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From the Ashes
Carter Pate and Harlan Platt deliver
practical advice in their new book, The
Phoenix Effect: 9 Revitalizing Strategies No Business Can Do Without. To
save you the suspense, here are the nine strategies:
Get to the Point
of Pain
Determine the Scope
Orient the Business
Manage Scale
Handle Debt
Get the Most from Assets
Get the Most from Employees
Get the Most from Products
Produce the Product
Change the Process
The authors bring valued experience in
turning around companies to the pages of the book, and most readers will nod
their heads in agreement when presented with what Pate and Platt have to say.
After reading a few chapters, I stopped nodding and began to see that a
reader can find multiple answers to the same question, and much confusion
about how to carry out what the authors say needs to be done. If you approach
this book as a primer, or a brief introduction, you’re likely to benefit more
than if you expect your own solutions to arise from these pages. Here’s an
excerpt from the Orient the Business chapter:
“Setting Orientation
Managers choose a company’s orientation when they set value and utility levels
for products or for the entire company, which they do either deliberately, by
selecting levels, or by default, when they respond defensively to a
competitor’s action. Needless to say, actively setting orientation is the
better method. That way, managers can coordinate their decisions on several
products, which maximizes the combined impact and minimizes the cost of those
products. A passive orientation strategy, which means that someone else is
declaring the position of your product or service, is dangerous. The
analogous situation in warfare is allowing the opposing commander to
determine when and where a battle will occur. Managers who dodge the
responsibility of setting orientation may not understand the intricacies of
their product or their customers. Or they may lack the confidence to define a
new direction.
We view setting a price point as the most critical orientation decision. Low
prices offer what economists call the elasticity effect, which stimulates
sales. If a high price reduces sales, it can also improve net margins. Consider
the substantial price difference between the $8 that Ameritrade, Inc. an
Internet company, charges to buy or sell any amount of stock and the $300
that a mainline Wall Street firm charges to sell a relatively small amount of
stock. These are two very different pricing strategies that both work.
Ideally, a business wants its sales and profits to grow rapidly, but often it
must settle for one or the other. A common strategy is to charge low prices
initially (or distribute coupons or other discounts) to attract business,
then raise them later. The flaw here, though, is that the strategy risks
misrepresenting the company’s orientation, which may anger consumers when
prices go up. The American Express Company is a case in point. It introduced
free stock trading in order to attract new customers quickly but then
instituted commissions, upsetting many of its new clients, some of whom
returned to their old brokers. A more astute tactic is to charge a high price
initially but include sufficient value and utility to offer a prestige
orientation. American Express’s mistake may have been to think only about
prices and to ignore orientation.
A successful orientation is always temporary. Customers and their preferences
change, technology advances, and new sources and forms of competition can
quickly unhinge a useful orientation.”
The authors go on to describe how not to
switch orientation too quickly or too slowly, leaving many readers confused
about what this means to their own organization. The chapter has ended before
clarity arrives. The
Phoenix Effect presents good examples of strategies that have worked and
that have failed. The typeface is large, and the pages turn quickly. This is
an ideal book to pack for a short flight, and a reader is likely to come away
with some ideas. We’ll all need to look elsewhere to make a Phoenix really
rise.
Steve Hopkins, July 17, 2002
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ã 2002 Hopkins and Company, LLC
The
recommendation rating for this book appeared in the August 2002
issue of Executive
Times
For
Reprint Permission, Contact:
Hopkins
& Company, LLC • 723 North Kenilworth Avenue • Oak Park, IL 60302
Phone: 708-466-4650 • Fax: 708-386-8687
E-mail: books@hopkinsandcompany.com
www.hopkinsandcompany.com
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