Kevin Minne
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Housing Identity Crisis,  Can We Afford to Innovate?

7/29/2016

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Even though the home building industry is ripe for disruptive innovation (BIG not incremental reductions in cycle times and costs) it might be that the industry cannot afford to innovate.
    The problem with the housing market (one of them) is a confusion of identity.  Just like a bank balance sheet where an entry can be both an asset and a liability, a house has the same two opposing identities.  For most people their house is their biggest investment (asset) and like any good investor the goal is to buy low and sell high.  On the other hand housing is a cost (liability) and it’s always good to keep costs low.  In other words when people can afford to buy a house they usually jump in and wait for the price to soar (meanwhile controlling their housing costs) so they can get rich selling to someone else.  But in order for home owners to get rich off this legal Ponzi scheme and for prices to go higher there needs to be more buyers than sellers.  (Simple stuff so far right?)          
    Unfortunately, the higher house prices go the fewer people there are that can afford to buy in and the chances of getting rich from selling your house diminishes.  That’s where banks step in with their version of a solution to solve the problem.  Banks have a vested interest in higher priced houses (protecting the value of your shared asset) so they facilitate the buy in by loaning more and more money to buyers which drives up prices and makes happy bankers and happy sellers.  (It’s all good right?)  Only it’s not, because the rising entry prices and falling incomes are eliminating more and more of the desperately needed buyers from being able to qualify for a loan and keep the cycle going.  (One recent Gallup poll over a two year period showed a 34% increase in the number of people who gave up hope of ever owing a home.)  For a market to be healthy there needs to be lots of participation and when participation drops it might be time to look out below.  (Are you with me so far??)
    So, this is where the identity crisis becomes a problem.  We need to be able to lower the entry cost of buying a home and simultaneously keep home values high for banks and owners.    (When you figure that one out let me know!)  But wait, maybe it’s time for a good old fashioned market correction to help make housing costs temporarily cheaper right?  Unfortunately, the last time this happened, lending standards tightened and many would be buyers lost their jobs which exacerbated the problem.  So, what do you do when the only people who could drive up housing prices can’t afford a house?  If we continue to loan money to keep prices up and increase participation we will have to have lower lending standards…. oh, wait we already tried that!  Or, we can focus on those really BIG not incremental (say 50% reductions in cycle times and costs and improvements in productivity.  But wait… if we cause a big drop in home building costs wouldn’t that lower the value of all homes overnight?  Think about what digital cameras did to film or the fax and email did to snail mail or cell phones did to land line phones, etc. etc.  
    The real questions are, can our whole “home owner investment philosophy” and our (still on life support) banking system and economy afford that kind of lowered housing price that might come from disruptive innovation?  And, how can we avoid another housing calamity if we don’t innovate to lower housing costs?

I would love to hear your ideas on how to solve this problem???  Just click the “comments” right below the “like” or “tweet” icons to add you thoughts.
    
By: Kevin Minne
InnovationGrowthSystems.com
720-354-0291

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Innovating on the Fringes

7/22/2016

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It’s not your mainstream customers that test your processes and help you innovate but those that operate on the fringes of your market.  They are the ones that have the new ideas and requirements that will force you to come up with better products and more efficient processes!  (If you’re smart enough not to ignore them.)
    Have you ever noticed how much money large corporations waste?  It seems like their operations are to big to notice the little things, they can ignore so much waste in one area of the company and yet squeeze huge and painful volume discounts out of their vendors in another.  Some mammoth corporations are notorious bully’s who use their size to make extreme pricing demands to stay competitive but do nothing to improve processes.  Now certainly there are advantages to scale and volume business models but many times in life and in business being a bully is not the most efficient or the most effective way to do things and it leaves a bad feeling.  Being the biggest can be an excuse for not getting better!
    If you follow the history of the big auto manufactures in the world, GM, Ford and Chrysler, all emphasized size and scale as their big advantage, whereas Toyota didn’t have that option especially after World War II.  Toyota was essentially operating on the fringes at that stage and since they didn’t have lots of demand they needed lots of product variation and efficiency in order to profitably meet the requirements of the few customers they did have.  So scale was not available to them as an advantage and rather than being the bully, like the american manufactures, they focused on learning and creating more efficient and flexible processes and eliminating waste.  Which, is what really makes a company profitable.  Once they created a speedy quick manufacturing process (two days to mfg. a car) they turned to design, then sales and so on.  Meanwhile as the american auto manufacturers continued to focus on cost cutting and moving their manufacturing off shore to find cheaper labor, the Toyota corporation was moving manufacturing to the US and operating profitably here.  They could do this because the Toyota Production System (TPS), not price bullying was winning. 
    Just remember there’s freedom on the fringe.  You know, out there on the edge, where you are in touch with the customer and the little details and can work away from the central command and control.  It’s where you can get things done without anybody noticing or meddling before your idea is ready.  It is where success hasn’t made you and your processes rigid.  The advantage of being small and operating on the fringe only comes when you are willing to continuously learn and innovate and not just copy the big guys.  Focus on the small details that the big guys just ignore or can’t see.  If you can do that then you will eventually be really ready to take on the big guys! 

By: Kevin Minne
InnovationGrowthSystems.com
720-354-0291

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The Debt Bet

7/15/2016

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To debt or not to debt that is the question.  Just about everyone has had to answer the question of whether to take on more debt in their personal lives or in business numerous times.  Debt is a part of our everyday lives and has been a part of the human experience all through history.  In fact the last time the United States was debt free was in 1835 under the Andrew Jackson administration because he wanted to abolish the old version of the Federal Reserve.  (Funny how his face is on a debt “note” known as the twenty dollar bill.)  However, taking on debt is not something anyone should take lightly in fact it should be very central to the ongoing evolution of all life and business strategies.  As we all know too much debt can bankrupt individuals, kill a business or ruin a nation, so debt choices are critical to success and one vital key to having an innovators edge.   
    Even the best innovators are subject to the fickle’s of finance.  Let’s not forget that any time we take on debt it is a bet on the future.  Any bet has unknown risks that come with it, but some bets are more risky (like horses and football scores) than others.  In business there are some economic environments where debt carries more risk than others and it pays to carefully consider what kind of environment we are in before crafting your strategy for the future.  For instance, the iconic investor Warren Buffet will only invest in companies whose products have long term predictable demand, such as Dairy Queen or Coke or shoes etc.  But even those products had a drop in demand in the last economic downturn, which wasn’t so predictable.  Unfortunately, much of our societal demand is driven by debt and there are very few people that can purchase with their own saved money.  Even demand for the most stable of staple products is highly uncertain when banks cut credit.  There was a time decades ago in many industries, when demand was so stable and predictable that more debt was the safest bet in order to win the market share and production war.  But now markets have definitely turned boisterous and unpredictable and debt can leave you imprisoned by an old and obsolete business model or product.  
    The deceptive lure of low interest rates can make it almost impossible to convince yourself to stay out of debt, because we say “it’s so cheap to borrow.”  Unfortunately, when investors are willing invest trillions of dollars in a negative interest rate bond to lock in a loss, it is sending a red flag that even though loans are cheap, all is not right in the economy….borrower beware!  Your investment in business or personal debt may also have a negative return whether you like it or not and now may be the worst time to be in debt.  Even the smallest payment can bankrupt a company when there is no money coming in!  So, be careful keeping your dream alive and don’t bet your future on debt.  Being debt free is just that, freedom to move and adapt to market wiggles unencumbered by debt.

By: Kevin Minne
InnovationGrowthSystems.com
720-354-0291

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Brexit the Biggest Strategic Spinoff in History

7/8/2016

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More lessons for business from Brexit.  The British exit from the European Union is still headline news but soon it won’t be and then only time and many new strategic decisions will tell if it was a good choice.  Anyone who has left the safety and security of a large corporate paycheck to launch out on their own knows it’s scary but also invigorating to jump, yet that doesn’t make leaving a good choice.  It is only a good choice to jump if there is a real vision and strategy to create new value.  If the European Union is just a sinking ship and the Brits were just the first to jump it doesn’t make them much safer.  In the corporate world it's not unusual to hear about great new product ideas that flounder and never really get off the ground until they are spun off from the mother ship and then there is an explosion of growth and value.  Think of the Bell telephone breakup and how it unlocked an explosion of new products, services and market value or when Pepsi divested itself of it’s restaurant chains to form Yum Brands.  The question for business and Britain is how do spin off’s unlock the value that is somehow hidden or stifled by the mother ship?  
      One opportunity to unleash value independently is just a simple matter of sales.  By “sales” I mean trying to sell the same executive team on giving your valuable product or marketing idea the scarce human and/or capital resources it needs to really take off.  While under the control of the mother ship there is only one place to shop for resources and if the top brass just don’t share the value vision there’s no where else to go.  Independently, ideas have options and they don’t have to be sold to one person or team.  If it really is a great idea you can usually find a champion.
    Another opportunity comes in the form of accountability, the old saying of together we can do more isn’t always accurate, lots of small boats make more captains than one giant ship and captains get credit for capturing the loot.  More small boat captains also can make better micro decisions and adapt quicker to market changes in their pond.  There is certainly something energizing and focusing about being completely accountable and not under the protective umbrella of HQ.  There is also something very suffocating about having someone up three levels get all the credit.
    Another advantage of independence is identity.  The term “European Union” doesn’t bring up pictures of the Union Jack waving from the top sail or tea time or London Tower, it is too convoluted to bring up any inspirational image.  A product like a computer is an empty identity but an Apple computer has an inspiring image and character.  Having a unique identity and reputation that people really own is actually really, really BIG.
    So, if you want to unlock your value think like a spin off… after the spin off (think outside the box ship) and create a strategy for unfettered growth in turbulent times.  With markets and demand becoming far more fickle it makes less sense to be big.

By: Kevin Minne
InnovationGrowthSystems.com
720-354-0291

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Brexit, What it Means for Your Business

7/1/2016

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It's hard to read anything about finance or international politics without bumping into the British exit from the European Union.  Contrary to what some believed it certainly did have an immediate impact on financial markets and very likely will continue to have an impact long term.   It may even have ignited a trend in the EU and elsewhere.  Even though it might seem far away and irrelevant to your business (after all it's just international politics and global finance) it's not, and there might be valuable lessons for innovators. 
    The Big lesson is that bigger is not always better, as unelected officials made decisions from a distance it seems that they lost touch with their real customer, the British people!   The citizens wanted a government that was more responsive to their input and to have a bigger voice in how they were governed.  In other words, they wanted more product features that met their specific needs.  In government as with business one size rarely fits all.  Eliminating service options might be more efficient and cost effective but it may also cause us to underserve or lose key customers, since the one size product offering often doesn’t fit anyone very well.  We can see this tendency in numerous industries and maybe none are more noticeable than banking.  Studies have shown that small banks are far more effective at meeting niche needs than big, yet we have seen a massive consolidation of banks to where now there are just a few who get labeled “too big to fail”.  This move is not about safer banking or serving the customer better.  Tom Peters, the author of “the Pursuit of Wow” once said, big isn’t always bad, it’s just highly suspect.  
    Toyota fights big by acting small, they work extremely hard to increase manufacturing capabilities so they can offer more product features without losing efficiencies in order to satisfy more specific customer needs.  The closer we get to customers the more detail we will see and understand about their needs and that is what enables, nimble adaptation and innovation.  Stay close to your people (customers and employees) so they won’t vote a Brexit on you! 


By: Kevin Minne
InnovationGrowthSystems.com
720-354-0291

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Building blocks for uncovering the hidden opportunities for  business growth and performance.  
  • If you ever wanted more than the daily work routine out of your job or business.  
  • If you have had a measure of success but still feel like you are falling behind personally, professionally or financially. 
  • If you ever wanted to push your business or profession to new levels of significance.
Then this book will provide tools to unlock the hidden explorer in you so you can discover and conquer new worlds of opportunity.


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