Posts Tagged ‘business management’

Book Review: The Collapse of Distinction by Scott McKain

April 12th, 2009

What is the biggest difference between McDonald’s – one of the most generic, yet consistent, hamburger chains in America – and Ted’s Montana Grill?  They’re both national chains.  They both have a menu with hamburgers as a primary feature.  They both offer fried potato products.  The difference between the restaurants aside from these quick highlights could be an entire study in distinction itself.  The focus of Scott McKain’s book Collapse of Distinction is how companies, teams and individuals can all search out the thing that makes you remembered: uniqueness and distinction. Ted’s Montana Grill serves gourmet hamburgers with high, high quality standards, fresh ground beef or (lower fat) bison patties.  Their french fries are cut on premises.  Their restaurant has a classic, nostalgic feel, and as if to assure you that they were happy to participate in the creation of your meal there is a buffalo head mounted on the wall of each restaurant.  Atmostphere is critical for the sense of reminiscence compared to the fiberglass (or otherwise) clown and his troup of imaginary friends who show up at each McDonald’s restaurant and on television commercial after television commercial.  I tell friends about Ted’s (when they’re visiting from places that don’t yet have them) and we all in my family tend to loath McDonald’s except for when we need a clean restroom on a long road trip.

Scott McKain’s analysis of distinction in the market place carries a similar comparison between a few local restaurants where he grew up in Indiana and the chains that came in and impacted the very same town by creating a consistent product, but lacked the personality of the local joints.  The book is personal, pragmatic, and gives you not just the theoretical and philosophical concepts but is by far the most useful book on thinking about product and experience design I’ve personally come across.  The book is to the point about the three destroyers of distinction:

  1. Emulation – the idea that since your competitor is doing something, you should, too.
  2. New Competition brings new challenges – New competition comes trying to interrupt your relationships.
  3. Bored customers – customers who have had the same thing over and over without any sense of newness or change may move onto something else just because its new.

What amazed me was that while these three things are the surface level problems Mr. McKain goes into each destroyer with a desire to help you find these problems in your own life [work ethic, philosophy on business, etc], your own team or your own organization.  How does he do it?  He does it by giving you two sets of tools at the end of each chapter, an executive outline to help you remember what the chapter was about for easier communication to the appropriate people in your life, and the second thing being penetrating questions that ask you to identify problems and solutions.  A book that does this without being industry specific is worth its cost even if it was $35.00.  Its not – Amazon.com currently lists it at $16.49 at the time of this writing which conveniently puts it at a price where you could buy a copy for yourself and a copy to pass on to a colleague so that the great content of this book could help your team or company bust through the blasé and stand out in a market of mediocrity.

This book has a number of pages that I have underlined and I have a slew of colorful 3M sticky-notes(TM) sticking out of the side with words like quote, clear chart, customers, homework, and blog.  If you pick this book up you need to be ready to engage yourself because Scott’s writing is full of things that will make you want to act.  I found myself having a tough time sitting through and reading because frankly it made me want to stop sitting there and do something!  Before you misinterperate that statement I need to clarify: the book is highly readable bits just inspiring.  Some principles are working their way through my thought process for my job and I’m anxious to develop a clear plan to present to my own managers for work.

I believe that by personally applying the principles in the book on how to approach opportunity to my own life it will help me develop and grow my own skills to the betterment of my family and friends.  On top of that I’m excited to share these concepts with my co-workers and team mates because I’m confident that their involvement with the ideas will help keep our team and company sharp.  These principles are not just about marketing (which is what I was afraid this book might be) they’re instead about a solid approach to breaking out of the stronghold of the differentiation destroyers:

  • Product differentiation
  • Price differentiation (this way can lie serious trouble)
  • Service differentiation

In fact the last point here comes with a quote that I thought was something that I personally look for in business transactions, “If you cannot impact the design of your products, and if you cannot choose or control the price, then your primary point of differentiation has to be in the service.” [emphasis mine].  Going back to McDonald’s verses Ted’s I can think of a lot more unique things in the service at Ted’s than I can for McDonald’s – its part of what makes Ted’s a place I want to take my family to and spend some time and money on food, and what makes McDonald’s a place we stop at for clean(ish) restrooms when we’re on road trips [disclosure: I almost always buy something when we stop at a restaurant for a potty break because I don't believe you should abuse the business and its facilities].

Should you buy this book?  Only if you want to see your company or business stand out in our toughened economy.  Should you then become an evangelist for bold differentiation within your team and company?  Only if you want to stand out amongst your peers and be recognized as a valuable employee.  Should you follow Scott McKain on Twitter?  I do.  Its already made me stop and think differently about some of my very own assumptions.

The Moved Buffer Theory Budget

March 12th, 2008

Have you ever wished you had an extra $200.00 a month? I know I used to wish that. The moved buffer theory is the theory that you should be putting the buffer in your budget at the ‘top’ of the budget rather than in each category. A buffer is an excess amount of money that is put in place to deal with a greater demand on your finances than is normal. If you’re familiar with “emergency funds” then you might describe the buffer as a preventative emergency fund built into your plan. If you are like me then you originally set up your budget with the buffers into different categories so that each category could absorb fluctuations in the category.

Heavily Buffered Categories

Evaluate the chart above representing a traditionally buffered set of categories. Can you see that the categories with buffers are theoretically more likely to use the buffer? By giving yourself access to more money you are more likely to absorb the buffer. The problem is that you should have some buffer somewhere because in real life all of the numbers are not known ahead of time (unless you are super lucky). By setting yourself up with a ’safe’ budget you are more likely to overspend potential savings (which is not the same as blowing out every budget category in overspending).

Instead, I would propose that you actually calculate a conservative amount for each budget category. What would you say to cutting each category by 20% and moving that buffer into its own category that goes untouched and your target for expenditure is reduced? That way if you over-spend in a category (or the water bill shows up and you find out you took showers that were too long, or watered the garden a wee more liberally than you had expected) you have a buffer category with funds for paying the water bill, but you don’t find yourself likely to spend a lot more in each category. The weakest link in your budget, the category that you’re overspending on, is dealt with, and you can review it for next month to see if it needs more funds, but you don’t just feed all of the categories excess money each month.

Lower Buffered Categories

There is little doubt that real life will happen, and the potential for surprises is great, but by taking out some of the waste where it didn’t appear to be in the first place, you may save yourself a lot more money in the long run. If you can save $50.00 a month in reduced buffer excess and put it into an investment fund, pay off debt, or possibly grow other areas of your life, its worth considering! I have begun to see a several hundred dollar a month buffer that I didn’t know existed because before I was spending it. Consider your choices as you budget. This method may not work for everyone, but for us, it has been a real relief.

Note: The Moved Buffer Theory Budget is based on the Theory of Constraints by Eliyahu M. Goldratt – only applied where I haven’t seen it applied yet. You might consider checking out Critical Chain, a book that applies the Theory of Constraints to business management.