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And the Winner is…High-Quality Content! March 7, 2011

Posted by David Dirks in Communication, Creating Marketing Materials, Creativity.
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In early March of 2011 Google confirmed for all time what I contend has always been the foundation of success in any medium: high-quality content.  Scrolls, books, magazines, newspapers and all other content delivery vehicles before the digital age have always lived or died based their content.  All Google did was declare war on sites that deliver low quality content that offers little use for readers.

As a creator and user of information myself, I’ve always been critical of content vehicles (digital or not) that offer little or no useful information.  In the digital world, the art & science (more art than anything because Google keeps its algorithm a secret), of “search engine optimization” or SEO, has created players who would rather game the system than provide you with solid content.

So it’s nice to know that the rules of the content game remain safely the same.  If you want to develop content of any kind, it must be created and engineered so that people easily recognize and value it.

I’ll throw in three basic tenants for developing content that I’ve learned over many years of trial, error, and success.

Relevant:  The content must be a match to the reader or user.  People will search for content in any delivery vehicle (magazine, website), which is material they instantly recognize as useful in the context of their interests.

Engaging:  High-quality content engages the reader by pulling their minds in directions they delightfully didn’t expect to go…but are glad they did when they get there.  Content that challenges and inspires the mind on a subject has always been a jewel.  High-quality content should be a great experience.

Insightful:  Content, whether written, verbal, or visual has to have enough depth to allow the creator to draw out any number of valuable insights.  My bias is for content to have insights that have a practical and actionable nature for the user.

Creating and sharing high-quality content is a timeless way to provide valuable information for both prospects and clients.  Google’s war against low-quality content just reaffirmed what we knew all along.

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Retail Mega Giant without Brick & Mortar? September 23, 2010

Posted by David Dirks in business strategy, Solving Business Problems, Strategy.
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The era of brick & mortar is being tested by some of the biggest players in brick & mortar stores.  Now Wal-Mart, in its drive to capture more urban market share, is experimenting with shipping online purchases for free from its website.  Working with Fedex, Wal-Mart is offering free delivery of online purchased products directly to a Fedex location.

So, without having to invest in urban brick & mortar locations, Wal-Mart gets a chance to sell product to those mostly younger buyers who are not inhibited to make online purchases.  This is also a smart move for Fedex who gets to develop the same distribution service for other large retailers as well.

I like this on several levels.  First, it proves that you can weld an idea from common elements.  Merging online selling with the distribution power of your delivery service is great example of this.  Secondly, it proves that even big dogs like Wal-Mart can think out of the box to solve key challenges.  Third, It once again proves that there are other ways to conduct business than by investing in retail structure.

Wal-Mart and Fedex are thinking beyond the usual in looking for ways to grow their businesses.  So should we.

Chrysler Business Strategy: Move away from the cliff September 17, 2010

Posted by David Dirks in business strategy.
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The underdog of the automotive world, namely the company called Chrysler, is a case study in what business strategy NOT to pursue.  Even before the economic crisis, Chrysler has been the well-known laggard against global competitors like Ford, GM, Toyota, and just about every other car maker you can think of. It’s been a rough road for an American icon.

So what was Chrysler’s business strategy?  Beats me.  No one is quite sure what the target market was for cars like the troubled Sebring were aiming for.  Doesn’t much matter because Chrysler has long stubbed its toes in three critical areas: quality, fuel economy, and interior design.  I can’t think of three core areas of a higher order of ‘worse’. 

You could also throw in the fact that Chrysler’s previous financial condition (and its previous hedge fund owners) precluded it from refreshing the brand with new or even updated models in a very long time. 

Times may be changing though.  Enter the dynamic and passionate Sergio Marchionne, the new CEO of Chrysler who also oversees the Fiat empire.  Marchionne took over Chrysler when it looked like there was nothing left to do but turn out the lights. 

According to most reports, Marchionne dived in and reached an immediate conclusion:  we have to fix what is obviously broke and fix it fast.  Stabilize Chrysler sales and start building the resources needed for market development through increasing profitability. 

You need to see what Marchionne did here to see how business strategy is more evolutionary than revolutionary.  His deep dive into what ailed Chrysler pointed to many key priorities and lots of places he could have invested time and resources.  What he did instead was prioritize and limit his focus to those three areas first.  Marchionne wanted to move Chrysler away from the cliff it was on the very edge of.

When faced with more internal things to fix than you can shake a stick at, often the best business strategy is to fix those areas that will then allow you to attack other challenges.  Marchionne knew immediately that nothing was going to get Chrysler on the path to sustained growth without fixing those three issues first and foremost.

Whether Chrysler succeeds is a matter of many other variables, some of which are beyond its control.  Still, the lesson here clear:  When your business is on the edge of a cliff, focus on moving a few steps away from the cliff as your first priority.

Digital Strategy: Publisher Makes a Move August 14, 2010

Posted by David Dirks in Strategy.
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Not long ago I reported that the publishing industry was undergoing a traumatic change in business strategy.  Shocking right?  Not really, since the publishing industry is the talk of the town in business strategy circles.  Rather than embracing the digital realm or rather, the inevitable outcome, publishers of most paper-based media have been running away from it.  With the popularity of the iPad and other electronic devices growing stronger by the month, publishers have been slow to figure out ways to survive and adapt to a new revenue model.

Right before our eyes however, already there are a few publishers who are now embracing the transformation from paper to digital format.  Dorchester Publishing, Inc. is one of the first to really move into the digital arena in a big way.  Dorchester publishes mass-market paperback books, of which the majority are of the romance variety.  The            publisher recently announced that it would no longer offer print editions of those books.  Move over Guttenberg, the rise of the e-book is here.  Dorchester’s story was first reported by Publishers Weekly and of late, the Wall Street Journal.

Is this the start of a publishing stampede into digital book publishing?  I believe we are witnessing just that.  More publishers will follow once they get over their belief that a book just has to be printed on paper to be a book.  Publishers need to grasp that it’s the IDEAS and STORIES that books contain that are the critical parts, not whether it is distributed via digital or paper formats.

Apparently Dorchester has sat down and calmly figured out a new revenue model that will allow them to continue to develop and sell mass-market ‘paperbacks’ in a digital format.  I guess there is something to be said for saving considerable expense from not having to print on paper.

As the e-reader and pad-based computer technology advances and advances quickly, the day of the printed anything is toast.  You can thank Apple for making that happen when it launched the iPad…which this blog posting is being written from.

A few publishers are still clinging to the printed book strategy because they still can’t figure out how to create a new business model from the digital age.  Eventually though, smarter and cooler heads will prevail and they’ll lumber along playing catch up all the way.

Like life itself, business strategy is always in motion.  Failing to recognize that has doomed many a company.  Remember Polaroid?  The old Kodak?  Corporate creatures from an earlier age that failed to grasp the impact of the digital market for cameras.  Hey, they still sell digital cameras for a profit, right?  Right.

Business Strategy: All Wars Are Local June 16, 2010

Posted by David Dirks in Uncategorized.
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I’m not sure who said this or if I’ve just made it up from something I heard years ago but it goes like this:  All wars are local.  Which to me, means that whether global military war or business war, the war seems pretty localized from where you happen to be in the battlefield.  It’s all-local.  Now it seems that the print media war, which is on a national scale is really a local war after all.

I have a very good example for you too.  I was on the E train in Manhattan when I noticed the ad campaign splashed above me.  It was for the New York Times and one of the captions caught my eye: “Not just Wall Street.  Every Street.”  Then I noticed the other ad posters on the subway wall.  They all had different captions but emphasized the same thing:  we cover New York LOCALLY.  Here was a major paper that not long ago focused on marketing itself as a national paper in addition to covering NY and the tri-state area.  Now the focus was convincing readers and potential readers that IT was the best for NYC coverage.

Now enter the Wall Street Journal.  It’s clearly a national paper in terms of its coverage.  However, it recently launched an entirely new section of the paper that focuses exclusively on local NYC news.  How about that.  All media wars are local.  It represents, at least here in NY, a fundamental shift in business strategy for print media.

Let me summarize what I think it means in terms of business strategy from the NYT and WSJ perspective.  What they are saying is, ‘We need to OWN our local market.  We need to completely obliterate all other competition.”  All media wars are local.  That’s it.  Somebody woke up and realized that in order to survive, print media needs to own the local space lock, stock, and barrel.

This is especially true in major metropolitan markets like NY represents but it also has implications for local and regional papers too.  While how local newsprint gets delivered will surely change (via electronic devices like the iPad or others like it), what really matters is who captures the most ‘eyes’.  Advertisers of any kind only want to invest in media devices where their customers are spending their time.  Whether that’s a printed version or electronic version matters not.  The more splintered a market is in the context of how many sources people have for local information, the worse it is for local media.  Own the space then.

The paper in which I author several columns, The Times Herald-Record, was way ahead of the ‘own the local market’ curve years ago.  I don’t recall the year but they introduced and marketed the mantra ‘Because we live here too’.  Their emphasis was squarely on localized coverage and more of it.  The feel of the paper changed as they put more investment into deeper local coverage of a broad range of events.  It was notable at the time that less print space was devoted to deeper national and global coverage and more shelf space devoted to local & regional issues.  All wars are local, including the media ones.

This all very understandable given that a reader can get national and global news from many other sources including TV or the web.  What’s really funny to me about the whole thing is that nothing has really changed here.  Marketing strategy has always depended on meeting the customer where they spend most of their time.  Advertising has always been based on subscriber counts of one kind or another.

In fact, I’d say that what’s happening from a business strategy perspective is that print media is going back to its roots.  There was a time when almost all your local newspapers were 90% or more focused on local events.  Like who’s barn burned down last month, who was the first to get plumbing or electricity in their homes or who’s cows ran away for a week.  National and global news wasn’t instantaneous like it is today.

So, we’re back to number of eyeballs again.  To survive, not only does local print media have to figure out how to revise how it delivers and sells its journalism, it first has to own the local media market.  Local media needs to own the local ‘eyeballs’ in that market.

All wars are local.

Focusing on Core Strengths: Disney April 21, 2010

Posted by David Dirks in business strategy, Decison making.
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The ebbs and flows of business strategy can vary how any enterprise, large or small, approaches the challenge of continual growth.  Very often the variances in strategy focus can either help or hinder growth.  Business owners are often faced with the challenge of ‘do we expand our product and/or service focus to other markets?’ in order to find additional opportunities for revenue growth.  The implications of expanding or contracting a business strategy are tremendous.  The world is littered with the carcasses of businesses that either died  because they wouldn’t expand their strategy beyond their current core or collapsed because they reached too far and drove themselves into the ground.

When you’re looking for additional revenues, what is the right strategy?  Expansion outside of core or staying within your core?

Disney and their movie business is a good example of deciding to go outside and then dealing with the consequences.  For more than a decade, the Disney studio cranked out one-off movies that had no connection to any core Disney brand like Cinderella.  To be sure, Disney did have some great success with movies series like “Pirates of the Carribean” and their Pixar division has done well.  According to the Wallstreet Journal (WSJ.com), everything else Disney was releasing was suppressing their overall studio results.

Predictably, Disney is now re-focusing it’s studio efforts around expansion of existing movie franchises (i.e. Muppets).  Their strategey: invest and expand studio movie offerings built around strong movie franchises that can also help their other revenue generating divisions.  For example, their popular ‘Hanna Montana’ franchise has not only spawned successful movies but has allowed Disney to roll Hanna Montana products across several of it’s distribution channels.  That kind of cross-pollination rings the cash register every time.

With its recent acquisition of Marvel Entertainment, Disney now has access to thousands of branded characters that they can develop deeper franchises with.  It also comes with an already established and faithful base of fans across the world…much like its own base of characters that Disney developed more than 80 years ago (Mickey Mouse for example).

The question for the rest of us is this:  Is there a litmus test that we can apply to determine whether or not it makes sense to stay within our core product and/or services or whether we need to expand outside of it?  Disney did both.  Focusing on what it already owns that has strong brand recognition and acquiring a new set of characters via Marvel that also have strong brand recognition.

If there is a litmus test, I’d put my money on the following:

1.  What do the numbers really tell you? Tricky, because numbers can lie.  However, there is always something to be said for doing the math first taking great care to insure that the math is not ‘funny math’ that is created just to make our case either way.  How does revenue growth and profitability of a non-core business strategy compare to our current core?

2.  Why leave your core business strategy in the first place? Have we done all that we can to improve results and expand our growth opportunities within our current core strengths?  Can we do a “Disney” and focus our resources on our current core business strategy while looking for outside opportunities (new products, services, acquisitions) that meld well our core strengths?

3.  Do we really have the expertise and depth it takes to run a non-core business ? There are plenty of times when a business will take on a non-core business strategy in the name of profits over expertise.  In most cases, since they don’t have much expertise to a business outside their core, they happily bleed the cash cow down until they end up selling the carcass to someone else.  You’ll hear senior management say, “We’ve decided to divest ourselves of assets that are not within our core business”.  CEO’s under pressure from shareholders and their board for accelerated growth and profits will often scramble to find a business that can bring cash into the fold.  Almost too predictably, a few years later they end up selling a non-core business often for much less than they paid for it.

Pursuing a non-core business strategy always has varying degrees of risk.  In the long run, I favor sticking to whatever core expertise and business strategy you have.  Expanding your core business with products and services that are directly or indirectly related to your core business is usually the best bet.  Disney’s example of extending their core movie business franchise by acquiring other strong character-based brands (i.e. Pixar, Marvel) makes sense and money.

When Getting Bigger Isn’t Better March 14, 2010

Posted by David Dirks in business strategy, Diagnosing performance problems, Fixing performance problems.
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A recent headline in the Wall Street Journal: Monster to Acquire HotJobs.  As soon as I read that headline, I knew it meant trouble.  Let me put this headline into context for you: When companies run into major challenges (aka trouble) and can find few answers to meet those challenges, they resort to buying another big competitor.  Remember when HP bought Compaq a few years ago?  HP was trying to find it’s way through a dismal personal computer market and groped for an answer by buying Compaq, which was also groping along.  Two gropes do not make for a good business strategy.  Result for HP?  The CEO was ousted after the HP board ran out of patience waiting for good to come out of that mega-merger.

On the surface, its very tempting to buy a rival who sometimes can be bought cheaply…sometimes not so.  The typical formula is this:  merge – cut costs wherever possible during the merger + instant market share = profits that flow from being bigger.  Well maybe.  In too many cases, buying another competitor to gain market share and profits means more of the same problems just in a bigger package now.

Sears buying Kmart is another great example of when getting bigger is not better.  Sears has been looking for a purpose for decades now and was already sickly.  At the time of the merger, Kmart was just about on a death watch from a retailing perspective.  The result?  The disease never went away.  Sears and Kmart are just as dismal performers than ever.

The giant job search database called Monster has seen it’s market strength zapped by low-cost players like LinkedIn and by savvy recruiters who now use business networking and social media platforms like Facebook to find great job candidates.  More companies are providing financial incentives for their employees to enlist their help in the recruitment effort.  Monster, once the king of the job search road, has found itself searching for ways to grapple with declining revenues and aggressive social media competitors.  The landscape for job search databases is forcing change.

For its part, Yahoo is looking to shed assets for cash but ends up the real loser.  According to the WSJ, Yahoo bought HotJobs in the heat of the dot com era for $436 million and is now selling it to Monster for a mear $225 million in cash.  Nice going Yahoo.

Getting bigger as a way to answer for declining revenues and market share is generally not a good business strategy.  History is full of great examples of this strategy.  Despite the hindsight, companies continue to grope for answers by spending money that could probably be used elsewher

Strategy: So You Want To Be A Rock Star? December 3, 2009

Posted by David Dirks in Dirks On Strategy: Episodes.
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DirksOnStrategy120209 <—-click here to for podcast

In business, there are many ways to gain valuable insights that can be applied to your business.  For instance, you can undertake a deep and regular study of your competition to gain insights.  You can also study trends within your area of expertise.  One way I like to gain insights that can apply to a business is to study an entirely different business or industry.  And that’s exactly what we’re going to do on today’s show.

Our topic today is the business of music.  The music industry is well-known for it’s glamour and shine, but at it’s core, it’s a business and one of the toughest at that.  Music trends come and go; musicians are here today and sometimes tomorrow’s forgotten hit.  I think they call those the ‘one hit wonders’.  How many bands do you know that were “hot” for a time and then never heard from again?

To help us understand and gain some insights on the music business, my guest for our show today is Professor Louie who is part owner of Woodstock Records.
In addition to being a record label executive, Professor Louie is also an active musician, his musical group Professor Louie & The Crowmatix on the Woodstock Records label, tour and perform songs from their eight CD’s playing at least 150 shows a year and are featured artists at premier Theatres, Clubs & Festivals in the US, Canada & Europe.

Shifting Your Business Strategy – 6 September 28, 2009

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David DirksThere are plenty of times when changes within your industry justify a shift in your core business strategy.  Industry changes like new product or service innovation, pricing, manufacturing processes, delivery mechanisms and such can create an opportunity for the business that is able to detect and executive on such changes.

Hewlett-Packard is just such a company that has recognized some major changes within the personal computer industry and is striking hard to take advantage of them.  In the September 9, 2009 issue of the Wall Street Journal,  writer Justin Scheck wrote that, “Hewlett-Packard Co. is using the dismal technology market to  bolster its position as the world’s largest personal-computer maker.  How it’s doing so is evident from a $298 laptop it sold at Wal-Mart Store Inc. in July.”

H-P has long been a big player in mid-and upper priced personal computers.  You could call it a ‘premium player’ in the non-Apple world if you compare it to the low-priced gang of Dell and Acer in particular.  Like Apple, H-P has positioned it’s brand as a higher quality, premium priced PC maker.  The folks that I  know who own H-P sound very similar in their praise and brand loyalty to people like me who are just nuts about iMacs and Macbooks.

So let’s review the changes in the PC market that led H-P to make a shift in its core strategy of positioning itself as a premium PC brand (still much less in price than Apple but higher than Dell or Acer) and shifting some emphasis on low-cost PC’s.

1.  H-P demanded cheaper rates from both suppliers and contract manufacturers using the leverage from its huge sales volume to drive prices down.

2.  According to the Wall Street Journal, it has “taken advantage of an improved supply chain to quickly design and deliver new, less expensive PC’s.”  H-P is working closer with retailers like Wal-Mart to improve sales forecasting for PC demand.  They are focused on maintaining a competitive edge based on large efficiencies in their entire design-to-ship process.

3.  H-P is also taking advantage of a weaker competitor in Dell.  With Dell not willing to match H-P with discounting of its own, H-P has been able to increase market share by almost 20% in the second quarter of 2009 (global shipments of PC’s).

While H-P has lowered it’s margins on PC’s, it is faring better than it’s other competitors and the additional marketing share (meaning more volume!) helps to keep the profit margins moving in the right direction.

What does the H-P experience mean for you?  Here are just a few top-line points to consider for your own business:

1.  H-P has demonstrated that it can take in the changes going on around it and move quickly with a strategy to take advantage of it and trounce competitors.  Lot’s of businesses note changes in their industry, the economy, global shifts, competition, and consumer preferences but how many are willing to act on those changes?  Are you prepared to take in the changes in your business & industry and create ways to take advantage of them for your business?

2.  H-P is willing to make a shift from its core strategy in order to increase market share and keep profits moving in the right direction…up.  Many businesses, comfortable with strategies that have worked very well in the past (or recent past), are reluctant to change or shift strategy and risk ‘killing the golden goose’.

3.  Outside of external changes, H-P continues to find ways to make their PC’s cheaper by constantly improving its own internal operations.  H-P demonstrates that sometimes it takes a two-pronged approach to get the results you need instead of relying on one factor alone to help you grow your business.  In their case, the combination of leveraging a changing PC industry landscape and creating greater operations efficiencies from within is the perfect duo for increasing market share and keep profits stable.

Shifting Your Business Strategy – 4 September 4, 2009

Posted by David Dirks in business strategy.
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David DirksThere is a point when the definition of shifting business strategies gets a bit muddled.  In general, there are two types of business strategy shifts.  The first is when you make adjustments or shifts within your core business.  For example, a local dry cleaner may want to expand revenues by adding a pick-up & delivery service.  That adjustment is relevant to their core business of providing dry cleaning services to the public.  It’s a shift from relying on just the brick & mortar building where people bring their garments to them.

The second shift is when you make an adjustment to your business strategy that is outside the core business.  Using our dry cleaning example, if the dry cleaner decided to utilize some extra space and open a cafe within his/her shop, that would be considered an out-of-core strategy.

In our current economic times, not a day goes by without another large corporation declaring that it is shedding ‘non-core’ operations and ‘re-focusing  efforts on our core business of (you  fill in the blank)’.  This is all neatly packaged as a ‘retrenchment’.  It’s more aptly called a ‘retreat’.

Why is that?  The answer is rather simple.  In a roaring economy, it’s far easier to justify shifting business strategy outside of your core business in the name of more revenues and profitability.  That old cliche, ‘a rising tide floats all boats’ comes to mind.

When the economic tide finally goes out something bad happens.  Those non-core business strategy shifts can sometimes become sink holes for cash or they require greater and greater internal investment to keep them moving forward…all at a time when capital is scarce.  Or capital is all of a sudden guarded like Fort Knox (unlike the free wheeling days of the booming economy).

When this happens, everyone heads for the hills.  The golden geese of last year suddenly have no supporters that want to keep them.  One of the main issues is that when a non-core business hits the skids, it’s much tougher to nurse it back to health.  Why?  Mostly because the intellectual capital of the company is not well invested in the non-core strategies.  There’s another saying is appropriate here:  Times of high profitability and growth can hide a lot of mistakes.  When the music stops, all of a sudden things are much more complicated and there isn’t enough talent available to fix it.  Again, it’s outside their core knowledge base.

A lot of times these non-core strategies get sold off to the companies that should have had them in the first place.  Now they can pick these assets up for song because the seller can’t get rid of them fast enough.

I know what you’re thinking.  Isn’t Berkshire Hathaway, Warren Buffets conglomerate, an example of shifting business strategy out of your core business?  In a word, no.  While Buffet buys and owns many different kinds of businesses, each runs independently and sticks to its core business strategy.  Geico, for example, was primarily known for car insurance but has expanded it’s core strategy to include other insurance lines like homeowners insurance.  Geico doesn’t own anything outside of that core business strategy of providing insurance.

So for now, we’ll continue to hear about businesses of all sizes and shapes starting to declare that they’re going back to their core business once again.  In many cases, refocusing on the core strategies makes sense.  However, when the next economic boom hits, they’ll be a migration once again to chasing profits by adding non-core business strategies to the mix.

The relentless drive for increasing shareholder value and profits will once again find executives scrambling to acquire or develop cash cows outside of their core business strategy.