Category: Uncategorized

by Margaret Lawrence

Etsy is often described as the “world’s largest flea market”. Since its beginnings in 2005, the company has created a vibrant on-line community of buyers and sellers of “handmade” and vintage items as well as craft supplies, it’s the online home for hobbyists who want to operate on a small scale.

Etsy’s successful niche strategy began by reaching out specifically to crafters, a group of sellers that are too small to be of interest to on line retailers eBay and Amazon. Founders Robert Kalin, Chris Maguire and Haim Schoppik molded these sellers into a cohesive user community by making buying and selling on Etsy a unique experience. Envisioning a virtual crafts fair, Etsy gives sellers their own storefronts where they can brand themselves by telling their stories and developing a close relationship with their customers. Sellers can express themselves and share their passion for their craft. Originally requiring that everything sold on the site be “handmade”, the company promises its buyers “something real from a real person” according to CEO Chad Dickerson. The vast majority of sellers are hobbyists operating on a small scale. The average sale on Etsy ranges from $15.00-$20.00 dollars.

A beautifully designed website and an ultra-efficient search engine encourage users to browse. Multiple tags identify items, making it easy to find what you want and discover new items in the process. Etsy uses “social marketing” very effectively. Buyers have the opportunity to “like” specific vendors, write reviews and share with friends. Visitors on Etsy linger an astounding eight and a half minutes. The company has defended itself from industry giants Amazon and eBay by keeping prices low. Vendors pay a 3.5% transaction fee and $0.20 per item for each listing. These prices are much lower than eBay’s 10% commission and Amazon’s 10-15%.

Since it began in 2005, the company has grown rapidly and attracted investment capital with an eye to continued growth. Success and rapid growth has, however, brought problems of its own. Etsy craftsmen sometimes need to work long hours to satisfy demand. Some sellers have become so successful that their “hobby” has turned into a small business and they are bumping up against the limits of their own labor. To maintain its “craft fair” image, Etsy originally barred its vendors from using outside labor to produce their wares. Successful vendors had to choose between limiting their growth, or leaving Etsy (or hope not to get caught outsourcing work). Backed by outside capital, and seeking growth of its own, Etsy changed its policy in October, 2013. The site now allows vendors to hire employees, outsource fulfillment and shipping, and manufacture products that they have designed.

Growth has brought Etsy to a crossroads often encountered by successful niche competitors. Can a company dedicated to DIY continue to grow? Has the company outgrown its niche? The company is at the point where it must choose between its core values and the growth their investors seek. They risk alienating their customer base and destroying the culture they have so carefully created. International competitors ezebee, Zibbit and MadeIt and, US based, Artfire are vying for disaffected Etsy vendors. Management hopes to continue as an online market for these solo crafters while also providing a platform for the small businesses that its most successful vendors have become.

The “game’s afoot” and it is too early to tell if Etsy’s shift in strategy will succeed. However, this company’s story offers some valuable lessons in niche marketing.

• Etsy successfully identified an underserved market: venders too small to succeed on eBay and Amazon.
• They created an on line site that fostered a sense of community that engaged and inspired participants.
• They followed up with a well-executed ecommerce strategy: a visually pleasing and user friendly website; opportunities for two-way communication between buyers and sellers to enhance trust and credibility; social marketing through Facebook type “like” buttons and buyer reviews; and excellent customer service.
• They are offering a new package of services to enhance the business platform they now provide their larger vendors.

The vast amount of information available on the net has made niche marketing cheaper and easier, especially for e-Commerce retailers. Market research can help identify underserved markets. Technology makes it easier to reach them. The ability to engage consumers and have a dialog (social marketing) creates trust and credibility. Niche marketing remains, as always, a viable strategy. However, as technology makes it possible to slice the market into smaller and smaller segments, it is more important than ever to ask the strategic questions:

• Is your niche sustainable?
• Can you defend the segment against competitors?
• Is there an opportunity for profit either in terms of higher margins or lower costs? and finally,
• Is there enough growth potential to make it worth the investment?

If you are looking for additional ways to tune-up your strategic planning process please download our complimentary ebook: Strategic Planning Tune-up: Ten Great Strategy Tips by clicking on: http://www.cssp.com/strategytips/.

By Denise Harrison, Executive Vice President and COO

Discussions concerning waste disposal and environmental impact are showing up more frequently during strategic plan development. With disposal costs and environmental regulations increasing, companies are finding creative ways to deal with their waste. Here is one example.

Cheese Brine

Cheese production in Wisconsin is big business; – in fact one quarter of the cheese produced in the US comes from Wisconsin. Cheese brine, a byproduct of the production process, and its disposal costs cheese producers thousands of dollars of each year. But what if they could find something productive to do with the brine?

Solution
Combine the cheese brine with the rock salt used for keeping roads from icing up. What are the benefits of this combination?

• The cheese brine activates the salt to make it more effective in colder temperatures enhancing road safety
• The cheese brine/rock salt combination helps keep the salt on the road – it is estimated that a third of the salt bounces off the road during the spreading process
• It reduces disposal costs for cheese producers
• It reduces road salting costs for the municipality using the cheese brine/rock salt mixture.

The downside: – well, it is a bit smelly.

Take-away:
As environmental concerns and waste disposal costs increase, look for creative ways to use your waste. There may be a new product idea hiding in your trash.

To learn more ideas for tuning up your strategic planning process please click on: http://www.cssp.com/strategytips  to download our complimentary strategy tune-up book.

If you have questions about how to re-invigorate your strategic planning process please email me at harrison@cssp.com .

by Margaret Lawrence

Good strategic planning begins with customer focus.  Knowing your market is critical, deciding which segments to pursue is a priority, but the process does not end there.  To compete effectively, you need to create value for your customers in ways your competitors can’t.   Look to your value chain to accomplish this. 

What is the value chain? It’s all of the activities that add value to your product or service.  As first defined by Professor Michael E. Porter, (1985) value chain analysis examines all of  the  resources such as raw materials, labor, capital equipment, etc. used  to create your products or services. Supporting functions such as R&D, information systems, marketing, sales and service are included and evaluated in terms of where and how they also add value.  This analysis can quickly reveal opportunities to produce better products and better serve your customer base.   

To see how well it works, look at Zara, a “fast fashion” retailer that has become the largest clothing retailer in the world. The company’s strategy is to delight its customers with clothing that mimics the latest in fashion at a reasonable price. Unlike their competitors who offer new designs at seasonal intervals, Zara ships clothing to its retail stores in small batches delivered at frequent intervals. Designs change frequently. Zara’s loyal customers know that new items will appear regularly, but also disappear quickly.  As a result, they visit the Zara stores more often and make more frequent purchases than typical shoppers, making parent company Inditex, one of the most profitable companies in its industry.  Zara has been so successful because all of the elements in its value chain, from raw materials to finished products hanging in their retail stores, work in harmony to support Zara’s strategy.

How does Zara do it? Some highlights:

  In this highly centralized company, things are done differently.

• High fashion items are produced at plants located at the company’s headquarters in Spain or nearby countries to guarantee faster response times and better quality control. Basic items that do not need to change quickly are manufactured in China at a lower cost.
• Zara owns or controls more than half its production facilities, considerably more than other clothing manufacturers. They have invested in high tech equipment and extra capacity that enable them to respond quickly to new fashion trends.  They are able to absorb these  higher manufacturing costs because their inventory turn is faster than industry norms, and less of their clothing is sold at a discount,
• Outbound logistics are centralized at headquarters. Finished garments are inspected, tagged and labeled at company headquarters, then delivered within forty eight hours.
•  Product designers get constant feedback from buyers in the store.  New trends are spotted quickly and designs change fast. Sales people are trained to get feedback directly from the customer to send to the designers on a regular basis.
• A sophisticated information system supports the smooth flow of information across all elements of the company’s value chain.

 Value chain analysis is a four step process.

• Identify the activities that form the value chain;
• Look for the ones that add the greatest value to your customer, and focus your attention on these. What resources can you add to improve your competitive position in these activities?  Are these activities aligned with your strategy?
• Look at costs. Where are you spending the most money? Where are your margins highest? Are you spending too much on activities that aren’t really adding value? How will you cut costs in non critical areas?
• Take a good look upstream and downstream, your suppliers and distributors, to look for ways to improve efficiency and add value.

Value chain analysis quickly identifies your competitive strengths and weaknesses. You will know where resources need to be applied either to improve the customer experience or boost margins by cutting costs.  

 To improve performance, optimize the value chain:

• Hire and motivate the right people with the right skills to support your strategy,
• Develop more efficient technologies and systems that support your objectives.
• Eliminate activities that don’t add value.
• Above all, focus on the elements of the value chain that create the most value for your customers.

Interested in more ways to improve your strategic planning process?  Download our Strategic Planning Tune-up book by clicking on http://www.cssp.com/strategytips/?blog.

Denise Harrison; EVP & COO
Recently I was discussing action plan progress (or lack of progress) with the action plan team. I asked the team what are the milestones for next month? What do we need to be doing in order to achieve our objective? It surprised me that the team could not identify the next steps to achieve a key milestone in the action plan. Once we clarified the steps the team was able to start working on the specifics and understood why the deadlines were important for each step in achieving the next key milestone.

During your monitoring action plan review it is essential that the key steps are laid out for the next month or two months. However, it is more important that the team members responsible for the steps understand why the steps and the timing of the steps are critical to achieve the overall action plan objective or achieve a key milestone within a plan.

Take the time in your monitoring meetings to ensure that you have the clear path defined for each action plan for the next month’s activity. If you have a clear understanding of what needs to be done and why it needs to be done your will find your team will be able to execute more efficiently.

Learn more from our webinar on execution, please click on Execution.  Questions about execution or strategic planning? Please contact Denise Harrison at harrison@cssp.com.

Conventional wisdom has it that sitting still is a strategic disaster – especially in high tech, but also in more mundane industries. As with many chestnuts I hear in strategic planning meetings, this one is both true and false. It’s true because the world will continue to move on with or without your company – and your customers don’t really care whether you are ready to come along with them. In technology markets in particular, many customers won’t wait for your company to get new technologies right – they will simply jump ship to whatever the latest and greatest provider is supplying (and if you doubt this, ask the folks at Research In Motion, whose Blackberry phone was the pinnacle of geekdom just a few years ago, but is now known as “the phone your employer makes you use” by those who still have them).

On a more profound level, however, there is a very delicate balance to be found between rushing forward into the new and really getting the value from what is already working. In the Blackberry example I just cited, I stuck with my Blackberry for two or three years longer because I liked the way the device fit my needs. I still miss being able to type without looking at the screen, which – of course – you cannot do with the latest touch screen phone models. I suspect many, many Blackberry users – past and present – feel the same way. But this does not stop people from shifting to other suppliers – it merely increases the perceived cost of shifting.  And there is the rub – because so many people shifted to an entirely new form factor, almost all new smartphone models –including Blackberrys – are designed as a touchscreen, candybar shaped phone.  This leaves customers who prefer an actual keyboard with far fewer options today.  It also makes Blackberry a “less-than-me-too” product, with a limited market, a poor result for RIM.

Smart phones are not the only products that suffer from over-acceleration.  Take a walk through a toy store, and you’ll be struck by how few of the products that were popular ten years ago are available today.  In many markets, new is confused with better.  From a strategic perspective, this isn’t just hogwash, it’s strategically very dangerous.  Many companies succeed with a very specific value model, and have great difficulty shifting into a new model – but feel compelled to do so because pundits tell them that innovation is the key to profitability.  Innovation is important – and in some industries, it’s a vital part of the value model – but it is not a substitute for really understanding the needs and preferences of your markets.  Whether you are developing real estate or designing packaging, it’s vital to really get inside your customers’ heads and understand what keeps them up at night.  It’s also vital to get why some customers like your company – and to assure that your strategy doesn’t eliminate that value in favor of innovations your customers don’t really care about.

Where does your company stand in this world?  Are you over-accelerating or under-accelerating in your strategic planning?  As always, I’d love to hear real-world examples and issues you may be facing.  And if you’d like to explore this concept further, feel free to contact me at .

By Denise Harrison, EVP and COO

Some companies are using social media to position themselves as thought leaders in their industry; others are using it to provide information and better customer service. Other companies are perplexed at how social media can help them. There are many examples of how to use the various forms of social media, but recently I ran across a video by Wm. W. Meyer on how to clean a drive slide. While you may not be interested in how to clean a drive slide, the video provides a good example of how you can use social media, in this case YouTube, to bring your product manual instructions to life.

As you develop your strategic plan your team should be looking at ways to use social media to:
• Raise your visibility by becoming seen as a thought leader in your industry
• Enhance your customer service by providing videos of how to fix or maintain your products
• Find candidates to fill open positions
• Find suppliers

Some of the social media channels may seem foreign to many folks who grew up when the fax machine was a new invention and PCs had not yet been invented. Your team needs to evaluate how these communication channels can reach your customers and potential customers.  Remember for some of your customers  social media channels are the normal course of interaction. I will cover other thoughts regarding social media and strategic planning in future posts.

I know many of you are successful at using social media. I would love to see your examples – please respond to this blog to show how you are using social media.

Comments and questions? Please contact me at harrison@cssp.com.

Old News
The ability to take a CAD drawing and create a physical prototype using 3-D printing was breakthrough technology 20 years ago. Now most design engineers use this capability to speed the new product development process quickly moving from concept models to functional prototypes into production.

New News
While visiting Stratasys, a leader in the 3-D printing industry, I found that the 3-D printing technology has expanded beyond its traditional prototyping application onto the manufacturing floor. Manufacturing companies are using 3-D printers to produce manufacturing tools (jigs, fixtures, patterns) to aid in the manufacturing process. 3-D printing technology allows production teams to quickly design and create manufacturing tools as they ramp up production for new products or streamline their production lines. In addition, if the tools are damaged they can be replaced easily and quickly without having to go outside to have the tool replaced.

Strategic Lessons:

1. Production efficiency: If you are a manufacturing company – assess whether or not you can use the technology that resides with your design engineers to gain efficiencies in your manufacturing process. Using 3-D printing technology to produce your jigs and fixtures may speed up your change-over.

2. Growth: Significant growth was achieved by identifying new applications for 3-D printing technology. As you look at the products and services your company offers; does your team use its strategic planning process to identify new applications to generate future growth?

If you have questions about any aspect of this blog post please contact: Denise Harrison; harrison@cssp.com