, if you lose 5 percent of customers to a competitor’s online proposition, that makes a big difference in both your profit and loss (P&L) and your competitor’s P&L. What’s more, online grocery typically attracts the most profitable customers: dual-income households, customers who prioritize convenience over price or promotions, big-spending customers—these are the type of customers you’ll be making more loyal to the franchise.
Second, digital literacy is evolving at an exponential pace. It took LeShop eight years to reach its first €50 million in sales on PCs but just three years to reach €50 million in sales on mobile phones. Retailers shouldn’t underestimate the “digital natives” generation. They need to begin transforming their organizations now; otherwise, they will have a rude awakening when outsiders like Amazon start entering their market.
McKinsey: Many grocers worry that online sales will only cannibalize store sales. What are your thoughts on that?

Christian Wanner: Two comments: first, if you don’t cannibalize your own business, someone else will do it for you. If you do not serve new consumer needs, your competitor will. Second, we conducted several studies on cannibalization, which repeatedly proved that a multichannel offer increases your overall share of wallet. 

For example, by isolating 5,000 households new to LeShop during one year and tracing their behavior with the Migros stores in the previous year, we observed a total sales increase of 30 percent among those households. Store sales to those customers declined by around 10 percent, but that decline was more than offset by the growth in the online business—and in a flat market, the cannibalization was clearly at the expense of our competitors.

Another study, involving a very big sample group, demonstrated clearly that our customers who shop both online and in stores spend twice as much as customers who shop only in stores, indicating that our online offering attracts higher-value customers. And customers who use three channels—traditional stores, home delivery, and Drive2 —spend 2.3 times as much.

McKinsey:Retailers today are experimenting with a variety of operational models for these new channels—fulfilling online orders from existing warehouses, from new dedicated warehouses, and even from stores. Will all these models continue, or will there be a convergence?

Christian Wanner: Convergence has already taken place on the transactional side: in website and mobile navigation, how you present the offer, and recipe and recommendation features. Website ergonomics and transactional behavior are similar across geographies and cultures, so you can leverage similar systems in different countries.

But I don’t yet see a strong convergence in logistics—there are just too many geographical and sociological differences, as well as business-model beliefs. In Latin America, for instance, the more affluent people are highly concentrated in certain areas of the city. In Buenos Aires, if you address those few neighborhoods, you’ve basically covered the relevant market for online grocery because 80 percent of the population is simply not at a socioeconomic level that will support your business. In such regions, you can go with a dedicated warehouse close to the geography you want to serve. This model will not be valid in Switzerland, for instance, where there is more of a mix of social classes geographically.
Then, you have differences in population density. Take the Netherlands versus France. The low population density in France probably explains the roaring success of the click-and-collect model versus home delivery, whereas in the Netherlands—where the population is very concentrated—the home-delivery model is viable almost nationwide. Ahold’s click-and-collect service is making serious inroads as well, because it brings extra convenience to the customer versus home delivery. Logistics choices also depend on a company’s existing assets, heritage, and capital-expenditure capacity. There is no single best practice you can roll out worldwide.
That said, already we see some models fading, such as store picking—that is, fulfilling online orders from stores. I don’t think that in 2014 your logistics strategy can sustainably be based on store picking, unless it’s a defensive strategy in a marginal business and you are picking in a very big hypermarket. Store picking is not industrially efficient if you account for true costs, and it does not fulfill the promise to the customer, because it results in many orders that have substitutes or missing products.
McKinsey: But couldn’t a retailer start with store picking and then gradually move to a more capital expenditure–intensive model such as warehouses or “dark stores”?

Christian Wanner: First, we will need to agree on the definition of a dark store. Tesco was the first to coin that term, I think, and at that time it meant a warehouse with exactly the same layout as a traditional store but without customers. This is certainly not a model I would advocate, because it fails to adapt the layout and workflow to create picking efficiency. Tesco has quickly recognized this, and each successive version of its warehouse integrates more automation and workflow efficiency.

To your question of whether store picking would be a sound starting strategy, with the intention of learning the business and then moving to something more sophisticated: it may have been a viable option for a retailer back in 2000, but not today, because your organization will be learning the wrong things. In store picking, the energy of the online team, the IT people, and the general manager will be spent on avoiding out of stocks, which means their energy will be spent on things like substitute management and product-supply planning.
You cannot imagine how much energy goes into substitute management: proposing intelligent substitutes, then having a whole logistics process for the customer to receive the substitute. You have to pick the substitute separately from the rest of the items so that you can ask the customer whether she agrees with the substitutes, and if the customer says, “I agree with this one but not with that one,” then you need a process whereby the rejected substitute comes back to the store, and you need a process to manage the price difference between what she originally ordered and the substitute, and so on and so forth. Little of this is useful when you scale the operation and move to a dedicated warehouse, which can fulfill 98 or 99 percent of orders with the exact products that the customer wanted. So I think it is wiser to set up a dedicated infrastructure and organization up front and then fine-tune it until it is ready to be scaled up.
But a dedicated infrastructure isn’t necessarily an enormous and fully automated warehouse. You still have to make important choices as to geographical reach, assortment depth, mode of delivery, and so on. It would be a mistake to start with a highly automated and capital-intensive warehouse before having gained experience in all the above aspects first.
McKinsey: Companies are understandably hesitant to make big bets on online grocery because profitability is far from assured.

Christian Wanner: It’s a “chicken or egg” debate. If you don’t commit yourself seriously to this business, you will simply never achieve any significant breakthrough. Online grocery is certainly a very difficult business to make profitable, but it has proved possible. LeShop’s home-delivery business has been profitable since 2011, and this is in Switzerland, where we pay warehouse workers between €3,800 and €4,000 a month, including bonuses. But achieving profitability takes hard work. It requires chasing every second, chasing every source of inefficiency, chasing every mistake you make to avoid paying the cost of correcting those mistakes.

I’ve found that many traditional retailers are stuck in paradigms or make choices that impede profitability in their online business. Take, for example, the “long tail” obsession: I come across traditional retailers who can only envisage their online store having exactly the same assortment as their hypermarket format, thus 30,000 SKUs. This is an ideological positioning, not a pragmatic positioning to start with. You typically have the chief marketing officer saying, “There is no way we should enter online with a smaller assortment than our biggest hypermarket, because that’s what the customer expects.” 
The problem is, your logistics complexity and costs increase exponentially with assortment depth, and the customer will hardly pay that premium. In my experience, if you have 13,000 SKUs, the last 1,300 of them will account for less than 1 percent of sales. So, you can only imagine what it means for 30,000 SKUs. It would require probably eight times the capital investment, because thousands of slow-moving SKUs will need automated instead of manual picking. It’s not impossible to manage a warehouse with 30,000 SKUs or more—Ocado is doing that successfully—but you need to be aware that it has direct and heavy consequences on your capital expenditures and organization.
Another area where you need to make hard choices is your online promotional strategy. Should you have exactly the same promotional schemes as you have in your stores, or can you leverage the advantages e-commerce offers? For example, in e-commerce, you can tailor promotions based on customer behavior, which you can’t really do in the traditional supermarket, except through loyalty cards. You might be losing a lot of margin points if the chief marketing officer insists on exactly the same product range and the same promotional scheme online and offline.
McKinsey: Are you saying the online business should be completely separate from the traditional retail business?

Christian Wanner: After 16 years in this industry, I still find it vibrant and fascinating because there is no absolute golden rule. The right structure depends on how the parent company is organized. A centralized company would require a different structure than a decentralized cooperative.
What is clear, however, is that retailers should not regionalize e-commerce; it has to be at least national, if not transnational, meaning that you use the same website and the same technological platform in every country. It doesn’t make sense to have several teams developing multiple websites and mobile platforms.
But should the web and mobile platform be developed by the corporate IT team or by a separate team? My opinion is that it has to be a separate, dedicated team. The main issue is the speed of releases: if you are just 1 percent of the business, you will hardly be a priority. You might be a priority for corporate IT when the project starts, but after version one has been delivered and you need changes, you will probably wait a long time for those changes. And in e-commerce, you’d better have a release of either bug fixes or improvements every four weeks.
I also think logistics should be driven by a dedicated team, not the central logistics team. E-commerce logistics is about picking and transporting single products, which is not a core competency of traditional retailers. Again, this competency has to be developed by the e-commerce team, with no legacy systems restraining it.
What about category management? My opinion is you need dedicated people looking at what’s happening in e-commerce and being very reactive to customers: tailoring the assortment, the promotional scheme, and so on.
McKinsey: What changes do you foresee in online grocery in the next few years?

Christian Wanner: Consumer behavior is evolving fast. Customers now expect to be able to interact digitally with any merchant, so a robust digital presence has become a must. When we launched our first iPhone app, in 2010, we did not foresee that three years later, one-third of our orders would be coming from an iPhone or iPad. Frequency was around 20 days between two orders on the website; it accelerated to 10 days between orders on the mobile phone. Our supermarket is technically in the handbag or pocket of our customers all the time. Our app even allows them to shop when they are offline. The screen is small, but repeat customers are able to drop 60 items into their basket in less than 10 minutes—that’s efficient shopping! So is technology evolving? 

Yes, but, more important, consumer behavior and expectations are evolving. And we’re not talking about tech freaks here—we’re talking about 50 percent of our customers shifting to mobile. This is an unstoppable megatrend.

In the coming years, retailers will need to work on what we call multichannel or cross-channel or omnichannel—that is, harmonizing the channel experience for the customer. It is about combining the digital power of e-commerce with the infrastructure and service of bricks and mortar, and determining what role each will play. We will have to leverage the richness of online information in the convenience channel because that is where the battle will be won. We will need to move the battle away from “I have the cheapest stuff” to “I have the best service.” At the end of the day, the winners will be those retailers that best understand the patterns of behavior of their customers and respond to those patterns intelligently.

byEnrique García López, Rémi Said, and Khiloni Westphely

Tuesday, December 30, 2014

PERSONAL SPECIAL....................... Here's why behavioural fitness is important in high-conflict office meetings

Here's why behavioural fitness is important in high-conflict office meetings

It's the end of a long day, and you're in a meeting you knew would be difficult. Anil doesn't like you very much, he likes your proposal even less, and he's trying to derail the meeting. And since you and Radhika are both vying for a promotion, she likely won't pass up this opportunity to poke holes in your ideas in front of the boss. It's another daily "moment of truth" in the modern workplace, one in which your behavior is as likely to determine
your results as the quality of your proposals.
What happens in this meeting, and how well you perform, comes down to a concept I call — behavioral fitness. To be successful, you must excel at the job-specific aspects of your work. However, in a world of increasingly well-educated and well-trained business professionals, you aren't the only one around who can get the work done, and done well. What sets the most successful people apart is their ability to move their projects and ideas forward, and this is often more about the quality of their behaviors than that of their ideas and proposals.

Who's flying your plane? Back to your difficult end-of-day meeting. What will likely happen is that you will do what you tend to do by default. When I present the common workplace scenario above to executives or to MBA students, about half say their default is that when pushed hard by colleagues, they push back. The others say they usually take a more passive approach, by either giving in or retreating to plan their battle for another day. Ask yourself, what would your default reaction be in this scenario?

We all have automatic behaviors. These are deep-seated habits that, when triggered, get executed almost automatically with very little effort and self-control.
The problem

iis that when we are running on auto-pilot we are less flexible, and flexibility is one hallmark of people who are behaviorally fit. In high-conflict meetings there are times when you should actively fight back, and other times when you should not. The key is to read the situation and act appropriately. People who are behaviorally fit are more aware of their automatic behaviors, and thus better able to override and replace them with behaviors that are more productive in the moment at hand. Depending on the situation, they can choose whether to interrupt - or allow others to keep talking; they can hold firmly to their own ideas - or let them go and carefully consider the ideas of others; they can willfully move a conversation in a particular direction - or follow someone else's lead.
What's in your toolbox?

In addition to flexibility, people who are behaviorally fit focus their efforts on developing a broader array of tools to choose to use from when they find themselves in challenging workplace situations. They are people who take the time to observe and learn from others, particularly those who do things very differently. How is Kumar so persuasive, what tactics does he use? When Priya runs meetings, how is she able to keep people focused on the problem rather than on their personal agendas? What allows Anita to feel so comfortable delegating to her team? Becoming behaviorally fit is about seeing the more effective behaviors of colleagues not with envy, but with curiosity.

Can you make it happen?
Behavioral fitness is about building a broad array of essential tools, and developing the flexibility in the moment to choose the right ones. But you also have to be able to use each tool properly, and this requires practice. Think about the last management or leadership article that you read, or training workshop you completed. Perhaps it had a title like "Five Essentials for Running Winning Meetings" or "How Leaders Listen". Inspired by the article or workshop, you might have thought briefly about trying some new and improved behavior in your next meeting or conversation with a colleague. Did you do it, and if so did the change stick? Far too often we fail to make changes in our behaviors, even when we are motivated to do so. We know we should be better listeners, micro-manage less, and be more open to the ideas of others, but with ever-growing inboxes of email and the constant pressure to deliver results, behavior change doesn't happen. Behavioral fitness in the workplace is like physical fitness in the gym. You don't get aerobically fit by running the treadmill a few times, and you don't become a better listener by spending a few days listening more carefully in meetings. People who become behaviorally fit make time to fine-tune their behaviors, and they practice daily. Fitness requires commitment.

The good news is that behavioral science offers a range of techniques that make behavioral change more likely to happen and to stick. Create social pressure by telling colleagues you are working on being a better listener, and then make things fun by challenging them to choose one behavior and do the same. Set alarms on your mobile device so that whenever you enter a meeting, you are reminded of your plan to regulate your emotions by taking a few deep breaths every time you feel yourself becoming frustrated. Motivate yourself to stop micromanaging by earning rewards: track every situation in which you feel the urge to tell others what to do, and reward yourself with a dinner at your favorite restaurant if you are able to "let go" at least 50% of the time.

Professionals who are behaviorally fit are the people who are able to make things happen. They succeed where others who equally smart and experienced cannot. So work to become more behaviorally flexible in the moment, build your behavioral toolbox, and practice better behaviors in every workday.

By Lee Newman ETCD19 Dec, 2014