Misalignment

During my time in college, I worked for a summer sales company that sells satellite TV service. I worked in the customer service department answering phones and talking with customers about problems they had with the service, etc. There were multiple misalignments in this particular company; I am going to focus on one here. According to the CEO, their strategy was to distinguish themselves from other satellite retailers by being honest with the customer and providing exceptional service. The CEO recognized that in door to door sales many dishonest things occurred, and he prided himself on wanting to be different and be customer oriented. However, the systems in place in the company didn’t provide sales reps a lot of incentives to be honest in their sales. For a couple months, we did customer verifications on the phone with every customer to ensure that each customer understood exactly what they were getting, but after a few months it was decided that the verification took too much time and that it wasn’t needed. Also, sales representatives were paid on the basis of sales made; nothing in their commissions was based on customer satisfaction with the product. So, while the CEO seemed to talk a good game, nothing in the actual systems in place provided incentives for sales reps to be honest or to put the customer first. It was all about making a sale at all costs.

As an employee in customer service talking with upset customers all day, I know firsthand the pain that was caused by this misalignment. We were constantly getting calls from customers who complained that they were lied to or that they didn’t get what they were promised by the sales rep. The supervisors and managers usually would side with the sales reps on problems, assuming that “they wouldn’t just lie to the customer about that.” However, the fact that these problems kept occurring seemed to suggest that the sales reps weren’t being completely honest. Even in situations where it was obvious that the customer was right, the company would try their best to weasel out of refunding money, etc. Because of this, I didn’t quite know how to handle situations where customers were upset, especially when I felt the customer was right. The CEO always talked big about being honest and helping the customer, but I knew that part of the blame would end up with me if a customer ended up cancelling because of something they were promised and didn’t receive. Basically, the misalignment created confusion for me and other employees. We didn’t really understand what our function really was and what was expected of us.

Steve Jobs

With the news this week about Steve Jobs, I have thought a lot about what made him so successful and how he helped Apple to achieve things they never could before. I think that applying the Hedgehog concept gives us a better understanding of why Apple has been so successful under Jobs.

First, they definitely do something that they are deeply passionate about. From the beginning of his life, Steve Jobs has loved technology. It is what originally motivated him to begin building Macintosh computers out of a garage. His fire and desire have motivated him throughout his life, and Apple has followed that fire. It is seen in every new product that has been developed by Apple, Jobs has a fire and a desire to come up with the "next new thing." The challenge now for Apple will be to continue forward with that same fire even though Jobs is gone.

Also, they know that they can be the best at the things they do. Apple does a very good job of choosing the things that they know they can be the best in the world at. They create almost every product that they sell in a way that allows them to be the best. They aren't trying to compete on price, they just make sure their product is so good that people will be willing to pay the price that they ask. And they really haven't failed much with this strategy. By only getting into things they know they can do best, they have created a brand that is worth more than any other in the world.

Finally, they have figured out that making the products they make is extremely profitable, as shown by their financial results in past years. Obviously, they carefully price and place their products to maximize profits, and have been very successful.

Steve Jobs took over a company in the late 90s in serious trouble. It is amazing what he did in the space of 15 years, and he accomplished it by using the principles in the Hedgehog Concept.

Housing Market

I read an AP article talking about the housing market and its current conditions. It says that the the past 6 months (March-August) has been the worst stretch (based on number of homes bought) in the housing market since record-keeping began. Due to the poor economy, many buyers are reluctant to make what is seen as a "big risk" purchase like a home.

Using the Porter's 5 forces model we have discussed in class, we see what makes the house selling industry so poor right now. Due to the incredibly low demand, buyer power is increased drastically. The article talks about someone who was able to buy a house for $35,000 less than the appraised price for the house they are buying. Situations like this are everywhere. Those selling homes are so desperate to make a sale that they are willing to accept offers for much lower than they should.

Also, the main substitute to buying a home is renting. Because there are so many people with property that they are not able to sell, it is easier than it has been to rent and is increasing the popularity and demand for renting. Thus, the availability of this substitute also negatively affects the housing market.

It is interesting to use the Porter's 5 forces model to analyze an industry and you can quickly pinpoint certain factors that play a big part in creating the success (or lack of it) in an industry.

Microsoft

I read in the WSJ an article entitled "Microsoft's Successful Move Toward the Cloud." It talks about Microsoft Office 365 and its features that allow users to work in the "cloud," meaning that they do their computing online, with their work being saved online, etc. As we discussed in class, Microsoft has made their money by finding a deep profit pool in the software industry that has allowed them to be very successful, while others, such as IBM and other computer manufacturers have had difficulties.

The article specifically mentions that Microsoft realizes that the growing trends towards computing in the "cloud" and the popularity of tablets such as the Ipad and smartphones are weakening their previous strong position in the software industry. As more and more software applications become delivered over the web and through devices such as the Iphone and Ipad, the use of Microsoft operating systems will decline. It seems like Microsoft's latest push towards computing in the cloud is their attempt to find a new profit pool that will deliver continuing profits that shareholders of the company have come to expect.

I see this as a very good example of a company that has thrived on finding their own niche in the computer industry continually striving to stay one step ahead of the game and hold their market share. We'll see how things turn out for Microsoft, but one thing is for sure: their understanding of the principle of profit pools and their dedication to constantly finding new profit pools will continue to benefit them in the future.

WSJ article: http://blogs.wsj.com/digits/2011/06/28/wall-streets-views-microsofts-successful-move-toward-the-cloud/?KEYWORDS=office+365