Afternoon Keynote Speaker Leo Hopf, author of Rethink, Reinvent, Reposition, presents the final session of FORWARD 2011- Renewing Your Business Via Strategic Innovation

1. Renewing your Business via Strategic Innovation Leo Hopf, leo@teamhopf.com 801-828-5041 Twitter @leohopf

3. Product/service line extensions (“whiter & brighter”)

4. Geographic expansion (“Let’s open a new office”)

5. Cost reductions (“Let’s get lean and mean”)

6. The above are valuable, but they bring unintended consequences

7. They reduce the sense of urgency for long-term action

8. They misdirect management’s attention

9. They often substitute “action” for good thinking.But there is another option – Business Renewal

10. Remember Blockbuster?

11. Netflix stock performance: Netflix / Qwikster announcement Price increase announcement Bigcharts.com June 20, 2011 September 19, 2011

12. Why is it difficult to renew your business while you are running your business?

13. Renewal can take place at any level: Renew companies Renew divisions Renew business units Renew products / services Renew business processes Renew workforce skills

14. The key: Focus on what you can control at your level in the organization

15. It takes different things to win at different points along the business life-cycle: Invest to grow the business in new markets, geographies, and product / service extensions Create a business model that will be of value to a set of target customers Reduce investment, increase profitability Renewal Protect through patents, copyrights, customer relationships, brand, standards, litigation… Acquire lead customers to validate the concept and build word of mouth Emerging / Growth Mature Either renewor milk / divest / minimize investment Dominate one market, refine the value proposition Decline Business Innovation Metrics

16. Over time products and services are moving faster and faster from one end of the lifecycle to the other. Record player, 125 years Radio, 100 years Cassette Deck, 40 years CD’s, 25 years MP3’s, ???

17. Where are the parts of the business you control on their lifecycle? Renewal Emerging / Growth Mature Decline Business Innovation

19. Start from scratch to build renovation alternatives specific to you

20. This will take longer, cost more, but will fit better in the end

21. Tools: Decision table, value chain, concentric circles

22. Off-the-rack

23. Apply proven renovation solutions to see if they are close enough to fit your situation with minor alternations

25. But what if your clothes came back in better shape than they were when you dropped them off? Strategy #1: Catch the New Wave Milt and Edie’s Dry Cleaning (II) Replace missing buttons Repair torn pockets Replace hooks & eyes Re-sew open seams Repair linings Check zippers Pant cuffs opened, brushed, and re-tacked All garments hand-finished & neatly bagged Prompt, friendly & efficient service The perfect garment at no extra charge.

26. Strategy #1: Catch the New Wave Milt and Edie’s Dry Cleaning (III)

27. The renewal process: Commit to the reinvention effort Choose the best alternative

29. Size the potential value

30. Select the short listWhat parts of your portfolio need renewal and which do not? What is the ballpark value potential of renewal? What is on the final short-list of renewal candidates?

31. Strategy #6: Get a Personality Transplant Activision Blizzard (Vivendi) (I) What was the largest grossing entertainment opening day ever? Spiderman 3 at $151 million? The Dark Knight at $158 million? The answer is the video game Call of Duty: Black Ops which sold $360 million on its first day. Creating a modern video game is far too complex for individuals and much too expensive to be funded by small groups. But the creativity necessary to envision and create a top selling game is endangered by the efficiency required by large companies. Activision had fallen into the efficiency trap and was spinning its wheels because of endless arguments between creative designers and financial management. And while they were arguing they weren’t making great games.

32. Strategy #6: Get a Personality TransplantActivision Blizzard (Vivendi) (II) In 1989 Bruce Davis took control of the company. His first move was to fire 142 of Activision’s 150 employees. And then he rebuilt the company from the ground up to appeal to creative game makers. He abandoned the commoditized approach to game development and placed his bets on unleashing the creative people to do as they thought best. Along with this creative freedom came measurements and rewards based on the performance of their games franchises.

33. Strategy #6: Get a Personality Transplant Activision Blizzard (Vivendi) (III)

34. What are the key questions addressed in Commit? Does this part of the business truly require renewal right now? Commit to the renewal effort Do we have the resources necessary to do the job right? Given everything else we have going on, are we really ready to commit the resources, time, and attention to a renewal effort?

35. A quote from George Canning 1770-1827, British Foreign Secretary: “Indecision and delays are the parents of failure.”

36. Question #1: How fast is your organization changing relative to the industry you are in? We change faster than the industry and lead the way. We change at the same rate as the industry. We change more slowly than the industry and tend to play catch-up.

37. What happens if you decide too slowly? Yahoo was the market leader in search a decade ago. And they were staffed with very smart people. But over the past decade they made numerous acquisitions unrelated to their basic search engine product. Rather than push forward towards a clear vision they meandered as if they had all the time n the world. Meanwhile Google rolled out new products and continued to refine its link-based search engine. From the market leader in search a decade ago, Yahoo searches have plummeted to less than 25 percent of Google’s. After turning down an acquisition offer of $33 per share by Microsoft in May, 2008 (Yahoo was holding out for $37 per share), Yahoo’s stock price dropped below $10 per share within the year.

38. A quote from Mario Andretti, race car driver: “If everything seems under control, you're just not going fast enough.”

40. Stretch the team’s thinking

41. Screen by applying the 12 strategiesHow are we defining the work which will be done in the renewal effort? How can we stretch our thinking to include the wild as well as the mild? Which of the 12 strategies best fits our particular renewal needs?

42. Strategy #8: Shift to the Sweet SpotTrader Joe’s Trader Joe’s started as Pronto Markets and competed in the convenience store industry with 7-Eleven. They carried products similar to what other convenience stores carried. But without 7-Eleven’s financial strength, their ability to expand was limited. So they changed the game and their name and moved to the Sweet Spot. They decided not to go head to head against either convenience stores or standard supermarkets. Instead they created something new and highly profitablea shopping adventure centered on their private label products.

43. Strategy #8: Shift to the Sweet SpotTrader Joe’s Trader Joe’s creates this adventure through fun and cheekiness. Its uniforms are colorful Hawaiian shirts. And it has created linked but cute private label names for its foods focused on ethnicity: Trader José’s, Trader Ming’s, Arabian Joe’s, and Trader Joe-San, for example. The stores continuously rotate 10 to 15 new items in each week and make room for them by eliminating the same number of older items. Thus, rather than being a predictable grocery store, which always has the standard offerings, Trader Joe’s has become a shopping adventure and has created the “Treasure Hunt.”

44. Strategy #8: Shift to the Sweet SpotTrader Joe’s Trader Joe’s does not try to be the best at everything. In fact, the company’s approach leaves it at a disadvantage in four key areas: You can’t go into Trader Joe’s and purchase a complete market basket of groceries. The company’s prices tend to be higher than many other stores. Trader Joe’s carries very few national brands. The stores tend to be in weak locations in aging or rundown shopping centers. But the treasure hunt and adventure aspects outweigh these weaknesses. Whether a customer is looking for wine, organic herbs, organic rice, dried fruits, imported cheeses, hummus, or frozen chocolate croissants, Trader Joe’s will always have something that interests them.

45. What are the key questions addressed in Choose? Is the proposed renewal strategy clear and compelling? Choose the best renewal alternative Have we done the work necessary to make a high quality decision? Is everyone needed to execute this choice aligned and committed to its success?

47. Holds an organization hostage to its least visionary, leastcreative, and least risk taking person

48. Slows organizational decision making due to endless meetings attempting to reach consensus. And once consensus has been reached, plans must be locked in place lest the can of worms is opened once again.Everyone can have their say, but they can’t always get their own way!

49. Eight executives from all over the US are in town. Where do they go for dinner? Korean hot pot Sushi Italian Indian

50. How long will it take to reach consensus… … so that the chicken will vote for Colonel Sanders?

52. The decision team should be the smallest group at the lowest level such that if they collectively agree they are unlikely to be overruled

54. Secure what is needed for success

55. Switch to the new business modelWhat has to change and what is the portfolio of projects that will bring these changes about? What assets are needed for the identified projects? How should we balance the efforts and transition between the old and new business models?

56. Here is the twitter handle @qwikster:

57. Strategy #12: Cash Out and Double DownBoise Cascade (I) In what businesses does Boise Cascade compete? Timberlands Paper Mills Pulp Mills Boise Office Solutions (Business-to-Business Office Products) Building Products Distribution

58. Strategy #12: Cash Out and Double DownBoise Cascade (II) What could they do? Most of their business units were in their late stages of maturity or had begun to decline. All the low hanging operational improvement fruit had long ago been plucked. There is always opportunity for additional continuous improvement, but that alone would not revitalize the market positions of Boise Cascade’s businesses. So in 2004 George Harad, the CEO of Boise Cascade, and his leadership team made a bold move to cash out and double down. They sold 100% of their timberland, pulp and paper, and building products assets for approximately $3.7 billion. And what did they do with the proceeds???

59. Strategy #12: Cash Out and Double DownBoise Cascade (II) They bought OfficeMax! Combining OfficeMax with Boise Office Solutions brought the company closer to buying power parity with Staples and Office Depot. It also provided the brand recognition and retail presence that they could not afford to build on their own. And it shifted their asset holdings to office products, an industry with a relatively brighter future than paper and building products.

60. What is the renewal choice facing the financial side of the organization? Don’t Drag out the pain Success A valuable piece in your portfolio Attempt Renewal Failure Clarity on direction – manage the decline / exit

61. The renewal process: Commit to the reinvention effort Choose the best alternative

62. Remember… No business grows forever, but there are always growth businesses