Cogniphany

There’s a lot that’s going to come together in this post today.

Franchises…

Risk Management…

Success…

This morning, I was doing some research for a project that’s coming up, and I wandered onto a follow-up editorial style piece in reference to the WSJ article about the failures that the Cold Stone Creamery franchise is running into.

One piece of wisdom I’ve found in business is that people are really interested in success stories. But, really the gems of wisdom are in looking at failures, especially when failure is far more common than success. In the franchising business, 70-75% of franchises fail. And that’s not the franchisee. That’s the franchisor. There’s a lot tied up in how those businesses fail, but looking at the anatomy of a failure is the way to go. Success can have some luck tied up in it, but generally, with that many failures, you can disect how it happened and look for common themes.

Additionally, there’s a third point in that article that should be addressed. And tied up in there, is why you want to examine the successes too.

3. Will the product survive a downturn? A $4 scoop of ice cream is fabulous business when most folks are feeling flush. It isn’t such an easy sell when people are cutting back discretionary spending. Ask yourself how you’d market any franchise during tough times as well as good times. And prod the company about how much leeway you’ll have to shop around for better deals on supplies.

I’m not sure I totally agree with this. I agree with the idea that you want to walk into a business decision with open eyes. But, you should never completely shy away from a business decision just because there’s some risk. This point led me to think of a couple of different things. One is an episode of “The Big Idea” with Donny Deutsch that I caught. It featured a number of risk experts, one of which was Tim Sanders.

Tim is a grand guy, and a joy to talk to. At the end of a conversation, you feel like you can take on the world. In this episode, he talked about “risk” and what it means in this economy. The people who, not only survive, but prosper in an economic downturn are the ones who see it as a chance to make money. If all you see is the chance of the sky falling, then you’re going to hide your head. If you take some chances (albeit calculated and careful chances), then you’re much more likely to be successful.

When I thought about this point in the editorial and what Tim had talked about, I started thinking about a local St. Louis favorite, Ted Drewes frozen custard. If you come to St. Louis, I’ll make sure that you get to visit this place. Beyond it just being an excellent dessert, it’s a marvel to watch from a business standpoint. The number of customers they process, in what looks like controlled chaos, is absolutely incredible to be seen. Additionally, they survived the Great Depression…all while selling ice cream frozen custard.

So, while there’s a point to be made about trying to sell an extravagant commodity in an economic downturn, it’s not impossible. And if you abandon all but the safest of bets, you’ll just blend into the rest of the sheep. When you look like the same person down the street, then you might survive, but you’re not going to excel. The person who diversifies and makes calculated risks is much better positioned to win the game.

A friend of mine has an icon that scrolls “One does not simply walk into Wal-Mart. There is an evil there that does not sleep.” It’s a play on a scene from the “Lord of the Rings,” where Boromir is talking about how they can’t just walk into the home territory of Sauron.

But, when I see things like this article from the Wall Street Journal. I begin to believe it more and more.

Wal-Mart Warns of Democratic Win

I was in a Wal-Mart this weekend and every time I’m there, I can’t get out of my head everything I’ve read about Wal-Mart’s business practices. By the time I’m done thinking, I can’t bring myself to spend money there, because it feels too much like I’m compromising my business ethics. Coming up in a couple of weeks, I’ve got a series about how to be a good manager. In the last part of the series, I do a bit of a twist and talk about how to utterly fail as a manager.

In all honesty, if you’d like to see how you can skirt the lines of unacceptable business ethics and even drift occasionally into the sort of area that will (and should) get you sued, do an examination of Wal-Mart. I used to really like Wal-Mart, but ever since the death of Sam Walton the company has completely forgotten the business ethics that it was founded on. This particular story is about Wal-Mart trying to strongarm its employees into voting Republican to avoid the oncoming unionization of Wal-Mart, and the entire argument is based in half-truths.

Sam Walton’s philosophy was to keep unions out of Wal-Mart, but his was one of active, positive engagement with the employees. Basically, you keep the unions out by making sure that your employees have what they need to be happy and productive. The new executives at Wal-Mart have taken Walton’s philosophy and turned it on its ear, bastardizing it into a mantra to use the sleaziest tactics possible.

I read a really good article today that took me to a slightly different place than the author probably intended for me to go to. Although, because of the overall message, I’m pretty sure that he wouldn’t mind.

“When IT’s Success Is A Flop”

As a part of his treatment of the subject, he talks about how there can be numerous reasons why an IT project might fail, and theyr’e not always obvious. Basically, many people may have a different idea of what “success” means, and depending on your perspective, one person’s “success,” may be another person’s, “aw, man… I need a new job.”

So, it’s really important, no matter what business you’re in, to really keep an open mind about everything that’s going on around you. You can frequently avoid an office land mine by just being aware and thinking about how someone else might see something that’s taking place.

I’ve frequently advocated that leaders should always work out on the production floor or sit in the cubicle farm for a while. They need that perspective to operate effectively as a leader. As soon as a leader forgets what that perspective looks like, it becomes hard to think like an employee and you have no ability to empathize.

And, you can apply all of this to department on department interactions. Spend time with the IT people, or the design people. At least understand their world a little bit, and also get a little bit a personal connection with them. When conflict arises, it’s a lot easier to bark at someone you barely know or don’t know at all; it’s a lot easier to see another person’s perspective when you have some degree of connection with them.

Sometimes, success in business–and for that matter, life–is being able to step outside of your comfort zone and look at how another person lives.

My friend, Bill Sherman, posted about Seth Godin’s “Are you in the tribe?” post.

Go read Bill’s post and Seth’s post. I’ll wait.

Do you want to be in the tribe yet? Of course you do.

If you’ve ever heard of Robert Cialdini, you know why you want to be a part of the tribe. Dr. Cialdini wrote about the principles of persuasion. He described these principles as the “click whirr” parts of our brain. When people invoke them, we respond almost automatically. Anybody can invoke them, but it takes a talented person to use them and not come off like a sleezy car salesman. That person is Seth Godin.

He’s heavily invoked the “Scarcity” principle, which basically means that as long as something is hard to come by, you can get people to buy it. That’s why you see a lot of ads on late-night television touting that some deal is for “a limited time only!!!” The three  exclamation points are mandatory.

He’s also got “Social Validation” running in there too. Social validation is the idea that you want this product because everyone else has it too, and you don’t want to be the one left out of it… do you? If you don’t have it and everyone else does, you’ll be left out of the club… er… tribe.

He’s probably got a whole lot more in there, but I just gave it a cursory glance. Oh yeah, he’s edited that no one else can get in, because of the overwhelming response. That’s some more scarcity.

Give Seth a round of applause if you’re a member of the tribe. He’s a master of Cialdini’s principles. I wish I was, but I moved too late to be part of the club.