Suppliers, Part Three: How to Best Leverage Them

This is my third post on suppliers. As a supplier as well as the leader of a corporation that spends millions of dollars annually with our suppliers, I feel strongly about the value of a good, honest supplier to its client.

Too often, corporations are one-dimensional with suppliers: bid them out, get the lowest priced one and move on.

This is the approach that GM perfected and it cost them. Corners were cut, creativity and passion disappeared (GM didn't want to pay for passion, creativity or loyalty). It's not fair to single out GM, there are good people there and there is hope that they will recover. But they won't without a different approach toward suppliers.

I've thought it would be interesting if we applied the Golden Rule to this. If you were treated by your boss the way many corporations treat suppliers, how would you feel and perform? If your boss said, "We're going to interview a few people that want your job and to be fair we'll also include you in the competition," would you be worried or would you say, "Great idea"? I think most of us would be at least concerned--after all the competitors may make performance promises that sound good but aren't realistic, they may say whatever it takes to win whether they can pull it off or not, etc.

Then factor in all the waste in doing the competition--hours upon hours of preparation, hours of going through the process for everyone and the emotional drain.

To be clear, all suppliers are not equal. The mediocre supplier that does only what is told should be bid out. The bad supplier should be fired. But if you have a dedicated, valuable supplier that goes beyond, why not first work with them to do what my previous blogs have recommended and utilize their insights and build a better, even more valuable relationship?

I say, why not give it a try? If it doesn't work, you can always bid them out next year.

Suppliers, Part Two: Get even more out of suppliers...

I've written about the value of getting insights from your suppliers. Your supplier will know much about how your company is running, where you're wasting money, how you are to work for.

But beyond your specific working relationship, the supplier can help a corporation dramatically.

A good supplier can, when its ethically possible:

1) Give you business leads. The suppler will know what's happening in the industry, they know what opportunities are out there.
2) Give you insights on your competition and share what is going on with them
3) Share what they're doing with other companies that might benefit yours (they may also get business out of this, good for them)

Ask your good suppliers to play a bigger role in your success. Why not?

Don't waste time on your speech...

This isn't a message on public speaking--I'm referring the "things are going bad, we have no sales, the economy stinks, the competition is doing bad also, etc.) speech.

CEOs to salespeople to hourly workers are preparing, refining and perfecting the "everything sucks" speech. That speech is a waste of time--and it doesn't work.

Think back on the times you've seen an interview on TV from a political candidate after they lost and they cried about how unfair the competition was...Or watch ESPN and check how you feel when a losing athlete talks about how the officiating was bad or how his/her team was just happy to be in the game (meaning they never thought they had the chance to win).

These "defeat speeches" do nothing for anyone. The answer is: be honest, totally honest...succinct, with no spin. Then focus the rest of your time on how to get out of the funk and make something positive happen.

Suppliers, Part One: An untapped source for economic health...

Corporations are looking for ways to save money, reduce budget and keep their doors open. Where do they usually turn?

Let's think--they downsize. They reduce offerings. They bid out their suppliers to find a better deal.

One place they seldom turn is to the people that know them best--their suppliers--not for money reductions, but for their insights.

Most of us are suppliers, think of how you could help your clients if they were open to your insights? Most suppliers--loyal, good ones--want their client to do well, be healthy and stable.

Sounds obvious, but it's not in our business world. Most corporations don't want to be vulnerable or beholden to a supplier. They're more comfortable hiring the supplier to do work.

The smart client should look at the supplier as a source of great insights (and of course good work at a fair price).

From Order-Taking to Order-Making

Companies are taking one of three responses to the current economy:
1) Lay-low
2) Business as usual
3) Order-Making

1) Lay-Low: There are plenty of companies that have given up and are in survival mode. They awkwardly smile when you ask how their business is. They've thrown in the towel and in hibernation, hoping to wake up to a better world in a few months.

2) Business as Usual: Other companies are moving along as if things are the same as ever. Those companies are the ones that all of a sudden will realize they're in denial and cut a third of their workforce all at once.

3) Order-Making: These are the opportunistic companies that respond to the recession for what it is making sure they have the right size workforce and operations while focusing on opportunities. These companies are in a positive cash position and have a huge advantage over their competition.

Big ideas and strong companies have been born in recessions and depressions--all from people that had the courageous and passion to fight the temptation to be in denial or in hiding.

Advice on wine and on the stock market

I asked advice of two very smart people recently. One is an expert on wine, the other a top financial analyst with a major bank. I wanted to know how best to take advantage of the current economic situation, i.e. to find good deals.

I asked the wine expert for his opinion as to my approach to buying investment wines now that the high-end wine market is slumping.

I asked the financial analyst for his recommendation on how I should approach the stock market or real estate.

They both said exactly the same thing:

Be patient, it'll get a little worse. Then it will be time to buy, because it will get better.

Desperate Times means Desperate Decision-making

My wife is a great networker, always helping people, connecting them, etc. It’s a gift. One day I received a phone call from a man (his wife is friend’s with my wife). He told me that his wife (via the Networker, my wife) wanted me to talk to him about being better at handling his personal finances.

After quickly fessing up that I’m not a financial guru and that I find P&Ls overwhelming, I shared one thing that meant a lot to him:

When you are financially strapped, the biggest danger is in the decisions you make. When people (or corporations) are in monetary peril, that’s when they do the most mind numbing things—they break the law, they lash out, they reward themselves lavishly, they disappear, etc.

And when you’re desperate and making horrific decisions, you can’t be yourself, you can’t be at your best for your family (or you clients or employees).

"My industry is down 40% and no one is buying?"

We need to stop and think when we hear things like, "My industry is down 40% and no one is buying anything."

That statement makes no sense, it does, however, cry out for pity for the person saying it--which may be their intent. If that's not the intent, then consider this:

The industry may be down 40%, but that means 60% of the customers are still
buying.

Most of your competitors are either laying low or in the process of cutting their services or staff--that means an opportunity for you to gain market share.

If you could go from 3% to 5% market share in your industry, you'll be able to make up for much of the industry downturn. There will be less business to go around, but the aggressive, focused company can benefit in the long run and minimize the damage in the short term.

Crispin Porter + Bogusky--what they really are good at

CP+B is a famous advertising agency, probably the top agency today. Most of the time, its their creative that gets the attention and I think that's unfortunate because their creative, while outstanding, is not the only reason, in my opinion, why they are so successful.

They get a lot of attention for "shock" advertising--for Burger King: Whopper Virgins, Buckin' Chicken, Subservient Chicken; Coke Zero, the VW ads (Brooke Shields and the "don't get pregnant to get a German minivan commercial), Microsoft (Bill Gates and Jerry Seinfeld goofing around), Domino's Pizza (the taste test attack on Subway), etc. All unique, sometimes maybe in questionable taste, but always memorable.

I think, there's more to what they're doing than the shock value. If you look closely you'll see that they're very strategic, very business savvy--not just superbly creative. They promote the "German-ness" of VW (the old VW Beetle that they named "Max"), they do competitive comparisons of products (for both Microsoft vs. Apple as well as Domino's vs. Subway), they actually focus on the taste of BK Whopper (Whopper Virgins), not just the price.


Barry LaBov, CEO
LaBov and Beyond
www.labov.com

In our sound byte world, Crispin is the wildly creative, cool ad shop. In reality, without their brilliant business minds, they'd be just another trendy ad agency.

Maybe the Only Good Thing to Come out of the Bernie Madoff Scandal…

A star is born. On his banjo and home made pvc reinforced horn and whistle, my friend Ed Parrish of Cessna Aircraft has launched his career.

http://www.youtube.com/watch?v=ltssFDNG5Tk

Why are the Best Places to Work the most Difficult for Some of Us?

I have a friend that works at a great company. The company has an organizational system that is very free form—a pretty complicated system in that a number of people may report to different supervisors depending on the issue. It can be unnerving for some. My friend was extremely uncomfortable with it.

He told me that at his previous company, it was simple—he had people that reported to him and that was that. He didn’t encroach on other people’s areas nor did they do that to him. This new company's approach was vague and unclear for him. He was concerned as to how he’d be held accountable.

I think this is a good example of the how an excellent company can be challenging to work at. That company wants people to interact, to negotiate, to deal with issues and to throw away the typical boundaries that are at most companies. They want you to look in the mirror and make sure you believe in what you’re doing—and if that company backs up what it preaches, they should also support their leaders’ decisions.

Dealing with other people, blowing up boundaries and standing up for you believe is tough but it may be what it takes to be part of a great company. It may also be why that company is great.

What Will Happen with Less Dealers?

Estimates are that there will be somewhere between 25% to 60% less dealers by end of 2009. That means less stores, dealerships, outlets and salespeople to buy cars, planes, boats, toys, appliances, and other products and services from.

This could be good. Before I share why I feel that way, I want to stress that I am a fan of good dealers, distributors, sales channels, etc. In fact, I think the good ones should be rewarded with the opportunity to represent bigger markets and sell more products and services at a higher level to more customers.

Years ago, my company helped Audi create and launch a dealership sales specialist program. First, my brave client reduced the number of dealers by 30%, which concerned his boss. Then we did the unthinkable. We appointed only one salesperson per remaining dealership to specialize on our product, Audi. Let's do the math...less dealers, way less salespeople. Sounds like a disaster waiting to happen.

Amazing things happened. Sales went up. Salesperson retention went way up. Customer satisfaction skyrocketed. Profits leapfrogged.

It seems that having one dedicated salesperson (at 30% fewer dealerships) who acted as if they "owned" the Audi franchise was superior to having hundreds of salespeople (some engaged, others disengaged) at hundreds of dealerships (some dedicated, others not) "playing the field" trying to sell whatever brand was easiest to sell at the moment.

What can happen if thousands of dealers disappear? A lot, if the ones that remain are the focused, passionate ones.

Tony Dungy--Business Lessons, Life Lessons

Tony Dungy just retired from coaching in the NFL. He broke the mold. Prior to him, a successful NFL coach was: white, fiery-tempered, a workaholic, and an ego maniac.

Dungy is a low key, ultra-focused Christian man who was just as determined as his NFL coaching counterparts and in return, was extraordinarily successful. His autobiography traces his story from being a standout ballplayer that championed civil rights to becoming a Super Bowl winner.

He had high standards, yet found ways to achieve them without carnage.

I met Tony last year. He was gracious, open, and (I liked this a lot) he was very warm to my ten year old son, who is a Colts fan. Tony engaged him, joked around and ultimately provided him (and me) an example of how positive a successful person can be.

Maybe the Economy has Bottomed Out…But why don’t I feel good?

Barring a disaster such as a war or an earthquake, it is possible that the economy has pretty much hit the bottom and won’t get worse, if anything it will begin to crawl back.

But if this is the case, we’ll be seeing the domino effect for the next several months with stores closing and businesses shuttering. Hard to fathom, but many companies just concluded the “best part” of their year and if they don’t have much to show for it, they just may pack it in. It’ll seem like things are getting worse, when in reality, we’re just seeing the reaction to what has already happened.

Trade Down or Partner Up

I just talked with my buddy Tony Mikes, President of Second Wind Agency
Network (an association for small to medium size U.S. ad and marketing agencies)
and he told me the strongest trend he's seeing in his 800+ agency network: Trade Down.

In Tony's words:

Across the nation, larger clients are re-thinking what they're getting
from their big agencies and are starting to trade down to smaller, hungrier
shops that will do far more with far less budget.

Of course, I love hearing that since I run one of those hungry shops. My two-cents on this:

1) The smaller marketing shops are also more entrepreneurial. Many times, the big agencies are most like the mega corporations they serve. The right small shop can bring energy and fresh ideas at a lower budget.

2) Sometimes, a combination of both a smaller shop and large agency working together is successful, too. We've worked as a team with some big agencies and it's been successful. We carved out our portion and the big boys did their stuff. Client got quicker service, paid a little less.

Here's an interesting insight on #2 above. Many of the big agencies are uncomfortable doing the smaller, quick turnaround projects on tight budgets--sometimes they feel obligated and pressured to do them (they don't want to say "no" to the client). They're willing to lose those projects to a smaller agency IF that agency is a good partner (doesn't undermine them or their work).

Trade Down or Partner Up--either are better than the alternative.

Is it my imagination or...

Does the new CIA chief Leon Panetta look like comedian Steve Landesberg (the guy on Barney Miller)?

Doesn't Chicago Bears quarterback Kyle Orton look mysteriously like the late great bassist from the Who, John Entwhistle (both beer lovers and neither ever could throw a football more than 20 yards) ?

I just saw the movie Valkyrie and enjoyed it. Just one question. Why do the Germans (in the movie) need to have British accents?

And one more thing... Instead of focusing on what we want, why can't we be satisfied, no, thrilled, with what we do have--our clients, our family, our friends, our country?

Politics and Something Positive

I think it's great that the recent President's gathering in Washington happened. The former Presidents as well as the current President and future President all met together, shared notes, etc.

All parties concerned, especially the current Prez and future Prez deserve credit for supporting each other. I have never seen this happen before and am uplifted by it.

It's good lesson for me--if you're open to learn as well as open to share, everyone wins.

Chrysler's $200k "Thank You" Ads Uproar

Chrysler just received their billions from our government and shared the good news with the nation--in the form of print ads in the Wall Street Journal and other pubs. Conservative estimates put the cost of placing those ads at $200k each--for a total of at least $600k.

Now, there is an uproar against this waste of money and I think that's valid. It is a waste, especially with economic experts predicting that Chrysler cannot survive much longer than three or months. But...

To Chrysler's credit, they are trying to show gratitude. They are simply not used to thinking "small" like entrepreneurs do everyday. They're used to big, slow, plodding, uncreative bloated actions like an ad in the WSJ. What else was on their wish list--a multi-million dollar Super Bowl ad thanking America? You might be surprised.

Let's not crucify Chrysler. We're witnessing that money alone will not save a company, opening their minds to new thinking will have to happen. They still have the chance to succeed.

Want to Show Leadership in a Tough Economy? Don’t take a raise.

It doesn't matter if you’re doing a good job or if you try hard—I assume that. If your company is in trouble and contemplating a lay-off or cutbacks, why give raises to the highest paid people in the company? Do the math. If the top 20% of a company do not get a raise, that may equate to “saving” numerous employee jobs.

Few corporations take a position like this. They usually continue rewarding the top people (and everyone else) as if nothing has changed in the economy. Or they end up laying-off white collar and blue collar workers in droves. Quite often, they end up doing both, in that order.

Again, this has nothing to do with the executives’ performance, just as laying off workers usually has nothing to do with their performance. It’s an opportunity to show leadership and save jobs.

Pink Floyd and Company Morale

Being a former rock and roller (my songs sold well under one million copies), I love to read bios on my favorite bands. It's often occurred to me that I run my company like a rock band more than a business, which has its good and bad points.

In the Pink Floyd biography, Comfortably Numb, there's a wealth of business nuggets that can be gleaned such as:

Taking LSD when you have schizophrenia is not going to contribute to a positive outcome. If only America's CEOs understood this... Seriously here are few that stood out to me:

1) Success can be a huge barrier to growth. When PF scored their first hit album, it was devastating for the band, they had a difficult time following it up, egos emerged--they went from four guys who got along well to two factions that fought continuously.

2) Together, they were magic. Apart there were not.

3) Greed never motivates. A constant stresser in the band revolved around who got credit for writing the songs. Song rights are the most lucrative part of the business and the more songs you are credited with, the more money you make every time your album sells.

Think how tough it is to deal with success in business--that's when your tempted to become fat and happy, that's when people think they're the greatest thing, etc.

How many times have we ended a relationship that had magic because we thought we could survive without that person. The truth is you usually can survive it, but if it truly was special, maybe you should have tried harder to save the magic.

And, how often do we create incentives that actually form a wedge in our company and de-motivate?

Sure they all ended up making some Money, but years later I bet they'd tell each other they'd Wish You Were Here.

Let's Make this the Best Recession

We've all heard of the Great Depression. Why don't we name this recession? It could be called the Best Recession.

Pardon the positivism, but since more millionaires were created during the Great Depression than at any other time, it is possible that we can actually end up seeing good things come from this economic downturn. Things such as:

Maybe the U.S. auto industry will actually get in touch with the market and re-engage us
Maybe we'll see reasonable prices on homes and real estate
Maybe the U.S. will look at our manufacturing base as an exciting growth opportunity
Maybe this great country will become recommitted to entrepreneurialism
Maybe this economy will force us to really become energy independent
Maybe we will feel less entitled and more grateful for jobs, money, and customers
Maybe the young"Best Recession" generation will be as impressive as my parents' generation
Maybe we will now face issues that have been lurking for years and solve them

Hopefully we not see another Great Depression, but we can make the best out of this recession.


Barry LaBov, CEO
LaBov and Beyond
www.labov.com

Richard Branson on Entreprenuerialism

Richard Branson was just interviewed on the web and told us what we small business owners love to hear: that the recession is not our fault and that we will be the guys that get the nation/world out of the recession. He went on to say that entrepreneurs have the right mindset needed to deal with times like these.

You gotta love Branson, he went from Virgin Records to Virgin Airlines and now onto Virgin Bride (yes, a bridal shop). With his British accent and rock and roll looks, he's the closet thing to a Business "Beatle." He has the "nod factor"--everything he says sounds so good, you want to nod in agreement.

I think there's an opportunity for entrepreneurs that he neglected to mention. Yes, we have to think "small and entrepreneurial" to compete against the big companies, stay alive and hopefully thrive.

But our biggest opportunity may be in helping those large companies think entrepreneurially--those large corporations need someone to awaken them to the beauty of thinking "small."


\http://www.openforum.com/dtw/video_multi_richardbranson.html?campaignid=OF2_ola_sb

The Recession’s Dirty Little Secret…and a little Rock and Roll

You’d think that while there are plenty of challenges to a recession, that at least the upside is that companies would want your business more than ever. Not true.

It’s been proven time and time again that when the economy slows down, so does the service level we receive. That explains why you enter a big box store and they don’t pay attention to you or why the restaurant you love just isn’t quite as good anymore.

Why does this happen? Plenty of reasons. Establishments are staffed tighter; employees are worried about their future and aren’t performing like they should. Maybe the store isn’t as full and the employees feel less energy from that.

Turn to rock and roll for the answer—my favorite Bruce Springsteen story. Decades ago Springsteen when he was a struggling musician, was set to play a huge coliseum. He was stunned to show up on stage to find only a handful of concertgoers—six or seven people in total. Most performers would have been tempted to walk-off; Springsteen instead chose to continue to perform as if there was a capacity house and gave one of his great shows. Years later after much success and hundreds of sold-out performances, a person came backstage and introduced himself, “You may not remember me, but I was at a concert of yours years ago—in fact, I was one of seven people that were there. It was the best show I ever saw. I’ve been a fan of yours every since.”

That’s the way we should approach our clients everyday whether or not they have as much budget or whether the store is as full as usual. Perform like Springsteen. That’s why they call him the “Boss.”

Donuts: Antidote for a Rotten Economy

Sure the economy looks bad; businesses are struggling or failing in some cases. What can be done?

Look no further than coffee—Dunkin Donuts is aggressively pursuing Starbucks and making great progress. Why? They’ve shown passion and bravery—they obviously believe in their product and they’re not sitting back playing it safe. They’re now in more supermarkets than ever and Starbucks is in retreat.

On the opposite side of the equation, look at the Big Three. They have a built-in market for their products yet they’ve alienated most of that market. Why? Look at their product—it’s tired, unimaginative, outdated, overpriced, etc. They evidently didn’t believe in their product. They showed no passion, no guts.

Bravery and passion are necessary to succeed in this economy, without both, you have no chance.