Friday, September 29, 2006

Are you not responsible if you do not read your emails?

It used to be said that "ignorance of the law is no excuse." I suppose that these days, not reading your email is sufficient reason to escape culpability.

Wednesday, September 27, 2006

The degree to which GM is out of touch is breathtaking. Is Wal-Mart next?

GM's management is intelligent, well educated, and dedicated. However, it operates in an insular world in which they have lost touch with the consumer. The fact is that GM is dead, but like a rotten tree, it looks solid on the outside. It even sprouts green leaves. They are likely to continue to circle the wagons and cut themselves off even more from outsiders. Bringing in an outsider may not be enough when the outsider has spent 37 years at one company - a company which does not deal with consumers at all.

In a similar fashion Wal-Mart is running in circles. The strengths which made it successful - the ability to bring low prices and wide variety to customers in C and D counties, rural ones, and its incredibly strong supply chain from retail stores back to its suppliers, have reached the point of diminishing returns. It has no skills in cultural sensitivity, so it has failed in Germany, Korea, is struggling in China (vs. Carrefour) and the UK (vs. Tesco). It is having difficulty dealing with market entry into the urban East and West Coast. its new committment to Organic Food and designer clothes may leave its existing customer behind, without winning customers from Target and Whole Foods. Its move from one store format to four is too little, too late. It is hiring 200 new marketing people, most of whom do not understand retail and will under-estimate the difficulty. Right now, they are optmistic, but there will be a culture clash, and the inevitable short-fall will be seized upon by old-timers to push out the newcomers. Just as once, people thought that A&P, and then Sears, were invincible, yet lost their market positions, so will Wal-Mart, which is now where Gm was 10-15 years ago, as it brought in many consumer marketers, and started acquiring luxury brands.

Tuesday, September 26, 2006

Private Equity and Turnaround Management firms do not often understand Brand Value

Most managers in Private Equity and Turnaround Management firms do not completely understand Brand Equity and how to manage it. Yet, it is an essential part of what they do since in many cases, the brand value can be more than tangible assets.

However, most marketers do not understand finances well enough to help.

Sunday, September 24, 2006

"I don't know" - A powerful tool

I have never undertood why saying "I don't know" is such a difficult thing. However much I do know, there is much more which I do not. Admitting that I do not know, or do not know everything about the topic may result in learning something new. "I already know about that" is the phrase which will ensure that you never learn any more about it. So many of us get into trouble because we assume we know something, but do not know it well enough.

Many years ago, a major consulting firm's Brussels office carried out a three month investigation of the European market for hockey equipment. Only when the client arrives in Brussels for the presentation did everyone discover that the firm has investigated the market for field hockey (more common in Europe), whereas the client meant the ice hockey market!

Thursday, September 21, 2006

Why would anyone believe what a politician says about an opponent?

I have always treated what any politician says about an opponent. Yet, time after time, we do see that negative advertising seems to work in politics. This is puzzling. If an advertisement says something negative about a competitor, I assume that this is self-serving and likely to be untrue or taken out of context. Politians are even more likely to do this, yet it seems to work. Given the scepticism with which politicians are viewed in general, this is astonishing.

Monday, September 11, 2006

Supermarket recycling in the UK shows more societal differences

European consumers are far more aware of issues such as recycling and global warming than US consumers are. They are prepared to make real changes in their lives to meet the needs. while energy use in the US continues to climb per capita, in Europe it is dropping. Supermarkets in the UK are moving towards compostable packaging in the case of Sainsbury, or reuse of shopping bags in the case of Tesco. No one in Europe seriously challenges the idea that gasoline taxes need to be high to keep prices as a disincentive to use. Meanwhile in the US, the idea that prices should be low is the prevailing philosophy.

Sunday, September 10, 2006

In our wish to make all cultures look alike, we gloss over deep-seated differences.

"Today, in the West, there are no good excuses for religious belief - unless we think that ignorance, reaction and sentimentality are good excuses. This is of course not so in the East, where, we acknowledge, almost every living citizen in many huge and populous countries is intimately defined by religious belief. The excuses, here, are very persuasive; and we duly accept that 'faith' - recently and almost endearingly defined as 'the desire for the approval of supernatural beings' - is a world-historical force and a world-historical actor."

Now this was by Martin Amis in The Guardian newspaper in England. In the US, or in many other countries it would be an outrageous statement, but in the UK it was greeted with apathy. The fact that two countries may be English speaking and share many traditions does not mean that people think alike. Watching a British TV program, I am always struck by the differences in pace, script, and ways in which even sex and violence are treated. Clearly, the two countries are different. If this is so, how different are countries where language, religious tradition, literature, education, and politics are completely different?

Saturday, September 09, 2006

Simplification is essential, but dangerous

Situations are complex. They are often too complex for individuals to grasp. Whether we are examining the situation in the Middle East or the market for flash memory, it is incredibly convoluted. So management consultants, academics and journalists work hard to simplify the situation so that people can understand the issues. As a result, politicians, executives, and voters often think that the issues are simple. So we are caught in a "Catch 22." If we do not simplify, the issue is incomprehensible and often goes unadressed. If we do simplify, the problem can be tackled, but later it can come back to haunt us. Sometimes even the people who do the simplification become victims and start seeing it as easy.

While we may have to deal with a situation by simplifying it, we need to recognize that there is often much complexity which lies behind the issue.

Wednesday, September 06, 2006

So H-P follows ENRON into the corporate lack of ethics Hall of Fame

One of the interesting things about corporate and government life may not be that people have become less ethical, but that there is less sense of shame about it. How can Patricia Dunn, the Chairman of the Board of H-P, use people who pose as individual Directors to get their phone records? It seems that much as companies such as ENRON, Peregrine Systems, and many others saw nothing wrong with what they did, so too companies feel OK about options backdating, or channel stuffing, or null trades. Elected representatives see nothing wrong with voting for measures which will enable them to profit from, for example, the sale of land. Perhaps people have always been out for themselves, but the constraints on dishonorable behavior have grown less.

Sunday, September 03, 2006

Pattern recognition skills rather than industry expertise

Industry expertise is very dangerous. When someone runs a business on the basis of what has been already done in that industry, it becomes a self-fulfilling prophecy and the business suffers. The most innovative thinking in an industry often comes from someone outside the industry, but who has worked in a number of industries and has learned pattern recognition. It took Lou Gerstner to turn IBM around. An industry insider could never have done it.

Friday, September 01, 2006

So what does it take first to turnaround a business?

Some twenty years ago I inherited a division in trouble. It was a frozen food business which my predecessor had pushed my corporation to buy. As its boss, he kept on expanding the number of products it sold, and the geography in which it sold them. As I saw back then, you cannot sell your way to profitability if your costs are out of control. The first thing to do is to control your costs. This business had become spread too thinly, so withdrawing and cutting costs was the first prerequisite to turning around the business. This is not easy of course, and having had to do it several times since, I recognize that experience is important.

Once you have successfully cut costs, and redefined the business model so that it is possible to make money, you can start to think about growth. Business expansion can only come after all else is stable and you are not sure that you are simply going to put yourself back where you were when you inherited the business.