Critical thinking and business

Contrary to what some may think, business really doesn't want employees who can think critically, if that critical thinking causes them to question company policies, procedures and direction. That is not acceptable at all. What they want is an employee who can implement policy that comes down from above, implement it efficiently. Critical thinking limited to implementing policy. What they really want is an employee who wants the answer, which management supplies, who then will implement that answer. No muss, no fuss. And that is what schools tend to supply, students who have been supplied the answers and who then apply those answers to certain factual situations. The perfect employee. But this makes critical thinking a skill, one that is learned and applied to certain areas only. Critical thinking, if approached correctly, cannot be limited in this way. People who think critically are not answer dependent, that is answers that someone else provides. They think independently and they question policy until it makes sense to them and will say so when it doesn't, (unless they come to a calculation that their job is more important and that it might be threatened by doing something like that.) In other words they have the tenor of mind that makes and influences policy not that accepts it as the truth they must implement. To put it plainly, critical thinking, as conceived and taught here, makes for good high level leaders. Critical thinking as a skill limited to implementation, makes for good lower level managers and employees.

I have had some people say that their company is the exception to this rule. It may be. But I would first like to know if the company management really allows the worker to think critically or are they jsut saying that that is what they want even though in practice the facts say something different but the employee has accepted the hype as a working creed. I won't say that categorically all companies act this way. There are some notable exceptions. But more companies do than don't.

So what is to be done about it? A lot can be done but it requries some shifting in focus. I would like to tak about it but will probably save it for the other blog, Prometheus' Brain.

"So, you seem to have a lot on your chest. Are there other things that are really bothering you?" Yes, there are. How about this: Brainstorming doesn't work. And this: Benchmarking rests on an assumption that has not been proven. And there are others. We may get to them here.

Loyalty

Is loyalty too expensive? Not for Nucor.

I would say it is expensive to not have it.

I once tried to make the case to a group of MBA students in one of my classes that loyalty was not something companies cultivated but was something that they needed to rely on. One student, an accountant by day, said that cultivating loyalty was too expensive. Nucor suggests that it isn't and that it is a necessary thing. But setting that aside, my student was looking at it from a "we-have-to-buy-it" perspective. But can loyalty be bought, really? Isn't loyalty a result of respect, mutual respect? Does that cost anything?

A lot of it is simply being human. But that is tough for some MBA educated sorts who see businesses as machines made up of replaceable parts. If a manager feels he can easily get a replacement--something that is not obvious at all-- what kind of respect will there be?

A company with a loyal workforce can weather all kinds of storms. And it will have a number of eyes watching out for the interests of the company. How much is that worth? But this won't be the case with a company where employees are doing what is required of them only and waiting for their next paycheck--and the company sees that paycheck as the limit of their obligation.

Some business plan questions

Here are some questions we send to prospective clients to help them flesh out their business plan. This is just to get them started, a starting point. There are more detailed questions that should be asked later.

Maybe these will help you get started.


The Market and Competition

What is your market?
If you are looking at a market segment, what is that market segment?
What is the size of your market?
If your company is looking to manufacture and/or sell a product, how much of the market is from domestic manufacturers?
i. How much is from imports?

What is your competitive advantage?
Quality? What is it about the quality of your product that is better than that of the competition?
Cost? If it is cost, will it be cost alone? How will the company make sure that it remains competitive on cost in the face of increased competition?
New technology? Why will the consumer purchase the new technology over staying with the old?

If your competitive advantage is a new technology, is that new technology protected by a patent, copyright (for things like computer code), or trade secret?
If a patent, who owns the patent? Do you have a royalty agreement with the patent holder?
i. If so, please include the details of that agreement?
If the business is dependent on a patent or proprietary formula and the company does not now have the rights to manufacture or market the product under the patent or proprietary formula, how is the company going to secure the rights to the product or formula?

What is your competitive strategy?
Why do you think you can capture market share with your product?
Why will the consumer buy from you rather than buying from the other current competitors?

If you are looking to build a factory to produce the product, why build a factory instead of having it manufactured for you either locally or in some other country?

Financials

If you are already an existing company:

Include Information on the sales history of the company for the past three years. This will mean total sales set out by month as well as information on the source of these sales. (Who were the customers who bought the company’s products?)

Include information on the expenses of the company from month to month set out by month. This would include wages and salaries for workers and management; any payments on leased equipment; any rent needing to be paid for company offices, warehouse or factories; shipping charges; advertising expenses; any taxes paid for the business from month to month including the date due; and any other expenses needing to be paid monthly.

Both of these will be needed to put together an income statement for the company.

Management

Who will be the principal managers of the business?
What is their experience, education and background?
What are their management responsibilities going to be?

Please include a current curriculum vitae for each.

Marketing

What is your marketing plan?

How will you price your products for sale?

If you are now a company doing business, who are the principle customers the company has now?
Who are the customers the company is looking to sell to in the future?

What method will you use to market to these customers?
How will these potential customers be identified by you?
How will they be informed of your products?
Why are they going to buy the product from you rather than to keep purchasing the product from the competition?
What methods will be used to sell these potential customers your products?
i. A sales staff?
ii. Advertising?

Where will the company advertise and how much will it cost per month?


We ask for the information on the principles because we need to know who they are andwhatt their experience is. This the kind of information you will need to provide when looking for financing. So be prepared to give a good account of yourself.

Listen to the customer

General Motors, the world’s largest company, has fallen on hard times. Its bonds are rated junk by many bond raters and it has had to trim employees and costs to avoid what many think inevitable—bankruptcy. So why all the problems? There are the standard answers, the one GM gives: too high healthcare and retirements costs; not the right kind of incentives for buyers; problems with suppliers; etc. But the real problem is that people aren’t buying their cars.

A few years back I read an interview with Waggoner, the current head of GM. In it he said that everything could be measured—everything. He depended on that “fact” to propel GM to new heights. His argument boiled down to: Everything can be measured and that measurement would allow him and his managers to set a company direction toward greater profitability.

Measurement depends on numbers. Numbers are the basic units of measurement—the “quanta” of measurements. They are the metrics. If you want to find out what is really going on in business, according to this view, get the numbers. If there are no numbers on it, then you must get numbers on it. If it is not possible to get numbers on it, what are you left with? it isn’t important? it doesn’t exist? not worth your time? it’s not a “thing”? or what?

In GM’s case, they came up with the numbers and those numbers told them something. That “something” was used to figure out their products and product mix. But when that met up with the consumer, the consumer didn’t buy. Something is wrong here.

GM would say that they got the measurement wrong. I think they got the measurement right but bypassed what the consumer was telling them to get to the numbers. The customers didn’t really know—the numbers did. The numbers knew better.

But they didn’t know better.

Listen to what the customer is telling you. If you don’t have a way to listen, find a way to do it. It is that information, what the customer is actually telling you, that is crucial for your business.

Business ideas--If you build it, will they come?

You remember that movie, Field of Dreams, where the guy heard voices telling him to build a ball diamond? “If you build it, they will come” was what he heard. Well, he built it on his farm in a cornfield and they did come. Some players from the old disgraced Chicago “Black” Sox came and played. And so did the people in his farming community. They came to watch. So he built it and they did come.

Only in Hollywood.

“If you build it, they will come” may work in a fantasy picture but business is not fantasy. It has a hard-nosed, no nonsense kind of realism about it. And it takes more than building it to get them to come. And when building it means putting together a good idea, it takes more than that good idea to get them to come.

In my work in Ukraine, I read business plans. It is tedious a lot because most of them aren’t any good. And why aren’t they any good? Because they don’t show how they’re going to get people to come. They may have a good idea and most of the plan is spent setting out that idea. But when it comes down to showing how they’re going to get people to come, that is the shortest section of the thing. Often it’s mostly one-lined with something like “we’ll hire a sales staff to market it.” Oh really? Maybe they’ll know how to do it?

Not good. I will say this and this may go over like cold water splashed in the face: The idea is a lot less than half of a good business plan. That is, the idea is not the most important part of the business plan. Shocked?

“So what is the most important part?” you ask thinking that I just dissed all that time you spent figuring your spectacular, blockbuster of an idea out. And the answer is: How you’re going to get people to buy what it is you have to offer is the most important thing. A lot of people spend a lot of time refining and fine-tuning the idea. But if they have no clue about how they’re going to get people to come, that is, how their going to market it, then they have nothing. Call your idea a killer idea, or call it the biggest thing since Post-it® Notes, it won’t matter. If you don’t know how you’re going to market it, you have nothing.

Got that?

Cost cutting your way to success

There’s a story told of a rancher who needed to cut his expenses to be more profitable so he had a real brainstorm one day. His ranch was a horse ranch and the answer was to cut down on the feed he gave out. By reducing the feed to his horses he could save money and that money would end up on his bottom-line.

So he reduced it. Sure enough, his expenses went down. That confirmed that his idea was a good one. So he cut it down even more. Sure enough, his expenses went down even more. He kept doing that for a number of weeks and saw his expenses go down and his profitability go up.

Finally, the horses were down to eating nothing. That added up to zero cost for feed and most everything moving to the bottom-line—a manager's dream, no?

Problem is, a few days later his horses died.

“Well, that’s an obvious one,” you say. “Horses will die if they aren’t fed—duh?” Well, it must not be as obvious as all that because businesses do the same sort of thing all the time. They figure they can cost cut their way to success and profitability but pare to the bone the experience they offer the customer, the experience that is their core product.

What do I mean by this? I mean street sweepers at Disneyland. Disneyland has been one of the cleanest places on earth, even if being one of the happiest might be debated. It was the cleanest, that is, until Eisner got a hold of it. He thought he could cut costs at Disneyland and that the cleaning crew could be pared down to help do it. So that's what he did. The upshot was that Disneyland was not nearly as clean as it was and Eisner was able to claim more profitability.

Problem is that that affected the Disneyland experience. Many shareholders, some of whom led a revolt against Eisner, thought the Disneyland experience had suffered as a result of Eisner. And now Eisner is on his way out. Good result?

And I mean the servers at a local restaurant I liked. They had a change of management and that new management was concerned with costs. So they trained their employees on carefully doling out portions to make sure no one got more than was fiscally sound for them to get. And it showed. From one day to the next, almost, you could see the change. The servers looked like they were measuring in their heads what to serve. This took them away from the friendly service they once gave and also positioned the customer as the enemy. And for a restaurant that prided itself on a down-home atmosphere and menu, this was, shall we say, not good. My attitude toward the place changed after that.

So what does this mean? It means you must understand what is the core product you offer, that is, the core experience you offer the customer and don’t stint on giving it to them. If you cost cut that to improve your profitability, you are starving your horses.