Tuesday, July 24, 2007

Journalistic Idiocy

By now, any of you who are going to buy the 7th and last Harry Potter book (which some Internet wags have already started calling “Harry Potter and the Truckload of Money”) have already done so; most of you have already read it. Some of you are probably still outraged at the New York Times for publishing its “early review” of the book, two days before it went on sale. I will leave the debates over free trade and freedom of speech to those individuals (and bloggers) better informed about such things, and just point out to anyone who may be reading today that from a business standpoint this was the height of journalistic idiocy, a move that can not benefit (and can greatly harm) the Times. It is, oh now there’s that word again… STUPID!

And it’s not even the dumbest thing the Times has done regarding the Harry Potter series…

Needless to say, the Times is defending its right to review the book once it was available for purchase. A spokesperson for the paper went on record as saying “Our feeling is that once a book is offered up for sale at any public, retail outlet, and we purchase a copy legally and openly, we are free to review it. We came across a copy of ‘Harry Potter and the Deathly Hallows’ at a store in New York City and we bought it.”

I’m not sure if any of this is legal; certainly no retailer in North America had the contractual rights to sell the book before 12:01 am on July 21st. Even if it is, it does not excuse the blind stupidity of the exercise. With something like 9,000,000 copies of the book pre-ordered and tens of thousands of people lining up for release parties around the world, there are very few people who are going to make their purchasing decision based on the New York Times review. Either you don’t read the series, or you were already planning to read the book. Which means that this early review serves no purpose beyond displaying the fact that the Times got a copy three or four days early.

Then there’s the whole business about reorganizing the bestseller list. As blogger Michael Giltz points out in the Huffington Post, the change in recent years that makes “children’s books” a different category is a direct result of the success of the Harry Potter series, and guarantees that “Deathly Hallows” will never make the New York Times bestseller list, despite being the hottest-selling book in the past four hundred years or so.

Of course, as Giltz points out, without the early volumes’ success on that very list, the series might never have found its current audience. In which case, it’s possible that the later volumes would never have been written, and it’s almost certain that the millions of children who have become interested in reading because of the Potter series would be off playing video games instead.

I can’t see the advantage to the New York Times of lowering the number of readers going forward, since they depend on readership to stay in business. Leaving aside the issue of when the book review page became part of the op-ed page (the bestseller list is just supposed to TRACK sales, not comment on them!), all this does is undermine reader confidence in the Times itself, and decrease the paper’s credibility in a time when, following the Jason Blair scandal, they are already suffering.

Again, I can’t say if this violates journalistic responsibility or not. I can only tell you that, purely from a business standpoint, it’s amazingly (there’s that word again…) STUPID!

Monday, July 23, 2007

Reality TV Revisited

All right, I promise this will be my last post about “reality” television. At least until the next thing on a so-called reality show that strikes me as having some relevance to this blog. But something came up in last night’s season finale that struck me as intriguing from a business standpoint, which is why I’m bothering all of you with it today.

A few weeks back I mentioned the Food Network’s homegrown reality/contest show, “The Next Food Network Star” in this space (see the post “Reality Television” back in June), which I believe is a brilliant adaptation of the reality show/competition format, in that not only does the Network get a highly engrossing contest show, they are also using this competition to screen, audition and test-market potential new on-air personalities for their network. To my knowledge, it’s the only example to date of a television network using one of its shows as a means of creating new shows. Spin-off shows have been common on television for decades (“Happy Days” helped to launch at least three or four spin-offs, depending on how you want to count them), but this is using an existing show as a development tool, generating new programming and new on-air talent.

Now comes the tricky part. In this year’s competition (Food Network is in it’s third year of the show), one of the two final contestants was forced out at the last second, ostensibly because he fudged a few of the details on his resume. Nothing that bad, really; certainly nothing that would interfere with having your own television show. But, nevertheless, the sort of mild fudging that could easily get you fired in the corporate world, or turned down for the job, if it was detected early enough. Food Network compensated by bringing back the last runner-up; the last contestant eliminated from the show, and proceeding with the popular/fan vote that concludes the competition (and hopefully brings in greater audience participation and viewership). When the dust settled, it turned out that, in fact, the replacement finalist, the woman who had been eliminated in the last week of the competition, was declared the winner of the popular vote, and therefore of the contest.

I think this brings up a few questions. First off, is a fan vote really a good idea? It works for say, the “American Idol” singing competition, since the same fans voting are the ones you will be counting on to buy the winner’s records, but the fan favorite here (in reality show “behind the scenes” moments and snippets of on-camera time) may not actually make the best on-air personality for a television network. Second, if the network executives didn’t really want this contestant (remember, THEY voted her off the show), will they be able to make a successful show around her? Will they even try? Third, if the Network thinks the other finalist (the one THEY actually picked) is a better choice, can they offer her a program as well as the “official” winner? Or would that undermine future competitions?

And finally, most incredibly of all, why on Earth didn’t the Food Network CHECK THE REFERENCES of the contestants? Even a brief background check would have informed them of the issues their finalist was going to have, and they could have done something about the situation earlier. Unless you think the whole thing was a set-up; a prefabricated plot twist intended to add interest to the show and manipulate the audience…

In which case, all is well, and none of the other questions really exist…

Tuesday, July 17, 2007

Getting Organized

As you might expect, Organization is very nearly a science in and of itself, encompassing everything from organizational design to how you arrange items on your desk and I don’t intend to try to cover it all in a single blog post. That said, there are a few key concepts I want to call to your attention precisely because they are so little known and poorly understood – even by the people who should know better.

First off, let’s consider idea of organizational design. Clearly, we want to have as few levels or “layers” of management as we can, since management personnel command high salaries but don’t themselves generate revenue. This means having a few managers and as many workers as we can. In a perfect world, we would just have the CEO supervise everyone else, producing a company with only two levels (an extremely “flat” structure, in business school terms). Unfortunately, this is impossible except in very small organizations. There is a limit to the number of subordinates (or subordinate units) a given manager can supervise effectively; in b-school terms this is referred to as Span of Control.

If our people are doing work that requires very little direction (physical labor, like digging ditches, being the most common example) then a single supervisor might be able to control as many as 30 of them; if they are doing complex intellectual tasks (accounting, writing code, consulting, managing a department) then the Span is more likely to be in the 3 to 8 range. This isn’t an easy balance to strike, but it is critical to the long-term success of the organization. If the span is too large, quality will inevitably suffer because the supervisors will be unable to correct mistakes, and efficiency is likely to drop because the supervisors will also have too many subordinates to direct effectively. If the span is too small, the company will lose money paying too many management personnel, and is likely to suffer from micromanagement on the part of the underutilized management personnel.

Also, note that the Span of Control will vary at different levels of the organization. One foreman can probably handle several dozen ditch-diggers, but a manager will have his hands full trying to supervise more than five or six foremen and their crews, and a Director will do very will to control more than three or four work groups.

Then there’s the issue of duplication of effort. Quite often in large organizations you will have multiple departments engaged in the same task, while other activities are completely ignored. During the planning process you will have broken the overall mission of the company down into goals, objectives, and tasks; while getting organized it pays to group those tasks by similarity, so that work groups with the resources to handle multiple similar tasks are assigned to do so, and multiple groups are not assigned to the same things.

Of course, for any of this happen, the management personnel at all levels need to become involved in the process; ultimately, it is just as important for a single team leader to organize his or her people into the optimal configuration as it is for the Chief Operating Officer to make sure his or her divisions are not working at cross-purposes. The only way to be sure that your subordinates (or subordinate units) are operating efficiently, not duplicating effort, and receiving the correct level of supervision is to understand the process and know what needs to be done – and what everyone reporting to you is able to do. If you came in at the entry level and have worked your way up, you probably already understand what the people and groups reporting to you are doing. If not, there’s no time like the present to find out…

Thursday, July 12, 2007


Of all of the manager’s functions, the one that has probably gotten the most ink in recent years is the Planning function. This is not to say that it is the best understood, however. A quick search on Amazon, for example, yields 432,112 different entries, including such similar sounding (but completely irrelevant) topics as Event Planning, Estate Planning and Financial Planning. Even restricting your search to business topics will bring up tens of thousands of books about planning at different levels, not to mention journal articles, lectures, tape series, videos, and (ahem!) blogs.

Like many other disciplines, the details and minutiae of Planning can take years to master, but the basic concept isn’t actually all that complicated. When you look at a large task, like building a new brand of automobile, eradicating world hunger, or even getting all of this week’s work finished, there’s obviously a lot of things going on. The trick is to break each one of them down into smaller and smaller pieces, until you reach a level where there is a concrete action you (or one of your personnel) can take to complete that task. This type of planning is often called “Planning By Objectives” or PBO, since what you are doing is, in effect, breaking your overall mission down into subsets or Goals, and then defining the Objectives that must be met to complete each goal.

Once you have the individual action items worked out, it is helpful to arrange them according to the order in which they need to be completed. For this, the Gantt chart can be extremely useful. Keep in mind, of course, that this becomes exponentially more complicated as the scope of your overall mission grows. A complete Operational plan for a five-member work group might take you only a few minutes each week; the plan to start a new car company would take months to complete, and a (workable) plan to eradicate world hunger has so far eluded even very large organizations formed to do just that…

In general, a Strategic Plan is one that covers the complete scope of the organization, starting with the Mission of the agency, and working down to actual tasks and action items. An Operational Plan deals with a specific unit’s operation, and is most often limited to the immediate period under review (e.g. a monthly, quarterly or annual plan). One could think of the organization’s Strategic Plan as being the sum of all of the Operational Plans completed for the duration of time during which it exists. A Daily Plan may or may not be necessary, depending on how many subordinates you are responsible for, and how many tasks are to be accomplished in that given day. When employed, it can be considered an Operational-level plan with a duration of only one day.

Of course, once you’ve planned out what you need to accomplish during a given period, the next step is to determine what resources you will need and who will be tasked with which action items. That step is collectively known as Organizing, and it will be my next topic…

Wednesday, July 11, 2007

The Manager’s Job

By now I’ve made so many comments about managers doing their jobs (and failing to do so) that some of you are probably wondering what it is that a manager is actually supposed to do. Asking around the office won’t help; your supervisor will probably start going on about making schedules, wrestling with budgets, writing reports, making sure that key operations do not become fouled up, and lot of other specific duties that won’t tell you anything about the science of management. Asking a management professional probably won’t help either; most of us would claim to make the sun rise and the crops grow if we thought anyone would believe us for a moment.

All of this contributes to management science appearing to be much more complex than it really is, and helps to keep the salaries of people trained in it from plummeting any farther than they already have. As a result, too many people are intimidated by the idea of studying management, and wind up either faking it and hoping for the best, or staying out of management positions altogether. The truth, however, is far less grand. The science of management is comprised of four (and only four) main parts: Planning, Organizing, Directing and Controlling.

Planning includes Strategic Planning, Operational Planning, Daily Planning, and a variety of more specialized planning functions. Some companies actually maintain a Strategic Planning (or Forward Planning) department, usually reporting to the President or General Manager, specifically to help the various senior managers keep their plans straight. So if you’ve ever felt that a manager who refuses to plan things out in advance is derelict in his/her duty (as well as incompetent), you are quite correct…

Organizing is probably the least understood of the functions – and consequently, the one most often done incorrectly or ignored altogether. If the Planning function is the means by which we determine what we want to accomplish, then the Organizing function could best be described at the means by which we determine HOW we will accomplish these things. This will mean determining which personnel will perform which functions (organizing the company into departments, workgroups, and teams), how much time and money and other resources will be devoted to each task (the scheduling and budgeting functions), and what processes will be used to insure performance, quality, proper supervision, and so on.

Directing is the function most people associate with active management: telling your subordinates what you want them to do. Managers of a strict and hierarchical nature may see this as “giving orders” while those of a more artistic bent may see it as directing a play or conducting a symphony. Some people are so uncomfortable with this concept that they will give it a less forceful-sounding name (such as “leading” or “coordinating”); true failures may actually refuse to do it, and let the employees just do as they will.

Finally, Controlling is the feedback part of the process, whereby the manager monitors the progress being made toward goals and performance targets, corrects problems, adjusts plans, rewards those exceeding expectations, and brings those who are failing back into line. It is important to note that the Controlling function must be part of the manager’s daily responsibilities; limiting the Controlling functions to annual reviews or the occasional disciplinary action is every bit as incompetent as limiting the Planning function to a few days each year when the budgets and sales targets are formulated.

Of course, any specific manager may also be tasked with additional functions by higher management, and many professionals serving in the manager’s role will also have work of their own to complete. But the manager’s job itself remains the same – and has, in fact, since the first group of people began working on a project together. The only real questions facing the management professional are “Are you performing all four of these functions?” (you’d better be!) and “How do I perform all of these functions?”

Which is a topic for another day…

Tuesday, July 10, 2007

That Word Again…

There’s an old piece of bumper-sticker wisdom that you often hear quoted in discussions of management theory: “If it’s stupid, but it works, then it’s not really stupid.” In general, I’m opposed to Management By Inappropriate Aphorisms (MBIA), but every so often I run across one that bears repeating, and when I do I will try to pass them along. In this case, I feel that both the original phrase and its logical converse are things that the working manager needs to keep in mind.

First off, consider for a moment how often you have encountered entrenched procedures, unwritten rules or outright superstition in the workplace. For most people with management degrees, the excuse of “That’s the way we’ve always done it!” is an obscenity, or at the very least an invitation to completely re-write everything relating to that procedure. The problem here is, people rarely latch onto procedures that serve no purpose whatsoever. If your unit has been doing something the same way for an extended period (and has not been behind schedule or over-budget the entire time), then something about their method must actually work – and it is your first duty as a manager to determine WHY this became the standard procedure and WHAT is good about it before proceeding further.

By the same token, when you are examining the daily operations of your unit, one question you need to ask yourself continuously is “Does this work?” Because, of course, the converse to the old phrase listed above is: “If it doesn’t work, and it requires money or any other resource, then it is stupid.” A given procedure may not have any obvious functionality – it may simply raise morale by making the employees feel safer (Safety Needs, Level 2), making the employees feel more socially connected (Social Needs, Level 3), or by making the work environment more pleasant to spend time in (Satisfaction, Level 4 or 5, depending on how it works). The point is that if it doesn’t generate revenue (serving the company’s needs) or benefit the employees at some level (serving their needs), then we must question why we are doing it at all.

Of course, both of these activities are part of the basic functions of being a manager. It isn’t enough to just follow blindly the work-flow procedures set down by previous management teams, any more than it is sensible to assume that any long-standing procedure must be faulty. Before making a change in a standing procedure, ask yourself, “Do I understand why we do this? Can I explain what is good about it, and why it could be made better?” It will always be easier to just take action – to follow one’s “gut instinct” and make changes that appeal, or go along with long-forgotten rationales and proceed with the status quo – rather than analyze the situation, decide on the best course of action, and (where necessary) create need changes.

But not doing your manager’s duty is inherently – there’s that word again – STUPID!

Monday, July 9, 2007

Four Types of Managers

Management science owes a lot of its basic theory to military command theory, largely because up until the Industrial Revolution, the only institutions to attempt any form of large-scale, multi-level operations were governments and military units. One traditional lesson from command theory, which is still applicable to our discussions of management today, is the concept of the Four Types of Officers, which can be rendered as the Four Types of Managers for our purposes.

The origin of these classifications is uncertain; the late David H. Hackworth attributed these distinctions to Carl von Clausewitz, the 19th Century Prussian military theorist, but if this attribution is correct I haven’t yet found the reference in On War, Clausewitz’s primary work. In any case, regardless of where Colonel Hackworth got them from, these classifications are still just as useful as they were fifty years (or two hundred years) ago.

In any large organization, this line of thought goes, there are four basic kinds of officers: the intelligent and lazy, the intelligent and industrious, the stupid and lazy, and the stupid and industrious. Hackworth (and presumably Clausewitz) argue that the lazy and intelligent make the best commanders, since the lazy man will invariably find the easiest way to do anything, and on the battlefield, the easiest way is generally the one that gets the fewest people killed. In general, the side that loses the fewest soldiers will probably emerge the winner. By contrast, the intelligent and industrious will make the best staff officers, because they will throw themselves into getting all of the details right – again, saving lives and potentially winning the war. But if you try to make commanders of these officers, they are too likely to bog down in the details, and lose the larger picture.

The lazy and stupid are merely the natural by-product of any large organization, and can always be slotted in somewhere – give them any job that requires a commissioned officer’s authority but no actual work, and they will succeed brilliantly. It is the industrious and stupid who must be eliminated from the organization as quickly as possible, given their habit of working like bees – and screwing everything up.

In management terms, these same types apply. The lazy and intelligent make the best line managers (or executives) because they will find the easy way to do everything – provided higher management does not allow them to just make everyone else do the work (easy but not helpful). The intelligent and industrious make the best staff people, and are the ones you want running the staff departments, because they will always get it right. You can usually find something to do with the lazy and stupid – provided you can convince them to stay out of active management functions. Running a work group full of experienced professionals, for example – your lazy and stupid “manager” can sign the time sheets, approve the requisitions, write progress reports to higher management, and stay out of the way. Certainly a better arrangement than having one of your valuable professionals waste his or her time doing all of that.

It is important to note that when we speak of eliminating the industrious and stupid from the company, we are not referring to those individuals who can be taught to complete a task (or better still a number of tasks) without fouling them up. While these individuals may not be the most intellectually gifted of your subordinates, they can’t really be described as “stupid” in this context. Indeed, if we as managers have an employee who can be counted on to do even one useful task correctly, it is incumbent upon us to find the proper position for that individual, and we who have failed if he or she is assigned to do anything else.

Take another look at the management team reporting to you. Are you making proper use of each of them? It’s worth thinking about…

Friday, July 6, 2007

The Universal Skill

Anyone who has known me for a while will have heard me going on about how Management is the only profession that everyone in the world automatically assumes that anyone can do. That’s not strictly true, by the way; nearly every literate person also assumes that he or she could write a book (and secretly harbors the belief that their book would be an instant best-seller). But it’s still a rant you will hear me go off on at the drop of a hat, simply because unlike a doctor, a lawyer, an accountant, a carpenter, a teacher, a baker, a scientist, a peace officer, or even a garbage collector, everyone seems to assume that if a given employee manages to survive two years on the job without doing anything incompetent enough to be fired, that employee is automatically qualified to supervise other personnel.

Obviously, this drives me slightly nuts. As a management professional, I’ve taken three years of Master’s classes, compiled fifteen years of corporate experience (and another six of consulting experience), read, studied and reflected on the profession of leading and managing people, only to be confronted time and again with people who place no value on the profession I practice. Some companies will go so far as to make managerial appointments purely on the basis of price, promoting the individual who will require the smallest salary in their new position, and some others will sink to the level of offering no salary increase whatsoever (expecting their new “managers” to accept the higher workload purely for the joy of their new “power”).

If the only consequence of these displays of idiocy were that management personnel had something to complain about, and Scott Adams got a never-ending supply of material for the Dilbert comic strip and his other works, I’d just put up with it, the way lawyers put up with lawyer jokes and doctors put up with snide remarks about their handwriting. But the truth is, the mirror Mr. Adams holds up to the working world is sometimes chillingly accurate (I’ve actually received memos that unintentionally quoted Dilbert strips!) and these lapses (and the idiots who make them) are often responsible for companies failing, investors going broke, and thousands of worthwhile people losing their jobs.

And the worst part is, it doesn’t have to be this way…

Management is a science; leading people is an art. Neither one is something you can just pick up out of the atmosphere and instantly achieve professional competence in. Yet by the same token, the theories and rules of management science are just as simple and logical and necessary as those of any other science. Once you understand the Hierarchy of Needs, for example, you will never fail to grasp why a company picnic is a useless gesture when the workforce is underpaid or fearful of losing their jobs. Once you grasp the concept of “managing up” you will never fail to consider how you can get what your unit needs from higher management, nor why it is critical for you to do so.

Management remains one of the most lightly regarded of all of the professions, not because people cannot understand it, or even because they do not understand it, but rather because it is the only truly universal job function. No one cares if a lawyer can’t practice medicine, or if an accountant has no idea of how to bake a cake, yet both of these professionals will, in all probability, be required to manage other people at some point in their career. To do this effectively, they need to apply the same care, determination and professionalism to learning the manager’s skills that they would apply to learning any other aspect of their professions. Because the simple truth is, sooner or later, management WILL become part of their professions.

And probably yours, too…

Thursday, July 5, 2007

Pin Collecting

Being a Management Scientist at Disneyland is a lot like being an engineer on a tour of NASA – you spend all of your time looking around you going “Whoa! These guys are good!” A lot of it is obvious, like the line management techniques. True, other theme parks also get people to stand in a line for two hours waiting for a three-minute ride, but Disney invented most of these ideas, and refined most of the others. It’s amazing when you see things like the “new” submarine ride – basically a fifty-year-old idea refurbished with current technology (robotics, animatronics, and so on) and then marketed like crazy.

Or consider the food service operations. I’ve been through other theme parks, water parks, zoos, aquaria, athletic stadiums and convention centers, and it is my observation that Disney not only processes more people through the chow lines in less time than any other venue under the sun, but they also sell a better grade of food. This is due in part to recruiting and training a better grade of personnel, employing better team efforts, and designing better facilities. However, it’s also due to ideas like the “food package” concept: rather like a “value meal” at a fast-food stand, most of the park’s food service operations only sell food in packages (e.g. an entrée, a side dish, a roll, and a drink) for a fixed price, and only offer five or six of these packages. Having fewer menu choices means that fewer items have to be fabricated, and people don’t need as much time to decide.

Of course, the packages aren’t a particularly good deal for some guests, particularly given the sky-high pricing of everything at Disneyland. But with no real alternative (eat here or go home) most people pony up for the food packages anyway. However, none of this compares to the pin-trading scheme. This is built around the little cloisonné pins of the various animated characters that have been staple souvenirs for generations. The pins themselves have always had a certain following who collect, display and trade them, but they have always been a niche specialty, without the vast appeal of say, balloons or hats with Mickey Mouse ears on them.

The Disney people have come up with a new wrinkle, however. They sell nylon lanyards specifically made to display these pins, and packages of 4 or 7 pins to start your collection, in shops all over the park. What they’ve done is to issue lanyards and collections of pins to various park employees (or “cast members”) and then encourage visitors to trade pins with the employees as well as other visitors. Since pins from any Disney facility in the world are in play, people take every opportunity they can to stop cast members with pin lanyards, just to see if the employees have something from another Disney facility (in another part of the world) or a pin from prior years that is no longer being produced to add to their collection.

Since all of these “pin trades” are made one-to-one, you have to have a supply of pins of your own in order to make trades. Since the pins average $6 to $10 individually (or a pack of 4 for $20) and the average visitor will need around 10 per visit to made trades with, the Disney people have effectively increased their income per visitor by something between $50 and $100 each. Of course, there are some visitors (like me) who don’t collect pins, but we must be averaged against people (like one woman we met from Santa Ana) who come to the park every week and buy 20 to 30 pins on each visit.

And the really beautiful part of this scheme is that it costs the Disney Corporation almost nothing to pull it off. Most of the employees they have trading pins are actually doing other jobs, stopping to swap pins only when asked to (the cast members can’t refuse a trade request from a guest). The exotic pins (from other parts of the world or other years) are brought in by the guests themselves, requiring neither fabrication nor inventory control. And the cost of fabricating new pins is so low that not only are the sales nearly pure profit, but the Disney people can afford to bring out new pins and “retire” old designs regularly, giving new visitors something to buy and trade with, and old visitors something to return and trade for.

It’s ingenious, and vaguely disturbing to watch in progress. Which leads me to the same comment I made on the last post: “We’re not worthy! We’re not worthy!”

Tuesday, July 3, 2007

“We’re Not Worthy!”

I spent yesterday and much of today at the Disneyland Resort complex in Anaheim, California, which is why today’s post is coming in late (and yesterday’s was made before we left – no computer access). It was the first time I’d been back to a Disney theme park operation since getting my MBA, and I was reminded again of why Disneyland (and the later parks) are the subject of repeated case studies by business schools and feature in so many textbooks about management in general and customer service in particular. It’s because these people are really amazingly good at both…

Take, for example, the development of the new park, Disney’s California Adventure. Disneyland itself had been developed about as far as it could be; they had reached the point at which the only way to install a new ride or attraction was to remove an earlier one – possibly bringing in additional visitors to see the new items, but risking alienating anyone who had particularly liked the removed items. This has the potential of breaking the Second Law, and there is no way the Disney people are going to botch something that fundamental. Instead, they reorganized their parking setup, turned what had been the main parking area into a new theme park, and called it “California Adventure.”

Quite a sharp idea – especially when you realize that the revised parking scheme is actually somewhat more efficient than the old one. What elevates this remodel to genius level, however, is making the new park a separate facility requiring separate admission. If they had just expanded the existing park, there is no question that they would have drawn more people to see the expansion, but volume has never really been a problem for the Disneyland complex; they already operate at a satisfactory percentage of capacity. Perhaps more to the point, visitors who are planning to visit the park from other parts of the world probably will anyway; there is something inherently marketable in the original Disneyland (and in the phrase “We’re going to Disneyland!”) that even the Florida or Tokyo complexes have never quite equaled.

By making the new park a separate facility, the company effectively increased the amount of money made on nearly every visitor, local or not. By paying the $20 upgrade to your ticket, you get to visit both parks on the same day, thus visiting all of your old favorites and seeing the latest attractions as well. Relocating certain events (such as the highly popular Electrical Parade) into the newer facility makes it that much more likely that visitors will pony up the extra money to visit both parks; so does the inclusion of new food service options and the availability of alcohol at the new park. And even if they don’t, the price to visit just one park or the other is the same. Not complicated; merely brilliant.

Then there’s the Pin Trading scheme… But that’s a posting for another day.

Monday, July 2, 2007

Yesterday’s Shoes

Had occasion today to visit one of my favorite retail stores; it turns out that a couple of the members of my household did not have the correct shoes for tomorrow’s family outing. So we went by the Sports Authority and took a look through their shoe department. We split into teams, with my wife and daughter taking to the women’s shoes section, while my son-in-law to be and I looked over the men’s shoes. I like Sports Authority specifically because, in addition to all of the cutting edge new stuff, they will often have last year’s hottest athletic shoes available at as much as 50% off because they are LAST YEAR’S shoes, and all of the people who are into cutting-edge fashion will no longer buy them.

Sure enough, we were able to locate a pair of athletic shoes in his favorite style at 40% off the original list price. The women’s shoes were a little more problematic, however; since women’s shoes are designed more for looks than for function, our daughter was unable to find a pair that was both comfortable enough to be worth wearing and attractive enough not to make a goat retch. Finally, she gave up and looked in the men’s section, where she was quickly able to locate a pair of walking shoes that both fit and looked acceptably. These, too, were marked down from last year’s price.

It was only as we were leaving that it struck me that what I had just seen was a very clever business model indeed. Sports Authority has competitive prices on a whole lot of clothing, shoes and athletic equipment, and occasionally features some very good bargains on the latest styles and fashions. This suffices to bring in people for whom “the latest fashion” is important. But they also seem to buy up last year’s items – or perhaps, simply don’t stop selling those items at the end of their “model year.” The result is that the store also appeals to people like me, who don’t care in the least about fashion trends, but are looking for the most value for their money. It means that they are, in effect, spreading their reach over a much larger range of demographic categories than one normally associates with retail stores of any kind, let alone specialty stores.

Of course, the drawback is that they require a great deal of space, both on the sales floor and in the back room, in order to cover the wider range of products. They also incur a certain risk of not being able to obtain a specific size or color of a discontinued item (and thus breaking the Second Rule). But these are relatively minor drawbacks, in that they would need a large amount of space to display their range of products and styles anyway, and that most retail stores already can’t seem to get anything on order. They managed to address my needs as a customer (good bargains, reasonable selection of choices) while at the same time satisfying many more upscale patrons’ needs (latest styles and colors). They got my business, and they will again.

Which leads me to this question: How many more businesses could increase their customer base simply by retaining some of last year’s merchandise for another few quarters? Or by some other strategy that uses the same sales floor, same personnel, same supply chain and inventory control, and same marketing systems to address multiple additional demographic groups? I could make an argument that some businesses already do, and in future posts I probably will, but what the reader really needs to ask is, are there other groups of customers we could service with our existing infrastructure? And if so, why aren’t we doing so? It’s worth thinking about…