Lagging Indicators – No way to lead

There is an old war story that pops up in business-school classroom discussions regularly that goes something like this: In the early days of World War I, combat planes would go out on missions in the morning and most would come back later in the day. Of those that made it back, many would be sporting bullet holes from enemy fire.

As the mechanics worked to put the planes back into fighting shape for the next day, they eventually started to “reinforce” the planes in those areas where they would typically see damage. The mechanics reasoned that while adding the extra weight of the reinforcement material would sacrifice a little range and maneuverability, it would make the planes safer, and would lead to fewer repairs next time.

Not knowing the original source of the story, I hope it is a fable, since the “real lesson” to be learned from the bullet holes is the exact opposite of what the conventional wisdom was.  The only bullet damage the mechanics ever saw was the non-lethal kind, so by definition, the mechanics should have been more concerned with reinforcing those parts of the plane where they had never seen damage.

Taken a step further, since reducing combat flight casualties was at least in part dependent on better dog-fighting, then the added weight of the plane modifications might have actually made the problems worse.

The story is instructive in many ways – it illustrates the danger of relying on certain types of “common sense” and more broadly it illustrates the inherent limitations of internal data collection. For companies with performance problems for example, often the best source of feedback aren’t your customers at all, but rather those who should be your customers but aren’t. Then again, customer feedback is a “leading indicator” and most companies tend to define performance problems in terms of lagging indicators like revenue or net income.

The airplane example is representative of a greater lesson of WWI – as the first large-scale conflict of the industrial age, it illustrated in gruesome and tragic fashion how competitive strategy and tactics that had served for generations could be rendered instantly, and irrevocably obsolete by the new technologies of the ererging industrial age.

The increasing interest that middle-market companies are showing in all things strategic reminds me that as we move farther along in this transition to the information age, executives are quickly realizing that the tactical views that have served them well in the past are not just outdated, they might even be dangerous.

Add comment November 8th, 2006

Down on the farm – Ruralpolitan Baby Boomers may be a long-term bust

As marketers from a number of agriculture-related industries have been aware for several years, not all baby-boomers are moving their empty nests to the beach, golf community or urban downtown. A noticeable number are embracing the “ruralpolitan” lifestyle and moving to the country.

According to Farm Industry News, ruralpolitans are “a fast-growing group of farmers with either single or double incomes derived off the farm. This group represents a whopping 47% of all U.S. farm households. A typical double-income ruralpolitan earns an income of about $85,000 a year but posts about a $3,000 loss on the farm.”

From the perspective of ag-related marketers, a big increase in the number of wealthy, high income, non-bottom line focused farmers must seem like a morphing of Green Acres and The Twilight Zone…but in a good way. A closer look at the numbers suggests that there may be generational plot device at work, with the Baby Boomer generation playing the rural-loving Oliver Douglas while Generations X & Y seem more likely to embrace Lisa Douglas’ Park Avenue point of view.

Setting aside the Green Acres cultural impact for a moment, it would seem reasonable that having some background or exposure to rural life is positively influential if not predictive of adults looking to live, but not work in the country. If that is true, then Generations X & Y will likely be heading back to the country in much smaller numbers a generation from now.

Statistically speaking, Baby Boomers were 7 times more likely to be exposed to life on a farm than their Gen Y counterparts. A Lafayette Associates analysis of US Census data shows that while more than 1 in 3 Baby Boomers born in 1950 were born into a rural farm family or had grandparents on a farm, for a Generation X’er born in 1970 that ratio had grown to nearly 1 in 7. For a Gen Y’er born in 1990 that ratio had grown to more than 1 in 21, seven times what it was for Baby Boomers.

Absent stronger research about consumer preferences for choosing a ruralpolitan lifestyle, the many middle-market companies that serve agricultural sectors will need to be highly circumspect about future growth forecasts. For today’s ag-marketers, these ruralpolitan Baby Boomers are indeed booming. But like so many other markets that have remade themselves to suite Baby Boomers’ tastes, the Boomers inevitably move on, and growth falls with a thud. Given the significant differences in exposure to rural life between these three generational groups, for today’s ag-marketers, the “post-Boomer thud” may be louder and come quicker than most. Meanwhile, “make hay while the sun shines.”

Add comment October 29th, 2006