Preparedness
Other names:
Caution
Definition:
The habit of anticipating and avoiding obstacles.
"[T]o avoid or to mitigate or at least to anticipate those evils that will likely result from a good act that we contemplate doing. ... take steps, if necessary, to avoid such evils. ...to be on the lookout especially for the bad consequences of a contemplated action" (Freddoso)
Advice:
"Successful people figure out what they can do now to make certain their future selves will do the right thing. Anticipate how you will self-sabotage in the future, and come up with a solution today to defeat your future self" (Bradberry, #4)
Empirical Research:
Case examples:
Tom Monaghan, when facing a major challenge to his company's ability to use the name "Domino's Pizza," filled "many legal-pad pages with notes on what we should do if the worst happened" (Monaghan, 226)
Gifts of the Holy Spirit:
Further reading:
Vices opposed:
Thoughtlessness, failing to "to judge rightly through contempt or neglect of those things on which a right judgment depends" (II-II Q. 52, A. 4)
Advice:
"Successful people figure out what they can do now to make certain their future selves will do the right thing. Anticipate how you will self-sabotage in the future, and come up with a solution today to defeat your future self" (Bradberry, #4)
Empirical Research:
Case examples:
Tom Monaghan, when facing a major challenge to his company's ability to use the name "Domino's Pizza," filled "many legal-pad pages with notes on what we should do if the worst happened" (Monaghan, 226)
Gifts of the Holy Spirit:
Further reading:
Vices opposed:
Thoughtlessness, failing to "to judge rightly through contempt or neglect of those things on which a right judgment depends" (II-II Q. 52, A. 4)
Case Study
ReplyDeleteIn the late 90s, many predicted that the Internet would render traditional business practices obsolete, investing heavily in online companies like drustore.com and placing pressure on established companies like Walgreens.
"Walgreens’ response in the midst of this frenzy?
"'We’re a crawl, walk, run company,' Dan Jorndt told Forbes in describing his deliberate, methodical approach to the Internet. Instead of reacting like Chicken Little, Walgreens executives did something quite unusual for the times. They decided to pause and reflect. They decided to use their brains. They decided to think!
"Slow at first (crawl), Walgreens began experimenting with a Web site while engaging in intense internal dialogue and debate about its implications, within the context of its own peculiar Hedgehog Concept. 'How will the Internet connect to our convenience concept? How can we tie it to our economic denominator of cash flow per customer visit? How can we use the Web to enhance what we do better than any other company in the world and in a way that we’re passionate about?' Throughout, Walgreens executives embraced the Stockdale Paradox: 'We have complete faith that we can prevail in an Internet world as a great company; yet, we must also confront the brutal facts of reality about the Internet.' One Walgreens executive told us a fun little story about this remarkable moment in history. An Internet leader made a statement about Walgreens along the lines of, 'Oh, Walgreens. They’re too old and stodgy for the Internet world. They’ll be left behind.' The Walgreens people, while irked by this arrogant comment from the Internet elite, never seriously considered a public response. Said one executive, 'Let’s quietly go about doing what we need to do, and it’ll become clear soon enough that they just pulled the tail of the wrong dog.'
"Then a little faster (walk), Walgreens began to find ways to tie the Internet directly to its sophisticated inventory-and-distribution model and— ultimately—its convenience concept. Fill your prescription on-line, pop into your car and go to your local Walgreens drive-through (in whatever city you happen to be in at the moment), zoom past the window with hardly a moment’s pause picking up your bottle of whatever. Or have it shipped to you, if that’s more convenient. There was no manic lurching about, no hype, no bravado—just calm, deliberate pursuit of understanding, followed by calm, deliberate steps forward.
"Then, finally (run!), Walgreens bet big, launching an Internet site as sophisticated and well designed as most pure dot-coms. Just before writing this chapter, in October 2000, we went on-line to use Walgreens.com. We found it as easy to use and the system of delivery as reliable and well thought out as Amazon.com (the reigning champion of e-commerce at the time). Precisely one year after the Forbes article, Walgreens had figured out how to harness the Internet to accelerate momentum, making it just that much more unstoppable. It announced (on its Web site) a significant increase in job openings, to support its sustained growth. From its low point in 1999 at the depths of the dot-com scare, Walgreens’ stock price nearly doubled within a year.
"And what of drugstore.com? Continuing to accumulate massive losses, it announced a layoff to conserve cash. At its high point, little more than a year earlier, drugstore.com traded at a price twenty-six times higher than at the time of this writing. It had lost nearly all of its initial value. While Walgreens went from crawl to walk to run, drugstore.com went from run to walk to crawl." (Collins, Good to Great, pp. 145-46)
Case Study
ReplyDeleteIn his autobiography, Pizza Tiger, Tom Monaghan explains the business practice of defensive management. "We use a lot of sports analogies at Domino's because what we do in the pizza delivery business is very much like playing a team sport. We frequently use sayings like, The team with the best defense wins. It may be cliché, but it's true. I'm a strong believer in defensive management.
Mark Latvala, a Domino's area franchisee in western Pennsylvania, coined the term defensive management, and he described it in an article he wrote for the Pepperoni Press in 1983. It recounted a visit I made to his store when he first became manager. He had sales of only $2,446 his first week, and he asked me for some advice. I told him, 'Mark, at this volume, you can't afford to lose a single customer. You've got to make sure that every one is completely satisfied.'
"He said he thought about that and connected it in his mind to teamwork in pro sports. The team whose players know how to perform the fundamental defensive tasks day in and out doesn't get scored on. So even if its offense score only once, it will win.
...
"Defensive management means taking care of the business you have. I've always said that if you just take care of every single customer, your business will grow by 50 percent a year. Make sure every pizza gets there in thirty minutes, make sure every one is good - no burned pizzas or raw pizzas - and don't skimp on the ingredients. That's it. You don't need any sophisticated marketing programs. The solution is simple, and it's right before your nose." (Monaghan, Pizza Tiger, pp. 245-46)
Case Study
ReplyDelete"When I took command of Benfold, I discovered that the usual policy was to have only one crew member able to perform each job: one job, one person. As a result, we were one-deep in just about every critical position. In effect, I was held hostage by the key people on the ship. If they left for any reason, I would have to scramble to get the job done, and probably not done well. It was very disconcerting.
"I started training backups right away, and kept at it for my entire two years aboard Benfold. Not everyone loved that side of me, but being loved wasn’t my priority.
"The trip back to San Diego from the Persian Gulf took six weeks, and the crew set sail in R&R mode, as they had worked hard for the last hundred days. People understandably envisioned a leisurely cruise from port visit to port visit along the way. For the first twenty-four hours, I allowed this mood to prevail: We relaxed, had a cookout, and just hung out. Next day, we hit the training trail, using a new program designed to speed the learning process.
"We drilled every day. People grumbled. They felt it was their right to do nothing for the six-week transit home. I announced that intense training was mandatory, period. I told them there was a choice—we could do it now or do it back in San Diego, when they would rather be at the beach with their families—and I chose now.
"We not only kept our skills honed, we started training the third, fourth, and fifth string. When one team became proficient, we put in the second; when that team learned, in went the third. Soon, I was four- or five-deep in just about every position on that ship.
"Cross-training became our mantra. By the time we reached San Diego, we had young sailors, barely out of boot camp, doing the jobs of first-class petty officers with several hash marks, and doing them well. By grooming people to move up and accept more responsibility, cross-training raised morale. By teaching them what their shipmates did, it improved team skills and spirit. The result was a huge plus for the ship." (Abrashoff, It’s Your Ship, pp. 203-04)
Case Study
ReplyDeleteIn Everyone's a Coach, Don Shula explains how he prepares his players to improvise when necessary if the game does not go according to plan. "Sometimes it takes guts and ingenuity to change the plan. Dan Marino's fake grounding of the ball in the last 38 seconds of our second Jets game in 1994 is a perfect example. It looked like improvising, but it was something we started to work into our two-minute drill that year. Bernie Kosar, the quarterback we picked up from Dallas to be our insurance policy for Marino, had experimented with the play at Cleveland and also Dallas. To pull the play off, the situation has to be just right - a time when the other team would be expecting the quarterback to try to stop the clock by throwing the ball to the ground (that is, legally grounding the ball). When our quarterback is going to ground the ball intentionally, he yells to the team, 'Clock! Clock! Clock!' This signals everyone to line up to protect him while he throws the ball to the ground. This in turn stops the clock so we can get into the huddle and call the next play.
"In the game against the Jets, it was the ideal situation: 38 second to play, and we still had one time-out left. Bernie's on the headset with Dan and sends in the word. Dan yells 'Clock! Clock! Clock!' and the linemen get ready to block. Dan makes eye contact with Ingram, the receiver on the right side. Dan takes the snap, calmly steps back, looks at the ground, and fires the winning touchdown pass to Ingram as the Jets stand there flat-footed, anticipating the stopping of the clock. It couldn't have worked better." (Blanchard and Shula, Everyone’s a Coach, pp. 109-10)
Case Study
ReplyDeleteHeinz Ketchup founder H. J. Heinz, who had faced bankruptcy in the Panic of 1874, took precautions even in the midst of rapid expansion by borrowing large sums of cash to hedge against a potential credit crisis. This preparedness served him well in the similar Panic of 1907. This Panic, as Quentin Skrabec Jr. explains in H. J. Heinz: A Biography, "cost Heinz's neighbor George Westinghouse his Westinghouse Electric Company because he lacked cash to cover bond calls. Heinz, however, progressed through the panic with strong cash reserves." (160)
So successful was Heinz' strategy that his business continued to expand through 1907 and 1908, when most other companies were forced to contract. "Heinz was perfectly positioned for the downturn with products like baked beans and tomato soup. The steelworkers of Pittsburgh saw their wages reduced by as much as 30 percent while their strike progressed. Baked beans offered a great source of low cost high protein. Baked bean sales in Europe also increased with the downturn. Heinz also introduced oven-baked red kidney beans to his lower cost line and high protein peanut butter to the market.” (170) (Skrabec, Jr., H. J. Heinz, pp. 160 and 170)
Case Study
ReplyDeleteJohn D. Rockefeller’s legacy is complex and controversial, as historian Ron Chernow demonstrates in his monumental biography, Titan: The Life of John D. Rockefeller. Nonetheless, the devout Christian Rockefeller exemplified several virtues in both his business and philanthropic activities. From his early boyhood in the backwoods of upstate New York, he displayed the same caution that would be one his most distinctive marks as a world-famous industrialist. “When playing checkers or chess, [young Rockefeller] showed exceptional caution, studying each move at length, working out every possible countermove in his head. ‘I’ll move just as soon as I get it figured out,’ he told opponents who tried to rush him. ‘You don’t think I’m playing to get beaten, do you?’ To ensure he won, he submitted to games only where he could dictate the rules. Despite his slow, ponderous style, once he had thoroughly mulled over his plan of action, he had the power of quick decision.” (Chernow, Titan, p. 18)
Advice
ReplyDelete“The central paradox of planning is that no plan will be executed as originally conceived. There is always the challenge of the unexpected.” (Rumsfeld, Rumsfeld's Rules, 88)
Advice
ReplyDelete"No plan survives first contact with the enemy." (Attributed to Helmuth Von Moltke)
Advice
ReplyDelete"Plans are of little importance, but planning is essential." (Winston Churchill)
Advice
ReplyDelete"The very definition of 'emergency' is that it is unexpected, therefore it is not going to happen the way you were planning." (Dwight D. Eisenhower)
Advice
ReplyDelete"Everyone has a plan until they get punched in the mouth." (Mike Tyson)
Case Study
ReplyDeleteArthur Ciocca explains in Thinking Outside the Box: The Wine Group Story that when the Coca Cola company acquired Franzia and appointed him as CEO, Franzia was already locked into a number of short-sighted, long-term contracts with grape producers that reflected a poor understanding of the agricultural industry. These contracts had been entered into during short-crop years, when the price of grapes was high, but they failed to account for the ordinary cycles whereby short-crop years are followed by long-crop years, oversaturating the marketplace. “Over the three years it took to get our inventories in balance, we negotiated hundreds of transactions. The grapes and wine that we sold were pure commodities in a grossly oversupplied market. The market conditions couldn’t have been worse, but the lessons we learned could not have been better. They left us in good stead in the ever volatile and cyclical grape and bulk wine markets.
“From that point forward, we never committed to long-term grape contracts to maximize easy profits at the top of the cycle when grapes were in short supply, because we didn’t want to be saddled with those expensive grapes when the cycle turned. Instead, we preferred to maintain our flexibility to purchase less expensive better quality grapes when the market softened and there were more grapes to choose from. By doing so, we would be much more competitive and in a position to grow share of market at the bottom of the cycle when competitors were oversupplied, usually with lower quality grapes.
“Any wine company can prosper at the top of the cycle, but not everyone can survive at the bottom of the cycle. It’s much better to moderate profits at the top and be strong at the bottom than it is to maximize profits at the top and be marginally unprofitable or weak at the bottom. A good management team will try to maximize profits over the duration of the cycle which usually lasts eight to 10 years.” (Ciocca, Thinking Outside the Box, p. 27)
Case Study
ReplyDeleteIn his book, Thinking Outside the Box: The Wine Group Story, Arthur Ciocca, founder of Wine Group, Inc., explains how Franzia maintained its competitive edge by understanding and anticipating the strategies of its rivals. “By the mid-90s, the Franzia Winetap had become the biggest wine brand in the U.S. – growing at double-digit rates and devouring everything around it. It was too big to ignore any longer and competitive entries were being planned by Franzia’s two largest competitors.
“Fortunately, we had a lot of time to anticipate their actions and develop a plan. Gallo was the main threat, but this time we had them in the same predicament they had us in years before when we were cost-disadvantaged with glass jugs. As a result of our scale, we had significantly lowered packaging and filling costs and our selling expenses were lower. We knew Gallo would try to undercut our pricing to get retail distribution and consumer trial. We also expected that they would try to trump our packaging and perhaps even run media advertising to support their product introduction.
“We were ready on all counts. We were prepared to meet their low pricing. We knew it would be more painful for them because of our cost advantage. Sure enough, Gallo launched at ‘blow out’ prices which we met on Day One. Anticipating Gallo’s packaging was more difficult. We’d been working on improving our package for over a year and we had several very exciting designs ready to go. We could have launched earlier but we didn’t want to tip our hand and give them a target to shoot at, so we waited. The minute we received early intelligence about their design, we sprang into action with the option that blunted their effort most effectively. We were able to move so quickly that the two competitive packages got to the shelf at the same time. Gallo looked like it was emulating us.
“Our plan if they advertised was to make our product as prominent in stores as possible to attract some of those new users to Franzia. Given our head start as an established brand, we had the best store presence. As it turned out, Gallo’s strategy was simply to steal share of market from Franzia. They had no intention of building the category because it disadvantaged their jugs. Consequently, they did not advertise. Our head start paid off. Franzia consumers were loyal and refused to switch sides. Much to the chagrin of our competitors, their entries not only failed to cannibalize Franzia as they had hoped, but also actually expanded the category. As the category grew, Franzia added one million cases in 1997 and then dug in to hold the dominant position with a 60-65% market share, which it has held to this day.” (Ciocca, Thinking Outside the Box, p. 87)
Case Study
ReplyDeleteIn his book, Thinking Outside the Box: The Wine Group Story, Arthur Ciocca, founder of Wine Group, Inc., discusses how the company learned early on to plan ahead in light of extreme financial pressures and restrictions. “In 1975, just about everything was wrong with our inventory and the grape contracts which would become inventory over the next several years. The tens of millions of dollars of grapes to which we were contractually obligated for several years were substantially more than we could sell or store even under the best conditions. These contracts included undesirable varieties of overpriced grapes with lax and ambiguous language as to the quality standards the grapes must meet. Fixing this problem was a tall order for a new management team inexperienced with grape growers and the commodity aspects of buying and selling grapes and bulk wine. We were either going to learn fast or drown in the overflow of poor quality grapes.
“We decided the way to solve a multimillion dollar problem was $10,000...$20,000... $50,000 at a time. We formed a task force, spelled out the issues and laid out a plan.
“Everyone pitched in and did their part. Morris Ball and Stan Gajarian worked with the grower community and identified problems and opportunities. Lou Quaccia took on the responsibility of working with other winemakers and facilitated numerous bulk wine sales and swaps. Lou and I both worked the wine broker community to solicit their help. Jim Walls made the winemaking run smoothly. He made significant quality improvements and lowered costs. I strapped on my selling shoes and wore out the soles cultivating and calling upon winery principals to negotiate and transact deals. Lynn Bates, working behind the scenes at the winery, kept us all honest by clearly identifying which financial transactions made sense and which did not. We met often and adjusted our strategy to fit changing market conditions in this volatile marketplace of grapes and bulk wine. The instant we sensed a new sales opportunity, we pounced on it with a creative and attractively priced offer, frequently beating our competitors to the punch with only minutes to spare.” (Ciocca, Thinking Outside the Box, p. 25)