Downsizing

Never Mind The Beef. Where’s The Plan?

Sad news in the advertising industry this week with the demise of Cliff Freeman & Partners, the legendary ad agency whose founder was responsible for, among other noteworthy entries, Wendy’s “Where’s the Beef?” campaign.

The Ad Age article that describes the company’s closure cites various causes, including lack of a succession plan, an inability to evolve with the changing media landscape, and failed merger attempts.

Creative service companies often end up like Mr Freeman’s. From king of the hill to an industry by-line in a decade.

These three reasons are present in virtually every case:



  1. The inability or unwillingness of the founder to make themselves irrelevant. By the time Mr Freeman tried to do so, the company was operating from a position of relative weakness, and the management evolution appeared borne of desperation.

  2. A relentless focus on the service that made them successful, without ever understanding the core strength that made those services valuable - as the creator of memorable brand personalities, in any medium.

  3. Failed restructuring attempts. 80% of all mergers fail. When the underlying motivation is a shotgun wedding to fix a fundamental weakness, that number goes up into the high nineties. Mergers and acquisitions work when the chemistry is instinctive, or there is a clearly defined and articulated vision that one person takes responsibility for.


Mr Freeman isn’t the first to make these mistakes. And he won’t be the last.


But every one of them is avoidable.

At a time when the marketing food chain is changing before our eyes, the advertisng and production industries are in desperate need of better business models.

Head meet sand, however, is not one of them.

Chrysler. A Case Study In Unconscious Capitalism.

Why does the world need Chrysler? Or General Motors?

As business models they are subsidized blackmail. In which the American taxpayers provide the subsidy and the guilt.

Were Chrysler or GM to fail, the loss of jobs and the reverberation through the American economy was deemed to be so devastating that we are told it is worth the price we pay to keep them both around.

In which case, wouldn’t it be better to use all this political, emotional and financial capital to build companies worthy of the investment.

Great companies, big and small, are run consciously.

They know why they are in business. The know what they are trying to achieve. And they work to create value for four groups of stakeholders.



  • Customers

  • Employees

  • Suppliers

  • Owners


There is no order of priority to that list. Great companies work equally hard for all four groups. And, unsurprisingly, the businesses who succeed in every area, produce the best financial results.

Both Chrysler and GM are off to a lousy start. As my friend Jerry Solomon wrote today, General Motor's self-serving approach to one group of suppliers is extraordinarily destructive. To any supplier short-sighted enough to accept their terms. And to themselves.

The Obama administrations have revealed their shock at the state of both companies.  And came close to letting them fail. The inside story is here. It's worth reading. Chrysler were ultimately saved by the deal with Fiat. Which came with a heavy price.


Chrysler's new marketing chief, Olivier Francois, is also responsible for: marketing all of Fiat’s brands; leading all of Chrysler Group’s advertising; brand development and strategy development, and is also CEO of Chrysler. He will “execute his duties via a trans-Atlantic routine.”

His reputation as a marketer is that his work should first of all be noticed. And he is stronger on style than strategy.

Hardly a platform for a turn-around.


Perhaps we should collectively ask him to step into our office. Since, in large part he works for us.

Or perhaps we should simply decide that Chrysler and GM are both past saving and build companies that create things the world wants.

Starting with respect.

What Did You Expect?

The first sign of madness, I’m reliably informed, is the expectation that repeating the same behavior will eventually create different results.

Today, far too many business owners are talking about change but acting the same.


They focus on two things. Cutting costs. And having conversations. With anyone about anything.

If you want a different outcome, you have to act differently.

Not talk. Act.

Otherwise you already know what’s next.

A smaller version of what you had before.

And as a growing number of business owners can attest, there is nothing smaller than nothing.

Four Changes A Business Shouldn’t Make

There are many things you should be doing as a business owner at the moment.

Here are four you should not.


1. Charging Less For The Same Service.


This is a one-way ticket. Once you give more for less you establish a new normal. There is no way back from that.

Instead, look at your business from your customer’s eyes. What’s valuable to them? Charge for that. And replace the things that aren’t valuable to them with things that are.


 


2. Trying To Be Something You’re Not


Understand what you do. Which is not always obvious when you're involved in the day to day.


The best way to make sure you really know is to ask your customers why they use you. If you refuse to accept platitudes and the easy answers, you'll gain incredible insight.


Once you really know what makes you great in the eyes of your customers, look for other ways to use that expertise.


This will do two things.


Grow your business against your fundamental strengths - always the strongest platform. 


And prevent you from getting involved in trendy areas that seem like a good idea, but which are almost always expensive distractions.



3. Cutting By Cost or By Experience or By Position.


Every company has its own view about how to cut overhead. In my experience, they almost always use the wrong one. Assuming you've reached the point where salary cuts just aren't enough then there's one simple method you should apply.


Cut by value. What someone costs is not the criteria. What each employee is worth, is. We've developed a Value Matrix™ to help our clients do this. You should have something similar.


 
4. Jumping Into Social Media Without A Strategy.


It’s time consuming to do it well. And not everyone should be doing it.


If you’re going to get into the white-water rapids of social media, you need to understand how you're going to benefit by doing so.


Then if you decide it's worth it to you, get in. With purpose.

Lay Off the Lay-Offs

The news this morning is that more people lost their jobs in February than in any month since 1949. Which makes 4.4 million since December 2007. Staggering numbers. We’re on our way to ten percent unemployment.

But why? Aren’t these the very people that companies need to buy their products and use their services? Without a job they’re not likely to be consuming much of anything.

Companies that are choosing lay-offs over salary reductions - and it is a choice - are only looking at one side of the problem. Cutting costs. They’re hoping someone else figures out how to encourage people to spend.

I was in a meeting yesterday in which we heard that a highly paid employee had been told he was being let go last week. He asked if he could take a thirty percent pay cut instead. The company instantly agreed.

I’m sure he and his family are spending less than they were. But they are still spending. And more than if he had lost his job entirely. Which doesn’t take into account the fact that he’s not depleting his investment funds to pay for his lifestyle, or putting his house on the market. That’s a model that will create a natural bottom to all this built on real value.

If every company faced with the need to cut overhead had looked at the problem holistically, the answer would have been pretty clear. Companywide salary cuts give you: better cost saving results faster; more ability to keep your customers happy; a belief among your staff that you’re trying to protect them; a shared willingness to innovate and take responsibility for finding answers and flexibility if things get worse or improve. It also keeps the economy moving forward, albeit at a slower pace.

As a species, we do best when we’re moving forward. And generally we’re pretty good at being able to keep one eye on where we’re going while navigating the broken pavement along the way.

Running a business is the same thing. But if you’re only worrying about avoiding the broken pavement, who knows where you’ll end up?

Freezing In Place Only Makes Your Teeth Chatter

In tough times, it's become standard advice that companies shouldn’t freeze in place. That's true. Problems that were obvious even in good times become infinitely worse if you do nothing when your market is shrinking. The challenge now is to find a way to move forward without adding risk.


The first step is to leverage your best assets. Your people.


Start at the top and make sure your stars are doing things that only they can do. Have them delegate everything else, then go through the same process with every level of staff. You'll eliminate the 15-20% of busy work that no one at the company should be doing and immediately foster higher job satisfaction. People who like what they do also start to innovate better ways to do it.


When the economy comes back, your business and your people will be ready to take advantage of this new-found focus.