Written by ZOOZ
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| Issue 15 |
We are glad to
send you the 15th issue of LaZOOZ.
This monthly newsletter is sent as a free
service to thousands of senior executives.
not include advertisements, and features different sections
We have tried to keep it short, knowing that your time is precious and your work is plentiful. Those who wish to learn more can find links to articles and sources of relevant information. We hope that you will find the newsletter useful. We would be glad to receive any
comments and suggestions.
Ari Manor, CEO, ZOOZ
On strategic development in practice
As low-cost as possible
Companies that are on the left end of Porter's Smile enjoy a high level of profitability and very high revenues - despite the fact that their products are not different from others. In fact, this is the secret of their strength. They supply exactly the same products as competing companies, but at a lower price. Giant corporations, such as Teva (generic pharmaceuticals) and Keter (plastic materials), are thriving thanks to their control of costs. How do they do this? At first glance, it seems that being the least expensive is enough … "cheap" and superficial. But in reality, it entails a very sophisticated and complex process that requires patience, planning and especially precise implementation:
- How do you buy at
lowest cost? The bigger the company, the
greater its buying power - it can obtain lower prices
and easier terms from its suppliers. For example, the
Kupat Holim Clalit HMO and the Steimatzky bookstore
chain buy at lower costs than their local (and
relatively smaller) competitors. Not every large
company chooses to pass such cost savings on to their
customers. But a company that does so and chooses to
be the lowest priced over time, must also be the
largest in the field.
- How do you grow? Organic, natural
growth via internal resources usually is out of the
question. In order to grow rapidly enough and enjoy an
insurmountable size advantage, you have to focus on
external growth via mergers and acquisitions. This is
precisely how Keter, Teva and similar companies have
grown. And since the large majority of company mergers
fail, this is a very difficult path to implement. When
people say that Teva excels in strategic planning,
they are referring, among other things, to its
uncommon ability to successfully acquire and integrate
more and more companies.
- How do you merge successfully?
First, you have to buy the right companies at the
right time. For this purpose, you should maintain
detailed files over the years on each candidate for
acquisition (including economic parameters and the
character and motives of senior executives). In
addition, you should assess the economic benefit that
can be derived from the acquisition and compare this
to the candidate's market (stock) value. When the
right moment comes, and only then, sometimes after
long years of anticipation, you should act. And this
is just the easy part. Mergers usually fail due to
organizational problems. Therefore, even before the
acquisition or merger, you should prepare a plan of
operation that ensures the smoothest and most rapid
integration possible of the two companies. And this
plan should be implemented with due respect and also
with the necessary determination.
- How do you leverage the advantage of
size? The larger the organization, the more
complex it becomes. It has more employees, more
processes to manage, more products and services to
provide, and more customers to serve. Size can become
a burden if the management is sloppy. When things
become more complex, costs can skyrocket. There are
added costs of mid-level managers. The bureaucracy
grows. There is the danger of complacency. Unless you
focus, all the time, with determination, on lowering
costs. This is precisely why this strategy is called
"controlling costs." You need to
constantly think about how to raise efficiency, how to
improve and how to lower costs. And the good news is
that the bigger the organization, the more
possibilities there are for saving costs within the
organization. Relatively modest salaries (in return
for economic stability), business process management
(BPM), information management, and transitioning to
full automation are a number of ways to lower costs.
- And what about innovation? When
you are trying to provide products at lowest cost, you
should focus on technological and operational
innovation, find new ways to design, manufacture and
transport products and packages, and to provide
services and support in a less costly way. Keter
concentrates on manufacturing products that contain
less plastic (and more holes). Teva focuses on
producing generic pharmaceuticals at costs that are
several times lower than producing ethical (original)
medications. Both companies do this while carefully
meeting the required quality standards. In both cases,
a lot of intelligence and engineering wisdom is
- And what about globalization? In
today's world, companies that seek to supply products
at the lowest cost must usually be truly global. This
is another aspect of leveraging their advantage of
size. This may entail procuring raw materials in one
country, manufacturing in another country, packaging
in a third (because of surplus trade agreements) and
selling the product in a fourth country. Similarly,
global corporations must acquire companies in many
countries and know how to bridge between very
- And … a bit of modesty won't
hurt. Products that are supposed to be the
least expensive must also display "low prices."
Otherwise, no one will buy them. The design should be
simple and not ostentatious. For the same reason, the
organizational culture should be modest. You cannot
expect employees to suffice with a modest salary and
managers to focus on cutting costs when the executive
offices are too luxurious. Someone visiting Teva's
various sites would not suspect that it is such a
large and rich company. And this is good.
- So, where do you start? This is
truly a difficult problem. In most sectors today there
are already giant competitors and there is no point in
trying to catch up to them. They simply have a huge
lead and are so big now that it is impossible to
surpass them through a campaign of mergers and
acquisitions. And even if you have almost infinite
funding and make an attempt, the gap would only widen
because their response (mergers and acquisitions, of
course) would be more efficient and successful. This
is their specialty, remember?
- Nonetheless, where do you start? You
first need to identify a field where there is no clear
decision, preferably with a dozen mid-sized competitors
(so that there will be something to acquire);
and then: acquire one company, focus on cutting
costs, acquire another company and successfully
integrate the merger, leverage the company's
size and cut costs, track additional candidates
for acquisition, improve the efficiency of processes
and reduce costs, acquire another company, refine
processes, tighten the belt, improve operations,
deploy globally, and ultimately, after about
50 years, become a giant, inexpensive and … modest.
Simple, isn't it?
- For seminars on
Inventive Thinking in Technology (and cutting
click here (PDF, in Hebrew)
- For articles on strategy and other topics: click here
- Information on strategic consulting: click here
Innovation ideas not yet realized
Ideas for innovation in the bathroom
following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):
- An expandable bathtub
that opens into a double tub when needed.
- A bathtub that turns red to warn when the water is
- A bathtub that maintains the desired water
temperature - with heated walls and a thermostat.
- A bathtub with a mobile drainage opening that can
be lowered to ensure a water level in which an infant
will not drown.
- A shrinkable bath (to make it a suitable
size for an infant, or to clear space in a small
- A bathtub that plugs up automatically - the plug
closes when the faucet is on to fill the tub.
- A Pyrolite bathtub that cleans itself after being
- A slanted bathtub - one side is higher than the
other side (comfortable to lie down in; water is less
deep near the head)
- A bathtub with a small propeller, which mixes the
water as it fills the tub so that the heat is
distributed uniformly in the bathtub.
something yourself, okay?)
A tip on effective management
Hebrew calendar in Outlook
Purim? Why isn't anyone answering in France? When is the
New Year in Kuwait? Should you send a holiday greeting
to customers in Japan for their Spring festival?
Outlook , the electronic calendar on your computer, knows how to display for you the holidays of any country you choose. You just need to nudge it a bit. Here's how you do it in Outlook 2003:
Options from the
Tools menu of Outlook.
- In the window that opens, select Calendar
Options from the Preferences
- Select Add Holidays from the new
window that opens.
- Select the countries you wish to add from the new
window. Then select OK three times to
close each of the three windows.
That's it. Your calendar now includes the holidays you desired. Enjoy.
This can help you plan meetings in Israel and travel abroad, but also to surprise (and excite) countries from countries from Finland to Yemen when you sent them a greeting on their special holidays.
- For installing the
calendar in other versions of Outlook: click
- For information on ZOOZ workshops: click here
- For news on ZOOZ clients: click here