Banks have been dealing with evolving regulations for as long as banks have been in existence. So while the Dodd-Frank Wall Street Reform and Consumer Protection Act has given some in the banking industry cause for worry, the critical issue is how institutions will evaluate the potential effect and cope with increased regulations. While some banks might buckle under the threat, others will adapt to the new laws and regulations without allowing the complexity and costs of compliance to become an impediment.
“Savvy institutions recognize that the key is aligning their adjustments with their business models and processes,” says Jim Stempak, a principal at Crowe Horwath LLP. “By integrating compliance with normal business operations, banks stand to extract greater value from their business processes.”
Smart Business spoke with Stempak about how banks can find opportunity in new and revised regulations where others find dismay.
What regulations must banks be prepared to deal with in the near term?
Compliance officers are struggling with the efforts of bank regulators as they implement regulations under Dodd-Frank. Banks do not know what to expect from future regulatory examinations or where examiners will focus, so those expectations remain a moving target.
Questions also remain about the range of authority of the Consumer Financial Protection Bureau (CFPB), the agency established by Dodd-Frank. All banks will be directly or indirectly affected by CFPB rulemaking. Some will be required to work with this new agency’s examiners, who will be conducting exams and assuming responsibility for consumer compliance regulations in certain banks (those with more than $10 billion in assets). The CFPB is in the process of bringing its employees up to speed on the agency’s mission. Banks, however, are waiting without clear direction regarding the scope and timing of the CFPB examination process and how the new agency will coordinate efforts with other federal bank regulatory agencies. Financial institutions will be forced to contend with this environment of uncertainty for quite some time. Meanwhile, there are some measures that banks can take now that will allow them to successfully navigate this changing environment.
How have banks historically coped with increased regulation while managing to stay successful?
As the dust settles on Dodd-Frank’s initial effects, banks can begin to see that successful adaptation comes down to taking a measured and systematic approach to integrating the requirements with normal processes, often using enhanced technology. However, a silo approach to compliance is unlikely to succeed. Saddling the compliance officer with the sole responsibility of adapting to this new reality is unrealistic. Instead, success requires that key managers throughout the organization get on board. Line-of-business managers, for example, will need to integrate Dodd-Frank compliance into their daily activities, while IT managers will need to adjust existing technology platforms to integrate processes that facilitate compliance, or possibly design entirely new processes and technologies.
History offers examples of how banks learned to turn difficult regulatory requirements into opportunities. Take, for instance, the Know-Your-Customer (KYC) identification programs required by Bank Secrecy Act (BSA) regulations. This mandated banks to catalog their customers’ banking activity to better identify suspicious behavior. To do this, some banks used the information they gathered to develop a profile of each customer.
Another, more effective, approach manipulated existing processes and technology platforms to better gather information while sending a message to each customer that outlined how the bank’s inquiries were intended to better understand each customer and provide him or her with personalized products and services. As a result, the customer experience was improved, new accounts were opened in less time and many cross-selling opportunities became available to the bank. The customer service enhancements were in addition to establishing a solid platform for efficiently and effectively complying with the regulatory requirements.
Similar to what was done for KYC compliance efforts, information obtained through Dodd-Frank mandated data collection also likely will provide opportunities for banks to use the information for marketing and other value-added opportunities. By ingraining the requisite activities in their existing processes, banks were able to successfully adapt to the regulations rather than treating them as if they were burdensome compliance activities.
How can organizations best cope with complying with these regulations?
To facilitate compliance with new or revised regulations, organizations should develop cross-functional teams that alert the organization to changes that are likely to be required or that are coming. Teams can begin to develop strategies for implementing new or revised processes and technology. This will necessitate involvement from thought leaders from all levels of the organization, rather than taking an approach focused solely on compliance. Teams should develop a client-focused experience that also improves product development and existing processes as they work to bring the organization into compliance.
When dealing with certain consumer lending regulations, the team should consist of management representatives from areas including mortgage origination, consumer lending, regulatory compliance, IT and marketing. Teams should coordinate efforts to monitor specific regulations that affect consumer financial products, analyze the customer’s fit with the product and deliver products fairly to all consumers. This is especially important considering CFPB will be carefully evaluating compliance with new and revised regulations for consumer financial products, including mortgage loans.
Every financial institution will be touched by the regulations and it is up to banks to take an integrative approach to compliance to make a smooth transition while positioning them to take a competitive advantage. This will allow them to comply with the regulations while simultaneously advancing their business.
Jim Stempak is a principal at Crowe Horwath LLP. Reach him at (214) 777-5203 or firstname.lastname@example.org.
Insights Accounting is brought to you by Crowe Horwath LLP
In business, as in life, there’s a benefit to having guidance that’s tried and true. Most successful business owners can cite mentors who have directed their paths along the way. As companies grow, those informal relationships are usually replaced by formal boards of directors. A board of directors is a very useful method for allowing significant shareholders to feel they have a say in the strategic planning for the company.
It’s my opinion that all companies – regardless of size – need to have a board. In this two-part series, I will explore the benefits that a small company can gain from having a corporate board and how a small business owner can establish a board.
First, let’s examine the benefits:
1) A good board of directors will do what employees often are afraid to do: challenge the leader. Most employees don’t feel empowered to speak up when they think a strategy is misguided or out of sync with customers or a target market. Board directors should be willing to openly question ideas and the assumptions that guide strategic planning to help the president or CEO suss out their soundness.
2) A board can provide accountability – particularly in family-run businesses where it can be hard for an unbiased assessment of the business without familial issues clouding judgment.
3) Boards can help with recruiting, evaluating and selecting top job candidates, as well as setting compensation criteria that are fair and transparent. Since directors are removed from the daily running of the business, they can help with succession planning.
4) For companies considering a public offering, setting up a board early can help acclimate the owners to the enhance scrutiny that they will face once the company is publicly traded.
5) A board of directors is legally required for registered corporations.
Next column: How to create your own board.
Patricia Adams is the CEO of Zeitgeist Expressions and the author of “ABCs of Change: Three Building Blocks to Happy Relationships.” In 2011, she was named one of Ernst & Young LLP’s Entrepreneurial Winning Women, one of Enterprising Women Magazine’s Enterprising Women of the Year Award and the SBA’s Small Business Person of the Year for Region VI. Her company, Zeitgeist Wellness Group, offers a full-service Employee Assistance Program to businesses in the San Antonio region. For more information, visit www.zwgroup.net.
When Andrew Dorn, Industry Leader, Information Intensive Business, Acxiom Corporation, was recently researching the top manufacturers in the United States, one topic kept coming up — the strong growth expectations focused on the world's emerging markets. With the economies of the U.S. and Europe in flux, Dorn felt that, now more than ever, manufacturers need to be attentive to those emerging markets.
"The world is now flat," says Dorn. "Competition comes from everywhere, so manufacturers need to be everywhere."
Because of that, Acxiom has partnered with Smart Business to present a special one-hour webinar: "Driving Global Sales for Manufacturers: Why global growth for manufacturers is more important than ever."
During the webinar — on Wednesday, September 19 at 1:00pm EST — we will discuss why global sales for manufacturers is critical, what factors should be considered in developing or refining the international strategy, and, finally, present a roadmap that can be employed to optimize chances for success.
Featured panelists will be Zia Daniell Wigder, Vice President and Research Director, Forrester Research; Jennifer Barrett Glasgow, Global Privacy and Public Policy Executive, Acxiom; and Michael Biwer, Managing Director, Acxiom.
"As you enter the global market, it is imperative you understand the privacy laws in each country as they are quite complex and some are very stringent, for example, having criminal penalties for some violations," says Barrett Glasgow.
Other topics to be discussed include:
- How to determine which countries to enter and what data to gather to understand regional customer requirements
- Recommended approaches to building country-specific strategies that can help facilitate smooth transitions, lowest possible cost-of-entry, and consistent performance
- Considerations for navigating the complex web of country-specific data protection and privacy laws companies must adhere to in their efforts to connect with customers and prospects
- Best practices used by leading companies that have successfully entered new markets
"The U.S. and European economies are still recovering and the balance of growth is constantly shifting," says Dorn. "For example, China and Brazil have been experiencing strong growth. They are encountering a maturity curve, but that doesn't lessen the importance of the issue — manufacturers need to be diversified and have a presence in all major world markets."
The webinar, "Driving Global Sales for Manufacturers: Why global growth for manufacturers is more important than ever" will be held at 1:00 pm EST on Wednesday, September 19.
Everybody knows that men and women think differently. But do those differences matter when it comes to working remotely and managing remote teams? In my opinion, they matter a lot. Managers who don’t understand and embrace these differences do themselves, their companies and their employees a disservice.
In my new book, “You Can Have It All, Just Not All At Once,” I cite scientific studies that show how women’s and men’s brains function differently from one another. These differences are important because managers who are unaware of these conflicting world views might assign values to behaviors that don’t get the desired results.
Break it down
A major difference in how the sexes’ brains function is that women tend to be skilled multitaskers, while men are able to concentrate on one task for longer periods. Neuroscientific research confirms this, and women often take pride in their ability to handle several things at once.
This is a plus and a minus, both for women and for those who manage them. I believe it’s a core reason that women tend to overcommit. Those who manage women remotely can benefit from understanding this, especially since excessive multitasking can inhibit creative thought and lead to burnout.
On the flip side, a man’s ability to focus on one thing for a long time can be seen as beneficial, but it can also lead to tunnel vision and insensitivity to people and any behavior not seen as mission-critical. There’s also a tendency to believe that the amount of time spent on something equals better results, which is not always true. Often, short bursts of concentration bear better fruit than agonizing over tasks for extended periods.
A major difference between the sexes that impacts managers is that women are generally more likely to speak up if they’re unhappy about their circumstances, while men tend to suffer in silence. Normally, men will tolerate a negative situation longer than women will. This doesn’t mean that a woman’s complaints are without merit, or that men don’t experience the same misery.
But if a woman mentions that something is wrong, she might be seen as a complainer by a male manager. Conversely, a female manager might take a man’s stoicism as being uncommunicative or not proactively trying to improve a situation. Such value judgments can harm a working relationship.
Without the daily contact and familiarity of working in the same location, it can be difficult for managers to understand what’s going on with their team. One person’s laserlike focus is another’s antisocial moping. A willingness to abide short-term discomfort for long-term goals needs to be balanced with a willingness to change and improve the current situation.
Understanding how gender impacts behavior is a key reason why good leaders take the time to get to know their people and look at results, not at specific behavior that can be misinterpreted.
Gender Difference No. 1: Typically, men communicate in bullet-point style and strive to get to the point quickly, while women are more prone to tell a story or paint a picture. Women share experiences to show commonality and build on other people’s discussion points, whereas men focus on statistics and rankings and relate by sharing stories to “one-up” each other.
Solution Strategy: Women need to get to the bottom line quickly and succinctly. Men need to understand that when a woman tells a story, she is building common ground.
Gender Difference No. 2: Women like to talk about a problem, to emphasize their feelings, and to process thoughts aloud as a way to include others. Men like to move to problem-solving right away, alone. They place high value on achieving results and prefer activity over discussion.
Solution Strategy: Women should not try to get men to talk if they’re not ready; they should observe and listen rather than processing out loud. Men need to understand that processing is a way for women to include others and build relationships.
It is my belief that men and women can become one through understanding, value and honor. We all need each other, and even when we don’t agree on everything, we can learn to disagree while still showing respect for each other’s differences.
Sherri Elliott-Yeary is the CEO of human resources consulting companies Optimance Workforce Strategies and Gen InsYght, as well as the author of “Ties to Tattoos: Turning Generational Differences into a Competitive Advantage.” She has more than 15 years of experience as a trusted adviser and human resources consultant to companies ranging from small startups to large international corporations. Contact her at email@example.com.
When Jim Snow became president of Gold’s Gym International three years ago, he stepped into a tough challenge. The recession was in full swing, and retailers were closing left and right, leaving behind a glut of cheap, readily available retail space. This void presented a ripe opportunity for operators of tiny, low-overhead gyms offering super-low-priced monthly memberships.
The discount gyms were feasting on the opportunity, thereby cutting into the market share of many of GGI’s smaller gyms, in some cases deeply.
“It was pretty clear; when I arrived, I started holding meetings with all of my stakeholders to learn about the business environment, and this was one of the key threats to the business that everybody was searching for an answer to,” says Snow, who took the helm at Gold’s Gym International in 2009 after having worked for five years as regional vice president at Omni Hotels, a sister company of Gold’s.
In its many years of existence, Gold’s has carved out its territory as an operator and franchisor of full-service gyms: large facilities covering 40,000 to 60,000 square feet that offer a wide array of fitness services and amenities. The company, which has 700 gyms and more than 3 million members worldwide, has always fared well in the full-service segment of the fitness market.
In more recent times, GGI has also begun operating and franchising fitness-only gyms — midsize facilities covering 20,000 to 25,000 square feet that offer fewer services and amenities than the full-size gyms, at somewhat lower membership rates. These fitness-only facilities were the ones that were feeling the pinch from the rise of the discount microgyms when Snow came aboard.
“Our full-service gyms are really made up of two kinds of gyms,” Snow says. “We have the big full-service gyms with all the amenities: pools, basketball courts, group exercise programs, etc. And as we looked at the marketplace, we saw that these gyms continue to compete very well because they offer so much value.
“But then we have a segment of fitness-only gyms that are in that 25,000-square-foot range. They don’t have the basketball courts, the racquetball courts, the pools, those kinds of things. They were more susceptible to this new low-cost discount gym that was coming into the marketplace.”
The discount operators were opening scads of smaller gyms — 8,000 to 15,000 square feet — in areas near GGI’s fitness-only gyms. And because the microgyms operate on lower overhead and can therefore afford to offer super-low membership rates, they began luring Gold’s customers away.
“In those markets where they built the discount gyms, there was a lot of attrition,” Snow says. “We started feeling the effects of the low-cost gyms on our product. Sometimes it was as much as 25, 30 percent of the volume. That can be pretty significant to an operator, especially an independent operator or franchisee who’s got their entire life on the line and is personally guaranteed against everything.”
The proliferation of discount gyms had begun a couple of years before Snow joined GGI, and the company hadn’t taken any action to counter it.
“This started happening in ’07, ’08, and it grew from there,” Snow says. “I came in October of ’09, and it had not been addressed. So it was a pressing priority. It was critical that we resolve this problem.”
Weigh risks, benefits
Snow and his leadership team began looking at the idea of creating a new type of gym to compete directly with the discount microgyms that were cutting into Gold’s market share. There were pros and cons to be weighed. The weigh-in became a prolonged process. Eventually the pros prevailed.
“Once we decided to consider this opportunity, we pulled my team together,” Snow says. “My stakeholders in this were the GGI team, the senior executive team, the management team, the franchisees and the board of directors at our parent company, TRT Holdings.”
Adding a new product line to Gold’s traditional full-service line of gyms would be a major shift for a company that hadn’t changed its offerings much since its birth in Venice Beach, Calif., in 1965.
“Nothing had been added to our gym line in 45 years,” Snow says. “We’d been the same company offering the same product, basically, for a very long time. So this would be a major change in direction. We had to think it through: Should we compete in this low-cost, high-growth segment?”
There were significant risks to take into account.
“We had potential risks to GGI that we needed to work through and get everybody comfortable with, and I needed buy-in from the senior team here,” Snow says. “One of the major risks was possible damage to the brand. Not all line extensions work.
“So we went through a pretty long and arduous process of understanding this line extension before we jumped into it, because our brand is the most valuable asset we own. The Gold’s Gym brand has been around a long time. It’s a storied company. It has tremendous value, and you don’t want to damage that brand by making a mistake.”
The company also had to weigh whether it had the financial resources and manpower it would need to put a new brand into the marketplace.
“You don’t just go out and launch a brand,” Snow says. “It takes a tremendous amount of work from everybody and financial commitment. There were many questions that needed answers. Did we have the internal talent required to do it? Could we build these gyms? Could we put them up quickly? There were a lot of pieces to the puzzle when you start looking at launching a new brand like this. So we had got a lot going on here, because we’ve got a lot of divisions, and this would be a major undertaking by Gold’s if we decided to move forward with it.”
On the other side of the ledger, GGI’s leadership team also determined that the potential upside was significant.
“It seemed like an interesting opportunity,” Snow says. “As a full-service gym owner and operator, as well as a major franchiser, the low-cost gym seemed to provide a lot of advantages to our brand.”
Among those advantages: A new line of low-cost gyms would enable GGI to quickly increase its distribution of gyms across the country because the gyms could be built quickly. The gyms would be relatively easy to run, requiring only about half the management team that a full-service gym needs. In addition, they were projected to become profitable quickly.
“In the end we determined, after we’d gone through this process, that there were enough potential advantages and the risks were low enough that it warranted proceeding,” Snows says.
Lay out the plan
The next steps involved conducting consumer research studies, creating the new brand’s concept and image, creating financial models with best- and worst-case scenarios for the new line of gyms, getting the company’s franchisees on board with the new concept, and then, ultimately, presenting the idea to the company’s board of directors. It was a yearlong process in all.
“We presented it to the board of directors in the late fall of 2010,” Snow says. “We had a finance analyst who had completed a compelling set of financial models, and we presented those to the board. And the board, after quite a bit of discussion, agreed to fund the Gold’s Gym Express development on a beta-test basis. That gave us the funding mechanism we needed to move forward, to build between six and eight Express gyms.”
Over the next year, GGI wound up building six Express gyms in a variety of markets around the country to test the concept. The Express gyms offer Basic Memberships for $9.99 and Gold Memberships for $19.99 a month, as compared to the $30 to $50 monthly memberships at GGI’s full-sized gyms. All the Express gyms have performed well in their test markets.
“The beta-test gyms are performing much better than our original models projected,” Snow says. “One of the things we look at is upsell percentage: the percentage of customers who buy the Gold Membership instead of the Basic Membership because of the extra benefits that come with it, like tanning, massage, half-price drinks, and unlimited guest passes.
“Our models projected that these test gyms would have an upsell percentage of about 20 percent. We ended up with an upsell percentage over 50 percent — much higher, obviously, than we thought we would experience, and also much higher than the industry average.
“Our projections are at least a year ahead of schedule in terms of what we thought these test gyms would do. They break even much faster than we thought they would, and they’re growing to maturity very quickly, much quicker than we had projected in our pro formas. Also, they’re ranked right at the top of all of Gold’s Gyms in terms of service and customer satisfaction — and that’s coming right out of the chute.”
Based on these test-gym results, GGI decided this past spring to move forward full-throttle with development of the Gold’s Gym Express line of small, low-cost gyms.
“In the last couple of months, we made the financial commitment to move forward and to build up to 50 new Express gyms in 2013,” Snow says. “That’s where we’re at right now. We have 30 to 40 leases that we’re working on. My guess is we’ll build 10 in the first quarter of 2013 alone. And we’ve got a few gyms that will have leases done this year; we’ll probably get another six to eight done this year. Then we’ll probably get an additional 25 to 50 done next year. Our franchising division has about 30 gyms lined up right now for new franchisees.
“We’ll probably end up with between 50 and 100 Express gyms by the end of ’13, including those that will be in the pipeline. So we feel good about that. It’s right in line with our projections.”
Proceed with caution
Asked what advice he would give executives faced with similar challenges posed by low-cost competitors moving in and grabbing market share, Snow says it’s important to avoid the knee-jerk reaction of simply lowering your price and your standards to meet the competition head-on.
“Don’t jump to conclusions about discounting until you’ve researched and understood all the possibilities available to you,” Snow says. “Discounting is typically the first reaction that everybody has, and it’s typically one of the worst things you can do. Your services and your product line are based on certain things you did when you built the product to maintain certain margins.
“So just going and cutting your rates and allowing your product to stand as is, while this will probably drive some volume, will destroy your margins. And it will be very difficult to ever come back from that.”
Snow also recommends that if an executive is considering introducing a new product line that will affect the company’s overall brand, it’s crucial to avoid getting ahead of yourself and hurrying the process.
“There are times when you would like to move faster as a leader,” Snow says. “But it’s difficult to move fast until your internal teams have bought in. You can’t go forward without them. Now, not everybody is going to jump on board right away. But as long as they jump on board once the decision is made, you’ll be OK.”
In the end, as with most important tasks that businesses face, teamwork and group sacrifice were key elements that enabled Gold’s Gym International to successfully grapple with the tough competitive challenge it faced.
“There’s no problem that we would cross here in this company that any one person believes they have the perfect answer to,” Snow says. “We operate as a team. It’s a team environment. The team works together to help work through problems. We use the leadership and knowledge and expertise from all our people coming from different backgrounds to help us make the right decisions and move forward.”
HOW TO REACH: Gold’s Gym International, (972) 444-8527, www.goldsgym.com
THE SNOW FILE
Gold’s Gym International
Born: Manhattan, Kansas
Education: Bachelor’s degree in marketing, Kansas State University
What important business leadership lessons did you learn during your time in school that you use today?
My marketing classes helped me understand the value of consumer studies, customer focus and the need to drive top-line revenues. Today, my primary role is to balance revenues, customer service, and the owners’ priorities. And everything starts with revenue. You’ve got to look for it everywhere and drive it incessantly.
What was your first job, and what important business leadership lessons did you learn from it?
One of my first jobs coming out of college was with Marriott Corp. Marriott gave me an excellent basis of training for my future career. One of the things they taught is that they expect their managers to work hard and perform at a very high level. I took that credo and told myself I’m always going to be the hardest working person I know, and I’ve tried to do that throughout my career.
Do you have an overriding business philosophy that you use to guide you?
You’ve got to have a dynamic culture that supports your associates. And you’ve got to have an organization that takes the needs of the customers into account, and a mentality that doing those things will take care of your owner’s requirements.
What traits do you think are most important for an executive to have in order to be a successful leader?
You’ve got to be transparent. You’ve got to be courageous enough to go the uncomfortable route when you don’t have complete buy-in. You’ve got to be confident in your direction. You’ve got to think big. And you’ve got to be willing to swing the bat.
What’s the best advice anyone ever gave you?
Be aggressive and set the expectations very high for your company.
There’s an old saying that the best way to get yourself out of a hole is to stop digging.
The problem is that, too many times, you think there’s a treasure lurking just a few more shovelfuls down, so the digging continues. As the hole gets deeper, you keep at it because you’ve already put so much effort into it that it would be a waste to stop now.
There are many examples in business of these ever-deepening holes that eat up manpower, time and money. Sometimes, the elusive treasure is a product that’s sputtering along but just can’t quite get going like you had hoped. Other times, it is a person who has all the promise in the world but doesn’t have much to show for it other than a warm chair and a lot of frustration on your part. The “hole” might even be an entire division that is underperforming or a vendor that just isn’t meeting your needs.
Corporate America is littered with decisions that seemed like a good idea at the time but that just didn’t work out. Remember New Coke? It was meant to replace the Coca-Cola that everyone grew up with, but it lasted only 77 days before the classic formula was reintroduced to the market.
The Coca-Cola Co. wisely made the tough decision that its reformulation didn’t pan out the way it had hoped and brought back the old formula. The result was that while New Coke may have failed, the company retained its top spot. It realized the hole was getting too deep with no return in sight, so it got out.
If you’re going to be successful, then you will have to make tough decisions. No matter how close to the buried treasure you think you are, at some point, you have to take your shovel and climb out of the hole and move on.
It’s called cutting your losses. Coke executives could have stuck to their decision because every bit of market research showed that people liked the taste of the new formula better, but it just wasn’t showing up in the sales figures. Maybe you’ve invested a lot of time and money into a product or a person, but there comes a point where you have to give up and focus your resources on more productive areas.
You can’t be afraid to make these tough decisions. It might be easier to justify further expense to keep going, but don’t wait any longer. Pull the plug.
Ending a project that’s bleeding money is an easy decision. The really tough choices come with the marginal performers — people included. To know when enough is enough, you need to set up accountability for projects and people so you can measure how well things are going compared to the standards you’ve set.
If something isn’t measuring up, get rid of it. In today’s business world, profit margins are too thin to waste money on unproductive portions of your business. You can’t afford to have a nonproductive anything — be it a person, division or product — weighing you down. Do everything you can to help the people affected move on, but make the decision and stick with it. These types of decisions are never easy. You never know how they will affect your business. It will always be easier to keep going after that elusive return on your investment, but you have to hold yourself accountable, as well. If it’s not working, it’s time to make a change.
So stop digging now before the hole gets so deep that you are unable to climb back out of it.
If you are interested in learning more about publishing a book, please contact our publisher, Dustin Klein, at firstname.lastname@example.org or (440) 250-7026.
Fred Koury is president and CEO of Smart Business Network Inc. Reach him with your comments at (800) 988-4726 or email@example.com.
In developing a strategy, creating a new business or launching a product line, intensive preplanning is what can make the difference between success and failure. This same principle applies to negotiating just about anything. No matter what you want to achieve, be it selling a new customer, buying a competitor or hiring a superstar, you must determine what is the end result you want before you put pen to paper or make that first introductory call.
We’ve all heard hundreds of time about the importance of “putting yourself in the other guy’s shoes” or showing some empathy. Good basic advice, but do you really follow these suggestions?
In many business relationships, if it becomes a win/lose transaction, at the end of the day, one side is going to be very unhappy and the other side, albeit temporarily satisfied, could ultimately lose, too. In most instances, both sides have alternatives. Unless you have found the Holy Grail that no one can live without, the other side always has choices. One of which can be to do nothing and take a hike.
Most negotiations begin with the thought, “What’s in it for me?” Instead, the first question should always be, “How can we enable the other side to win (or feel as though they have won)?” It’s all about looking at the objective through the other person’s eyes. This simply translates into giving the “opposition” something that they must have, even if they’ve yet to realize it, while meeting your own needs. Rather than start with figuring out how much can you make on the deal or the positive result that will accrue to you if you hire a particular superstar, ask yourself, “What can I do to make the other side feel like the winner?”
For your next initiative, start at the end and work toward the beginning. You might just be pleasantly surprised with the road map you construct using this technique. Here are a few examples.
You want to buy a competitor because it has a product that will enhance your offering, but you don’t need all of the other widgets that this target manufactures. The traditional strategy would be to make an offer knowing that, if you succeed, you’ll scuttle all of the company’s other operations, cherry-picking what you want from the carcass. This could work and might be the easiest way to achieve your goal, but this Machiavellian method of taking no prisoners likely won’t play well with the target company owner, who has spent years building it and is emotionally invested in the business and the organization’s employees. When you look at the situation through the lens of the founder, you determine that a different approach, such as paying a good price for the entire business, plucking the item you want from the company, and then selling the rest of the company back to the employees could be the ticket to getting discussions started. This way the owner gets his money, he is a hero with his employees, and you acquire the product you need to grow.
Let’s say you want to hire the best salesperson in your industry who, unfortunately, works for your competitor. Instead of just going in and offering a big salary and bonus, which he or she most likely has already been offered by someone else, try to determine, after doing your homework, what this superstar’s hot buttons are. Maybe he has made it known that he would like to work remotely from a desert island while continuing to build his book of business. Looking at it from his perspective, you figure out that you can buy him his piece of sand somewhere with a beautiful view, obtain highspeed Internet connectivity to his paradise and allow him to work six months per year in his dream location. Rather than just making a cash-rich offer, start the negotiations by providing a solution to your target’s fondest expectations.
Putting yourself in the other guy’s shoes is far from a new idea. However, too many executives forget that creating a win-win is preferable to having it only your way. Remember, many times, instead of just knowing the answers, you first have to figure out what questions to ask to ensure success.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at firstname.lastname@example.org.
A unique new book with an unorthodox, yet proven approach to achieving extraordinary success.
What does it take to grow rapidly and effectively from mind to market?
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Scott Kirsner spent three years immersed in the movie industry in order to write a book called “Inventing the Movies: Hollywood’s Epic Battle Between Innovation and the Status Quo, from Thomas Edison to Steve Jobs.”
He talked with directors like Francis Ford Coppola and James Cameron, editors, cinematographers, studio chiefs, producers, tech companies that sell technology into Hollywood and even actors with an interest in new technology like Morgan Freeman.
He discovered that Hollywood serves as a great case study for how any long-established, successful and self-satisfied industry responds to new technologies and new ideas.
Even when a new idea seems to have obvious merit and even when its inventor can make a strong case for it, 95 percent of the people involved in the industry fight the new idea with all their energy for as long as they possibly can until they realize it has the potential to grow their business in surprising ways.
Case in point: Within a decade of Hollywood’s fight against the Betamax video recorder, which went all the way to the Supreme Court, the studios were earning more from home video business than they were from ticket sales.
Here are several movies — all of which you’ve likely seen — each with an important backstory that innovators can learn from.
Sometimes technology needs to be just good enough, not perfect. “The Jazz Singer” will forever be remembered as Hollywood’s first talkie — even though it wasn’t among the first dozen to try to sync up the pictures on the screen with a soundtrack. But the technology that Warner Bros. banked on, developed at AT&T’s Bell Labs, was better than what came before it. It was just good enough to turn “The Jazz Singer” into a hit — especially combined with a performance from Al Jolson that practically leapt off the screen. The system still relied on phonograph records that could scratch. If the film broke and needed to be spliced back together, the entire movie would veer out of sync. The Warner Bros./AT&T technology was just good enough to start the sound revolution in Hollywood, though it didn’t endure for very long as a standard. Five years after “The Jazz Singer,” even Warner Bros. had switched over to a technology that more reliably linked the audio with the visuals.
Innovators never underestimate the importance of allies. Shot in glorious Technicolor, “Gone with the Wind” won the Best Picture Oscar in 1939, marking the start of Hollywood’s transition from black-and-white to color. But Technicolor had been working on its technology for making color movies since 1915, developing new kinds of cameras and film-processing techniques.
Like most start-ups, the company nearly ran out of money several times and had to continually hunt for new investors and allies who’d make movies using Technicolor’s technology to show how it was improving. These allies included the swashbuckler Douglas Fairbanks and Walt Disney, who won one of his first Oscars for a short cartoon made in Technicolor. Technicolor co-founder Herb Kalmus met another key ally at the racetrack at Saratoga Springs: Jock Whitney, a rich playboy who used his money to option a novel by Margaret Mitchell and help turn it into a movie starring Clark Gable and Vivien Leigh.
Innovators spot market opportunities first and chase them relentlessly. Entrepreneur Andre Blay had no connection to Hollywood, but in the mid-1970s, he was among the first to realize that home video machines like Sony’s Betamax (which sold for about $1,000 at the time) presented the potential for a new business.
He sent “cold call” letters to most of the major Hollywood studios asking them for the right to sell their movies on videotape. Only one studio, 20th Century Fox, consented, offering movies like “Butch Cassidy and the Sundance Kid.” Blay’s first ad in “TV Guide” netted his company $140,000 in revenue, and within a year, Fox acquired his company for $7.2 million in cash.
Innovators find collaborators who share their vision, and they’re prepared for things to take longer than expected. Computer graphics pioneer Ed Catmull, while he was still a graduate student at the University of Utah, was one of the first people on the planet who believed that it’d be possible to make a full-length computer-animated movie that people actually would pay to see. As he marched toward that goal, he connected with two people who bought in to his vision: John Lasseter, an ex-Disney animator, and Steve Jobs, who purchased the fledgling Pixar from George Lucas and helped develop it into a company that could stand on its own two feet, selling hardware and software while also pursuing Catmull’s ambitious, audacious goal.
Catmull admits that he thought the goal of making Pixar’s first film would take a decade — it took two. Disney eventually bought Pixar in 2006 for $7.4 billion.
As a business owner, there are many lessons to learn about innovation from the movies.
Guy Kawasaki is the co-founder of Alltop.com, an “online magazine rack” of popular topics on the web, and a founding partner at Garage Technology Ventures. Previously, he was the chief evangelist of Apple. Kawasaki is the author of ten books including Enchantment, Reality Check, and The Art of the Start. He appears courtesy of a partnership with HVACR Business, where this column was originally published. Reach Kawasaki through www.guykawasaki.com or at email@example.com.
Left or right? Up or down? Yes or no? The human life is full of choices. We make them on a minute-by-minute, hour-by-hour, day-by-day basis. It’s what we do, how we live and move and have our being in the world.
Consider some choices you may have made in the last few years:
- What car should you buy?
- Should you ask her to marry you?
- Are you ready for another baby?
- Is this house right for you, or should you keep looking before you make an offer?
- Who should be let go in the next round of budget cuts?
- Will your department reach its goals this year?
- Should you ask for a raise?
- Is it time for your mom to enter a nursing home?
- What do I need to do to lose weight?
- What will you eat for dinner tonight?
Decisions are usually easier when we are only faced with two choices. Blue or red car? Two-story or ranch-style home? Slim Fast or Weight Watchers diet plan? Our brains are somehow wired better to choose between two competing choices.
It’s when we have more options that we sometimes stall, flutter or downright choke.
- Three people from a team of eight in the department must be let go.
- Should we marry now, when we finish college or after we find secure jobs?
- In order to best reach our yearly goals, should we focus our attention on X, Y or Z, and how much of our remaining budget should we allocate to the project we choose?
Life is full of hard choices, and the bigger they are and the more options we have, the harder they get.
Through my years in working with individuals, groups, companies and organization, I have narrowed the questions we need to ask in order to make the right choices both in our life and in business.
Here are 3 of my best tips for making the right choice:
1. Analyze outcomes, not pros and cons.
Many of us have been taught somewhere along the way to take out a sheet of paper and divide it down the middle with a line. On one side we list the “pros” of a certain choice, on the other, the “cons.”
This old school way of making choices is time worn and tested, but I think there is a better focus: outcomes. In the end, the outcome of a choice made is what truly matters.
Working through a big decision can give us a kind of tunnel vision, where we get so focused on the immediate consequences of the decision at hand that we don’t think about the eventual outcomes we expect or desire.
When making a choice, then, it pays to take some time to consider the outcome you expect. Consider each option and ask the following questions:
- What is the probable outcome of this choice? (This is the list we should make.)
- What outcomes are highly unlikely? (This allows them less weight in the choice.)
- What are the likely outcomes of not choosing this one? (These are negative outcomes.)
- What would be the outcome of doing the exact opposite? (Play “devil’s advocate.”)
Our thinking should be in terms of long-term outcomes and not short-term pros and cons. And we should broaden our thinking to include negative outcomes. In doing so, we will find clarity and direction in making the right choice.
2. Ask why – five times.
The Five Whys are a problem-solving technique invented by Sakichi Toyoda, the founder of Toyota. When something goes wrong, you ask “why?” five times. By asking why something failed, over and over, you eventually get to the root cause.
Although developed as a problem-solving technique, the Five Whys can also help you determine whether a choice you’re considering is in line with your core values as a person and a business.
- Why should I take this job? It pays well and offers me a chance to grow.
- Why is that important? Because I want to build a career and not just have a string of meaningless jobs.
- Why? Because, I want my life to have meaning.
- Why? So I can be happy.
- Why? Because that’s what’s important in life.
We now see how the first two tips are interrelated. By asking the Five Whys, we learn that having meaning and being happy are desired outcomes that influence the choice made in asking the first question: Why should I take this job?
The continued relationship can be seen in revealing the third tips for making the right choice.
3. Follow your instincts.
This tip affords you the ability to work through the first two tips with a sense of personal confidence.
Because research shows that:
The conscious mind can only hold between five and nine distinct thoughts at any given time. That means that any complex problem with more than (on average) seven factors is going to overflow the conscious mind’s ability to function effectively, leading to poor choices.
Our unconscious mind is much better at juggling and working through complex problems. People who follow their instincts actually trust the work their unconscious mind has already done.
When we allow ourselves to focus on long-term outcomes rather than short-sighted pros and cons, take on the task of asking “Why?” five different times, and trust and follow our instincts, we put ourselves in a much better position to make the right choice in any given situation in life and business.
Like anything we go through as human beings, this process takes work. Get to work and let me know how it goes.
DeLores Pressley, motivational speaker and personal power expert, is one of the most respected and sought-after experts on success, motivation, confidence and personal power. She is an international keynote speaker, author, life coach and the founder of the Born Successful Institute and DeLores Pressley Worldwide. She helps individuals utilize personal power, increase confidence and live a life of significance. Her story has been touted in The Washington Post, Black Enterprise, First for Women, Essence, New York Daily News, Ebony and Marie Claire. She is a frequent media guest and has been interviewed on every major network – ABC, NBC, CBS and FOX – including America’s top rated shows OPRAH and Entertainment Tonight.
She is the author of “Oh Yes You Can,” “Clean Out the Closet of Your Life” and “Believe in the Power of You.” To book her as a speaker or coach, contact her office at 330.649.9809 or via email firstname.lastname@example.org or visit her website at www.delorespressley.com