CAUSING DISRUPTION – A VIABLE STRATEGY

31 10 2011

Having recently looked at Blue Ocean Strategy and how, for innovative ideas it presents a great way of creating new, uncrowded markets, I thought it would be useful to look at the Disruption Strategy; a proven, viable way of launching new products into ‘the red ocean’, the already crowded markets.

For some, seeking to launch a new version of an existing product into a crowded market might seem like lunacy yet, over the years many companies have managed to do just that by the intelligent application of Disruption Strategy. And how such disruption strategies work should be a lesson to those already occupying space in the crowded market for if they aren’t paying attention it is they who might end up getting squeezed out!

How does the Disruption Strategy work?

Let’s take as our example the Japanese car industry. When firms such as Toyota, Datsun (the original name of today’s Nissan) and Honda wanted to enter US and European markets in the sixties they were faced with a number of challenges. Primary among these challenges were that they were perceived to be already overcrowded markets and that Japanese build quality was (falsely) thought to be inferior.

In a nutshell, the Japanese manufacturers’ strategy was to attack the ‘discount’ end of the market with cars that had higher spec as standard than the western competition. This disrupted the accepted ‘norm’ and car buyers, liking the added, higher spec option, slowly started buying the new products. Some of those buyers were from the traditional discount end of the market but some were also people seeing a like for like product with the more expensive, higher specification models they had been purchasing. Gradually, this gained the Japanese a foothold, the big US and European manufacturers happy to concede a little ground at that end of the market to a ‘discount’ brand.

But having conceded that ground they opened the whole market to their new competitor. The market was disrupted and the western ‘big boys’ struggled to recognise what was happening. The Japanese companies slowly started competing higher up the quality/price chain, the western manufacturers conceded more ground although now it was not quite so voluntary but the initial damage had been done.

In the UK, it was British Leyland’s build quality that started to be questioned; “not as good as the Japanese” according the buying public. They couldn’t respond and a slow death began.

Meanwhile the Japanese continued to gradually disrupt the previously accepted way of doing things until they reached a point where market share and their own size allowed them to compete not just as equals but in many cases as superior products. The battle for a significant share of the market had been won.

Today, the Japanese are the world’s largest manufacturer of cars. The British automobile industry has been decimated; the US is still struggling to come to terms with the new reality and companies like Saab exist on a very shaky basis. The German auto industry reacted both the fastest and the best and now has a reputation for extremely high build quality which has allowed it to survive and thrive in a market redefined by the Japanese.

Elsewhere, the Korean manufacturers have studied, learned and then employed an almost carbon disruption strategy to that of their Asian neighbours 40+ years ago.

In the last decade or so we have witnessed the ultimate triumph of the disruption strategy which enters at the discount end of a market with its arrival as a luxury brand. Back in the sixties and seventies they would never have believed you had you told them how prestigious Toyota (as Lexus) and Datsun/Nissan (as Infiniti) would be in 2011.

© Jim Cowan, Cowan Global Limited, October 2011

Read more blogs by Jim Cowan

info@cowanglobal.net

Twitter @cowanglobal

Facebook.com/cowanglobal





GOVERNMENTIUM – SCIENTISTS DISCOVER NEW ELEMENT

21 10 2011

I received this ‘article’ via email earlier today and found it amusing. So, in amongst all the serious blogging, I thought I would share it with you. I hope you enjoy it as much as I did.

Oxford University researchers have discovered the heaviest element yet known to science. The new element, Governmentium (symbol=Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312.  These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called pillocks.

Since Governmentium has no electrons, it is inert. However, it can be detected, because it impedes every reaction with which it comes into contact.

A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete.

Governmentium has a normal half-life of 2 to 6 years. It does not decay, but instead undergoes a reorganisation in which a portion of the assistant neutrons and deputy neutrons exchange places.

In fact, Governmentium’s mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes. This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration.

This hypothetical quantity is referred to as a critical morass. When catalysed with money, Governmentium becomes Administratium (symbol=Ad), an element that radiates just as much energy as Governmentium, since it has half as many pillocks but twice as many morons.

Author Unknown (if you know the author please let me know so he/she can be correctly credited)

Read more blogs by Jim Cowan

info@cowanglobal.net

Twitter @cowanglobal

Facebook.com/cowanglobal





LEGACY AND THE OLYMPIC STADIUM – IN THIS WEEK’S EPISODE OF 2012…

12 10 2011

Anyone who has seen the satirical television  series 2012 must be beginning to wonder whether it is in reality a documentary as the subject of legacy stumbles from farce to fiasco taking in broken promises along the way…..

In this week’s episode we revisit one of the only two legacies actually  promised as part of our bid for the 2012 Olympic Games, that of the stadium  (the other was an increase in participation in sport).

First, a recap. What was promised was a stadium which could be used by  the athletics community after the Games. It was recognised that the Olympic  stadium would need a significant reduction in capacity in order to be suitable  for athletics needs and the plan was to remove the top-tier once the  Paralympics had finished leaving a stadium with a capacity of 25,000. The  stadium staying ‘as is’ was never part of the promised legacy or of the plan.

Then enter West Ham United (supported by Newham Council with Council Tax  payers money) and the plan changed. The legacy for athletics was forgotten  (although obviously it wasn’t sold to the public as such) and the new ‘legacy’  became one of a football club running a multi-event stadium (with athletics  track) to which athletics would be lucky to stage five events a year and gain  little or no grass-roots value from. But, we were told, because the track was  still there it was a legacy for athletics.

It was sold as ‘legacy’ so well that the public loved it. So when  Tottenham Hotspur entered stage left they were quickly painted as the ugly  sister. And yet, what Tottenham proposed was a reduced capacity (as in the  original plan) and a 25,000 capacity home for athletics (as in the original  legacy promise). But as the athletics legacy stadium would be at Crystal Palace  (still in London last time I checked) and the track at Stratford would be  removed, no one liked the idea. Tottenham were intent on seeing fair play  though and court action loomed.

Also heading for the Courts were Barry Hearn and Leyton Orient who  (rightly) pointed to football rules forbidding the re-siting of a larger club (West  Ham) on the door step of a smaller club (Orient). It looked a mess; it was a  mess and it was a mess wholly of the making of those charged with delivering  the supposed ‘legacy’ (forget the ones that were promised, we’ll never see them).

Meanwhile UK Athletics (UKA) were so pleased with the whole set up that  they decided to keep their head office in Birmingham and support the  redevelopment of that city’s Alexandra Stadium where their new offices will be  sited. Publically they always supported the West Ham move because it preserved  the track – although they could never explain what use to the sport was a track  at a 60,000 seat venue which the sport could rarely access and never fill.

Then, all of a sudden they could – well, for one week in 2017 at least.  It was decided to bid for the IAAF World Championships which would require that  big stadium in Stratford. It should be remembered that UKA had previously been  awarded the World Championships for 2005 before embarrassingly having to  withdraw on the back of broken government promises. The sport was given a £40  million ‘legacy’ (they do like that word) payment by the Government (apparently  to stop them complaining) – £40 million which has produced a legacy which can  only be described as invisible at best. Certainly the grass-roots of the sport  have seen no benefit.

The IAAF received guarantees the track would remain and that Britain  would definitely not cause embarrassment by pulling out again. Minister for  Sport, Hugh Robertson, went on television and promised the nation that the track  would remain (probably to yawns all round).

Whoops Minister! It then emerged that both Tottenham (they whose plan  actually delivers the promised legacy) and Orient had rather strong cases and embarrassment  was on the cards should they win the legal battle. So the same people who  promised one legacy (well, two actually) and then changed the plans decided  that they would change the plans again.

The Olympic Stadium was suddenly not going to be sold. It was going to  stay in public hands (you could hear the tax-payers cheer). It was going to  keep the track. It was going to stay at a 60,000 capacity. It was now going to  be leased to a football club (no one doubts a deal has already been done with  West Ham) for a rent equivalent to approximately 40% of annual running costs  (more cheers from the tax-payer).

UKA, who are staying in Birmingham, can now continue their bid for the  2017 Championships. They love it. Although how it services any athletics legacy  beyond that has yet to be made clear. West Ham probably love it too but can’t  do so in public (yet).

Grass roots athletics can’t see any benefit. Tottenham lose out big time  despite being the only party apparently concerned about the nation’s legacy promise  being delivered. And Orient…..well, it’s not clear how this clears up their  issue. If (when) West Ham do move into Stratford, it could well be the death  knell for them….unless they fight it in court?

Oh yes, I forgot to mention; UKA’s only rival for the 2017 IAAF World Championships?  Qatar. The only nation ever to have actually delivered a legacy of increased  participation on the back of a major games (2006 Doha Asian Games). I guess if  we lose we can always accuse them of corruption or has that already been done?

We await the next chapter with bated breath. It would make a great  storyline for a satirical television show only surely, no one would believe it?

As for legacy? As for clear strategy? As for promises?

© Jim Cowan, Cowan  Global Limited, October 2011

Read more blogs by Jim Cowan

info@cowanglobal.net

Twitter @cowanglobal

Facebook.com/cowanglobal





CHELSEA FC AND THE CHELSEA PITCH OWNERS – MORE DETAIL PLEASE

6 10 2011

Chelsea Football Club’s sudden and unexpected offer to the Chelsea Pitch Owners appears reasonable at first glance but on closer inspection more detail and guarantees must be sought…..

When Chelsea Pitch Owners (CPO) came into being in 1993, it was as a way of the fans safeguarding the future of their club at a time when the property developers were hovering over the prime piece of SW6 real estate that is Stamford Bridge.

The basic premise was simple and very effective, if the fans own the pitch and the land on which the stands are built then the ground can’t be sold (at least not without their say so).

In 1997 CPO bought the freehold (supported by a £10 million loan from the club) and have since leased the land back to Chelsea FC at a peppercorn rent. CPO has sold 15,000 shares at £100 each and, declaring my interest, I am one of those shareholders.

On the face of it Chelsea’s offer to the fans seems reasonable. Chelsea’s future is far more secure than it was in the 1990s now that Roman Abramovich has brought his £Billions to the club and Stamford Bridge’s capacity for further development is limited by the geography of its location. So, if the club want to develop a new stadium and move, they will need to own the current ground in order to sell it.

The CPO was set up entirely for the purpose of safeguarding the well-being and future of the club. The club seems to be suggesting that our time has now passed and I know many other CPO shareholders who agree (and lots of others who don’t).

My personal position is one of doubt. I need a lot more information before I can believe that CPO selling the freehold back to the club is in Chelsea FC’s best long-term interest.

Chelsea FC’s last end of year accounts show an operating loss of £68.6m against a turnover of £205.8m. The financial picture is improving but not at a rate of knots and without Abramovich’s ownership the club would be in trouble.

Abramovich appears to be here for the long haul and has publicly spoken of passing the club onto his son in the future. Yet my unease is not calmed. We have seen tragedy at Chelsea before, most recently the death of Matthew Harding, so we understand that nothing is forever thus begging the question, what plans do the club have in place should tragedy strike? It would be good business practice in most organisations to have continuity and succession plans, even company wills, in place.

Have Chelsea taken care of such details or is the strategy one of enjoying the good times and crossing collective fingers that they don’t turn bad? For without ownership guarantees there is no guarantee of the club’s best interests being served by a future owner. Such worries are currently safeguarded by the CPO ownership of the Stamford Bridge freehold.

Of far smaller concern to me is the club’s offer to buy shares at the same price (£100) fans paid for them. The intention was never that shares in CPO were in any way about profiteering but if we are to trust the future of our club to those making the offer one would hope they are good enough at finance to realise that with inflation their offer is one which asks the fans to lose money on the deal – as if football fans aren’t fleeced as it is these days!

My ‘investment’ in CPO shares was never meant as an interest free loan and I would expect a modest adjustment to the offer to counter the effects of inflation. That £100 buys much less than it did on the day a reserve team player called Rati Aleksidze and an emerging youth team player called John Terry presented me my share certificate on the pitch at Stamford Bridge (see picture).

One final thought, the main thrust of the club’s perceived need to buy the shares in order to develop and move to a ground with a larger capacity; if the well-being of Chelsea Football Club is the primary motivation and the fans have served the safeguarding of the club’s home so well for nearly two decades, why the need to buy?

Why not include the CPO in the development plans and when the time comes to sell Stamford Bridge we do so on the understanding that we will then pay the funds raised to the club in return for the freehold of the new ground?

To me, that makes sense from a business, from a football and from a fans perspective and continues to safeguard the future of the club regardless of the fates that fortune’s fickle finger might deal us.

It is not enough to simply be Carefree. It is up to the CPO to KTBFFH! (Apologies reader if you don’t understand, Chelsea fans will).

© Jim Cowan, Cowan Global Limited, October 2011

Read more blogs by Jim Cowan

info@cowanglobal.net

Twitter @cowanglobal

Facebook.com/cowanglobal