And now for my very favorite quote of the year, offered by Nissan CEO Carlos Ghosn.  In reference to the Nissan Leaf, a zero emission vehicle, Ghosn said “this is the future, and everything else is going to look obsolete, like sending messages with pigeons”[i].

As Gnosh put it in an interview in Fast Company, “if you already have an emissions problem with 700 Million cars, what problems are you going to have with 2 Billion?”. In the case of Nissan, Ghosn is looking beyond the defined needs of customers and is anticipating the needs of the global market in a decade or more. It is not good enough to solve problems we can see, the strategist must seek to solve problems that are not readily apparent. To consider such scenarios, strategists must consider Social, Technological, Economic, Ecological and Political trends and consider how various combinations may change the landscape of an industry.

In my book and blog“ Intended Consequences”, I predicted remarkably volatile prices for fuel and the potential for oil to reach prices of far north of $100 a barrel. The predication which became an eventuality was based on an evaluation of “converging factors”, independent trends that combine to create a tipping point. The automobile industry is on the cusp of such a fundamental shift. Toyota has been selling the Prius since, 1997 but the initial curve for adoption was remarkably slow. What we see in evidence today are converging trends that will provide the impetus to create disruptive change in the form of rapid adoption of alternative vehicles:

Political: The U.S. government’s recent announcement of an agreement with thirteen automakers that will reset the Café fuel economy standards to require an average of 54.5 miles per gallon by 2025.[ii] The willingness of OEM’s (original equipment manufacturers), to work with the government in a race to dramatically improve fuel efficiency illustrates their understanding of radical changes in their operating environment.

Social: Shifting sensibilities towards sustainability will drive adoption. Electric cars are somewhat impractical for working people who may not have time to charge them (up to 8 hours) providing a leg up to hybrids.

Technology: The new Prius plug in will offer up to 87 miles to the gallon illustrating explosive improvement in battery technology. Many of the world’s top scientists are working on batteries that could expediently improve performance, size and cost.

Ecological: In Nissan’s case,  the rapid growth of highly polluted Asian markets is viewed as a driver for future demand. Recent disasters in the gulf and elsewhere have heightened awareness of the risks of oil exploration.

Economic: Americans are still fearful of OPEC’s influence and the ability of the cartel to manage worldwide oil prices. As battery prices decline, the value proposition of hybrids will only continue to improve, and the total cost of ownership for such vehicles will be drastically reduced.

Businesses are well advised to review such variables as to develop scenarios about their industry. It may not be possible to look into a magical crystal ball to predict the future, but careful study of trends provides us context on what products and services to develop in order to create disruption.

In Outliers, Malcolm Gladwell asserts that one needs to invest 10,000 hours in an activity in order to become an expert. I take solace in knowing that I am evidently both an expert in Strategic Planning, and overcoming the drama induced by teenage daughters.

The rapid escalation of global competition has brought about a new round of hyper-specialization.  The concept of specialization is nothing new; the division of labor has been a key tenant of economics since the birth of capitalism. Yet sites such as Guru or eLance, have propelled specialization to a new art form, where one can access dozens of specialists from around the world in any conceivable competency in a matter of minutes.

Specialties that do not require any special education (other than what is readily available on the internet) such as graphic arts have quickly commoditized. You can hire a graphic artist online for $15 an hour.  In cases where greater technical aptitude is required, specialists still out-earn generalists. The median Internist in the U.S. earns $176K per year, while Cardiologists earn a median of $403K (some make $800K or more). [i] If you had a heart attack, which would you see?

Perhaps the most common strategic blunder I observe within entrepreneurial companies is a penchant for addressing overly broad targets. Marketers, seeking the largest audience cast too wide a net. In their need to satisfy the largest number of prospects, they become de facto generalists. That is, instead of addressing a niche market with specific solutions, they try to satisfy a larger audience with a multitude of products and services. At some point, the value they can provide suffers from diminishing returns.

The more crowded a space, the more difficult it is to differentiate, and the greater the need for expertise. Before its bankruptcy filing, GM attempted to sell within every segment, from sub-compact to Hummer. GM experienced what is often referred to as the peanut butter effect; the wider you spread something, the thinner it gets. GM’s branding was diluted and ability to control quality constrained.

Many small businesses may employ generalists because of their lack of talent depth. To have one IT professional manage a network, build the company website, select an ERP package and fix all the desktops is an archaic paradigm worthy of recalculation.

The reason that specialists are worth more than generalists is that they have a deeper subject matter expertise that drives:[ii]

Quality-Processes replicated over time promote less deviation, less defects and fewer errors.  The specialist thinks deeply about an area of expertise in which they have experience and are less likely to make mistakes.

Speed- Specialists do not need to reinvent things. Cycle times on proposals and product delivery is faster. If a company offers 50 stock products instead of 500, they can manage less inventory and ship items quicker. For every new project outside the boundaries of a company’s expertise there is resource draining learning curve that costs time and money.

Relationships-As the specialist is highly respected, their opinions are sought after by the media and people who want to know them, hire them and refer them to others.

The realities of outsourcing and off-shoring are driven by these phenomena. It is inherently inefficient to participate in activities that are not within a firm’s core competency and do not directly contribute to the bottom line. Thus, the migration of labor (outsourcing) will rise at a fervent rate.

In fact, the entire concept of the corporation, with its multiple functional departments (such as accounting, sales and marketing, design, operations, engineering, manufacturing, etc.) is under some attack. Social norms around what constitutes a working environment are shifting quickly and enabling greater specialization. Collaboration tools make the world of work far more virtual, which will continue to feed the frenzy.

Think about how to specialize as to optimize your revenue, margin and profit.

The long term implications of Japan’s massive earthquake and tsunami have recently begun to materialize. Over the course of the last twenty years, management principles have centered on efficiency; do more with less.  Six Sigma, Lean Manufacturing, outsourcing, and off-shoring have boomed. Perhaps our fascination with reducing costs and optimizing return on assets has manifested in an overly minimalistic view of the world.

The recent supply chain disruptions have illustrated the vulnerability of our thinking as just in time translated into late product shipments, unsatisfied customers, and sluggish earnings, spanning from Toyota to Tiffany’s. The vulnerability may be far greater for smaller companies with less sophisticated logistics and reliance on a smaller web of suppliers.

Thus the central question is shifting away from what is the minimum possible cycle time to what are the supply chain risks and how can they be mitigated? Manufacturers have had to adapt, in some cases reengineering their products to use components or materials that have been suddenly unavailable.  Some product development teams have had to adapt, at times looking like a scene from Apollo 13 (when astronauts famously had to construct a part based on the materials they had on hand).

Customers have the right to ask more questions about how their vendors manage supply and what types of contingencies they have in place.  As has been evident in recent years, vendors and customers alike must think broadly about what eventualities could disrupt the global marketplace and collaborate on solutions. The horrific events in Japan reflect only the latest in a series of events that are reshaping how products come to market.

I have to admit I am a hater; a Cowboys hater. Clearly one of the most talented teams in the NFL, the Cowboys are off to a 1-4 start, and leading the league in penalties. They are an undisciplined bunch.  Organizations take on the personalities of their leaders, and America’s team carries on with the swagger of its egocentric owner (Jerry Jones). The Cowboys look the part, but do not execute very well.

Most everyone reading these words knows the fundamental principles of business.  I am not suggesting any of us stop reading, and learning; we all need that. But the basics are clear: create a compelling offer, hire great people and manage your cash and balance sheet.

It is one thing to know what to do, and another to actually execute. Like the Cowboys, many businesses have a fundamental lack of discipline. They do not stay true to their business discipline and core competencies. As Jim Collins points out in “How the Mighty Fall”, many of the Good to Great companies have not sustained their success. Collins blames an undisciplined “pursuit of more,” as some Good to Great companies expanded into new lines of business too far afield from what they knew best.

The organizational effectiveness of a company is often tied to the discipline of its leaders. The lowest functioning entrepreneurs are the ones who simply do not follow through on their own commitments. Some talk of corporate values but act irresponsibly. Others say they have a premium offer, but discount vigorously. Some come up with a plan and do not follow it.

Discipline and organization are often linked. It is those who have the hunger to execute who seem most organized, and most committed to outcomes.  It just takes a little more time to delve into details to insure your organization is fulfilling its commitments.  Setting goals and following them takes work. If you accept mediocrity, so will others.  We should all aspire to do the best work we can, and hold our people accountable for doing the same.

There is an old saying that #%$@ roles downhill. If the leader lacks focus and discipline, so will his or her followers. I have had the opportunity to work with some world-class entrepreneurs and they are spot on with follow through.  For the crème de la crème, discipline is part of their DNA.  They do what they say, and say what they do.