bizzXceleration: Performance, Value and Profit

Well with a lot of the economic news and analysis posted we can segue back to business analysis but let's keep in mind that one feeds the other - a fact, for example, that all the most lauded names in value investing have lost sight of. And paid some terrible penalities for. Again the mantra: Economy - Industry - Company. In other words you can never neglect the macroecon news in general but right now the metastasizing worldwide economic slowdown is driving everything. Just to put it in context and remind you we offer up this little tidbit from the WSJ:

Personal Income Falls, Sentiment Is Weak  Falling personal income and weak sentiment suggest consumer spending, the juggernaut of U.S. economic growth, could be headed for the first sustained decline in nearly two decades. "Consumer spending is poised for a major slowdown," Wachovia Corp. economist Mark Vitner said in a note to clients.

Auto Industry Outlook

The executives of Detroit have been wrestling with the consequences of decades of bad decision making - struggling might be a better word. They've trimmed up their legacy costs by taking retirees off the healthcare gravy train and re-negotiated their labor agreements. They're also downsizing to reduced total sales and much smaller market shares, among other major moves we'll talk about. Unfortunately they didn't anticipate as bad a downturn as they're getting and left key decisions very late in the game. It wasn't until about late Spring apparantly that they true magnitudes of the downdraft came to them. This chart shows YOY% changes and absolute auto sales for two timeframes. The first strategic oopsie was that these guys set themselves up for a 16million unit sales year with the downside being 15mil when you read their annual strategy presentations. They started to change that to 14mil with a headge in some cases, primarily Chrysler's team, for 13mil. Well as you can see those were wildely optimistic. And - if you find any credence to any of our economic analysis - shouldn't have been a surprise. In fact when you look at these numbers - a point we've made before - 16mil is aberrational. In fact they should have been strategically re-building themselves to make money at 12-13mil. But actually the situation is even worse than these charts make it appear.

 Mike Donnelly over at CEO Economic Update put together this fascinating chart a while back where he takes the same long-term timeframe but adjusts sales by looking at the % of the workforce buying a new car. While my charts would indicate major strategic problems and a dismal outlook Mike's tell you that the industry has crossed a major tipping point into a whole new buying environment. One that they are, despite all the headline announcements NOT positioned for. Nor one that they appear to be anticipating yet.

Auto Industry Business Performance

One of those key announcements is that all the majors will start making smaller cars in the US and will do so rapidly by first selling marks they're already making in Europe while they invest in and ramp up domestic manufacturing capabilities. Two things struck us as really total astonishing about this. First, that they could make announcements with such short timeframes for serious transitions, which imply they've had the capabilities for years but have avoided committing to them. And second that they waited until the wall was knowcked down on them and ignored the handwriting for as long as they could. The old George Carlin joke that "the '60s were good to them" seems to be entirely true and, sadly, they just now seem to be enterring into the drug rehab program from whatever they were smoking since then. On a strategic and operational basis they're facing three clusters of challenges. First, they've got to survive the next 3+ years, not 1-2 like they keep saying, and find the financial wherewithal to keep themselve alive. That by itself looks extremely unlikely, at least for all of them. Can you spell bankruptcy - which would be a disaster for them and us. Second they have to start selling and then making decent sized, high-quality and appealing small and mid-size cars asap. Preferably in 3-5 years or sooner. Bear in mind the design and development cycle for cars is 3-6 years long so shortening it up is a huge problem and they'll have to depend on what they can quickly lay they hands on that's already in the pipeline or production. Third, in the long-run, they need a complete re-tooling of operations, development and the product/market mix which again requires money they haven't got. In a previous post we pulled all this together using our performance analysis framework to assess the industry on the whole and the individual players, with the results you see here. Which may turn out to be too optimistic even yet.

Paradoxes of Performance

Charlie Rose recently did a three evening set of interviews on the Auto Industry starting with a session on design which was very interesting and encouraging. More so if we thought something would come out of those discussions quickly enough to have an impact. The set concluded with Bob Lutz talking about design in general at GM and the Volt in particular. GM's versions of a high-stakes, high-reward, very high-risk "Manhattan" project. Gutsy and courageous and illlustrating a return to their roots IOHO. But the most interesting and valuable was the middle show which was an hour-long interview with Rick Wagoner. Talk about a guy facing enormous pressures and coping well. And starting to do some of the right things. We urge you to watch that one in particular and reach your own conclusions. But some of ours would include a sense of sadness and shock that he rationalized the commitment to big SUVs and cross-overs as the result of the CAFE standards and the unwillingness of Americans to buy and the unintended consequences of too low gas prices. A nice thesis but one that falls on the simple fact that Toyota, Honda and Nissan have been very good mid-size and smaller cars that are attractive, appealing, high-quality and innovative and profitable for years. And as a result have started in one part of the auto industry ecology and gradually taken over more and more of it. Hondo in particular illustrates what happens when you define a strategic vision, translate that into good design and back it up with superb operational execution and functional capability. In their case that's particularly true of their commitment to flexible manufacturing which gives them a capability to switch what they make from what's not selling to what is. If you want some interesting backup on these assessments watch the several prior interviews with Wagoner and notice the evolution of the rationalizations and explanations !

The bottom lines here are that the Auto Industry is facing as big or bigger a set of challenges as the Finance Industry who we've taken such "joy" in bashing, runs a serious risk of bankruptcy in the near-term, faces major investment requirements to switch over their product mix and more to re-engineer their operations. All told they may in fact be an even less appealing investment than the Finance Industry ! Auto Industry Failure Odds

Continue reading "Back to Bizzness: Escalating Troubles for Auto Industry" »

Posted by dblwyo at 02:16 AM | Permalink | Comments (0)

Continue reading "AutoFutures: Re-Thinking the Car Business, or NOT ?" »

Posted by dblwyo at 09:28 AM | Permalink | Comments (0)

Now that all the market excitement has gone away it's time to return to our roots and talk about business performance some more. Specifically the Auto Industry whom we don't mean to abuse to much but have done so before and will likely have future opportunities. Actually, all things considered, we hope so. Oh wait...the Industry employs 13 million people and is 4% of the GDP. And Goldman just said sell GM after it, or because or something, reached a 53 year low. We'll leave it to you to graph out the stock prices of the Failing 3 but's pretty scary. We've covered the industry several times before and actually had both good and bad things - good in that they were finally gingerly sneaking up on their fundamental requirements for deep structural changes. Bad in that they were sneaking up, were kidding themselves about the state of the industry and economy and we thought they were going to get body-slammed real bad. Ahem....

After the break we've got our little collection of readings from which there are some primary take-aways. Detroit has finally conceded - knowing and doing are two very different things mind you - that the future is NOT pickups and they need to change their model mix. And they're also willy-nilly converting to the high church of not 16 million in annual sales. More interestingly they're starting to be willing to tackle the kind of revolutionary changes needed to survive. The example being GM's Volt - which could be a real game changer. And is the kind of innovation that made Detroit great. The sad things in all this is there's plenty of talented people who knew what was wrong, know how to fix it but opted for incrementalism because the didn't feel the boiling water. No matter how many dashboards run back how many years. One of our favorite quotes suggests that the Industry can't survive at 14 million cars for two years. Check out the chart - they did just fine for three decades between 13-14mil !!! What misplaced fantasy of lease-financing, discount subsidies and over-production of ancient models nobody really wanted made them think it was graven on stone ?

The problem is that the let themselves get trapped in a corner by their own manufacturing - though admittedly there have been major improvements. Here's one of the things that have gotten them into three decades of up and down. When TOY created (actually borrowed from Westinghouse) their Production System (TPS) the changed the traditional economics of manufacturing. Before the lowest unit cost was from processes, then assembly lines and then batch manufacturing. So you made money by keeping the lines running at any cost and shot for enormous scale. By moving to more flexible, cellular manufacturing TOY could run their lines in much smaller sizes, they got lower unit costs and they kept getting better and better. This may seem a little arcane but manufacturing competence is one of the two core requirements for Detroit's success. Just as much as software development should be Redmond's. In all cases start falling down, or loosing ground big time on those core capabilities, and you're writing out your own death warrent. When Kirkkorian put money into GM a while back I though he was nuts because GM was dodging the issue; contrawise when he put money into Ford this spring I thought he was a darn smart risk-taker because Ford under Mullaly is starting on those changes. Now in a matter of a few months everybody's conceeded. Do they have time ? The need to make money at 12-14Mil cars - in fact they need to defend their turf in much smaller corners than that.

Bear with us on this one - it should be worth your while but amateur graphic artists that we are, using PPT and trying to capture ideas in 3D and then blog 'em leaves some challenges open. Nonetheless with a little imagination and sympathy this may be clear - the Auto Industry (or - we emphasize - any) is driven by the key dimensions of its' ecology and their dynamics. Here the dimensions are vehicle type, customer socio-graphic and car size. Detroit had this space all to itself but the Japanese got in in the econo-box and used manufacturing excellence to expand into the rest of the space while Detroit kept retreating to Pickups. The Japanese even did an end around by attacking the flank and creating their own luxury models. When you give up marketspace you lose economies of scale. If you lose economies of scale you need to change your own processes and economics but Detroit was trapped and kept retreating. When you loose marketspaces to a competitor who can make money in smaller niches thru better products where their profit and returns are higher at any concievable scale they become cash-flow generating machines. And you become profit-sucking machines. Instead of milking SUVs and Pickups for profits, x-subsidizing the rest of their products and brands and fighting rearguard Detroit would have been better off re-investing in development,manufacturing, marketing, distribution, logistics and everything else.

They're smart people who're backed into a corner and if they don't make it they'll take a chunk of our economy with them. Not good. As an investor though these are the strategic issues to consider,  unless you want to go back and ride the old roller-coaster with the old Kirk. BtW our two prior posts on the Industry had some interesting charts that flesh out this picture and assessment. (Auto Industry:Boil, Boil, Toil and Trouble) 

Continue reading "Once More Into the Breech: 3 Decades of Auto (Industry) Delusions" »

Posted by dblwyo at 02:27 PM | Permalink | Comments (1)

Let's start with the market situation as captured by these charts on sales. Toil and trouble indeed...the top chart shows YoY changes in GDP vs annual sales in millions for autos. Odd correlation but striking, eh what ? Particularly that sales appear to have run an average of ~ 14+ million since '76 with a dip to 13Mil in the last bad downturn. And were only bumped up over 16Mil during the tech boom and maintained there by incentives since ! What kind of industry can barely stay in business running at 114% of ideal capacity ? Instead of making money at 90%, or 80% or 70% ? Detroit built and subsidized it's own trap here.

They chose to argue "we can't make money on small cars" despite the clear evidence that the Japanese and all other foreign manufactures could. Instead they chose to retreat from huge swaths of the marketspace, abandoning those potential profits and cash flows, and keep older factories running at losses because of labor and other fixed costs until their hand has been forced. And keeping things alive by subsidizing money losers with higher premiums from SUVs, etc. Instead of figuring out how to design and build cars people would buy, changing the manufacturing, distribution and procurement operations to support those innovations and putting in place the kind  of management systems and infrastructures necessary. Which is where the funds should have gone.

We've tried to capture what was, is emerging and the vital next steps in this composite assessment of the industry and some of the key players from Detroit. Note: this is not a depiction of an ideal, if it were we'd have Toyota with a 9 on Manufacturing and Honda with an 8 on design and so forth. Nonetheless this is our best judgment on the key factors, based on our enterprise framework (Performance Assessment Basics: Five Fundamental Factors), of the requirements, the composite average for Detroit and some guesstimates on each of the Dying Three. You might want to a) look at each of the factors and short-hand requirement note to see if it makes sense to you. And then b) come up with your own ranking. The only good news is that things have improved...the bad that they haven't improved much at all...and the really bad that the possible next steps are most likely still many steps below long-term requirements.

The auto industry has to deal with a wide variety of sub-spaces in its' markets and you could break them down in many ways. But at the heart of the Detroiters deepest structural short-comings is the inability to make money except in one very "narrow" band of products. The one that's clearly under the most threat now from environmental conditions and has been for decades. BtW - on the whole we mean the color coding to represent the outlook for that sector largely with respect to Detroit; and how they are or aren't positioned in it, both strategically and in terms of operational capability. In that sense the Hybrid space probably shouldn't be green but there are some promising models coming even though it's a small space.

The correct choice was to use the cash from those segments to re-engineer the others...or abandon them. That would have meant facing many harsh realities, which until the last 24 months or so, nobody was really willing to admit. Cerberus takeover of Chrysler was a sign as well Mulally being brought into provide adult supervision and normal good business practice to Ford. Here's the rub - all the plans that the MSM has been applauding are cost-trimming around the same underlying structural problems. Not a headon attack on those deficiencies.

Given our druthers we'd all like to be grasshoppers and not ants. The problem is that ants do better in tough times and senior corporate executives are paid to be the whip-cracking foremen of the ant colony. And it's not like any of this is a mystery to anyone...just take a gander at GM's l.t. stock chart and tell me that this isn't what the market consensus has been expecting ! 

As you skim the excerpts after the break you'll find a longish collection of readings that sketch out the strategic situation, the current sales and outlook picture - which apparently has blindsided everybody, and individual company discussions. The lead off is a great WSJ article that basically comes to the same conclusions we're arguing here. The last is a vidclip interview with Chrysler's new executive team that's more than a little coy but also, reading between the lines, pretty deeply insightful on what needs to be done. It stacks up nicely against our little blueprint checklist. And finally, at the top, are some very recent CNBC, et.al. vidclips worth your time. Particularly the one from Bloomberg where Mr. Johson of Lehman (how ironic) discusses the state of things.

BtW - the original quote from Shakespeare is "Double, Double, Toil and Trouble" and the entire scene certainly describes the witches brew that the auto industry has created for itself. Also at the end you'll find the pointers to a couple of prior postings on the industry that might be worth reviewing. Especially inasmuch as they have some interesting newsclips along with some useful graphics, particularly on manufacturing. 

Unfortunately climbing out of the cauldron they brewed themselves is going to be long, difficult and painful for the industry. And before you get too overwhelmed by the schadenfreude remember that the industry is still a major part of the overall economy. Not what it was, certainly, but its' troubles are still our troubles.

Continue reading "Auto Industry:Boil, Boil, Toil and Trouble" »

Posted by dblwyo at 08:57 AM | Permalink | Comments (0)

Let's focus on the Auto Industry which is important, and still gigantic, in its' own right but also the exemplar of much that goes on in the business world. Now in case you haven't noticed the US auto market is facing a severe and accelerating downturn which appears to have been somewhat unanticipated, particularly by GM. On the other hand the turnaround team at Chrysler at least claims to have positioned itself for a sharp drop in total demand and a major shift in its' structure. And Ford, who'd have thunk it, actually did pretty well all things considered. In fact we'd argue that Ford, relative to what might have been reasonable expectations, is turning in an amazing performance.

Yet all told all manufacturer's are experiencing a very bad and worsening market (& if you don't think that says something about the economy we need to revisit the Into to Macro discussions...). Below in the readings you'll find an overview from Ghosn, some specific stories (BMW, Daimler, GM, Ford) that support these points including the applause for Ford and some big picture discussions of Toyota's structural and strategic advantage as well as the issues with completely re-thinking the stables of brands that need to be downsized. Those last two should be taken together as they define the Yin and Yang of the Auto Industry. At the end of the day, beyond the Business Model - Strategy - Execution - Accountability mantra we've defined for performance what're the necessary changes ? At their heart Auto companies really do one (two) things. They build cars, which more properly broken down, they design and manufacture cars. And coming from the industry that defined the world's model of manufacturing excellence those roots seem to have been lost.

Let's consider manufacturing excellence and the state of the world using the graphic at right. Where this is important is that the argument applies to any manufacturer anyplace in the world so as stakeholders in any such, whether the Auto guys, John Deere, Caterpillar, or whomever here's a simple model to think about. When you think about it you can make things as 1-Offs, that is completely to order, like a new prototype or an F1 Racer. Or start with some basics but go thru extensive customization like, for example, the Bugatti Veyron. There's a reason that a Veryron is so expensive or a suit from an English bespoke tailor will look great but cost you. The next alternative is to run in batches - that is invest in some capital equipment and make more than one of pretty much the same thing. Make enough and pretty soon the cost/unit is less, and then far less. Which suggests that if you set up a manufacturing assembly line you can just churn those suckers out for lower and lower unit cost. Finally there's the notion of making things a continuous process, as say, an oil refinery or chemical plant does. Or for that matter, in a way, Intel or TI do. The reasons more don't do that is pretty obvious - not everything's a barrel of oil, a gallon of chemical or a one of a million chips. (admittedly stretching the point). So for most things where market size, product characteristics and manufacturing technology dictate you end up choosing between custom, batch or line processes.

What Toyota introduced many years ago was a manufacturing process that didn't require a giant, rigid, very high volume, inflexible and non-interruptible manufacturing process. Otherwise known as the Toyota Production System or "Lean Manufacturing". What they discovered was a way to organize manufacturing where one could achieve comparable economies thru more flexible and cellular manufacturing. Which by it's very nature was also more flexible in terms of both setup and interrupt and different models. In other words it was profitable to make just enough to suit a particular market and then switch to different models. Now in the first picture what you see is the shift of unit manufacturing cost, that is direct operating cost, as the result of this innovation until a Lean Manufacturer can beat a line manufacturer on direct costs. Sadly we've known about all this for several decades. More sadly of the companies who've started Lean initiatives some 70-80% are abandoned. But the consequences are even more dire.

Because you see we were talking just about direct manufacturing costs. If you're committed to a full-roar line process you keep it pumping no matter what - which means you build as much as possible and stuff the market with stuff the customers may not want so you end up with lower prices. And worse yet because you're running these giant machines you've got these equally huge procurement and distribution operations that are just chock-a-block full of inventory, costs, delays and disruptions. On the other hand a Lean Mfg who's running in much smaller lots, who can stand to be interrupted, who can start & stop, change models, etc. etc. and doesn't mind as much idling his operations enjoys benefits in Total Operating costs and Revenue per unit. The end result is two strategic benefits. One is a much higher unit profit than a traditional manufacturer. The other is a long-term dynamic advantage as and if they keep improving - able to make more and more profit from more and more targeted products that add value and command higher prices.

Now we've argued that the US Steel Industry was a perfect model for what the Auto Industry is going to have to go thru. It looks like Ford and Chrysler have finally realized that and are well-started. But what other industries and companies need to get on this bandwagon. Give it some thought. Better yet ask who's on this journey to a complete re-think and re-work of manufacturing operations. Those will be the folks you want to invest in. Contra wise the ones who aren't, or who abandon these sorts of initiatives, are going to face an increasingly inhospitable world.

Continue reading "Business (Auto Industry): Worsening Outlook, Improving Peformers, Key Issues" »

Posted by dblwyo at 05:06 PM | Permalink | Comments (0)

When Lee Iaccoa was booted to Chrysler he managed to save them with a combination of an innovative nwe product (the Minivan - which Ford had turned down), draconian cost controls and product manufacturing rationalization on shared platforms. In the process the US gov't actually made a profit on its' bailout funds. Yet over the next three decades Chrysler has cycled in and out of profitability depending on whether or not it had a hit for a few years. From the auto company known for the sustained excellence of their engineering and product they became the boom-n-bust kids. And that's despite several extremely innovative transformational efforts that deservedly made the Harvard business case files. This includes a revamp of the design process using CAD/CAM technology, re-structuring the inbound supply chain and supplier relationship management processes and similar major innovations. What it didn't manage to do was change the fundamental DNA of the company - the processes, culture, decision-making processes.

In a way Chrysler's story, suitably modified, is the story of the Detroit auto industry - once the examplar for manufacturing excellence, product design and development, quality and customer focus. How long has it been since any of those have been true, at least generally ? So after "coasting" for those same three decades on its' historical legacies the industry is facing a huge amalgamation of challenges: inefficient and broken processes, cost pressures, lack of manufacturing quality, products that customers, shall we say, don't love and nearly tonedeaf marketing, sales and service. The greatest irony of all is that the Industry knew and knows all this but could't find ways and reasons to change.

Well those reasons, and the decades of denial, have been presented. Not only the contininuing challenges from the Japanese, e.g. TOY, and some reborn European manufacturers but a change in the global car market and rising worldwide competition. All of which is reflected in the readings excerpts. NA sales are in the tank and the product mix was wrong for this energy inflation environment. It turns out that Europe, ha for decoupling is in the same boat, and even companies like TOY are facing major challenges.

Yet Mullaly at Ford, the Nardelli team at Chrysler and Waggoner and the GM team have made major strides by trimming costs, downsizing to the markets and starting to revamp operations, development and go-to-market. The real question is whether they'll get enough speed to lift off before they can lift off. Pilots talk about V1 - the speed going down the runway where you start to get enough lift to rotate the nose up. Mullaly in particular is doing all the right things at the sickest of the Big Three but V1 is coming up awful fast and it's not clear they'll get the speed they need.

Someday we'll try and go into a broader assessment and diagnosis but for  now let's look at one of the most fundamental problems that's just beginning to be addressed - the vast differences in cost structure between world class and the Big Three. Short-trimming, even the major surgeries performed, only help. This requies fundamental re-thinking and re-engineering. When you face a competitor who's cost structure is innately, organically lower than yours they can make a profit while you loose money at any scale of operations. When costs rise or the market shrinks then the superior operator has a long-term DYNAMIC advantage. Worse, in shrinking AND more finicky markets a manfacturer can no longer appeal to economies of scale to survive but must learn to make money at smaller scales in each market niche it serves. Oh my aching head....

Continue reading "Auto Industry: Pressures, Changes & Outlook - Finding V1" »

Posted by dblwyo at 07:09 AM | Permalink | Comments (0)

Somehow or another all the business news is either finance or technology news these days. I'm sure that's not true but that's the net effect give my readings. The huge wave of finance industry news is, under the circumstances, not a surprise and we covered it yesterday. It's worth bearing in mind that the Industry was a whole appears to a) be as badly broken thru its' own self-inflicted wounds compounding and b) as the credit markets go thru an extensive de-leveraging process that the industry will be badly shaken up and re-structured. And perhaps c) we may have a long way to go.

The first two stories below are on Chrysler and Pfizer - both of which industries have backed themselves into similar corners. The Auto industry by getting stuck in its' own rigidities and denying the need for change for 3+ decades. As we've mentioned the core of the Pharma industry is their R&D activities and, very unfortunately for them, their core business model of chemistry-based drug development is broken by exhaustion. And the nextgen replacement (bio-chemical/biological) is not a near- or intermediate-term potential (though depending your horizon you should be lookin at systems biology and what's going on with "synthetic" life). Whic leaves us a bunch of Tech industry stories. Which in turn are stories about escalating pressures for cost control and change, companies failing to innovate and some succeeding.

In the latter class are Apple and TIVO both of whom have focused on defining and delivering value. Preceeding them is a story about one MS fantasy about Yahoo - that it'll help take them into the on-line software arena by combining Yhoo's on-line DNA and MS's software development DNA. Excuse me - their core strategic value propositions at which they've been failing miserably for years now ? Yahoo obviously but for those of you not enchanted with Longhorn, excuse me Vista the pitiflul remenants of a grand(iose) vision terribly executed and perhaps flawed in conception (btw do a search on Code Red and MS sometime for an understanding of how badly their supposed core competence in programming failed them). The other side of the coin is HPQ which is well on it's way to re-balanced and re-factoring itself, illustrated by a story on Hurd's moving to the next step by starting in on re-directing their R&D labs toward a stronger commercial focus (a step Gerstner took at IBM back around the mid-90s).

The first two tech-related stories are more general interest tech stories which define the ecology of the industry. One counseling IT departments to start putting pricing pressure on their vendors. The other on the topic of business vs technology alignment. We've all heard the stories about businesses able to change an industry thru the strategic use of technology. The problem is that for 20 years it's generally the same small handful of exemplary firms, e.g. WMT, FDX, Schwab, et.al. What you may not be aware of is that there's a huge gap between the MIS department and the operational business which the industry has been struggling with for decades. And despite the bottom of the "stack" becoming a commodity the top part where business solutions live is as much about magic, mis-communication and 70% failure to deliver rates as it ever has been.

As a friend of mine with almost 40 years in the business said:

La plus ca change, la plus ce meme chose.

Continue reading "WRFest 9Mar08(Business):Auto, Pharma & Tech News" »

Posted by dblwyo at 11:54 AM | Permalink | Comments (0)

We're still plowing thru last week's news in digestible chunks having split our weekly reader not only into Economy, Markets and Business but also split Business into this, the 3rd of 4 sections. Given the volume and importance of the various stories it seemed like a good idea and also allows us to wrap a little framing around them as well. A metaphor that captures the approach is that we try to take both an ecological view and a species specific view and look at the interactions. The Economy defines the longer-term geo-climatological context that everybody has to deal with while the markets capture the shorter- and intermediate-term cycles and behaviors. And the Industry/Company studies (Ganesh Filters III: Analyzing Businesses Blueprints) look at the status and outlook for key species. So far this round we've covered the Finance Industry, which at 30% of the market is important in its' own right but also heavily influences the flow of "energy", directly impacts the behavior of the Traditional and Technology businesses. And we specifcally broke out the LBO industry this round because it's on the cusp of what the industry is beginning to view as a major change in its' environment and what it will take to survive. To continue with the biological metaphor/model the LBO industry has contributed perhaps 20% to the rise in stock prices, perhaps more in the '07 over-trend "bubble" but is now facing a huge structural shift where different characteristics will be favored over agility and financial engineering genes. THERE WILL BE A SHIFT in the population as a result. Which will in turn impact all the other players.

Which sort of leads us to the old-line traditional industries in general and the Paper, Auto and Retail industries in particular. In each of these cases we'll return to a constant theme - what does it take to run a good business - in a new perspective. What are the functions, capabilities and processes required to execute a strategy and deliver value. And since several of the most interesting stories are about Retailers we'll frame the discussion using the chart at right (click to enlage) which shows the a complete, architected Retail enterprise. Hopefully you can imagine similar illustrations can be developed for other industries as well. Given a strategy and business model those must be EXECUTED by daily Operating efficiencies, managed by good Tactical planning and, over-time, adopted & adapted by Strategic changes. In the chart what you see is a complete, representative inventory of these capabilites structured to show, to some extent, how these all related to one another. As you evaluate an investment what you're really asking is how are these processes being performed at each of these three timeframes. And unfortunately the answer is all too often not particularly well.

Continue reading "WRFest 2Mar08(Business): Paper, Auto and Retail News" »

Posted by dblwyo at 04:14 PM | Permalink | Comments (0)