The ‘Right’ price for your shovel, (or) what has ethics got to do with it?

Remember this old post where we had written about The right price for your products?

Taking it forward from there, we would like to bring to you this post from HBR.

After a Blizzard, what’s a fair price for a shovel?

We discussed, and what follows was the quick post one of us wrote, and in fact insisted upon over email.

Haha..simple, pricing objective needs to be clear….it is not just about one season profit.

Also if we are assuming that the shopkeeper will gather inventory before the start of winter, then why won’t the consumers do the necessary preparation for the season and buy shovels and other necessities?

….now, there could be some lazy bones like me who will start digging a well when they are thirsty…also, there could be some instance where shovels will break…now, if a shopkeeper wants to squeeze money from those cases in point, it is absolutely fine, if the pricing objective is being met.

i.e if my business (my shop’s sales) is unpredictable and I am not sure about sustainability till/ during next season, and I am really in a cash crunch situation, I would milk the cow by increasing the price……think if I don’t have this unpredictable  cash crunch situation, but I increase the price, what will happen if rest of the season (even next year season) is normal winter – I will lose customer loyalty………………………………..

NOW, OF COURSE if it is not about me, but we all lobby and increase the price at once (and there is not a game theory defaulter), enjoy the profits (you may never enjoy this in future, as consumers would be extra cautious (prepared in advance) from next time onward – But not all; humans are humans) 

Right Focus: Lessons from a leadership workshop

“All of you had the wrong focus”

A two day leadership workshop, having participants from across the globe, ended with the above statement being made by company’s MD.

How is it possible, we thought; we had all made profits!

We carried on… “Oh, all these workshops are designed in such a way that in the end, everyone wins. Victory is for giving a feel -good factor to the participants”. But was there sense in the statement? In hindsight, there was a lot of sense. Let’s tell you why.

The workshop was designed around an outsourcing business scenario. The storyline we were given was:

A US government agency wanted to create more business and job opportunities in the market, and wanted to give a contract of manufacturing small boxes of different material (wood, steel etc) to third party vendors. The agency invited entrepreneurs to bid for the project. Entrepreneurs were required to register a company before submitting the proposal. The registration department had put some preconditions such as setting up of a few basic departments before submitting the registration application. For the purpose of the 2-day workshop, every hour was equivalent to a month.

First, some (say five) participants were selected to be the entrepreneurs / CEOs secretly by the workshop panel. All the entrepreneurs  started the required recruitment to build mandatory capacity and capability for registering their companies. The COO, CFO and other employees (all positions allocated to the rest of the participants by the workshop panel) were hired by the entrepreneurs after agreeing on salary/ stakes etc.

The next step involved presenting a case to equity investors for raising the required capital, so that relevant hiring could be completed and company could be registered by paying the stipulated registration fees. Although this step was not very easy, the workshop panel made it bit easier for letting the participant to at least register their companies and move forward.

Once the registration was done, the individual companies started building capacity before submitting the proposals to the client. This step again required some investments, and this time, the companies prepared detailed and stronger business cases and progress dashboards for presenting to the investors.  By that time, four hours i.e. four months had passed, and the companies were under further pressure of paying salaries and government bills (taxes, insurances etc).  An addition to the situation was the requirement to submit the quarterly financial reports “audited by designated agencies” to the government i.e. more money was required. All the companies were trying hard to raise capital, and were constantly developing relationships with the investors – Investors were Gods on the Ground.

Ah ha… some of the companies developed a bit of capacity and approached the client; they got a few small orders from the client. Moments to celebrate – companies were in a better position to approach investors again for raising more capital to fulfill the orders. Yes! More money, success was nearby!

Nope – four more hours i.e. four months went by. Alas.

The new bucket of cash given by investors was just sufficient to pay salaries, government bills and quarterly auditors’ fees. Not to worry – keep growing your relationships with the investors; relationships are the blessings. But the blessings were not working; although investors were pumping in the money based on relationships, progress, growth, potential etc, the situation was not improving.

Then a miracle happened – free contract size announced by the government agency i.e. based on company’s capacity and capability, any number of boxes could be supplied (ranging from 1 box to n boxes, where n could be any number really).

Wow! Everybody started making money, and everybody started scaling up as there was unlimited demand from the client.

 Well, everybody was rich by the end of the workshop – Happy Ending!

Then a session to analyze the entire exercise started. Executives started commenting about individual companies’ performances, right/ wrong strategies and good/ bad execution. Also, they started giving feedback to individuals in different capacities e.g. a person who acted as a CFO of a company was told about the gaps in his practice.

Now, the time had reached when the MD of our company was asked to comment about the entire exercise. After making general comments such as an amazing event, good participation etc, he said, “All of you had the wrong focus. It is not the investor who generates money for a company, but it is the client who makes an enterprise big. Sadly, the client was the most ignored person in this entire workshop. Forget this workshop: even in reality, very soon the companies lose customer centricity, and only the wrong focuses are left.”

Do we all know that customer centricity needs to be the top most focus? Of course we do, but do we all REALLY stay focused? 

How do you ensure you have the right strategy?

Are Strategy and Execution two different things? How do you ensure you have the right strategy? How do you ensure that strategy is executed well? If a great strategy produces poor results, how can we argue that it is great?  Are execution problems symptoms of trouble upstream in the strategy-development process?

 

Of course, Strategy and Execution are two different things, but let us start with the last question – Yes, to a large extent, execution problems emerge due wrong strategy (*** Don’t jump on to conclusion that right strategy exists). Some leaders argue that a non-executable strategy is not a strategy in essence; this is little too harsh statement for the most admired business concept “Strategy” – A Strategy that seems non-executable for one organization, can do wonders for others; it is just identifying the right catalysts while formulating a strategy. Right Catalysts?

Right Catalysts – Go back to the old school thoughts, core-competencies/ capabilities. It is important first step to identify your capabilities to start developing a “Capability-Based Strategy” – In reference to the given questions, I will term it as the Right Strategy. Then analyze the capabilities based on your identified target market/ pond to fish (Remember capabilities can become weaknesses if right “Pond to Fish” is not selected). Another important factor to consider here is organization’s strategic landscape i.e. does the management want to make a short-term strategy and let the company emerge from its current position or the focus is long-term destination (*** Changes in the Strategic Landscape can make the right strategy wrong – After making a short-term strategy, it is insane to define long-term gains).

Execution Excellence is a vast subject, but at the core, it heavily depends on organizational culture and structure e.g. in a fairly horizontal organization where many people at different levels are empowered to take decisions regarding the pieces of strategic initiatives, the only drive could be integrating/ aligning people and process to achieve excellence; in other environments, there could be other drivers such change management.

Great Strategy, Poor Results – Not a right fit!