Tajne biznisa

Life is complex and complicated, and so is business. But our desire to attribute complex phenomena to simple factors is deeply ingrained in our minds.

Read more in my fresh newsletter:

The Focusing Illusion: Don't Fall into the Trap Set by Business Books and Academics The “single shot” strategic bias

Startup failures rise by 60%
It’s Thursday, and it’s time for the ‘Trend of the Week’ column

“Startup failures in the US have jumped 60 per cent over the past year, as founders run out of cash raised during the technology boom of 2021-22,” Financial Times reports.

Shutdowns are rising sharply, even as billions of dollars of venture capital flow into artificial intelligence startups.

The jump in bankruptcies is because "an abnormally high number of companies raised an abnormally large amount of money during 2021-2022", said analysts at Morgan Stanley in a recent note to clients.

The trend isn’t new. The first signs were noticed at the end of 2022.

But it still persists, which will impact the startup world in the long term.

More startups fail. Fewer startups receive investments.

According to Morgan Stanley, VC-backed companies employed 4 million people in the US.

The newspaper also states that investment is "going to startups working on artificial intelligence.”

So, when the AI bubble bursts, we'll wake up in a different world.

Contemplation questions:

[1] Does your strategy imply receiving a significant investment soon?

[2] How are you going to get it?

[3] How will you adjust your strategy in response to the cooling of the investment market?

Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

Do you believe that buying just one thing will change your life?
It’s Tuesday, and it's time for the ‘Customer cognitive biases' column

Are all wealthy people happy?

Are people with disabilities unhappy?

A firm ‘no’ to both questions.

Daniel Kahneman used these examples to illustrate the so-called ‘focusing illusion.’

"Nothing in life is as important as you think it is while you are thinking about it," he said.

Quote: “Paraplegics are often unhappy, but they are not unhappy all the time because they spend most of the time experiencing and thinking about other things than their disability. When we think of what it is like to be a paraplegic, or blind, or a lottery winner, or a resident of California we focus on the distinctive aspects of each of these conditions. The mismatch in the allocation of attention between thinking about a life condition and actually living it is the cause of the focusing illusion.”

The focusing illusion is the belief that having one particular thing (education, high income, a marriage, a job, a car, etc.) can change our whole life for the better.

Marketers skillfully use it to persuade us that buying a new smartphone, a purse, an EV, or an online course will improve our lives forever.

And we’re willing to accept the idea.

Even B2B clients often believe that having only one thing – a brand, a CRM, or an AI-backed solution, will catapult their business into the big leagues.

It is the focusing illusion at work.

Contemplation questions:

[1] Do your customers believe buying just one product from you or your competitors will change their lives?

[2] How could you use it strategically?

[3] Would it be ethical?

Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

Reading books about ‘six key success factors,’ ‘seven steps to outcompete your rivals,’ or ‘8-step change processes’ is a complete waste of your time. Read more in my fresh newsletter:

The Focusing Illusion: Don't Fall into the Trap Set by Business Books and Academics The “single shot” strategic bias

Would you trade your time for my benefits? It depends
Today is Tuesday, and it's time for the ‘Strategy in One Minute' column

Corporate Culture and Value Exchange

We all participate in value exchange – at home, at work, and everywhere.

But we do it only if we believe it somehow benefits us.

Imagine we are two colleagues who work for the same company. I ask you for help with my project. Will you agree?

It depends on if you’ll benefit from it.

If you’re just a nice guy who loves helping others, you’ll agree. Your benefit will be your feeling that you’re needed by others.

But if you're not that nice or very busy, how will you answer my request?

In some companies, staffers help each other; in others, they tend to refuse.

What’s the difference?

When an employee helps a colleague, it rarely brings immediate rewards. Such a value exchange implies you give something now (your time, for instance) and will receive value in exchange much later – if you receive it at all.

Everything changes for the better when a company has a clear strategy.

The employees are willing to help each other because they believe they will be rewarded later in the form of the company's strategic success.

So, a healthy corporate culture is one where employees are willing to support one another. And they do it not (only) because they expect others to help them in the future.

They do it because they help implement the business’s strategy.

And they, in turn, will benefit from this.

Contemplation questions:

[1] Do you have a clear strategy?

[2] Do all your key employees know the strategy?

[3] Do they all know their strategic priorities for this year?

[4] Do they understand how they could help each other to implement the strategy?

Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

Picture credit: Tom Fishburne | Marketoonist

‘Poor Man’s First Class’
A strategic stalemate for airlines

Southwest Airlines has announced that it will soon assign seats on flights and sell some with extra legroom.

Discount airlines such as Spirit or Frontier offer what one passenger called ‘poor man’s first class:’ Wi-Fi, extra legroom and drinks.

United, Delta, and American sell some rows at competitive prices with discounters' cheap fares.

If the trend persists, all airlines worldwide will soon be even more like each other than today.

It looks like a strategic deadlock.

Retail chains, car manufacturers, banks, mobile operators, and many other businesses copy each other’s strategies. And gradually, they become identical beyond recognition.

But how can a company lure and retain customers if it can’t offer anything unique?

When my clients face such problems, we try to dive deeper into the customer experience.

For airlines, customer experience means flight ticket websites, checking in, and flying.

For passengers, it means thinking about the trip, choosing the right date, selecting an airline, buying tickets, checking in, driving to the airport through traffic, getting late, standing in long lines, waiting, having a coffee or a beer in a café, standing in lines again, boarding, and so on.

For airlines, flying is their job.

For most passengers, it’s a complete waste of time.

It takes me up to 20 hours door-to-door to travel to Central Asia to participate in the board meeting.

I'd pay a lot for the service if I could simply teleport from point A to point B.

Airlines try to make traveling with them cheaper or more convenient.

How about making it faster by reducing time at every possible stage?

Strategy isn't about gaining a market share or making a profit. It's about improving customer experience effectively and profitably.

Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

Many talk about the Flywheel Effect in business. Few know what it really means. Only a handful can actually create it.
Read more in my fresh newsletter:

How To Spin the Flywheel: Three Steps to Skyrocket Your Business The Flywheel Effect Can Make Or Break Your Company

In 2013, JCPenney found itself in a scandal.



Consumers believed that a kettle it sold resembled... Adolf Hi**er.



The company had to stop selling the item.

Confirmation Bias and Strategy
Strategic Cognitive Biases on Sundays, part 20

You may have heard of the Confirmation Bias, a cognitive bias that makes our brains notice only what confirms our beliefs and filter out what doesn’t fit our worldviews.

But Rolf Dobelli, in his book The Art of Thinking Clearly: The Secrets of Perfect Decision-Making, points out that it distorts our strategic thinking, too.

Imagine a company that has just crafted a new strategy. The CEO and the board believe that the strategy is excellent.

The first quarter passes.

Some of the quarterly objectives are achieved, and some are not.

Achieved objectives confirm the validity of the strategy. Unmet goals may sow some doubts about it.

However, the CEO and the board think differently.

They believe that achieved targets prove the strategy is correct and that unmet goals are just 'fluctuations.'

From my experience, it happens in almost any company – until it’s too late.

Be honest – some figures may indicate that your strategy is not as good as initially seemed.

¬¬––

Retreating but Not Releasing
Founders as the power behind the throne

What does Howard Schultz really want?

In 2010, I was named CEO of a company founded by a charismatic entrepreneur 15 years earlier. When he invited me to run his business, he said he'd like to spend more time with his family.

It wasn’t true. He spent all day, every day, in his office and interfered in everything. His family didn't see him much.

But it was only part of the problem. He acted as someone who would do his best to prevent me from succeeding.

In 2016, I joined the board of directors of a large business. For many years, the founder had managed it solely, but in 2016, he hired a CEO and the board.

Exactly like the founder from the previous case, this one didn't go too far from his chair. And he also acted like someone who wanted to undermine the CEO's reputation.

It was particularly strange because he himself had hired the CEO a few months ago. It wasn’t the best CEO I’d ever seen, but she was competent and deeply engaged.

Why do some founders discredit the CEOs of their companies and hinder their work?

It looks illogical because the CEOs’ failures mean their brainchildren’s failures.

But founders are humans. Most of them are very ambitious.

They won’t stand for it if an outside CEO turns out to be better than they were.

Subconsciously, they want to remain the best CEOs in the company's history, even if they’ll pay a high price for it.

I’ve never met Howard Schultz, I don’t know him, so all my thoughts about the situation around Starbucks are nothing more than speculations.

But it reminded me of those two founders.

What are your thoughts? Please share your opinions in the comments.
––
Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

The standard diameter of a CD is 120 mm, and this size was established in the early 1980s when Sony and Philips jointly developed the format.
Initially, Sony engineers proposed a disc with a diameter of 100 mm, which could hold about 60 minutes of audio. However, during negotiations with Philips, it was decided to increase the disc size to 120 mm so that it could hold the full performance of Ludwig van Beethoven's Ninth Symphony, which lasts about 74 minutes. The leadership of Sony, particularly Norio Ohga, who was a classical music enthusiast, played a significant role in this decision.

Strategy in Three Minutes. Episode Four is live!

Today’s topics:

Value Chain and Value Exchange

Why customers don’t switch to your product

Are you a freelancer? You’re in a big company!

Read more and subscribe for free here: https://open.substack.com/pub/strategyintwominutes/p/strategy-in-three-minutes-episode-13b?r=1ko3yw&utm_campaign=post&utm_medium=web

How To Spin the Flywheel: Three Steps to Skyrocket Your Business
The Flywheel Effect Can Make Or Break Your Company

How To Spin the Flywheel: Three Steps to Skyrocket Your Business The Flywheel Effect Can Make Or Break Your Company

Are you a freelancer? You’re in a big company!
It’s Thursday, and it’s time for the ‘Trend of the Week’ column

Nearly half of the world’s workforce are now considered freelancers.

Some stats by TechReport:

1.57 billion people out of 3.38 billion workers across the globe, or nearly 46.7%, are freelancers.

As of 2023, the US alone had up to 73.3 million freelancers, and this number is estimated to rise further, reaching 76.4 million by 2024 and 90.1 million by 2027.

Typical freelancers (36.1%) spend over 20 hours freelancing weekly.

According to predictions, the market size of freelance platforms will hit $9570.3 million in 2030.

An average freelancer earns roughly $47.71 in the United States. On average, freelancers earn an annual income of $99,230.

As of August 2024, 50 countries have a digital nomad visa program (compared to only three in 2020).

We need to take these numbers with a grain of salt.

In such statistics, a freelancer is any person who is not employed. But there is a difference between a digital nomad, a DoorDash delivery driver and a guy who’s looking for a full-time job but is currently taking on some side hustles.

Moreover, some freelancers or self-employed would be happy to have full-time employment, but it's just too hard in their countries.

Contemplation questions:

[1] Do you take advantage of this trend?

[2] Do you hire freelancers to handle any tasks for your business?

[3] Do you consider going freelance yourself?

––
Want tips on flipping your strategic thinking?

Check out my podcast Strategic Seeing on Apple Podcast or Spotify

Why customers don’t switch to your product
It’s Tuesday, and it's time for the ‘Customer cognitive biases' column

Once, Daniel Kahneman, Jack Knetsch, and Richard Thaler conducted an experiment.

Students were given a mug and then offered the chance to sell it or trade it for an equally valued alternative (pens).

The amount participants required as compensation for the mug once their ownership of the mug had been established ("willingness to accept") was approximately twice as high as the amount they were willing to pay to acquire the mug ("willingness to pay").

We love what we have more than we theoretically could have.

The scientists called this the Endowment Effect.

When your clients tell you that they’re fully satisfied with the solution they have, this may happen because of this effect.

They value what they have more than what you offer them – even if your product is better.

A bird in the hand is better than two in the bush.

You need to demonstrate many advantages of your solution to convince them to give it a try.

Or it may have only one edge, but it must be a killer advantage.

Contemplation questions:

[1] How many advantages does your product have?

[2] Are these edges clear, obvious, and convincing?

[3] How could you change the way you communicate these advantages?

[4] What could you do to convince customers to try your product? How about a free trial period?

––
Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

How To Spin the Flywheel: Three Steps to Skyrocket Your Business
The Flywheel Effect Can Make Or Break Your Company

Read more in my fresh newsletter:

How To Spin the Flywheel: Three Steps to Skyrocket Your Business The Flywheel Effect Can Make Or Break Your Company

Episode 8 of my podcast Strategic Seeing is live!

Find the podcast on Apple or Spotify and listen for free.

This time, we're talking about the strategic flywheel: how do you create it?

How do you catapult your business to new heights?

The links:

https://open.spotify.com/show/4G4kY1KJ9u4xxHTsPS0moR?si=3d5b894275344d7c

https://podcasts.apple.com/si/podcast/strategic-seeing-by-svyatoslav-biryulin/id1753022653

Value Chain and Value Exchange
Today is Tuesday, and it's time for the ‘Strategy in One Minute' column

Michael Porter coined the Value Chain concept in 1985.

He stated that every company is a set of activities that aim to create value for its customers.

The concept is often visualized as a line, running from the raw materials to the products for the customers.

But there are some ‘buts:’

[1] Business processes (or activities) never look like lines going from left to right.

[2] Though customers are the main stakeholders, they are not the only ones. A company must deliver value for employees, suppliers, shareholders, and other stakeholders.

[3] We shouldn’t consider the processes inside an organization in isolation from the processes that connect it with the other organizations – suppliers, banks, subcontractors, etc.

[4] A company not only creates value for customers but also gets value from them, not just in money but also through insights and feedback.

So, the Internal Value Network can be a better definition than the Value Chain.

The internal Value Network is a set of business processes or Value Waves, that:

[1] Deliver value for key stakeholders.

[2] Connect the company with the other organizations.

Contemplation questions:

[1] Do you have a map of your key processes?

[2] Do they deliver more value to stakeholders than your competitors?

[3] What can you do to improve the key processes?

[4] What processes in your Value Network capture more value than they create?

[5] What strategy could let you make your Value Network stronger?

––
Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)

What should a CEO be experienced in?
Don’t miss the point

Should a CEO be a seasoned leader?

Yes, they should. People are the ones who do the job.

Should a CEO be good at finance?

Yes, they also should. Money streams for a company are the same as blood streams for a body.

But from whom does the money come into the company? It comes from the customers.

According to a study, only 13% of CEOs of Fortune 100 companies started their careers in marketing and sales (and marketing and sales are not the same things!).

Another study stated that only 26 of the thousands of members of Fortune 1000 boards had a marketing background.

The latter study claims that having an experienced marker in a board of directors ‘fosters innovation.’

I never trust such studies because they see a causation where there is only a correlation.

But if customers are so important, how can a CEO delegate communication with them to the marketing department?

There are few genuinely customer-oriented businesses.

Many companies claim they are ‘customer-obsessed,’ but set financial strategic goals only.

A CEO may not be a professional marketer.

However, they should still know how to identify the company’s core customers and their needs.

And having a savvy marketer on the board of directors never hurts.

––

Want tips on flipping your strategic thinking?

Check out my podcast Strategic Seeing on Apple Podcast or Spotify.

Strategy in Three Minutes. Episode Three.

Topics of the week:

1. Value Network and Value Exchange

2. Customer cognitive biases: Availability Heuristic

3. Trend of the week: Gen AI creates more work for employees than it takes away

Read more:

Strategy in Three Minutes. Episode Three. 1.

Strategic Roots:
Why Goal Trees Fall Short and Processes Matter.

Pyramidal hierarchical structures are everywhere.

Animals and plants are classified in a hierarchical pyramid: from kingdom, phylum, class, order, family, genus, to species.

Organizational structures most often look like pyramids.

When you use a mind map to delve into the root cause of a problem, you employ the hierarchical approach.

The method of reasoning "from the general to the specific" appears natural to our minds.

But when it comes to strategic goals, the tool misfires. There is another approach that can be a better solution.

Read more in my fresh newsletter:

Strategic Roots: Why Goal Trees Fall Short and Processes Matter

Gen AI creates more work for employees than it takes away
Trend of the week

In a recent study by the Upwork Institute, 2500 global C-suite executives, full-time employees, and freelancers in the U.S., UK, Australia, and Canada were surveyed about AI and its impact on productivity and efficiency.

Key outcomes:

[1] 81% of global C-suite leaders acknowledge they have increased demands on workers in the past year.

[2] Leaders have high hopes that generative AI will help boost productivity, as 96% of C-suite leaders say they expect the use of AI tools to increase their company’s overall productivity levels. Already, 39% of companies in the study are mandating the use of AI tools, with an additional 46% encouraging their use.

[3] However, this new technology has not yet fully delivered on this productivity promise: Nearly half (47%) of employees using AI say they have no idea how to achieve the productivity gains their employers expect, and 77% say these tools have actually decreased their productivity and added to their workload.

[4] About 40% say that they're having to spend more time reviewing or moderating AI-generated content, and 21% are being asked to do more work because their managers believe AI let's them "do more."

[5] 38% of employees report being overwhelmed by having to use AI to do their jobs.

Bosses believe that a technology will increase their subordinates’ productivity because they have no idea what the subordinates do, and how.

Don't you have a sense of deja vu? Haven’t you seen something similar ten or twenty years ago?

––
Want tips on flipping your strategic thinking?

Check out my new book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism, on my website (the link is in my profile)