| Issue 04 |

Amnon Shacham, CEO, Palkar

• Number of employees in firm: 40 in Israel, 12 others in the USA
  
• Number of employees under my direct responsibility : 5 report directly to myself, but I consider myself responsible for all employees
  
• We provide : PVC boards, especially for home fencing in the US (our major market) - for both decorative and functional uses (backyard privacy). Also profiles for the Israeli construction industry.
  
• I'm on the job for : 18 months. Before that I was CEO of Camel-Sarid, and before that I started up and managed Camel-Sarid's subsidiary in Chicago.
  
• I like on the job : The excitement - no day is like another - when I answer the phone I never know what problem I might face. The are many surprises that go with the job. In addition, the fact that I work in a worldwide market enables me to make interesting personal contacts, especially in the US. For example - people are enthusiastic about the fact that we are on the banks of the Jordan River. In a nutshell - I jump out of bed to work every day.
  
• Most difficult on the job : Letting people go, which is sometimes neccesary. Talks of cutting expenses might sound good, but it always hurts someone.
  
• Goals I set for myself : Camel-Sarid was a healthy firm taht tripled its turnover and has built a well-known brand in the US market - achieving some peace of mind and consumer loyalty. In palkar I am trying also to position the brand so that sales will be secured for years to come, even under changing market and currency exchange conditions, and to increase the firm long-term value. In life in general - I am a workaholic, and tremendously enjoy what I do, which is felt in my personal life as well. The children benefit and enjoy form my feeling of satisfaction and success.
  
• Our vision : The vision I mentioned in the previous paragraph is the one that leads me, though I admit we haven't had an orderly process and that I was the one that brought it with me. I promote it mostly in the US, in our marketing activities.
  
• Original product in our market: Palkar's white PVC fence was a type of breakthrough, that occured before my time. Previously there were only wooden fences, and the PVC product was created as a result of an error and proved to be a success (no need to paint, no "eyes" like in the wooden ones, etc.) Today, the Israeli market is in fact saturated with this product, in spite of the slow growth of the local construcion market.
  
• Sources of innovation : As I mentioned, I am relatively new to Palkar, but I am a great advocate of the Systematic Inventive Thinking (SIT) method for New Product Development. In Camel-Sarid we had several such workshops (incidently, the first ones were facilitated by Ari Manor, CEO of ZOOZ). In Palkar we did come up with new product ideas during a technical forum discussion, but not through systematic investigation - which only strengthens my opinion that there are other products to be developed in a systematic manner. Palkar is a small company, with some limitations on its activity, but when we approach the matter, we will do so using SIT tools, and with outside facilitation (although I myself am familiar with the tools).
  
• Book recommendation :  Endurance, an Epic of Polar Adventure (by Worsley and O'Brian, W. W. Norton & Co.). It is the story of the British Sir Ernest Shackleton who tried to cross the South Pole. It's an amazing tale of a journey. I believe it to be a must-read for every manager, although it was not written as a management book. For me it's a source of inspiration and even admiration, in matters of team an d people management.
  
• Would you like to be interviewed? : contact us
  

Becoming a Rising Power

According to Michael Proter, there are five major forces that influence any given market, and therefore any firm's chances of growing and maintaining high profitability: Competitors, Suppliers, Clients, Alternative Products/Services, and Potential Entrants (new competitors not yet in the market). Every market has its own balance of powers, that must be carefully understood and considered.

Thus, for instance, Israeli OTC medicine manufacturers have their clients (especially the Health Care Associations) as a very powerful and threatening force, while their suppliers are much more convenient. Quite a different case is that of a food chain restaurant branch (e.g. a McDonald's branch) that is very much dependent on its supplier (the chain) which might terminate the franchise at will, and is less dependant on the clients -single consumers (a private person). Developing a business strategy in any given market therefore consists of analyzing and preparing to deal with these five forces, paying special attention to the most powerful ones.

So far - things are quite clear and well-known. However, the Five Forces Model meay be used in a totally different, and surprising, manner. Instead of checking the most powerful forces in your market, you may ask yourself the "opposite" question: how can our organization become a powerful and threatening force, in the long term, for other players? In other words: how can we become a powerful and awesome client, supplier, competitor, alternative or new entrant? Moreover - on which of these five options should your strategy focus on?

Let us demonstarte the above through some examples:

• A generic medicine manufacturer  - May become a powerful and growing competitor, and an extremely strong client , thorugh a strategy of M&A, using the size advantage to gain efficient purchasing and operations, cut costs and offer a varried medical solutions basket. This has been and continues to be Teva's strategy.
  
• A food chain  - May become a powerful and rising supplier by sitching an ownership model to one of franchising (instead of serving end-consumer, it serves dependant franchisers). This is exactly what McDonald's did. In fact, most of McDonald's dollars were made in building a real-estate empire, by using the rent from franchisers to fully pay for its assets (commercial assets - restaurants).
  
• A big accounting firm  - May turn into a pwerful and threatening new entrant , by going into the business consulting market. This was done by the leading US accounting firms, which became so powerful as to stimulate the regulation of the authorities due to an apparent conflict of interests (accountabts are supposed to uphold the law, and therefore should be neutral and not as invloved as business consultants are).
  
• A tourism agency  - May supply an alternative product/service , posing a major threat to local tourism, by supplying cheap overseas vacation packages. Indeed, charter flights and tourism packages to Turkey, Cyprus and other near destinations offer some tough competition to Israeli high-end hotels. 

To conclude, an interesting strategic discuusion may begin with the following investigations: How may our organization become a rising force? How can we turn into a threatening competitor within our own market? How can we be a powerful supplier through an unconventional business model? How can we acheive big client status with dependent suppliers? How may we invade a new market and be a major new entrant? How can we offer an added-value alternative product/service to existing solutions in parallel markets? Which of these direction might prove most promising? Your future may depend on the anwsers to these questions.

• For articles on strategy and other subjects : click here

Chinese Market (Hebrew) / Y. Einav / Ramot Pub.

China grows ever closer to the West, and draws growing attention in the business world. For Israeli business people, China may represent a cheap supplier of import goods (consumer goods), a good subcontractor of a variety of human-labor industries (programming, textiles, etc.), machinized industries (plastic, metal, etc.), and a giant client for sophisticated products (watering systems, communication equipment, and various high-tech products). However, in spite of the apparent attraction of doing business with China, Israeli business people who go there are faced with tremendous difficulties, especially because of the almost unbridgeable cultural gap, and the Chinese's tough and stubborn attitude in negotiation, and to doing business with "westerners".

The book "Chinese Market" attempts to bridge those gaps, and was written with Israeli business people in mind. It achieves its purpose, and we consider it to be a must-read for everyone planning on operating in China. Among other things, it describes the though Chinese negotiation tactics (demanding higher-than-usual expenses and stay, and refering to time as a tactical weapon), the behind-the-scenes political activity (making a local representative with contacts a necessity), the Chinese's loose interpretation of a written and signed contract as a mere working-paper, changeable by circumstances, and even - how to deal with their expectation to be compensated by every negotiating Israeli because of the failure of the Falcon deal (even if you have nothing to do with military industries).

"Chinese Market" offers an in-depth view of the Chinese business and organizational culture and mentality, and provides tried-out solutions and tactics to negotiation in China. In the 6 months sinces it initial print, it has become a best-seller, and busniness people who used it report that it has been invaluable in their endeavours. We, too, embrace their recommendation.

• Buy the book (Hebrew) on:  ibooks |  dbook
• A list of other must-read books for managers 

Reduction

The Reduction thinking tool is quite a surprising one - instead of adding something in order to innovate, it involves the (full or partial) elimination of one of the product or service's components, or of an apparently inferior product/service, but with unique new benefits.

The steps for performing Reduction are as follows:

1. Choose an existing product or service

2. List the components and resources of the product or service

3. Remove one of the components/resources (fully or partially)

4. Visualize the new product or service, and identify its benefits and uses

Example 1:

• Existing product: Book
• Components of the product: hardcover, pages, text, publisher, words, letters, chapters, ending...
• Improvements that have already been made:
  • Pocket books (soft cover - partial reduction of cover)
  • Reader's Digest - a collection of popular book synopses (partial reduction)
  • A gift book "What men know about women", with blank inner pages
• Improvements that have not yet been made (as far as we know):
  • Sample book – containing only the first chapters from a selection of books (if you liked the first chapter you can buy the entire book)
  • A student workbook with only a back cover - the completed exercise pages may be removed

Example 2:

• Existing service : taxi service  
• Components of the service: driver, car, seats, transport of passengers and luggage, pick-up point, desired destination, price…
• Improvements that have already been made:
  • Motor-taxi service (partial reduction of car, and reduction of 3 seats) 
  • Free shuttle service (reduction of price - for hotel VIPs, to and from airport) 
  • No-passengers taxi (for package deliveries only)
• Improvements that have not yet been made (as far as we know):
  • Driverless taxi (a car for rent delivered to your chosen location and picked-up wherever you choose to leave it)
  • Pick up from any location, with a single destination (e.g. airport)

• For a description of the Reduction thinking tool, along with other tools, read the article on Six Thinking Tools

Formule1 Hotels

In 1985 Accor, the owner of cheap hotels in France, faced a problematic market and some fierce competition, and therefore decided to make a strategic change. It consisted of building the Formule1 hotel chain, which offered a new previously unheard of 1-2 stars hotel service. These hotels offered very small rooms, with minimal furniture (no wardrobes), limited service hours (12:00 to 14:00 - check-out and check-in times), no restaurant and no view. The money that was saved in these reductions was used to buy top quality beds, for maintaining the rooms meticulously clean, and for acustic isulation in the rooms - all in order to ensure that guest have a good and pleasant sleep. The price of the rooms was 90 francs, similar to other 1 star hotels, and about half the price of 2 star hotels.

Formule1 hotel chain was a great success thanks to its innovative service-mix, and grew bigger then the next five cheap hotels competitors combined (!). It expanded to many other countries as well. In addition, its set up and operation costs were significantly lower than those of its competitors. Formule1 hotel chain succeeded in providing unique added-value to its costumers (good sleep) and even in expanding the market itself (it catered to truck drivers on the one hand, and business men on the other hand, which rarely attended cheap hotels before that). The process demonstrated by the chain's strategy is typical of value-innvation strategy, described in the Focus section of LaZOOZ 1.

• For previous issues of LaZOOZ: click here
• For Value-Innovation Workshops: contact us

Innovation ideas for Microwave ovens

The following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):

1. A microwave with a smoke detector - with auto shut-down when a fire is detected (and perhaps a water sprinkler)

2. A microwave with transparent walls (esthetic and content visible from all sides)

3. A microwave with detachable inner walls - for easy cleaning

4. A microwave with a food-attachable thermostat - heating up to a desired temprature

5. A microwave with a sound sensor - halting when the popcorn stops popping

6. A microwave with radiation leak and other malfunction warning

• Articles on Systematic Innovation 
• We will be glad to read your comments and suggestions

Planning A to Z

Abraham Lincoln once said that if he was given a axe and an hour for chopping down wood in the forest, he wood spend 50 minutes sharpening the axe and ten minutes cutting the wood. How much time do you spend on planning?

ZOOZ now offers inner-organization workshops on planning. The workshops allow participants to become familiar with basic planning principles (including strategic planning and tactical planning), to practice useful planning tools (such as SWOT and PEST analysis, SMART goals setting, GANTT tables, task-prioritization, backward-planning, and planning for uncertainty), and to develop control mechanisms (such as control junctions and report channels). The workshops (usually spanning 2 days) are customizable for various management levels, and are unique due to the fact that participants develop actual workplans and control systems for their own work.

• For further details please contact us

Idea Bank Management in Excel

Excel worksheets are normally used for financial and accounting applications, rather for keeping track of and managing textual content. Nevertheless, we recommend using them for idea-management. To be more spsecific - for managing a "bank" of ideas - a database of future product or service innovation ideas, collected from a variety of sources - employees, costumers, competitors, suppliers and...organizational innovation workshops.

Let's suppose you have over 100 ideas for innovations (a typical output of an innovation workshop). Where would you go from there? You should start by giving each idea a serial number, and rating the ideas according to relevant criteria (feasability, expected income and profit, benefit for firm's image, fit with overall strategy, etc.). The rating is done by an internal innovation committee, usually comprising managers from Marketing and from R&D. You may, for instance, rate each idea from 1 (very bad) to 5 (excellent), taking into account all of the determined criteria. The rating of ideas by members of the committee (including the idea's serial number, its rating by each member, the average rating and the standard deviation) are easily done in excel.

Now, ideas are easily sorted in descending order of their average rating, and the sorted list is copied to a new sheet, labeld "Discussion". This sorted table is then supplemented with a short textual description of the ideas and these other columns: "Date of discussion", "Decision", "Responsibility", and "Due date" (see example below).

Later, the innovation committee can discuss each idea seperately (begining with the top-rated ones), and then make practical decisions on every idea, and move the idea to other sheets as required (see example above):

• No Go - ideas that have been ruled out, with the reasons fo doing so
• Check - ideas that require a specific check in order to continue
• Form - ideas that need to be specified further
• Concept - ideas that should be examined with market concept tests
• Go - ideas that should be implemented, including development and commercialization

In such a way, the entire idea bank is dynamically and easily managed in Excel, allowing for new ideas to be added, existing ideas to change status (=moved to a different sheet), follow-up be done on tasks, and preservation of the "organizational memory".

• To download an idea rating form (Hebrew pdf file): click here
• More information on Systemtic Innovation workshops (including developing and screening of ideas) is available here
  

Moral Message

So far we have presented in this section several patterns (or logics) that fall into the type of the advertising promise (i.e. "If you do X you'll get Y"). This time, we present a totally different type of advertising and of sophistication.

The pattern of Moral Message, the advertiser uses the ad in order to preach and advance core its values, that are not necessarily related to a certain product or service it is selling. Thus, the advertiser tries to arouse awareness and induce social change, on the one hand, and to gain sympathy from those who identify with the message, on the other hand. Although the advertiser is not a political party or body - it is saying to the readers: "Choose us (= buy from us), and support social change".

Benetton, which has been consistently using social message advertising campaigns since 1989, is the most prominent representative of this genre. The amazing ad you see above, has such a sharp and clear anti-racism message, that any comments on it are hardly necessary. We will only point out the fact that the message complements well the slogan United Colors of Benetton, aimed against racism, but also indicating the colorful clothes sold in their stores.

Another ad by Benetton, from the same year, shows a black horse mounting a white mare. Naturally, such ads become the talk of the day, create wide public responses and result in excellent public relations. At the end of the day, Benetton achieves a prominent position thanks to these ads, and its costumers are willing to pay more to a company that uses its advertising budget to promote moral values.

• Source: Benetton - Hearts. Photo by Oliviero Toscani. March 1996 campaign. 
• For information on creative advertising workshop see page 18 of our Strategy and Marketing workshop description  (Hebrew, PDF file)