Netflix and Organizational Capabilities

Executive Summary: While I previously shared a thought exercise (link) on the kind of capabilities Netflix can demonstrate against its competition, this post is about the hard work that goes into creating an organization where teams work in concert, and in diverse ways, to develop these competitive capabilities. From the Desk-of-George-Lucas-Theory-When-In-Doubt-Make-Star-Wars-Prequels.

Why am I talking about Netflix?

Three reasons.

1. Innovation:
Netflix has been called an innovator that leverages its investments into innovation effectively towards business capabilities.

2. Market Capabilities:
Recently, there was news about Netflix looking at original programming, that kicked off this thought exercise on innovation and tactics below:
http://randomjunkyramblings.blogspot.com/2011/03/innovation-and-tactics-series-netflix.html

3. Distinct Context:
Unlike the iPhone, Netflix has entered existing markets and upended them without much "confetti about cool". It's almost like a B2B company in a B2C market.

What does Netflix mean for Other Organizations?

Netflix continued to invest in streaming capability for many years, before launching the product. This demonstrates a long term thinking about its business and its markets.

How does an organization connect
a. investing in long term capabilities, and,
b. thinking about markets,
In hindsight, all of this is as easy as pie. Lets look at the challenges.

Challenges with Making the Organizational Connections:

Let's take two cases within two functions in an organization.

1. Finance:
Say you are a business finance manager, and a business manager comes over to you about a prototype he would like to acquire and integrate into the company's product and marketing portfolio. How do you not only help him acquire the prototype, but also give him the leeway to invest time and resources toward patiently integrating an early stage startup product into a reliable portfolio asset at the company?

2. Marketing:
As a marketing manager, say, you realize you need an organization wide communication and analytics sharing capability to meet the product and competitive environment in the medium term. What kind of marketing programs, and in what prioritized order, do you push, to deliver phased, sustained capabilities to your organization over the medium term?

Suddenly, this doesn't look all that easy, does it?

For managers battling to get things done within their silos on a daily basis, these are not easy questions to answer. Thinking about this gives you the scale of the effort that an organization needs to put into developing capabilities that impact its markets.

What do you think?

Innovation and Tactics Series: Netflix Bids for Original Programming.

Executive Summary: Netflix has been lauded for its ability to manage innovation, especially for its ability to translate innovation into real impact on its business. This post helps us think through some of the market possibilities it can target. From the Desk of "Is it a bird? Is it a plane? Its a... Jedi mind trick!"

The News, The Question

Netflix seems to be making interesting moves in content production:
1. http://www.theatlantic.com/business/archive/2011/03/netflix-plays-the-long-game/72611/
2. http://blogs.forbes.com/chunkamui/2011/03/17/how-netflix-innovates-and-wins/

The news reminded me of a curveball I recently threw to some very bright folks:
Will Netflix get into running movie theaters (or atleast renting them out temporarily)?

What Does The Question Mean?

The folks found the question interesting enough to pause to think it through. This is not because they did not have a (what may seem like an obvious) ready answer, but because it should, and apparently did, make you think about Netflix's context and how it is disrupting the context around it.
To rephrase:
1. Can Neflix groupon its at-home viewers into a high quality, custom generated "in theater" experience?
2. Can Netflix be vertically integrated in a niche market, while still serving what is currently its core market?

All in all, how do these ideas impact its profitability and its margins? At worst, can a capability to pursue the option posed in the question be a useful negotiation tool?

To dig a little bit deeper:
- What about Netflix's current position and capabilities (e.g. continued investment in innovation) provides it a competitive advantage?
- As Netflix get to know more of its customers better, how can it leverage it's information better?

Structure Around the Question

Here are a couple of paths to making sense of this question on Netflix:
- Content Development and Production -> Content Channels and Distribution -> Content Consumption
Or the reverse:
- Content Consumers and Markets -> Content Channels and Distribution -> Content Development and Production

Deep Dive Into The Market and The Consumer

Lets walk through the first way of looking through this process:
A. Who is Neflix's core consumer? What market is Netflix targeting?

1. Viewers of TV and movie dvd like content "experience" at home with access to a mailbox and to an internet ready device?
2. Viewers of video content "experience" at home with access to an internet ready device?
3. Viewers of an entertainment "experience" anywhere with access to an internet ready device?
4. Viewers of an entertainment "experience" with access to an internet ready device or with access to a specific location?

Now, you can define a spectrum of "experience" as well, from a streaming video "experience" on a small device while on the move, to a fixed location video "experience" of the IMAX or the "IFC Theater"/ "Indie Movies" sort. As for margins, isn't the IMAX share price hear its LTM high?

Now that you have some lightbulbs flashing in your mind, need I say more?


What do you think?
 

Ad Spend Trends in the US

Executive Summary: A quick check with *you* on your thoughts on media and ad spending in the US. The objective is two fold- identify what you believe are the factors driving the trends, and then seek your forecast for this trend.

Trend: Advertising Dollars

I attended a conference where a respected businessperson emphasized a trend in the media industry. Ad spend in online channels was not growing the overall pie in terms of dollars. Instead the online channels were cannibalizing other channels. So the question arises- is there a disssonance between the change in the size of the pie, its slices, and consumer/ end user relevance?

Older, publicly available statistics are available here:
1. Fred Wilson:
http://www.avc.com/a_vc/2010/06/ad-spend-trends.html
2. Hal Varian:
http://www.theatlantic.com/business/archive/2010/05/a-google-eye-view-of-the-newspaper-business/56360/1/

Some Macroeconomic Factors

1. Are economic conditions factors in terms of the overall ad spend pie? How?
2. Are demographic trends factors in the stagnation of the overall ad spend pie? If so, how do these trends play out in terms of the slices of the pie?

Marketing Teams as Factors in Ad Spend Shifts

I also noted some opinions a few years ago that the move of marketing dollars from traditional media to online media would be slow because of deep, embedded marketing and agency relationships, as well as marketer mind share.

Consumer/ End User Behavior

1. Has the user's behavior across the various marketing communication touch points, even with the addition of online media touch points, changed?
2. Has the user's reaction to these marketing communication touch points changed over time?

What do you think?

White iPhone 4, Hamann Mercedes and Nike AF1 shoes.

Executive Summary: The White iPhone 4 has been a no show. Is this an opportunity that Apple can exploit? A la the Hamann Mercedes or the Limited Edition Nike DJ Clark Kent AF1 shoes? Does that fit into Apple's portfolio of marketing tactics? For some structure to these tactics, see:
http://randomjunkyramblings.blogspot.com/2011/03/innovation-and-tactics-series-ipad2-and.html

From the Desk of Aerosmith-said-Lateral-Thinking-is-Hard-On-the-Knees.

Carrying and using the "no show" Apple White iPhone 4 has apparently become a status symbol in silicon valley:
1. Why Apple can make a white iPad but not a white iPhone:
http://edition.cnn.com/2011/TECH/gaming.gadgets/03/03/apple.white.ipad/
 
Now, there are enough "shops" around the world happy to rip apart an Apple product, and some can even put them back together. In fact, you could even classify them as a subculture. However, can Apple use these custom built white iPhone 4s a as marketing tactic?
 
1.  Geneva 2011: Hamann Hawk
http://www.autoevolution.com/news/geneva-2011-hamann-hawk-live-photos-32206.html
 
2. Nike's Limited Edition DJ Clark Kent AF1 Shoes:
http://www.nike.com/nikeos/p/sportswear/en_US/media_details?video=3&videotype=video&guid=31aa9ccc-445b-ce59-7435-55c77c81215d_id1253&
 
How many companies you know would draw laughs, instead of being excoriated, for not launching a promised product or extension? :-)
 
What do you think?
 

Innovation and Tactics Series: iPad2 and iPhone Nano?

Executive Summary: Sometimes, the simplest things can be lost in the daily tactical maze. There have been a slew of statistics demonstrating that Android phones have been eating Apple's lunch over growth in marketshare. If you were Apple, how would you react to these market developments? With its product pipeline and brand dexterity, does Apple really care? From the Desk of Beatles-Were-Wise-With-Live-And-Let-Die.

... More: Think a simple 2x2 matrix covering- market penetration via existing and new products, adjacent market development via new and existing products, and entirely new markets via new products.

The Statistic

Google’s Android becomes the world’s leading smart phone platform:
http://www.canalys.com/pr/2011/r2011013.html

So, there have been rumors swirling about the iPhone nano:
1. Rumors of an iPhone Nano Continue: Smaller, Cheaper, No Memory?
http://onespot.wsj.com/technology/2011/02/14/351ce/rumors-of-an-iphone-nano-continue-smalle

2. Opportunities & Challenges Galore for Apple with 'iPhone Nano':
http://blogs.strategyanalytics.com/WDS/post/2011/02/16/Opportunities-Challenges-Galore-for-Apple-with-iPhone-Nano.aspx

Could they be true? What should AAPL be doing?

The Structure Around The Idea

Here are some steps to aid the thinking process:
1. Current Product for an Existing Marketing- iPhones:
Apple smartly squeezed all it could through its relationship with ATT. Now, to seek increased market penetration, it partnered with Verizon. iPhones are still positioned as products that are a "cut above the rest", and continue to generate great margins for Apple.

The feature pipeline for the current iPhone product line is strong and Apple can expect to continue to dominate the market.

2. New Product for a New Market- iPads:
Apple at the netbook's lunch. No other product is near the customer's utility curve (read conjoint analysis). With the iPad2, Apple widens the gap with competitor products, and safeguards its margins. However, would we say that the Android's smartphone market is a "new" market for Apple? Perhaps it needs a "new" product for this "new" market?

3.  New Products for Existing Markets: 
Really? See point 1. Even better, Apple's strong brand and positioning with its existing product line is so much "gold" that it can practically launch what were traditionally new products under the guise of extensions of existing products.

4. Existing Products for New Markets:
Make no mistake, the iPhone nano is a *new* product in the product development sense. However, in terms of messaging, the iPhone nano is brilliant in leveraging the consumer connection and premium positioning with the "nano" and pit it against "fancy-scmancy" andriod phones.

The Bottom Line

Now, the questions that remain:
1. Internal Assessment: Do Apple's current financial position vis a vis its margins, and its future product margins trends, demand the iPhone nano launch?
2. Competitive Assessment: What does the iPhone Nano launch do its competitors? You can't expect them to shrivel up and disappear. :-)

Stay tooned.
What do you think?

Smartphones, Hypercompetition and Integrated Marketing Communication

Executive Summary: You are a second ranked player in a hypercompetitive market. You learn, from an independent research house, that your customers are more likely to buy your products than your competitors customers are likely to repurchase theirs. What do you do? Do you utilize this in your marketing communication? From the Desk of A-Kick-in-the-Shins-Does-Not-Always-Save-Nine. :-)

The Statistics

While looking at statistics toward structuring a perspective on industry trends, I came across an interesting study on customer loyalty for smartphones, where, even though the iPhone outperformed Android phones in NPS (Net Promoter Score- a Bain methodology) metrics, (marginally) more Android users are likely to buy a similar device, compared to the number of iPhone users' likely to repurchase an iPhone.

 

Waiddaminute? Did you read that right?

 

The Communication Opportunity

 

Given the hypercompetitive smartphone market, you would think the Android marketer has hit the jackpot. You can imagine Google Android folks rushing to their agency with a new brief to launch the next multichannel campaign (broadcast, web, etc.) in no time.

 

You can even imagine a few briefs ("Android users keep coming back for more") and a few advertisements:
1. Android user sees a store sign, "New Android Phone" and buys one, while iPhone users are shown getting their grip right for the iPhone, or,
2. Android user gets another Android phone as a birthday or a Valentine's Day gift, "I always wanted another Android", or,
3. Voice over wraps up with "Even when independent researchers praise the iPhone, they can't help but admit that more Android users are likely to buy another Android phone, than there are iPhone users willing to buy another iPhone."

... and many more!

Some Structure and Strategic Thought

 

The standard approach may be pretty simple in the abstract: Corporate Strategy -> Market Strategy -> Communications Strategy -> Portfolio of Communications Tactics. However, things aren't as straightforward in the "real world", are they?

If you were an Android marketer who finds this statistic, you would consider a few things, not necessarily in a top down, structured manner:

 

1. Source and quality of information:
Is the source and quality of information firmly in your corner? Well, you'll take a firmly independent corner too, wouldn't you? It’s more than just checking if your competitor can throw a more effective/ damaging response with the same source of information.

 

2. Timeframe: Does this lead to a "multi-period game" over advertising where you do not win, or you have no first mover advantage, or both parties end up in an expensive stalemate with a negative outcome for you? Coke vs. Pepsi advertising is an example. Also, think about Pepsi stepping back from Superbowl advertising in 2010.

 

3. Communication Themes: What is Android's driving theme for the season or for the year? What is Android's multi-year communication and branding strategy? Does this drop in the ocean create ripples that turn in tsunamis, or should this drop be assimilated quietly using different tactics?

 

4. Portfolio of Tactics: Does the Android team have a portfolio of tactics aligned with its communication and branding strategy? Does the portfolio explicitly accept or reject this opportunity?

Digging into the Details
Let’s dig into a couple of the items listed above.

Timeframe:

Lets take one question- Do you think there are season spanning advantages to pushing the message? Here are some hypothetical situations that elaborate upon this. Say, it's the holiday season, and Android launches the campaign based on this research. Does Android have time to make an impact on sales? Does Apple have time to respond right away and nullify the advantage? Can Apple hit back harder around the same theme at the next key sales period?

The Source and Quality of Information:

The study, using the Net Promoter Score methodology, declares that the iPhone outperforms others in user loyalty:

http://www.zokem.com/2011/01/in-the-us-market-iphone-outperforms-other-mobile-platforms-in-user-loyalty-by-a-wide-margin-android-is-second-blackberry-fourth/

Given the number of iPhone users that have stuck through a lot of thin (network, antenna, cracked case, etc.) this should not be surprising. However, as you scroll past the Net Promoter Score based results of Mobile Platform Loyalty Ranking graph, and down to Repurchase Behavior graph, you would note an interesting result.

89% of Google Android customers would buy a similar device in the future. Compare this to 85% of iPhone customers being willing to by an iPhone in the future.

Huh?

Now, there are various perspectives to this:

1. The iPhone has set very high expectations and is doing a fantastic job keeping its user engaged.
2. Android targets a different customer segment than the iPhone and phone’s pricing could be a factor. (Perhaps not for long-http://www.pcworld.com/article/219712/cheaper_iphones_why_apple_might_risk_its_brand_identity.html)
3. Also, iPhone’s AT&T exclusivity (for this study period) could be a factor in Android's stats.

We can come up with a few more as we think through this. However, what do you think?

Innovation and Tactics Series: Groupon Wants My Married Friend to Speed Date.

Executive Summary: A light hearted look at the marketing tactics arising out of Groupon. No, I don't mean Groupon...zi. From the Mark Twain Desk of Funny Bones at the Jeffersonian.

Groupon wants my married friend to speed date! Really! Well, technically speaking, my married friend received a groupon for speed dating. I am sure you can see the humor in that. :-)

The smart folks would jump to thinking of this as a marketing, even statistical, error. However, this could well be the Jedi mind trick of the year so far- after the cool VW darth vader superbowl ad.

How? Here are some ideas...
1. Don't your married friends keep setting you up with dates? Duh, right? You would think their persistence factor would beat any email spam marketing tool known to man, or woman.

2. Do you know what the divorce rate in the country is? This could well be a long term, relationship building strategy for a future target audience. Disclaimer: A bright, married friend suggested this when I put this up on Facebook, so don't shoot the messenger.

3. Its an error- my friend would be one of the few, or many, random, in error recipients of the sophisticated, targeted statistical model used for the promotion.

I am pretty sure you have some ideas of your own. What do you think?

Innovation and Tactics Series: Putting Cool to Use- the iPhone at work.

This is an old link and an old post, and I have it here because its an apt start to a theme I would like to pursue.

The iPhone is cool. The iPad is cool. All that cool- what does it do for you? :-)

Here's an example of putting cool to use:
http://www.youtube.com/watch?v=NAllFWSl998

Resonates more than Angry Birds? I bet Angry Birds wins too when more of stuff like this happens. How has technology made your life better?

Next stop: iPhones and iPads for the working life?

What do you think?

Apple iPad : A Profile of a Technology Influencer / Opinion Leader / Early Adopter.

There are studies about shopping behaviour and there are studies. Then, there are Confessions of a Technology Shopaholic.

As a self-confessed gadget freak, I can see that the link below- a Technology Influencer / Opinion Leader / Early Adopter spilling the beans on a purchase- falls in the latter category:
http://shopping.yahoo.com/articles/yshoppingarticles/358/how-my-499-ipad-purchase-became-a-1170-credit-card-bill/

If you can't wait to hit the Apple store to see a decade long buzz on convergence and ubiquitous computing take a step closer to reality thanks to great productization and marketing, join the line. :-)

What do you think?
 
--

Cloud Computing and Innovation in Sourcing Strategies?

Executive Summay: A speculative look at innovation in sourcing strategies driven by Cloud Computing, based on pricing complexity and on third party players and standards helping develop seamless integration across vendors.

Would the adoption of cloud computing across industries lead to innovation in sourcing strategies? Would it lead to innovation in how the sourcing strategies are implemented?

Tried and tested single, dual or multiple vendor approaches exist, along with bidding mechanisms. If we are to speculate on potential for innovation, below are some possibilities. These are driven by the increasing complexity seen in the pricing of sourcing contracts- the elements of which sometimes resemble derivatives transactions.

1. Does the future hold structured arrangments where cloud computing locations (think: risk management/ disaster recovery/ pricing & capacity management) are transparently bundled into dynamic pricing of services? E.g. Dynamic energy trades/ demand management in the enery sector?

2. Does the future hold structured arrangements where multiple vendors could transparently bundle their services in a dynamic pricing model? E.g. Advertisers bidding on Google search response positions.

As you can see, this speculation rests not only on pricing going "derivative", but also on the emergence of a "glue" that holds all this complexity together and packages it for translation into everyday use.

Getting an answer to this can be broken down into the following steps:
1. Current state of the art in, and future trends in the industry:
- Are the players specializing? How?
- Which tiers of the computing infrastructure are being moved to the cloud and how?
- How are different sectors engaging with cloud computing and its vendors? E.g. Data privacy concerns in healthcare and financial services. We have covered some thoughts that impact this here:
http://randomjunkyramblings.blogspot.com/2009/08/privacy-and-social-media.html

The current state analysis process may be similar to the one we previewed for the consumer electronics industry here:
http://randomjunkyramblings.blogspot.com/2010/01/consumer-electronics-show-ces-2010-ce.html

2. Alliances:
- Is there a potential for alliances between players in the sector? Or would any partnership within the sector be a step toward mergers and acquistions?
- Is there a potential for vertical alliances? E.g. Cloud computing providers and Google Analytics?

3. Development of Third Party Standards for Cloud Computing:
- These would range from metrics to methodologies across quality of services, monitoring and executive reporting.


What do you think?


--

Stock Repurchase Trends and Forecasts

Executive Summary: Companies as diverse as Pepsi and Intuit have stock buy back programs. Below is an effort to structure an analysis of this corporate finance mechanism, and provide a filter for someone frequently coming across news on this mechanism.

Are there explicit stock repurchase trends in the equities markets?

Can these trends be categorized by sector, geography, excutive compensation structure, company capital structure, dividend policy, need to maintain EPS and EPS guidance, competitive nature of the industry, ranking in the industry, maturity of the player or the industry, or specific macro-economic forces (say a recession) at play?

Or, are these trends and forecasts driven by the specific circumstances of a particular company, and that there is a "natural" limit to a successful, organic reinvestment of cash flows back into the company's operations? If there exists such a "natural" limit, would the company's hurdle rate be the single most important factor in decision making?


What do you think?

Parallels to Regulating the Financial Sector

Executive Summary: The financial services industry and regulators are in rare agreement over the need for some sort of reform. The broad spectrum of views on the issue suggests a need for some fundamental questions that highlight the key decision making elements of the process. Here are some questions that may position you to quick get to the crux of the matter.

A friend* who owns and runs a company in the chemicals industry asked, "If the state is responsible for everything, and pays for everything, why have any liability (on the private players) at all?" As a responsible businessman, he was reacting to a news article that in case of problems, a power plant operator's liability would be capped at 5 to 10% of the total cost of building the plant. The sector? Nuclear power.

The financial services sector and its regulators are apparently in rare agreement that some change must be effected in the sector. The questions I raised in the exchange over the nuclear power sector may be applied to the financial services sector. This is to serve as a parallel to help think through the direction of regulatory reform.

The key to the questions is based on:
1. Market structure
2. Managing liability

Fundamental Questions
Here are some fundamental questions that may help us get a better grip on the discussion.

1. Liability:
- Why do we need the concept of a corporation and the limited liability corporation, for private industry to successfully exist?
- Why do we need the concept of bankruptcy and the potential of a corporation emerging from it?
- Why do countries support the concept of LLCs, and why do more "efficient" (???) economies have "good" bankruptcy laws and implementations?
- Does liability, actual or nominal, ever disappear? Or does it just sit hidden (liability arising out of the risk of a catastrophic event), or rest in plain view (estimated liability after the catastrophic event has occured), till some action is taken?

2. Comparables:
- Does a generator of hydro electric power, who has built a dam, get some sort of liability support?
- If yes, is there a particular reason for either denying or augmenting liability support for the nuclear power sector?

3. The Need for Private Players in the Industry:
- Why do we need private players in the sector? Why can't the government go it alone? Is there a need for more capital, technology, management expertise, or innovation?

4. Regulation:
- How does regulation create the right sort of safeguards and incentives?
- Can the regulation be effectively implemented/ enforced?

More on Liability
An example from the brick and mortar world:

If a building falls a few years after construction (now, we could use the example of crane accidents which have happened in New York), the supplier of building materials/ builder/ building management/ city may get sued/ face civil or criminal action/ etc. Perhaps the high cost of paying out the liability may cause one of the players to go bankrupt. Lets deconstruct this scenario:

1. Was the supplier of building materials working in an environment where faulty components were expected to be weeded out by other players in the value chain, and were not supposed to make the building collapse? In that case, was the liability shared by the "integrated" supplier, construction company and the checks and balances system?
2. Was the liability so huge that, despite it being correctly apportioned to all stakeholders, it remained so large that even after liquidating, the private players involved couldn't make a dent in the liability? In that case, what's the point of apportioning liability?
3. Is it possible to limit the effects of a collapse of a market to within the market? E.g. Does the market have enough players to replace the bankrupt company?
4. Would the collapse of the company cause the market to collapse? Would the collapse of the market be acceptable?
5. Is this a market where "failure" means only two options- all players come together to fix the problem, or someone is prosecuted for negligence, while the rest try to fix the problem?

An Example of a "Negotiated" Allocation of Liability
Lets return to the financial services industry, and look at how Iceland is handling the liabilities arising out of the collapse of its financial services industry:
http://online.wsj.com/article/SB10001424052748703391004575106452707894556.html
 
What do you think?

Update: Nikhil shared a wonderful article that showed that folks in the 1950s in the US had thought about these deep philosophical questions while creating an industry in the Nuclear Power sector. It's just fantastic to know that. Now, the same assumptions may not apply in a different context, but it is still fantastic to get an insight into "market engineering".
 
* Thanks Nikhil.

Organization (Re)Alignment and 360 Degree Messaging.

Executive Summary: Tools to tackle the "softer" aspects of organizational (re)alignment- backed by analytics, like the Identity Circle, in a previous post- need to be prioritized when organizational initiatives are planned. Purely as a current example, snippets from the global discussion on Toyota's response to its car performance crisis provide you the starting point to think about, and build, the tools to weigh your options more effectively.


The Crisis
Toyota is facing a massive car performance crisis. It has needed various parts of its ecosystem, which includes car dealers, sales, marketing, PR, operations, finance and suppliers, to move in a concerted manner across various channels to tackle it. The crisis has the potential to impact the industry as a whole. Yes, that's where the term 360 degree messaging comes in. It implies both external and external messaging.


The Conversation
Below is a snippet from the global discussion about Toyota's crisis that shed light on the response to the crisis:
1. Accelerating towards crisis: a PR view of Toyota's recall
http://www.guardian.co.uk/business/2010/feb/09/pr-view-toyota-reputation-management

As you would have noted, this article talks about crises that companies like Mattel and Cadburys have tackled previously. Toyota's crisis happens to be a current example in a continuum. The conclusion? A brand/ PR crisis is not an "unthinkable". It may be a Black Swan, but it needs to be explicitly considered.

Organizational (Re)Alignment?
How does the organization and/ or its ecosystem tie into a crisis response? Lets look at some questions that help us evaluate this.

* Are crisis response issues worth minimizing in advance? Do they deserve upfront planning and resources?
* Are crises response issues black swans?
* Is response to a crisis purely an external messaging issue? Is it a leadership issue? Is it an across-the-board organization/ ecosystem issue?
* Would tools that effectively (re)align organizations have helped Toyota or other organizations in crisis?
* Would the results of implementing such tools have helped response?
* Which tools are more effective at providing leadership, or the overall organization, levers to deploy an effective response?
* What tools are available?
* What are the pros and cons of each?
* How effective are each of these tools?



What do you think?



--

The Identity Circle: A Talk by Larry Ackerman

Executive Summary: Larry Ackerman gave an amazing talk on the Identity Circle recently in NYC. His insights and measured responses to queries led to an enlightening evening for the audience, and a fleshing out of the concept and implementation of The Identity Circle. A perspective would be to look at molding/ creating an organization's identity as a tool in a spectrum of initiatives toward organizational (re)alignment.

The Talk
Larry's talk was an interesting insight into the challenges of identifying and molding an organization's identity. The website below provides a great overview:
http://www.theidentitycircle.com/

It was refreshing to see the presenter acknowledge sources that have provided a foundation for his work- Maslow's Hierarchy of Needs was one of four.

Apple was a case in point of an organization that has transitioned through various markets and technologies while maintaining a core identity. Maytag is another example where his work yielded results.

Larry's experience with a multiyear engagement at a large, complex, multi-market organization shed light on the effort that goes into moving toward an identity for an organization. The challenges are greater for acquisitive organizations.

Plan for Organizational (Re?)Alignment
Larry explicitly tied in the Identity Circle with organizational alignment initiatives. However, how would you rank order this (re?)alignment initiative when an organization picks its top 3 initiatives for a period?

A Perspective on Organization Realignment
The concept can be looked upon as a part of a spectrum of initiatives organizations may use to realign themselves, where Identity Circle occupies the "softer" range of the spectrum, which is usually occupied by the communication/ messaging tools. Specific cost cutting and process and revenue improvement initiatives occupy the "harder" range of the spectrum. This tool provides leadership the levers for a faster turnaround toward results from hard initiatives.

Note: Larry pointed out in his talk that Identity Circle is backed by hard, analytical tools- its categorized under "soft" tools here as it's "direct" results focus on perception and attitudes. Looking at the steps in the process, you might agree that they are nothing but "hard". :-)

Now, the key challenge remains- given the need for all organizations, public and private, to turn around quick financial results, what would trigger an organization to target a complex and potentially long term initiative in its top 3 items on the "to do" list?

Some More Questions
Larry's thoughts on some of the questions I discussed with him.

1. Identity Beyond The Organization:
* Given that quite often, a nation may be attributed with an identity. Does the Identity Circle applies only to organizations?
- Yes. However, an organization with an identity may span diverse and complex entities.
* Does an industry like the diamond industry -from DeBeers with "Diamonds are Forever" in the 1930s to players like Zales today with DeBeers still a large player- shares an identity?
- No, the players share an image- the identity circle is still tied to the organization.

2. Identity and the Market:
* Do hypercompetitive markets, like Christiansen's Disk storage industry case, "own" the identity (or a large percentage of the identity) of an organization?
- No. The market plays a role in the identity of the organization, but the organization firmly owns its identity, even in extremely hypercompetitive markets that see frequent churn in participating players. Apple was a case in point.

3. Google and China:
* How does Google reconcile the hacker attack problems with China, its core theme of "Don't be Evil", and its initial intent of being an active player in China, despite known challenges going in?
- Google's tactical decision-making may vary to reconcile various objectives; however, longer term, its moves will be in line with its identity.


What do you think?


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Entrepreneur's Corner: Baked by Melissa, Bite-Size Treats!

Executive Summary: We look at an entrepreneurial venture, Baked by Melissa, and some things that stand out with this cupcake shop- product size, pricing and a range of product flavors.

The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is "Baked by Melissa".

The "Baked by Melissa" store's hole in the wall look belies all the work that seems to have gone on behind it- they already seem to have a following, and also run a catering operation. I discovered in when I saw a long line in SOHO, almost as long as the ones formed by fans outside the Abercrombie store on 5th Ave., leading up to a little window.

The cupcakes are bitesized, for a dollar each, and you pick a minimum of 3 from the shop. I was only too glad to sample 3 different flavors at one go. I can see cupcake fans going in for volume when they visit the store.

How Do You Find It?
http://www.bakedbymelissa.com/

Green Shoots?
Melissa Bushell started this venture after moving on from her last job. Talk about green shoots! Here's a candid (third party) interview:
http://cupcakestakethecake.blogspot.com/2009/04/cupcake-interview-melissa-bushell-of.html

It's a great insight into "Animal Spirits".

The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Baked by Melissa.
* The Product: Interesting mix of standard and innovative cupcakes. Did I say that I see cupcake fans buying cupcakes in "box sizes"? I can also see a bite-size cupcake going up against mini/ regular/ large cupcakes with a message- "lose the calories, but not the taste".
* Product Size and Pricing: Did I mention that the cupcakes are bite-sized, for a dollar each, and you pick a minimum of 3 from the shop? This strategy confers great flexibility on the margins.
* Positioning- While the messaging theme (see website) is simple and correctly centered around taste, it could also subtly play into a health and fitness savvy dessert-fiend profile.
* Merchandising- none noted at the store. A simple, "back to the basics of taste" operation.

Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.


What do you think? Ready, Steady, Cupcake?

 
 
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Entrepreneur's Corner: Organicoa, for Hot Cocoa!

Executive Summary: We look at an entrepreneurial venture, Organicoa, and some things that stand out with this cocoa shop- product taste and size, and positioning.

The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is Organicoa.

Organicoa is a cocoa shop (currently) at Lafayette St. in SOHO. The makeshift ping pong table instantly caught my attention- just the excuse you need to walk into the shop for some hot cocoa in the colder than usual weather. The leadership team happened to be around, was very warm to talk with, and was enthusiastic about sharing the organic theme behind the products and the merchandise.

The cocoa brought back memories of some great cocoa I enjoyed over a decade ago. One product comes close to the Organicoa taste- Milo. Yes, the Aussie drink.

The shop had small, bite sized cookies to go with the hot cocoa. Also, you don't have to buy hot coca to play ping-pong. :-)

How Do You Find It?
The facebook page: http://www.facebook.com/pages/organicoa/315291760276?v=info

Green Shoots?
A great product and an enthusiastic team. The team had taken over unused store space while the real estate firm looked to find a leasee for the the space. They aren't waiting around to make their venture happen.

The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Organicoa.
* Great product- It reminded me of some great cocoa I have had previously.
* Bite-size cookies- complement the cocoa. The size also gives you leverage to manage pricing and margins.
* Cup sizes- I saw a single cup size. The current "pilot" (my adjective) location gives them some time to test out price points.
* Store ambience- The large, bare store space still managed to ooze a warm, "lets hang out" ambience.
* Positioning- Yes, Organic is healthy is a core message. However, who would have thought about throwing in a makeshift poing pong table on the large store space? Tied to the ambience, "community" comes to mind.
* Theme is core to merchandising- from the colors to the organic content of the merchandise, the team has closed the loop on the message.

Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.


What do you think?

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Coming Next on Entrepreneurs Corner: Baked by Melissa- mini cupcakes as Bite-size Desserts?:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-baked-by-melissa.html

Aiding Economic Recovery in a Recession- The "I" of the Tiger

Aiding Economic Recovery in a Recession, a.k.a. The "I" of the Tiger, from the desk of Bengal-Tiger-Crackling-With-Ideas.

Executive Summary: There are various ideas and approaches being thrown about to help economic recovery out of this recession. Below is a recently published WSJ article by M. Zuckerman****. He suggests budgetary control, but also spending in "regeneration" programs focused on technology and infrastructure. We look at these through the lens of the GDP. We will expand on this and finally tie this in with Innovation and Animal Spirits.

The Background- Aiding Recovery
There are two broad streams of thought when it comes to aiding recovery. One focuses on cutting all cost and bailout toward balancing a budget, with "let it (a company) fail" as the mantra. The other focuses on providing large doses of temporary stimulus that would be followed by an extended period of belt tightening.

Below is a recently published WSJ article by M. Zuckerman**** that seems to belong to the second stream of thought. He suggests budgetary control, but also spending in "regeneration" programs focused on technology (tied in some way to innovation) and infrastructure.
The Article:
http://online.wsj.com/article/SB10001424052748703837004575013592466508822.html?mod=loomia&loomia_si=t0:a16:g2:r2:c0.133655:b29954458

Proposed Solution: The GDP Lens
Looking at it in terms of the GDP, where GDP = C + I + G + (X - M), the article can be summarized as:
 Big C (Consumption) goes down, G (government investment) goes up to assist in increasing I (private investment), and eventually "I" will limp back to normal, finally leading to a ratcheting down of G. Note that I am not talking about X - M right now.

I will admit that investing in infrastructure and technology via government regeneration sounds great. That's supposed to be the "soft", "behind the scenes" aspect of government spending led recovery in this equation. We can also look as some background on debt and economies below:
http://randomjunkyramblings.blogspot.com/2009/12/debt-and-economies.html


Proposed Solution: South Korean Precedent?
Now, South Korea seems to have pulled off something similar to become an OECD economy. South Korea racheted up debt to support imports of technology and machinery, which led to an increase in exports, and kickstarted private investment. The Chaebols, in this case, were instrumental in this maneuver.

* However, can this maneuver by South Korea be called a precedent?
* Was it, and is it now, easy to pull off?
* Could you call the Chaebols in South Korea a strong government-industry partnership?
* Is a very tight government- private industry partnership feasible in the US?
* Does the tight partnership help in managing and spurring innovation? If yes, is the spurring of innovation, and eventual reovery, quicker or slower than in other approaches?
* Can an increase in G truly substitute, or directly lead to, for an increase in "I"?
* Does an increase in G, at best, keeps the social fabric together, and provide a base on which "I" can rebuild? If yes, is there a minimum and a maximum turnaround time for "I", coming out of economic shock?

Perspectives on how economic recovery would assets itself globally are linked below:
http://randomjunkyramblings.blogspot.com/2010/01/economic-recovery-patterns-and-globally.html
Now, lets focus on the "I" of the Tiger.

The "I" of the Tiger- Funding the Recovery
How do we bring "I" back into business? The government could directly hand money to individuals and businesses, or it could hand it to banks and cajole the banks to make the right lending decisions. As we know, too much liquidity brought us to the real estate bubble. So, lenders/ investors/ government/ banks- whatsinaname? - must exercise "good judgement" in their practices.

* Do we have enough "good judgement" to go around for the massive influx of funds bottlenecked in the financial system/ sitting with the government?
* How do we prevent another bubble?
* On the flip side, how do we ensure that the distribution system works, makes money and hence leads to economic activity?

I am reminded of a conversation at a solar energy panel in 2008, where some folks were of the opinion that funds for solar energy projects were available, but they were tied up with the government (DoE?). The government had a poor track record of investing and ideas floating around including getting investment bankers to the party.

Since we are thinking about the what and the how of aiding economic activity, lets talk about innovation.


Technology and Innovation
Now, I have previously talked about innovation- an example is the link below.
http://randomjunkyramblings.blogspot.com/2010/01/innovations-impact-on-economy.html

However, lets get into some detail.
* Do good, fundable ideas arrive in some sort of random manner, or can we increase them by just waving money (and tweaking some more factors, if you like. E.g. increasing unemployment, etc.)?
* The VC industry is currently undergoing some sort of contraction as well.
* Research states that MITIE's (an arm of the Japanese government) investments in the electronics industry did not have a significant impact on it.


Animal Spirits
This is where "Animal Spirits" comes into play. You could call it the natural ability of a people to take risk, to innovate and/ or to build. Naive optimism, if you like. Some previous thought on Animal Spirits can be found here:
http://randomjunkyramblings.blogspot.com/2009/07/art-of-stimulus-and-economics.html

Are people taking risks to build something they believe in? I recently stumbled across a little cocoa shop in the city- the team had taken up an empty store for their venture while the real estate company looked to fill the space. Very enterprising, and they had a good product too! I really hope that company does well. More about it here:
http://randomjunkyramblings.blogspot.com/2010/01/entrepreneurs-corner-organicoa-and.html


Conclusion
The cocoa shop example tells me that the US is still a great place to turn good ideas into great engines for growth. I am keeping my fingers crossed for all the good, bright folks out there who have found/ are about to find a great idea.


What do you think?


Some more thoughts on aiding economic recovery can be found here:

http://randomjunkyramblings.blogspot.com/2009/07/economic-crisis-and-art-of-stimulus-to.html


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*****Note: The article was posted on a macroeconomics forum by Prof. Rosensweig to kick of a debate on approaches to recovery. The ideas here were posted in a condensed form at the form on January 24, 2010.

Economic Recovery Patterns and Globally Divergent Challenges to Recovery

Executive Summary: Some interesting ideas, including one by Stiglitz (link below) were proposed to manage the global financial crisis. How do those ideas look now? Do we have a path to "full" recovery yet?

Solutions and Paths to Recovery
I had talked about an interesting article by Stiglitz toward a co-ordinated approach to the global financial crisis below:
http://randomjunkyramblings.blogspot.com/2009/01/stiglitz-wrote-interesting-article-in.html

Globally Divergent Challenges to Recovery
The Economist had two articles, below, on paths to recovery that add more perspective to Stiglitz's article:
The Great Stabilisation
http://www.economist.com/opinion/displaystory.cfm?story_id=15127608
Leaders and laggards
http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=14816736


What do you think?



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Economies and Unemployment Numbers

Executive Summary: How are different economies handling the levels of unemployment numbers they face due to the economic crisis? One approach is to look at unemployment numbers across economies*** and then look for factors across various economies that would help them manage the rise in unemployment. We wind up by considering education, skills and animal spirits as potential factors for recovery, and identifying questions that will give us more granular understanding of how governments can impact recovery.

Some Country Unemployment Rates
The Economist had a great chart in the fourth quarter of calendar year 2009 that showed pre-financial crisis and post financial crisis unemployment numbers. If you compare post crisis numbers, Spain looked to be in much more pain than the U.S., coming in at 19.3%, with Germany looking to be relatively better off at 8.1%. Despite Spain, the Euro area may have seemed to be handling this pretty well- with the unemployment rate under 10%. Australia seemed to be doing fantastic at 5.7%.

Changes in Country Unemployment Rates
However, when we look at the relative changes from pre to post-crisis numbers, an interesting story emerges.
1. Spain's unemployment rate had changed by a multiple of 1.7 (70% increase).
2. The US rate had changed by a multiple of 2 (100% increase).
3. The British rate had changed 2.5 times. The Japanese rate changed by a little more than that. The rate for France and Netherlands had changed by a multiple of 4.
4. The German unemployment rate had change by more than a multiple of 8!
5. The Australian unemployment rate had changed by a factor of 3.

Finding the Questions in the Numbers- Before Finding the Answers
Interesting numbers? There's more food for thought below.

1. How are specific regions affection these country numbers? E.g. Spain has abysmal numbers- are they tied to a specific region or a sector?
* Geography and sector: In the U.S., California has been among the worst hit economies. A real estate bubble is one cause of the problems.
* Other categorizations: The Indian economy may show a dichotomy with the rural markets being more buffeted from global turbulence than the urban markets.

2. What do these reported numbers mean, on the ground, beyond the reporting methodologies?
* In the US, the "real" unemployment rate is being touted at 16% as people are no longer looking for full time employment.

3. What do the low pre-financial crisis numbers in certain economies mean?
* Global trade: 43% of the Australian economy is driven by trade. Its trade with China and East Asian economies has increased significantly in the past few years.
* Socio-Economic & Political Support Systems: European economies have significant support tools (including labor laws) built into the socio-economic system.

4. What does the wide variance in % change in unemployment rate mean?
* Impact of Global Trade: The German, Australian and Japanese economies have trade as a higher component of their GDP, compared to US which has consumption as a massive component. Does that explain their unemployment rate multiples being higher than those of the US?
* Impact on Recovery: Does a higher mutiple of unemployment rate mean that the economic recovery for these economies would take longer?

5. Does a country's pattern of a country's/ region's economic structure impact the behaviour of the unemployment rate- runaway unemployment, exponential unemployment, high/ low bounded unemployment?
* Trade with (Still) Growing Partners: Consider Australia, which trades with growing economies China and Indonesia. The increase in its unemployment rate was much more than that of the US. Does that mean trade with growing partners is irrelevant to the unemployment rate of a country in a crisis?
* Labor Force Characteristics: Could skills and education create a natural upper bound to an increasing unemployment rate? Or is it something deeper- related to "animal spirits"?
* Recovery: Do certain charts/ patterns of unemployment rate increases lead to quicker recoveries? E.g. Would unemployment rates in a highly skilled sector recover quicker? Could Iceland be an example here? Its unemployment rate changed from an estimated 1% in 2007 to 10% in 2010.

6. How well are country economic systems structured to handle increases unemployment?
* Work Force Finding Work Again: Do economic systems- taxation, socio-economic support features- help the workforce find work again quicker? If so, which economies would recover quickest from the crisis?
* Animal Spirits: What role do "animal spirits" play here? Would "animal spirits" be dulled by excessive state support during a crisis? Would states that provide a clear path for "animal spirits" to run free recover fastest? Does the previous question imply that states can "encourage" animal spirits in a particular direction? Does that hold up against research on state support for "private" innovation? How are the two scenarios different?
* Recovery: What elements of the economic system would lead to the quickest recovery? Would unemployment rate be the only ture indicator of a recovery? Case in point- Japan.

A Country Economic Employment Absorption Index?My first reaction was to consider building an index to compare country economic systems to indicate which ones would recover quickest from the crises.

While reading papers comparing labor markets like the US and France would be the first step, currently, the World Bank has some indices that attempt to characterize the flexibility of economies in labor markets, based on a study of labor market regulation across economies:
http://www.doingbusiness.org/ExploreTopics/EmployingWorkers/

Prof. Rosensweig*** suggested looking up "Labor Market Flexibility" and notes from the OECD and the ILO. I have found some interesting perspectives in some Economist articles. You are welcome to challenge the ideas presented below.

Readings from the Economist
European Approaches to Unemployment
http://www.economist.com/opinion/PrinterFriendly.cfm?story_id=14803179
http://www.economist.com/theworldin/PrinterFriendly.cfm?story_id=14742319
European Decline?
http://www.economist.com/world/europe/displaystory.cfm?story_id=15065405

Globally Divergent Challenges to Recovery
The Great Stabilisation
http://www.economist.com/opinion/displaystory.cfm?story_id=15127608
Leaders and laggards
http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=14816736

Promoting Entrepreneurship
http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=14743944



What do you think? Stay tuned!



*** First discussed (including some of the questions raised) at a macroeconomic forum guided by Prof. Rosensweig on Dec. 15, 2009.

Innovation's Impact on the Economy

Executive Summary: We have perspectives on measuring innovation's impact on a company and even on a sector. How do you measure innovation's impact on the economy? Would this information help government/ economic decision-making in any way?

The Background
There is some interesting an exciting work around innovation and organizations- The name Clayton Christensen immediately comes to mind. There also is some insight on innovation an industries- specifically clusters.

At CES, 330 companies joined 2500 existing companies in debuting 20,000 products. Now, given all the hype generated around the iPad and around CES 2010 in these tough times, how would you attempt to measure innovation's impact on the economy?

The Avalanche of Questions
* Does innovation make a significant dent on the economy (especially if the economy is driven by the Big C- Consumption)?
* Does innovation become more, or less, important during tough times for the economy?
* Does innovation help in economic recovery?
* What kind of innovation is best for economic recovery and well being?
* How do we categorize innovation- diruptive, incremental and something-in-between?

One Method to the Madness
Lets indulge in some rogue behavior and dive in approaches. We can then step back and evaluate value and ease of obtaining data elements of each approach. One approach would be to add up all the revenues of "innovative" products et voila! Given a consumption economy, does it really matter?

* You might argue that the revenue from some complex technique- say the legal mechanism that allows sovereign funds to invest in key infrastructure assets- may not easily be classifiable as an "innovative product" or service. Fine. Make an executive decision- in or out, or even halfway in.
* You might also argue that some of these products may have been manufactured elsewhere- well, then that shows up as trade or investments doesn't it?
* Why are we only looking at revenue? What about the rest of the financial statements of the firm in relation to the product?

Another Method to the Madness
Now, do you believe that the way out of a current economic quagmire is to focus on production of goods and services, and start saving?


How about trying to build an optimization function/ index that tries to minimize Big C (consumption) in the GDP?
 
The Model
Could we start by categorizing innovation with this objective in mind? Yes, it is a different way of thinking, and I am pushing the envelop a little, but I am sure we can come up with some sort of back-of-the-envelope index? It, tongue firmly in cheek, need not even be as rigorous as zero carbon footprint.
 
The Data
What do we really need for a rigorous approach here? Firm financial statments broken down by products? As easy as ABC (pun intended with Activity Based Costing)? Also, mapping these components to their net effect on the elements of the GDP?
 
What do you think?
 
Here's a crazy thought:
Would this sort of granular data help the government make more effective decisions in the interest of the economy?
 
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