Posts Tagged ‘partnerships’

Don’t worry about Lego Star Wars impairing kids’ creativity

Tuesday, September 8th, 2009

The New York Times this weekend profiled the business revival at Lego Group (”Turning to Hollywood Tie-Ins, Lego Thinks Beyond the Brick“).

The numbers speak for themselves:

Amid a 5 percent drop in total United States toy sales last year and the industry’s worst holiday season in three decades, according to Sean McGowan, an analyst at Needham & Company, Lego’s sales surged 18.7 percent in 2008. And despite a worsening global recession, Lego powered through the first half of 2009, with a 23 percent sales increase over the period a year earlier. It earned $355 million before taxes last year, and $178 million in the first half of 2009.

But the article contained an ominous message:

In the United States, Lego’s biggest market and the biggest toy market in the world, games with themes like “Star Wars” and “Indiana Jones” were among the reasons Lego sales jumped 32 percent last year, well above the global pace. But experts like Dr. Jonathan Sinowitz, a New York psychologist who also runs a psychological services company, Diagnostics, wonders at what price these sales come.

“What Lego loses is what makes it so special,” he says. “When you have a less structured, less themed set, kids have the ability to start from scratch. When you have kids playing out Indiana Jones, they’re playing out Hollywood’s imagination, not their own.”

Even toy analysts who admire the company and its recent success acknowledge a broad shift. “I would like to see more open-ended play like when we were kids,” says Gerrick Johnson, a toy analyst at BMO Capital Markets in New York. “The vast majority is theme-based, and when you go into Toys “R” Us, you’d really be challenged to find a simple box of bricks.”

Um… these guys have never been to my house. My 8- and 6-year-old sons are big Lego fans. Last winter, when we were at Disney, my 6-year-old chose to spend his birthday at the Lego Imagination Center. They’ve gotten “theme-based” kits for the Hogwarts Castle, various Star Wars fighters and Indiana Jones.

But if you think that has inhibited my kids’ creativity, you are dead wrong. Once these kits are built (sometimes even before they’re built), the pieces are repurposed to fit whatever my kids want to make. The 8-year-old built a little Segway-like device for a Storm Trooper to battle in; the 6-year-old mashed up a character with Storm Trooper legs, Indiana Jones’ whip and Harry Potter’s friend Hagrid’s bushy brown beard. The minifigures, in particular, are ripe for innovation and storytelling. Which makes sense–people like stories with other people in them.

Legos when I was growing up were 2- 4- 6- and 8-dot bricks, the occasional wheel and window. My guys have innumerable pieces from which to create–and they do, without limits and with interesting, unique pop-culture references that weren’t possible in my day.

I think creativity among our young is alive and well, and movie tie-ins won’t bother it.

Related post:
Lego knows partnering

“Need Cash?” teaches you how to improve working capital use, but be careful

Tuesday, April 28th, 2009

I have mixed reactions to the article “Need Cash? Look Inside Your Company” by Kevin Kaiser and S. David Young in the May Harvard Business Review. There’s no doubt that better working capital management can help lots of companies get through this difficult environment. At the same time, offloading your problems to your suppliers is a recipe for long-term difficulties.

I’m speaking of the practices around accounts payable management. The authors identify a mistake companies frequently make: assuming that receivables timelines and payables timelines are symmetrical. If I get paid net 30, I should pay net 30. Instead, they assert, each company should assess its environment, power over suppliers (or vice versa), and from there determine how it should pay/be paid. It may be possible to get paid by customers net 15, and pay suppliers net 60. This has a huge beneficial impact on a company’s working capital.

However, paying suppliers terribly late has nonfinancial costs. While a supplier may accept lengthy payment terms, there may be resentment, that can cause difficulties when contracts are renewed or new business contemplated. Suppliers may prioritize the needs of other customers who pay more timely. Other terms, such as delivery, might be tightened, which has impacts.

Worse than all this, though, is trying to changing payment terms unilaterally, or even invisibly. This is the old “hiding the invoice in the desk” trick, the “I didn’t get your invoice, please resend” trick, or the “phantom dispute” trick. In this case, the supplier negotiates net 30 terms but ends up getting paid at the whim of the customer. These kinds of techniques might be needed when you are truly distressed, but be prepared to be treated like a distressed company if you use them.

My experience, in account management, sales and executive leadership, has been overwhelmingly as a collector. Knowing that my company treated invoices from its suppliers as serious commitments helped me hold customers accountable to pay timely.

The authors are correct that companies should negotiate payment terms based on their strength in the situation and try to create an environment where they pay late and collect early. However, companies must live up to those negotiations. Don’t ignore payment terms or mess vendors around when their invoices come in.

Your collectors will thank you for it.

Related post:
If your key suppliers are in trouble, so are you

If your key suppliers are in trouble, so are you

Monday, March 23rd, 2009

When times get tough for businesses, they use the tools at their disposal to manage through till things get better. The tools that can make a difference quickly are blunt instruments that often have detrimental side effects. There has been a lot of creative thinking this time around about the wisdom of one of those tools, layoffs, and possible alternatives.

There is another set of tools that is easily used but which has not received as much scrutiny–shifting some of your issues to your suppliers. The favorite of these is s-t-r-e-t-c-h-i-n-g out payments. Perhaps, rather than paying your raw-materials vendor, or outsourcing provider, in 30 days, you let that stretch to 45, or 60, or more. Perhaps you wait till suppliers lose patience and escalate before you pay, and then, pay only the oldest invoice. You can also dispute invoice items and hope the supplier eventually credits that amount to you. Voila! Better cash flow.

In the current issue of the Wall Street Journal Business Insight supplement, Robert Handfield of North Carolina State University makes a well-reasoned case as to why companies should think twice about trying to solve their problems on the backs of their suppliers (”United They’ll Stand“). In particular, the costs of a significant disruption in the supply chain can overwhelm any savings in working capital due to slow-paying.

Handfield recommends an open dialogue between vendor and customer to ensure that risks to the supply chain (like the vendor’s ability to survive) are identified. He also urges customers to engage more closely with its best suppliers to ensure they have a relationship that will last beyond the current crisis. (In other words, if you want to take out your suffering on your suppliers, you may pay later by losing them.) Finally, he makes the point that times like these are ripe for innovation, including improving how companies and their suppliers work together.

Handfield writes, “The decisions of supply-chain managers in the current crisis may be among the most important they’ll ever make.” Rather than distance yourself from your suppliers, this is the time to bring them close. And that may mean, God forbid, staying current with your payments to them.