"Bottom line" management hits the bottom

Today's Wall Street Journal wonders whether the current market can be sustainable. The reason: most of the companies have just resorted to the classic, "conventional wisdom" response during downturns: aggresively cutting costs seeking to show a "stronger" bottom line to stockholders.

The problem is -as WSJ points out- that companies' revenues have been also going down.

Companies are certainly facing the limits of downsizing, resizing, restructuring and reengineering -all the classic tools of what C.K. Prahalad called "bottom-line management"- in order to further squeeze their costs often at the expense of human and intellectual capital, quality of services and products -in short, value added to the clients-

Without revenue growth -the "top line" in the profit and loss statement-, as Prahalad put it in 1994 "downsizing, the equivalente of corporate anorexia, can make a company thinner: it doesn't necessarily make it healthier." (Prahalad, 1994, Page 11)

"Bottom-line management" is the default doctrine taught at most MBA schools and companies are increasingly looking toward its many and dangerous consequences.

Some concerned observers like Dirk Van Dijk, chief equity strategits at Zack Investment Research pointed out that "you cannot simply cut costs forever to have sustainable earnings. You need revenues to grow them over time" (Lauricella, WSJ, Page 1)

Which drives us back to the importance and scarcity of good "top-line management" and strategies nowadays.

As Prahalad said presciently back in 1998: "downsizing belatedly attempts to correct the mistakes of the past: it is not about creating the markets of the future" (Prahalad, 1998, Page 11)

Top-line management is focused on strategy, adding value to clients, reinventing industries and markets and competing for a place on the future.

As an example, as publishing and newpaper companies keep shrinking and shedding talented authors and journalists, Amazon and Google push ahead for e-books and online journalism and advertising, increasing their revenues and creating a booming new market with new rules: theirs.

Cutting costs can end in what a publishing executive described recently: "we cut our cocktail parties because after all the other cuts, we had not enough customers interested in attending to our book presentations".

How can we apply "top-line management" to our PII projects?

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References:

• Prahalad, C.K. & Hamel, G. (1994) Competing for the future. HBS
• Lauricella, T. (2009) Can Rally run without revenue? Investors wonder wether profits based on cost-cutting can long endure. Wall Street Journal

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Upscale Whole Foods prospers in the midst of the economic downturn

Challenging all the gloomy forecast a year ago, Whole Foods' stock and sales are booming in spite of the global and US consumer downturn.

WF sales growth has outpaced Wal Mart and other low-price grocers, in spite of being up to 30% more expensive.

Consumers seem increasingly concerned with quality and health, even if they come at a higher price.

Advocates of reducing US healthcare cost coincide in finding prevention the best if not the onbly way to reduce HC cost at the time that the largest postwar generation -the baby boomers- reaches middle and retirement age -"payback time" for unhealthy diets and habits-.

• What lessons can we extract from Whole Foods success?
• How can we apply them to our PII projects?

Shall the small inherit the global market?

UAV stands for Unmanned Aerial Vehicle, a new category of military (and civil) aircraft that is quickly becoming the fastest growing segment in US military contracting.

More significantly, the top contenders in this new category of smaller, intelligent, pilot-less distance-controlled flying machines are new, small and medium-size companies, which -according to a recent WSJ report- are beating behemots like Boeing and Northrop in develiping new models and solutions at a faster pace and at a lower budget.

The Reaper



Other success story -Brazil's Embraer- has captured the regional jets world market rising from very humble origins.

Sonora seems to be in that trend for the coming years



And Guaymas is one of the hot spots



How can our South of Sonora ecosystem seize all the potential and business opportunities being offered beyond the obvious "comparative advantages" (such as location and lower wages)?

Food, health and e-performance

Carlos Peral sent this example of an e-performance application -an EPSS- that helps customers in building or checking recipes or ways to combine food products.

• How could you use this type of application in your project?
• How would you customize / adapt / "tewak" this product features to better meet the requirements and / or constraints of your PII project audience?

Tools such as Macromedia Captivate may be used to create in minutes an EPSS like the ones shown in screen and install it on a touch-screen PC or Laptop as a "kiosk" (a PC unit that can be used by customers by touching the screen)

Captivate might also enable you to create a cell-phone or iPhone application that can be accessed from cell phones (m-learning)

Here is an example



Here are some examples of touch screen devices

HP



HP tablet

iPhone

Online diet generation and weight loss Websites and applications



Fitness and diet Websites

Globalization and emotions

Browsing through materials for our inminent program on Performance Coaching and Management, I found two very interesting pieces for discussion.

The first one is a short insight from Peter Drucker on globalization



In the second Harvard and Sorbonne professor and diplomatic Dominique Moisi explains what he calls The Geopolitics of Emotions:

1. Emotions and world politics



2. Humiliation, hope and fear



How could you apply these concepts to the development of your project and its ecosystem?

Social networks: visions on the future of e-commerce

As conventional commerce plummeted at the onset of the current recession, Amazon and other e-Tailers experienced a surge in sales and stock price, as 20% og global retail moved online.

Let' s listen to two gurus -and businessmen- of the Web 2.0 era comment on their visions of the shape global commerce and for-profit enterprise will take:

Chris Anderson on "how to form the long tail":



Anderson on "free" as the future price for the e-economy



Anderson discussing it more in depth with Charlie Rose



Jeff Bezos and a different view on the future of Amazon and the e-business.



Eric Schmidt, Google's CEO



Food for thought?

How can we use these concepts on our PII projects benefit?

Social Networks pros and cons

Initially a passtime started among campus students at Harvard (see Facebook) , social networking has evolved into a huge variety of person-to-person, real-time, segmented communication tools that are used to post resumes or advertise businesses (Facebook) or coordinate 100,000 people rallies (such as happened with Twitter during Obama's presidential campaing in the US and the Iranian rallies for reform currently in place).

The videos below (another example of the power of sharing knowledge and using intellectual capital as social capital) explain how to start a Facebpook marketing Web page:

Introduction



Second part



How to create a Facebook group



How to create a Facebook homepage for business



Of course, there are several downsides on using social networks and not a few failures -most notorious using Virtual Worlds for adult education-

Check Facebook and discuss how could you use it for your PII project

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References

• The Economist (2009) Using social networks for business.

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