Tag Archives: Differentiation

You Should Read This Book Every Year – A Review of It’s Not Luck by Eliyahu Goldratt

If Plato and Socrates enrolled in a top MBA school, they’d likely drop out and produce something similar to It’s Not Luck by Eliyahu M. Goldratt. Written as a sequel to The Goal, It’s Not Luck uses an extended story approach to teach Goldratt’s problem-solving technique called the Thinking Process. Specifically, Goldratt shows how the Thinking Process can not only help sales and marketing revitalizing stalling businesses, but also help solve personal problems. The principles the book explores are so critical, that you should add this title to your list of books to revisit every year.

About It’s Not Luck

The book starts with a corporate board meeting in which a conglomerate decides to sell three of its companies, of which Alex Rogo, the main character, is in charge. Using the principles he learned from the Theory of Constraints, Rogo discovers unique ways to turn around each company quickly by dramatically increasing sales with no additional resources. He does this through mapping out the current reality of each company and then logically addressing the issues that keep them from truly solving their customers’ pains. An excellent summary of the problem solving method, called the Current Reality Tree, is available on a site by Jim Davis. What results from using this method is a logical formula for success. While not a prescriptive checklist, the answer is instead a set of principles general enough to carry far beyond the situations presented in the story.

Positive Impressions

This book is an enjoyable and motivating read because of its format, its broad application, and its evidence that success is not luck. Goldratt takes some rather complicated subjects and slowly spoons them out through a well-written story. While not quite Victor Hugo in symbolism, the story is engaging enough that you look forward to picking it up again. Particularly interesting is watching Alex Rogo apply the problem solving techniques to issues in his family life before applying them to business issues. Deciding whether to let his son borrow his car, helping his teenage daughter navigate boyfriend drama, and evaluating the purchase of a car to share with a friend are all canvases that Goldratt uses to paint the logic-tree method. Once introduced, the methods are much easier to follow later when they take on sales and marketing problems. The most positive takeaway is the assertion and evidence that success in business is not luck, but instead disciplined and creative problem solving that can be reproduced in nearly any industry.

Memorable Quotes

As concise snippets of wisdom, quotes have a powerful way of helping us remember important principles and lessons. Here are five quotes from It’s Not Luck that provide special wisdom.

“I can’t rely on [management] alone. And there is no point waiting for developments. I’ll have to find a way to influence them in the right direction.” p. 14

Often when we are not in charge, we rely on others to make tough choices and act. Equally often, however, we should act and make positive changes happen, even if it’s someone else’s responsibility.

“You’ll always find her busy, but never without time.” p. 58

Alex Rogo said this about his wife. She had embraced the problem-solving techniques espoused in the book and become a successful marriage counselor. This description exemplifies a constant life goal that many of us, myself included, strive to reach: busy, but always available.

“If you are constantly fire-fighting, you have the impression that you are surrounded by many, many problems.” “[But when] you follow the recipe, and you end up with a clear identification of the core problems.” p. 94-95

Referencing the problem solving techniques explained in the book, Goldratt captures the pain of constantly fighting fires. After careful analysis, we often realize that just a few root causes create most of the pain and emergencies we deal with each day. Using the 5 Whys is an excellent way to reach those problems. Incidentally, the Current Reality Tree method is closely related to the 5 Whys technique.

“It’s very important not to ignore these nasty reservations. Each one of them is a pearl, because if we do take them seriously, if we write each reservation as a logical Negative Branch, we can identify everything that can go wrong.” p.173

This quote ties precisely into another excellent quote, that problems are gold to be treasured. Without acknowledging and addressing problems, improvement relies solely on luck. Fortunately, the reverse is also true: addressing problems ensures improvement will occur.

“We didn’t have time for mistakes, so we had to spend extra time planning.” p. 265

Although I enjoy jumping into problems and live testing ideas, some extra time planning up front usually saves a large amount of pain later on. The old adage is often true – haste make waste.

Concluding Thoughts

The final pages elaborate and revise The Goal‘s key conclusion. The goal of a company isn’t just to make money. Rather, all companies have three basic goals:

  • “Make money now as well as in the future”
  • “Provide a secure and satisfying environment for employees now as well as in the future”
  • “Provide satisfaction to the market now as well as in the future”

Often, important decisions benefit only one or two of these goals. The key to building a great organization then is to find creative solutions that accomplish all three goals. Only then, can a company endure challenges and grow to thrive through them.

The business climate will only continue to grow more competitive and difficult to navigate. As supply chains grow and problems seem to multiply, It’s Not Luck reminds us in a powerful way that any challenge can be overcome. Whether you need to remember how to use the problem solving techniques explained in this book, or you just need to revisit examples of how to successfully jolt a company to triumph, It’s Not Luck is an excellent source of motivation and problem solving tools to review each year.

What thoughts do you have? Please share in a comment, and subscribe to future posts.

Surviving the Amazon Effect

The Amazon EffectThe Amazon Effect – a term for the change to the competitive landscape caused by the growth of Amazon.com. Jim Tompkins recently posted a podcast about this topic and how its changing the business climate. Essentially, Amazon has grown to become a competitor with nearly every company – from Walmart to Apple, Home Depot to Netflix. Jim predicts that because of Amazon’s growth, and several other tipping points, a perfect storm of bankruptcies will sweep through an unprecedented number of companies by 2014. The podcast also spends considerable time speculating on what the brick-and-mortar Amazon store will look like – a move that has many large retailers anxious as Amazon continues to expand its business models.

With Amazon competing with everyone, how can a small business endure this new wave of competition and survive the Amazon Effect? Three survival options are (1) differentiate your services to what Amazon does not yet offer, (2) leverage your business’s flexibility to innovate, or (3) join forces with Amazon and become a supplier. Above all, remaining focused on your customers will help weather any challenge.

Differentiate Your Services

“In real estate, it’s location, location, location. In business, it’s differentiate, differentiate, differentiate.” – Robert Goizueta

Obviously, in order to avoid direct competition with Amazon, your business needs to provide a product or service that is different. Though this may seem simple, the great challenge lies in staying ahead of how quickly Amazon’s portfolio is expanding. Having not yet opened a brick-and-mortar location, Amazon’s business model still relies fully on the Internet. Web hosting, software, and eBooks delivered electronically, as well as their enormous SKU count of products ordered electronically, all rely on their website and customers interacting with their system. Although their system is easy to use, that model leaves an opportunity for differentiation.

Highlight your Company’s Service

A key asset that a small business can offer is expertise and service to its customers. Although I sometimes spend hours comparing customer reviews and creating my own analysis of a product, I greatly value the honest expertise and guidance that small businesses provide. The more we become accustomed to working with computers, the more we feel refreshed with positive human interactions. Human relationship building is often absent from the Amazon experience. Therefore, customer service and human interaction can be a key to differentiating.

In addition, you may want to change how you approach your customers. Several years ago, IBM, seeing the trouble ahead for its business if it focused on hardware, switched its business model. Instead, it became an executive consulting company that helps implement its hardware and software. This value-added service satisfies a demand that a 1-Click purchase and a box full of hardware cannot.

Leverage Your Business’s Flexibility to Innovate

“The ability to learn faster than your competitors may be the only sustainable competitive advantage.” – Arie de Gues

Being a small business has an inherent strength of flexibility that most large companies wish they still had. Alignment is much easier when you can fit all your employees into one room and share your vision. More importantly, it is much easier to test and implement innovations because implementation on a smaller scale is more feasible. Once you grow as Amazon has, you cannot implement innovations as quickly and easily as a startup.

A friend of mine who recently completed a summer internship at Amazon highlighted one of its weaknesses. My friend had spent the summer working at a distribution center and proposing various process improvements. However, because of the company’s size and emphasis on short-term ROI, he was not able to implement his ideas. To be fair, I do not know any of the details or merits of his suggestions. Nevertheless, my friend did not want to work for them after the internship because of this experience. It highlights not only the lack of flexibility in operations, but also inefficiencies such as paying an MBA intern for a summer with little in return.

Instead, being able to integrate quickly the latest innovations in supply chain – or any other department – will help you withstand the waves of Amazon’s competitive presence.

Join Forces with Amazon and Become a Supplier

If you want to be incrementally better: Be competitive. If you want to be exponentially better: Be cooperative. – Author Unknown

For many businesses, the strength of Amazon is a boon rather than a burden. From my dad who sells books on Amazon’s marketplace to consumer goods manufacturers that work through Amazon as a retail channel, more people visiting the site means more potential customers. Recognizing that Amazon will be one of the main retail channels for the next few years can help you prepare your company to fit into its network.

How can you become a supplier to Amazon and other online retailers? Listing your products online is quite easy – most online sites pride themselves on large SKU counts, especially if you are the one holding the inventory. Success depends more on your ability to process orders seamlessly and drop-ship to customers. Quickly shipping to consumers will keep your supplier scorecards high and customer reviews favorable. Many 3PLs can handle these services for you, which is an excellent option if order volumes justify the expense.

Customer Focused Philosophy

The Amazon Effect is certainly a threat to many companies unprepared for the new competitive landscape. I agree with Jim Tompkins that many companies will eventual shut their doors because of the increased competition. However, Amazon’s devotion to its customers, more than their operations or business model, is what has made it so powerful. Jeff Bezos, CEO and founder of Amazon.com has said,

“Do not be competitor focused, be customer focused.”

That then is the key to surviving the Amazon effect. Recognize the increased competition, but then work on every part of your supply chain and business to serve the customer better.

What do you think? Please add your comments on how small businesses can survive the Amazon Effect.