The “Tuna Can” strategy

 “The key to a man’s heart is his stomach” is a well-known Arabic proverb that essentially narrows down a woman’s duties to the kitchen. As degrading as this may be to women, one can’t ignore the fact the food essentially takes up the most important moments of the day and if you are acquainted to the Lebanese cuisine then these moments will become almost “sacred”

I recently got married and my wife moved with me to KSA and since she is in a “transitionary phase” she needed a hobby. Having lived on her own since she went to college and then joined the work forces right after graduation let’s just say that cooking was not her greatest feat. So and in order to fill up a part of her time my wife decided to take on cooking and started preparing our lunch home! Yes feel free to feel sorry for me for being a guinea pig.

In theory, my wife is a great cook because of her mother’s tips and instructions. And although she did some “training” before marriage, her mom was always there to save the day in case something went wrong so you can say so she has never tested her wings on her own.

On the eve of the first “training” day we struck a deal between us. My wife isn’t the biggest fan of tuna but if left without any other option she can accept it for a meal. The deal was as follows: whenever she started cooking a new and complex meal she would keep a tuna can on the sink in front of her. The “tuna can” served 2 purposes: 1- it was enough motivation for her not to fail because otherwise she will have to eat something she doesn’t like. 2- In case her project failed, there will always be a backup plan. Needless to say, the strategy is a fruitful one! Sure enough she sometimes forgets the salt or is stingy with the seasoning and spices but overall it can be considered a success.

The” Tuna Can” strategy can work for you as well in any business situation; in fact, it is a must. The purpose is to always push an individual or a business to try something new or try doing things “differently”. Being skilled at 1 thing will not last forever neither will it help you in all the situations. You may be extra good at something but if you fail to develop it or build a new skill you might fall off the grid. Take Nokia or Kodak for example who were not only good in their industries they were the leaders yet they painfully fell off of the peak in no time. Had they had the courage to challenge themselves and try new strategies they might have stayed in the front seats.

Any skill you might have will never blossom unless fully put to test; and although the most challenging part is moving out from the comfort zone you do not necessarily have to entirely go out of that zone and this is where the “tuna can” comes in. The purpose of your “tuna can” is to act as a cushion for you whenever you leave your zone to try something new yet it should be something you strongly dread. This back up strategy should be simple as well and not complicated in order to be a temporary “fix” and at the same time not to consume much of your efforts as you fall back to bounce forward again to a different strategy. For Example, Nokia could have used the Android OS on their phones for a period of time until they had finalized one of the 2 OS systems that they were trying to build in-house rather than being stubborn and falling short of materializing any of those 2.

As much as the “tuna can” meal is easy and fast to prepare so should be your back up strategy just squeeze some “lemon, olive oil and a pinch of salt” and off you go!

As a procurement professional, I started implementing the “tuna can” strategy to my approach with existing and potential suppliers, I have trained my team on it as well and the results have been encouraging! This was a much needed step as we steer towards 2017 in a very challenging economy that requires us to change from “this is how it has always been done” to “this might actually work!”

If you are reading this, then this means I have survived both my wife’s cooking and her feedback on this article! Take your time to find your “tuna can” although I warn you, your spouses might not be as forgiving as mine!

 

 

Microsoft’s “Strategic” Mistake

Nokia’s life and death in the mobile devices industry is that of a fairy tale gone bad. After dominating the global market in the 90’s and mid 2000’s, a series of bad business decisions led to its dramatic downfall and demise. And although the climb was slow and painful, going downhill was as fast as a free fall. Nokia’s failure to remain competitive can mostly be attributed to failing in predicting the market trends, its slow reaction to technology and customer preference changes and the lack of an effective leadership to steer company ahead.

By 2013 it was obvious that Nokia needed  a savior; its global market share in the smart phone market had slipped to 1% or less, to add to that the company was facing fierce competition from local phone makers in both China and India which were once the company’s stronghold in the low end cell phone market. At this point, the company had only two options either to shut down the mobile device department or find a possible partner/buyer.

When Stephen Elop joined Nokia as CEO in 2010, the company was not in its best shape and form but also at the same time it was no secret that Microsoft was expressing interest in entering the smart phone market and it was no secret also that they wanted to do so through an acquisition. During that time, Nokia was struggling between two in-house operating systems instead of focusing on exclusively one so when Elop joined his first decision was to kill both systems in favor of windows OS. At the time, he justified his choice by claiming that he was seeking “differentiation” but soon after the first windows phone were rolled out Nokia announced that they will also produce android phones (how does that really differ from having two in-house OS?)

Turns out, all this was made in the purpose of setting the stage to ripen an acquisition by Microsoft. Elop did his job, Microsoft bought Nokia and all lived happily ever after….. Well not really because the story has just begun. No matter how great an idea is, if the execution does not rise to the occasion then the whole idea is just a big failure and this is where Microsoft seems to be headed to. Microsoft made two strategic mistakes in a very short period 1- They announced that they will remove Nokia’s from all their mobile devices. 2- when signing the deal with Nokia, there was a penal clause that forbid Nokia from independently producing cell phone devices before the end of 2016. Really now? Only 2016? You do not forbid such a strategic player from re-entering the market for such a short period only! Because despite all of Nokia’s failures in the recent years, the name alone was a leverage and Microsoft underestimated the power of the brand name and here are two big examples for why is that.

Example 1:  Back in the 90’s IBM was leading the market of personal PC’s with its legendary Think Pad laptops which dominated the business world but towards the end of the decade, IBM had decided to divest this department in order to focus on its core business. Lenovo, an up and coming Chinese manufacturer and seller saw the opportunity and jumped to it and they were able to acquire the division. Inside the corridors of Lenovo there was a debate on whether to keep the name “Think Pad” or kill it, eventually the proponents of keeping the name won and it turned to be a winning strategy since people related to the name and the confidence in the laptops was not lost despite being bought by a Chinese company which at that time still meant that Chinese products were substandard and not of a good quality.

Example 2: Nissan Motor Company is a remarkable car maker and one of the market leaders these days but they were not always that successful… nor were they always called Nissan…. The company that will soon celebrate its 100th anniversary changed hands of ownership many times in its early periods and just like any Japanese industry they focused on efficiency and reliability, two features that earned them the hearts of many car enthusiasts around the globe but under the name Datsun and not Nissan. So when the top management decided to kill the name in 1986, it proved to be an almost lethal mistake. The company went in a downward spiral because the confidence and familiarity that came with the Datsun name were lost by Nissan and people were not so welcoming of the new name so in addition to the rebranding costs and the marketing campaign to change the names, the slipping sales of Nissan nearly brought the company to its knees and led to drastic measures including hiring the first ever non-Japanese CEO to a Japanese company – The Lebanese Mr. Carlos Ghosn, and also hundreds of lay-offs, a decision that until that date was unheard of in the Japanese culture. 12 years after that, Nissan revived the name Datsun and is reaping the benefits of such a decision.

A third indirect example can be derived from the stories of BMW and Mercedes Benz, both car makers own or “owned” luxury brand cars and compact cars. BMW owns Rolls Royce and Mini Cooper while Mercedes owns the struggling Smart and until recently they produced the now defunct Maybach luxury cars. The reason why the first is successful with both brands and the second is failing is very simple: “differentiation”. BMW differentiated both brands and gave them a separate identity while Mercedes tried to associate them with its brand as much as possible just like Microsoft is doing so with the smart phones unit. Sometimes imposing a successful brand name on a different product can have a reverse effect and instead of acting as a leverage it would drown it….

A short while ago, Nokia announced that they were planning a comeback to the smart phone which poses a real and direct threat to Microsoft. When Microsoft purchased the cell phone division, they neglected the Nokia maps software which turned out to be one of the most valuable assets which is currently the target of many companies from cell phone companies to car makers. This alone can help in marketing and selling the new Nokia phones. The re-entry can be cheap for them and they can opt on choosing android OS just like the tens of cell phone makers in the industry. Along  with their maps and other solutions that Nokia is famous for it can prove to be a winning combo. Moreover, they might come back to their senses and work on redeveloping  their in-house software because the world might be ready for a new breakthrough.

Both companies are treading a fine line here because a comeback in the tech world is almost impossible and none has been able to do it so far. But in Nokia’s favor there is a remarkable brand name………..

This is Why Lenovo should purchase Blackberry

When I came back home to Lebanon for Christmas vacation in 2009, I was amazed by how popular Blackberry was in my little country especially among kids and teens, the most unlikely customer base for the most popular business phone. 8 months earlier when I first left, the smart phone was virtually non-existent in our market. I returned back to the USA after the holidays just in time to witness Blackberry’s downward spiral in Northern America while at the same time their global market share peaked. Blackberry’s 5 minutes of fame was short lived and what was once an owner of 43% of the US mobile phone market is now struggling to sell a few million devices with studies showing that they now barely control a little of 3% market share. Imagine yourself skydiving and for some reason the parachute doesn’t open; this is how fast Blackberry went down. Attributing this decline to the I-phone is not accurate or nowhere near the truth because in 2010, apple’s iconic product had already been there for 3 years and it was struggling for taking the scraps of blackberry.

Of course the ailing giant is now an easy target for interested investors but for some reason it is not really attractive. Those who seriously considered making a bid can be counted on one hand; a main reason behind that is the Canadian’s Government intervention and their close eye on all possible candidates. The reasons are obvious; it is still the device of choice for all Canadian and US governments and for most North American companies which raises lots of flags related to safety, security and confidentiality.  One of the biggest candidates – Microsoft – is out of the game after they purchased the Finnish Panda Nokia. I called Nokia a Panda because just like the Pandas, they were on the brink of extinction due to continuous failures in delivering competitive new products and losing market share so fast and they still are not officially saved. Of those candidates, 2 names stand out: Fairfax Financial Holdings and the Chinese computer company Lenovo. Not surprising at all is that the Canadian government favors Fairfax because it is a Canadian company first and second because they have bitter memories from when the Chinese targeted another Canadian giant – Nortel – and tore it down until it filed for bankruptcy in 2009.

Yet, the wise decision would be to allow such a transaction to happen if the Canadians are serious about saving the company. Unlike the late 90’s and early 2000s when Chinese companies were merely copycats (remember the fake nokia, sunny and many others?); Chinese companies have recently proved that they are hungry to develop themselves, differentiate their products and invest more in R&D to become more creative and the best part of it all is that they have tons of cash and/or access to massive funds when needed.

Lenovo specifically is a great example because what was formed originally by the Chinese government to organize the selling of imported computers in the Chinese market evolved into a giant that ended up purchasing IBM’s personal computer division with all the benefits and privileges that came with such a purchase. 8 years after the purchase, Lenovo has not destroyed IBM’s Think Pad as some skeptics might think; instead Lenovo prides itself with owning the best business laptop currently in the market. And this is exactly why the purchase makes perfect sense. Ever since rolling out its first smart phone with push email service on it in 2000, Blackberry enforced its image as the provider of the cell phone with the best business solutions and strongly capitalized on this image. It was a regular phone with all the other features that cell phones at the time had including games (remember the long hours you spent playing brick breaker and almost breaking the phone whenever you missed a ball?). To make a long story short: the business pc maker will be marrying the business cell phone maker, a happily ever after story?

One of the reasons behind blackberry’s demise is their failure to acquire big market shares in the big and growing Chinese market, whether it was because of a weak marketing network or in failure to appeal to the young Chinese consumers, Lenovo can circumvent that with its strong marketing network and its privileged position that it currently enjoys. It can increase brand awareness in China and it definitely has more access to a wider sales network.

In 2009, President Obama imposed a 35% tariff on Chinese tires imported to USA, the direct reason was to implement a safeguard provision to protect US manufacturers that were under the threat of losing their jobs. Of course the real reason is very different from that and it has to do with the silent economic war going on between the 2 countries; those same reasons banned a Chinese company from buying Hummer from troubled GM in 2009 and banned Huawei and ZTE from competing for US government contracts. By purchasing Blackberry, Lenovo will be able to avoid any possible embargo and enjoy better access than its Chinese counterparts to the North American market.

It is true that Lenovo does currently have a mobile device unit, but how many of you have actually heard of it? What is its market share? And what are its sales numbers? If Lenovo wants to be successful in that division and obviously this is where the future is now, they need to differentiate themselves and have a unique product. With its unique features and massive amount of patents, Blackberry can be Lenovo’s answer. Sure they can use android OS just like Samsung, LG, ZTE, Huawei, Sony, and Motorola….. Should I go on?

A few days ago, Blackberry announced that it has scrapped its plans to sell itself and instead they have resorted to re-financing themselves and try to save the company on their own through a cash flow offered by Fairfax. But despite that had they gone forward with their selling plan, most probably the Canadian government would have interfered to stop the sale to Lenovo because of their tight relationship with the Chinese Government. But for once, this would have been a purchase that would have actually made sense and would have worked – Anyone following Volvo’s news recently?

“Heinz: Under Buffet’s wings but outside McDonald’s Heaven”

In June 2013, America’s Investing Alchemist Warren Buffet finalized the purchase and privatization of the world’s largest and most renowned ketchup maker “Heinz Ketchup” but after 5 months of victorious celebrations, Heinz got its first slap in the face from what is probably their biggest and most valuable customer McDonald’s.

The news – as shocking as it may be to the rest of the world- was probably expected by Heinz after appointing Burger King’s former Worldwide CEO Bernardo Hees as the new CEO (He is still a vice chairman of Burger King’s Board, conflict of interest? Anyone?)

But what does it really mean for Heinz to be taken under Buffet’s wings? And what does it also mean to be kicked out of McDonald’s heaven?

Let’s begin by being kicked out: In USA, the effects will probably be insignificant given that Mr. Ronald only uses Heinz in 2 markets Pittsburgh and Minneapolis (Yey my state!). In fact, Heinz lost McDonald’s USA more than 40 years ago during their tomato shortage crisis in the 70’s (so the 70’s had 2 disasters oil shortage and tomato shortage how come people only remember the oil shortage didn’t they miss their ketchup then?). But Heinz will feel the heat in their European Business Unit and in what McDonald’s calls APMEA (Asia-Pacific Middle East) those markets have been the fastest growers for McDonald’s compared to the slow growing USA in terms of sales, revenues and branch openings  in the last 3 years. (McDonald’s have plans for 2000 stores in China by the end of 2013) and what is the number of Burger King Stores globally? 11,100. In other words China alone represents 18% on Burger King’s scale. This kind of dwarfs what is supposed to be the world’s second largest Fast Food Hamburger Chain. Keep that in mind and add to it that two thirds of Heinz’s 11 and a half billion dollars in annual sales come from outside the USA and the picture of how hurt Heinz may be by McDonald’s move becomes clearer. The question that poses itself here is whether McDonald’s really thought this one through? They did announce that they were gradually moving away but will they be able to find one supplier to fill in Heinz’s shoes in their global market? More important, what if Heinz decided to cut off their supplies instantly? Sure they will be shooting themselves in the foot, but if the other guys have already taken their decision why to extend the pain?

But what made Heinz fall under the attention of the investment alchemist Mr. Buffet? Up until 2006 Heinz was suffering, then they started implementing a very aggressive plan that lead to cutting costs. The plan – though weird in some of its aspects – was successful (Heinz makes its employees pay for their parking spots in the company’s HQ parking!) that was combined by an overseas acquisition plan. So in contradiction to most major sales where a company gets sold for its poor performance, Heinz was at a strong position when the sale happened. Right after the purchase in which he partnered with the Brazilian investment firm 3G which is known for its aggressive shakeups in every purchase it does and for changing CEOs and cutting the workforce in a vigorous attempt to slash SG&A costs; Heinz’s former CEO was replaced right away signifying a new era at Heinz where the shakeup policy which was already started in 2006 is getting another shakeup itself.

Buffet can be called the Alchemist or King Midas because he has the golden touch in investment; all the companies he has major stakes in are some of the most profitable in the world. He has an eagle eye when it comes to catching the perfect prey and he sees logic in places where others see nothing. If you take a look at his portfolio you will realize that contrary to most investors and mutual funds that are going like crazy after tech companies and junk bonds, Warren Buffet always looks for the simplest business models to invest in. In fact, IBM is as most “techy” as it gets and even in there he does not have a big stake. At almost $141,000, Berkshire Hathaway’s stock is highest priced on the NYSE and most of the companies in the portfolio witnessed impressive growth after they were taken over by Berkshire. Some of the names in the portfolio are: Geico insurance (remember the famous lizard?), Dairy Queen Ice-cream, Burlington Northern and Santa Fe Railway Company, Acme and Fruit of the loom. All are very successful brands with very simple business models.

But this time it’s different, Buffet is going head to head against the fast food behemoth, in ways it is a clash of the titans. In the past, we have seen many companies go bankrupt after falling off the grace of Wal-Mart because they could not find any replacement for the big volume of business they lost. McDonald’s is the Wal-Mart of fast food and falling of their grace will surely have drastic effects. Of course Heinz is a big name and they supply many other chains but place them next to McDonald’s and they would be just…… Pocket change.

In the Greek mythology, King Midas used his touch and turned everything Gold; but then he touched his daughter and she changed to gold also; has Warren Buffet touched his own daughter this time?