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Wednesday, 28 November 2007

Uncertainty is the Only Sure Thing

Some SCARY Geophysical facts

We live in the thinnest smear of gas on a congealed veneer of minerals, also thin, on the surface of a great big ball of molten rock surrounding a supercritical nuclear mass. This whole, totally improbable, shebang is whizzing around a huge and ongoing nuclear explosion ( a star), called the Sun. All of this is zooming along on some incomprehensible trajectory in the huge collection of other stars we call out galaxy. Other galaxies are also out there speeding about - there is no Highway Code in the Cosmos - they can and do collide.

The thinnest smear of gas we live in? How thin is thinnest? Imagine a large steel ball bearing - say 50 mm diameter. Now spray this with a fine lubricant, such as WD40, wait a while for any drips to go. The surface will look the same - with such a thin layer of oil it is barely visible. That oil will be several times thicker in proportion to the size of the ball bearing than our atmosphere compared to the Earth.

The congealed veneer of minerals? Well, some brave (or lunatic) scientists are busy drilling a hole into it to sample the molten contents. It is that thin.

Our life within this smear of gas is subject to enormous variables - we call the result of these "our Climate". Our thin smear of gas is enormously unstable, affected by its own contents, thermal variations (including "leaks" through the surface veneer) and radiation from the Sun. Sadly, so much of the current debate about Climate Change chooses to ignore the effects of Solar Radiation because it does not serve one or other sectional interest's argument.

The Sun is also enormously unstable - just have a look at this frightening video (Click Arrow twice to make it run)

This massive "blip", if it were pointing in our direction, could be good for a typhoon or tornado or two.

So, we are living in conditions of enormous improbability - maybe Douglas Adams was right?

The only certainty we have is that we are surrounded by uncertainty.

Therefore to equip and skill ourselves in any expectation of stability and surety is foolishness. But this is what so much traditional management thinking tries to do - and what so many financial analysts create as expectations for their projections. The Reality is completely the opposite.

The only wise thing we can do is to be ready for change - to have high levels of what we call personal and organisational Changeability. Organisations that do this tend to massively outperform the average - the research shows by up to 44% greater rate of sales growth. And they can withstand bad times infinitely better than their peers. They have much greater Competitive Strength.

Any business can assess its comparative Competitive Strength rapidly and inexpensively with the Competitive Strength Report and then decide what to do about it. They will get an immediate insight into their own organisational Changeability and the opportunity to understand what the potential consequences might be for them.

Please visit the Competitive Strength Report web site to see how you can find out whether the unforeseeable consequences of the next Sun Spot is more likely to threaten your future, or create opportunities to beat your competition.

Times are getting hard and the weak are about to get weaker

From The Times November 28, 2007
Major retailers lose sparkle as figures slump ahead of year’s biggest spree
Steve Hawkes and Miles Costello

Fears over the fallout of the global credit crunch grew yesterday as Signet, the jewellery retailer, and Pendragon, Britain’s biggest car dealer, blamed growing economic uncertainty for stark profit warnings.

John Stevenson, an analyst at Shore Capital, said it was now clear that there would be a marked divergence between winners and losers on the high street over Christmas.
He added that a spate of price cuts and Christmas sales by Debenhams, WH Smith, Gap, Burtons and Dorothy Perkins reflected the fact that stores were already having to use incentives to attract customers. “No doubt Christmas will be late and, with the next weekend representing the ‘payday’ watershed, retailers will be looking for signs of improvement as we move into December,” Mr Stevenson said.

Here we go again – it is the same brutal message of comparative Competitive Strength.
Times are getting hard and the weak are about to get weaker. So what’s new about that?

If we apply a Competitive Strength perspective then we can deduce something different. The key question is not who is or is not cutting prices and bringing forward Sales but whether the stores named were “having to use incentives” or whether they are choosing to do so.

Businesses that enjoy the high Competitive Strength level, better than Excellent, we call Free. For a retailer this means they can choose to discount where and how they want, using this as a tool to create greater competitive advantage. An obvious example of this is Tesco who are regularly and skilfully use the price cut weapon to make life difficult for their competitors.

Companies that are in the low Competitive Strength condition we call Constrained cannot "choose" to discount. They feel compelled to do so in order to chase the sales volumes they cannot otherwise generate, because this is all they can do. A business leadership in a Constrained retailer who states they have “chosen” to have an early sale is attempting either to disguise their weaknesses or, if they believe it, fooling themselves. Hoping it will be "all right in the morning" is not a strategy – it is Denial.

We say, please look at the Competitive Strength web site. Please see the frightening difference in both financial strength and business resilience there is between the Constrained and the Excellent. Please see just how deeply temporary and precarious is the position of the Constrained business.

The Competitive Strength Report is the only independent measure that will enable a business leadership to rapidly and objectively assess how they compare with the Free. Within days they can establish what their business’ position is – and more importantly, decide what to do about it.

Thursday, 1 November 2007

Two Swallows do not a Summer make – more like a Gulp!

From The Times, November 1, 2007
Foundations look just too shaky at Taylor Wimpey
Nick Hasell: Tempus

A writedown on the value of a company’s overseas operations and a gloomy outlook on trading at home would not appear the best formula for one of the biggest rises in the FTSE 100.
But this is housebuilding, or more specifically, Taylor Wimpey, the worst performer this year in what has been one of the stock market’s worst-performing sectors. So with the shares down 55 per cent over the past six months, yesterday’s 6 per cent gain can be read as no more than the covering of short positions and relief that its tidings were not any worse.
Not that all was gloom. Perhaps the biggest surprise was that Taylor Wimpey, now Britain’s largest housebuilder, repeated its confidence that it can achieve operating margins of 14 per cent in the current year. Given that improving Taylor Woodrow’s historically below-par margins was one of the key reasons behind the merger with Wimpey, that affirmation is encouraging.

The Competitive Strength perspective demonstrates why Merger & Acquisition strategies need to take into account the underlying operational cultures and competences of the companies involved. There is an enormous difference between the potential capability of an "Excellent" Competitive Strength organisation to deliver performance improvement compared to that of a "Comfortable" one.

As we have commented before, the ability to deliver an improved outcome will be substantially influenced by the degree of match or mismatch of Competitive Strength level and the Changeability of each outfit. If they do not match, or if they are not vigorously and competently addressed, then nothing will change.

According to this article, the jury is out. Will Taylor Wimpey be greater or less than the sum of its parts? If we disregard the initial share price lift that appears now to be attributable to extensive financial engineering rather than performance, the outlook does not look good. When we apply a Competitive Strength perspective, it looks bad.

Using Competitive Strength criteria, we can reasonably suggest that this may have been a “Comfortable” company merging with a marginally “Constrained” business in the expectation that something stronger would emerge. With no evidence of extremely rapid internal transformation, the most probable outcome is a larger “Constrained” business rather than a “better business”. Even if at the outset Wimpey might have rated a Competitive Strength of “Excellent” and assumed that they could absorb a “Constrained” company and remain “Excellent”, this was unlikely to be the outcome. The lower common denominator tends to prevail, as we have seen in so many previous mergers, which is why their success rate is barely 50%.

We believe therefore that there were questions that were not considered much less answered. What is alarming is that the architects of this merger almost certainly did not know that these questions existed and that they needed to be answered. They applied conventional thinking and got conventional answers and it now looks like this will produce the same disappointing results as at least 50% of mergers. We believe that the Competitive Strength perspective would have highlighted the other questions that needed answers.

You may like to know more about the Competitive Strength Report and Process, the only completely independent organisational self assessment tool that rapidly provides a simple and clear health check, and helps you decide what to do about your results. Please have a look at the Competitive Strength Report web site.