Advanced Option Strategies » Irresistible Force

Consider How Adverse Conditions Can Be a Blessing in Disguise

admin — Tue, 26 Jan 2010 07:28:25 +0000

When business conditions turn negative, take a deep breath and relax. Most circumstances are not nearly as threatening as they first appear. When dealing with the defensive postures that arise in an irresistible-force situation, a good first step is to ask how the changed circumstances could be turned into a benefit.
For example, a source of any budget shortfall anxiety is usually concern that bonuses and stock options would be decimated. Talking to your investors about the new circumstances may allow you to determine that by taking timely, appropriate action to adapt to the irresistible force, you’ll end up with a net benefit over time instead of the feared loss.
Why? You’ll benefit by operating under the positive influence of an offensive perspective. The stock price will soar as investors develop confidence in your new directioin, and with the higher stock price multiple you’ll be able to add the important new resources needed to grow and improve faster in the future. If you do this well enough, the stock option gains may offset your lost bonus for the year.
Let’s look at an example. In the 1980s, Bell & Howell Company decided to shift its mix of businesses to focus its attention into areas where opportunities for profitable growth would be much better. They moved beyond the defensive reaction of merely explaining why growth in their businesses was slow, to speeding up the company’s growth.
This shift meant selling or shutting down many businesses and spending a great deal of money to acquire and develop other businesses, and these adjustments caused a lot of pressure on earnings. As a result of these changes, from 1982 through 1987 earnings grew hardly at all. Yet the stock price expanded by several hundred percent, rapidly outpacing the market averages and the stock prices of companies that were providing stellar earnings progress.
The reason: Investors saw a company that would prosper greatly in the future because of these changes, and had confidence in the company’s management to do the right thing. In interviews done during that time, investors related that they were willing to ascribe value to the company’s stock based on positive actions that the company had not yet made or even contemplated simply because investors had so much confidence that management would represent the shareholder interests well.
What’s the lesson? Look at the bigger picture to see how you can use adverse conditions to choose a better path and attract more resources to help you succeed.

Implement Strategies That Feature Always-Win, No-Lose Adaptability

admin — Thu, 07 Jan 2010 07:25:09 +0000

You can easily imagine, I’m sure, how useful it is to anticipate so many circumstances that you’re ready for almost any conditions. Such preparation ensures you of being able to enjoy competing, regardless of what comes next.
Let’s consider an example, a business in an industry where the firm’s best customers are so happy with what is being done for them, that they actually resist new and better products.
It could be an enterprise that provides a service that generates significant incremental revenues and profits for its customers. When the customers are flush with financial resources, they turn conservative and want to make few, if any, changes.
How can this organization pursue the ideal best practice for adaptability? Here are some possibilities:
1. Find new customers in other parts of the world who are strapped for revenues and resources, and preferably where competitors would have trouble following your lead.
2. Develop new types of customers who could use your organization’s expertise to solve different problems.
3. Educate other executives, who are open to improvements, in the customer organizations about the benefits of the new ways to provide the service so that these executives will want to sponsor the changes.
Notice that these are all good things to do even if the existing customers were demanding instead vast increases in new types of services that only you could provide. Because existing customers aren’t doing so now simply makes it more appealing to allocate resources to work in these new areas.
You can think of these actions that allow you to prosper regardless of circumstances as providing a “no-lose option.” Under any set or degree of irresistible forces that you can propose, such options give you greater growth and success than you would have otherwise have enjoyed.
Occasionally, you can select from among the options a choice that is both “Always-Win,” and “No-Lose.” For the football fan prepared for the cold, this might also mean rooting for the fan’s favorite team while having a bet on the opponent so that the fan always wins.
Here is an organizational example. A company faces a wide variety of technological crosscurrents, far more than it can keep up with. In addition, its basic products are under tremendous pressure from customers for lower prices. Further, a lot of new markets are about to open up, but it is unclear what the potential is for each new market.
The company can choose to see itself as resource-poor and focus on rationing resources, or it can look for the combined always-win, no-lose option.
In the former case, the company will become more efficient, narrow its focus, and lose almost all of its opportunities. In the latter case, the challenge is to find others to assist and fund its new activities that have a greater financial resources and interest in the result than the company itself does.
For example, some complementary companies (those whose economic success results from what you are doing, but are not customers, suppliers or competitors) are developing products for these same new markets that will sell for 100 times the cost of this company’s products.
To better understand this kind of circumstance, imagine that you are developing a new medical test costing $25 that will diagnose the need for pharmaceuticals costing thousands of dollars per treatment. These complementary companies are often wealthy compared to your organization, and looking for new opportunities.
Without the testing company’s new diagnostic, the new pharmaceutical markets will not develop nearly as well. Perhaps some of the complementary companies would be willing to pay 90 percent of this company’s development costs and leave this testing company with 90 percent of the diagnostic profit.
If that were to occur, this test-making company would have plenty of resources, would grow much more rapidly, and be much more profitable. If implemented successfully, it seems to be an always-win, no-lose option assuming that more than 10 percent of the efforts bear fruit for successful new diagnostic test products.
The diagnostic company in this case has a usual success rate of over 40 percent. This means that choosing complementary companies to work with on a shared-benefit, shared-cost basis is an ideal best practice for achieving the test-making company’s optimal adaptability.

Adapting to Changes in Irresistible Forces: Optimism, Options, and Open-Mindedness

admin — Thu, 24 Dec 2009 07:53:29 +0000

Seek out the pot of gold at the end of the cold shower. To approach the ideal best practice for adapting to irresistible force changes, the biggest challenge to you and your enterprise is to view irresistible force consequences optimistically (although not over optimistically) and learn to see many ways they can be turned into a delightfully supportive environment for your operation.
More than half of your irresistible force consequences will initially seem to be about as desirable as a cold shower after being outdoors in cold weather all day. But that cold shower does have benefits. It can keep you from wasting water by shortening your shower, reduce your power bill for heating water, make you more alert, and help you stay used to cold conditions for other days when you’ll be outside in the cold all day.
A good way to start retraining your outlook is to ask yourself, “What is greatly positive about these new circumstances?” Then each time you come up with an answer, ask the same question again. Most people will have trouble finding answers at first, but with practice you’ll come up with quite a few.
The more frequently you answer this question about some circumstance, the more likely you are to hit upon a very valuable opportunity that will help you in both the current and alternative environments, regardless of what comes next.
In practice, an exercise in this area works best if a large number of people in your enterprise consider the question in small groups, using classic brainstorming techniques. In fact, some organizations have found it helpful to split the entire company into small study groups on the same subject. Each group then reports what it learned to the other groups.
Stimulated by the new thinking, the brainstorming subgroups meet again and find even better ideas. Then the results are shared again. This procedure can be repeated, each time getting closer to the ideal practice, until this thinking is no longer productive.
At that point, you can expand the number and types of people involved to include customers, partners, suppliers, distributors, shareholders, those in the communities you serve, and even experts from seemingly unrelated fields. They will help you see, feel, and hear more benefits from the new circumstances, thus providing more attractive opportunities for adapting to them.
The Choice Is Yours
The most innovative enterprises in seeing better options will be the most successful in the environment we are postulating of ever-volatile, and increasingly unpredictable, organizational conditions. This viewpoint has another fundamental advantage: It becomes a way to force the abandonment of your company’s current direction before conditions intercede to require that for survival.
When you have many choices to consider, you need first to determine which of the choices or combinations of choices exhibit no-lose or always-win, no-lose characteristics. In doing this, you need to be particularly careful of the overoptimism stall. A good way to evaluate the options is to have someone other than those who generate the ideas do the evaluation.
In fact, the more picky, fault-finding, never-satisfied people you can locate to review your options, the better. Then once the evaluations occur, send the options back to those who came up with them for revisions based on the new issues raised by the picky people.
When you select the options to go with, favor those that look safest on the no-lose grounds over those that look best on the always-win grounds. Companies have a way of being better at finding ways to avoid loss than in finding ways to always succeed. In this way, you can further hedge your bets while you are developing a higher level of skill in locating and implementing the always-win, no-lose choices.
Irresistible force enterprises can only expect to have a few capabilities that serve as primary causes of the firm’s effectiveness. Make developing always-win, no-lose options one of those key capabilities.
A Work in Progress
To truly approach the ideal best practice for adapting to irresistible force changes, never consider your work in this area completed. You need to keep an open mind in order to be able to see that the adaptations you’ve generated are simply the best options you’ve identified so far.
There are far better ones you haven’t yet uncovered or considered. You want to keep finding these better choices continuously, and smoothly substitute them for the ones you are pursuing now by being prepared to shift directions in a heartbeat when something better occurs to you.