Brand Autopsy

Chewy Marketing Quote

Another Chewy Management Quote

Earlier I shared a chewy management quote from John Teets, CEO at Viad. Today, we hear from Stanford Prof. Jeffrey Pfeffer ...

"A leader's job is to reduce uncertainty, not create it."

SOURCE: WHAT WERE THEY THINKING? (Jeffrey Pfeffer)

What Were They Thinking? (Jeffrey Pfeffer)

Long-time readers of this blog know I have an affinity for business books. Okay. Affinity is too loose a word. ADDICTION is more appropriate.

{Hi. I’m John Moore and I’m addicted to business books.}

Just because I’m addicted to business books doesn’t mean I enjoy every biz book I read. Too often I slog through lousy biz books hoping to mine a few knowledge nuggets. Unfortunately, most biz books fail to help me generate new ideas, nor do they give me a new perspective on a business topic. So when a business book comes along that delivers smart ideas and unique perspective, I get excited.

Jeffrey Pfeffer’s WHAT WERE THEY THINKING? – Unconventional Wisdom about Management has me excited. It’s a fast-paced book that’s laced with knowledge nuggets making me a smarter business thinker and doer.

Here are some of the knowledge nuggets Pfeffer shares that has this marketer thinking …

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WHAT?: Get Smarter by Taking Small Risks

SO WHAT?: “Companies are a lot like children—none are born knowing all they need to know, and relatively few are born smart. Most acquire intelligence by learning basic tasks and skills, mastering them, and then moving on to learn more tasks.” (p. 32)

“Relatively few companies actually embrace the management practices that are required to help them get smarter (p. 33). Learning and innovation also require letting people make mistakes.” (p. 36)

“The irony is that even as companies want to become learning organizations, they don’t want to be places where people can learn new things—because that requires putting people in positions where they do tasks they don’t do very well.” (p. 36)

WHAT NOW?: “The principle is simple—learn and fail on a small scale. But that ethos requires accepting that novelty and innovation are invariably accompanied by setbacks and failures. And embracing such a way of operating requires letting people fail—maybe even encouraging them to fail.” (p. 37)

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WHAT?: Working Longer Hours is a Fallacy

SO WHAT?: “Companies often make long hours sort of a loyalty test. Employees are expected to put their work and their employer first, and one way of demonstrating their commitment is by forgoing leisure and family.” (p. 69)

“Contrary to myth and much conventional wisdom, European companies can and do compete successfully in global product and service markets, even with vacation and workweek policies that put their U.S. competitors to shame.” (p. 71)

WHAT NOW?: “It’s time for the U.S. companies that have made late nights and short weekends a test of loyalty to come to terms with the myth that long hours and no vacations are good for the bottom line.” (p. 73)

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WHAT?: We Overemphasize Strategy

SO WHAT?: “There I sat at yet another board meeting, listening to the chief executive drone on about sales strategy and product strategy as he pointed to slick slideware filled with analyses of potential markets and buzzwords about our competitive positioning in the design visualization software market.

Then it dawned on me—almost no one in the room, including the person talking, had actually visited a customer or, for that matter, even used the company’s product in their own work.” (p. 166)

WHAT NOW? “Instead of sitting in meetings and spending time preparing fancy PowerPoint presentations, develop your strategy adaptively, by using your company’s best thinking at the time, learning from experience, and then trying again, using what you have learned. Under almost all circumstances, fast learners are going to outperform even the most brilliant strategists who can’t adapt.” (p. 170)

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Worthwhile stuff!

WHAT NOW? Well ... stop reading this and start reading Jeffrey Pfeffer’s WHAT WERE THEY THINKING?

Simple Advice for Better Presentations

While riffling through Carmine Gallo's just-published book, FIRE THEM UP, I landed upon some super-smart advice for delivering a more effective presentation. Gallo writes ...

A client once asked me, "How can I be more like Steve Job in my next presentation?"

"It's simple," I explained. "Tell your listeners why you're excited about your product, share a vivid vision of the future that your product makes possible, and be specific about how your product will help them succeed in business."

Most people hype features. Steve Jobs sells benefits. When he pitches products, it's not about him: it's about you. That is the secret behind a master showman.

Great advice.

The Rhetoric and Reality of Management

THE FUTURE OF MANAGEMENT from Gary Hamel is a must-read for all us businesspeople.

Gary, along with the wordsmithing help of Bill Breen, writes that management innovation lags far behind the significant innovation we’ve experienced in business with product development and business model development. He presents an argument explaining how outdated management practices, and not operating or business models, is the true culprit for why businesses fail to perform.

On page 35, Hamel writes … “Today, every CEO claims to be a champion of innovation—so why the barn-sized blind spot when it comes to management innovation?” In other words, there is a gap between the rhetoric and reality of management.

Interesting premise, eh?

Hamel is a proponent of management models which empower employees to be creative, be given room to experiment with new ideas, be rewarded for successes, and be held accountable for driving the business. Whole Foods Market, W.L. Gore, and Google are highlighted in the book as businesses practicing innovative management systems.

These case study companies Hamel highlights all have developed a corporate culture where bottom-up employee-driven innovation helps to fuel the success of the business. Unfortunately, businesses have failed to develop a company culture where every employee is given an opportunity to truly impact the business.

Hamel suggests there are three obstacles for why businesses fail in creating a management culture that is innovative, evolving, and ever-effective:

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#1 | Too Much Management, Too Little Freedom
“Anyone who has ever run a university, a film studio, or an open-source software project will tell you that getting the most out of people seldom means managing them more, and usually means managing them less. It means giving fewer orders, worrying less about alignment, and spending less time checking up on folks.”

#2 | Too Much Hierarchy, Too Little Community
“Hierarchies are very good at aggregating effort, at coordinating the activities of many people with widely varying roles. But they’re not very good at mobilizing effort, at inspiring people to go above and beyond.”

#3 | Too Much Exhortation, Too Little Purpose
"A moral imperative can’t be manufactured by speech writers or ginned up by consultants. It can’t be cobbled together in a two-day off-site. Rather, it must grow out of some genuine sense of mission, possibility, or outrage. A moral imperative is not something one invents to wring more out of people. To be regarded as authentic, it must be an end, not a means.”

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If you enjoy chewy business fodder, I recommend reading Gary Hamel’s THE FUTURE OF MANAGEMENT. This book will probably go down as my vote for the smartest business strategy book of 2007.

Chewy Management Quote

John Teets, former Greyhound Corp. chairman and current CEO at Viad once said ...

"Management's job is to see the company not as it is ... but as it can become."

[source of quote]

Bill Gammell on Seinfeld Marketing Lessons

Could it be everything Bill Gammell learned about marketing, he learned from watching Seinfeld? Maybe not everything ... but he did learn some smart marketing lessons from Jerry, Elaine, George, Kramer, and the Cougar 9000.

Consider Bill's e-book worthwhile (and fun) weekend reading.

Click image above ... (go ahead, do it.)

QVC and EGM

Yeah I know ... lots of chatter about Employee-Generated Media (EGM) on the blog recently. There just happens to be a rash of instances lately. Here'€™s another interesting example from QVC. (Yes, the home shopping channel.)

QVC recently launched an ad campaign centered around trying to own the letter "Q."

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[SIDEBAR: I always smirk when I hear us marketers make such grandiose statements like we are going to own the letter "€œQ."€ At Starbucks we used to focus some of our marketing efforts to "€œOwn Coffee." I always had to bite my lip whenever I would say something like, "This re-introduced coffee passport program will help enable us to "'˜own coffee.'"€ Starbucks doesn'€™t own coffee. Never has. Never will. Coffee isn'€™t ownable by anyone.]

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Back to the post ...

QVC is putting a lot of energy behind their customer-facing campaign to own the letter "Q" ... a new, bolder logo ... lots of stylish billboards ... an overhauled website. All this activity is focusing on the QUALITY aspect of hyping the QVC experience of Quality, Value, and Convenience.

Turns out this focus on owning the letter Q began as an internal marketing initiative in June 2006. All 13,000 QVC employees were given a logo t-shirt and given the challenge of getting the most spectacular product placement. The winning employee would get $10,000.

I'€™m not a fan of doing gimmicky stunts to capture customer attention. As a marketer, I much prefer to garner customer intention more than capture customer attention.

However, this Product Placement employee contest from QVC is a fun idea to tap into the creativity and ingenuity of employees. According to the New York Times, one QVC t-shirt wearing employee had their picture taken with Donovan McNabb, Philadelphia Eagles quarterback, and that picture found its way on the Eagle'€™s website.

QVC employee Peter Fey, brother of writer/actress Tina Fey, had his famous sister plug the t-shirt and QVC during an appearance on The Tonight Show with Jay Leno. (Watch the Tina Fey/QVC video clip here.)

The winning QVC t-shirt product placement came from an employee who organized a belly flop contest for an autism charity. Each contestant wore the QVC t-shirt and a local TV station did a live stand-up from the event.

Fun stuff. I hope more companies entrust and encourage their employees to do similar things.

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SOURCE: New York Times article | Sept. 21

the Deloitte Film Fest

In an earlier post on "Employee-Generated Media," I referenced an article from the Wall Street Journal explaining some accounting firms have encouraged its employees to make short videos about their on-the-job experiences. These videos are being used as recruiting tools to attract talented college kids.

Deloitte & Touche ran a contest with its employees to create videos answering the question, "What's your Deloitte?" They received over 400 submissions from employees and have posted 14 videos on a Deloitte Film Fest YouTube page.

Kudos to Deliotte! There's a lesson in all this for other businesses to follow. The lesson being ... Be good to your people and your people will be good to you.

Watch these amazing Deloitte employee-generated videos showcasing the creativity, passion, and thoughtfulness that Deloitte has inspired within its employees.

Yeah, it's easy to get cynical about this stuff. However, I urge you to look beyond the super-rosy depictions and think what would happen if your company encouraged its employees to do something similar. Would the depiction be rosy or thorny?

>> Thanks to Marc Bresseel for the video hook-up.
>> RSS Readers ... click here to watch ALL the videos on YouTube.

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Deloitte and You

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The Green Dot

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Iron Man

Dell and Social Media

Last night at the Austin Social Media Club event, we learned about Dell’s forays into “social media” from John Pope, Lionel Menchcha, and Caroline Dietz. (John, Lionel and Caroline are responsible for managing Dell’s social media initiatives.)

During this 90-minute panel discussion, they shared how Dell is using their Direct2Dell blog and their IdeaStorm project to become a better, more responsive, and more likeable company. (Great stuff.)

Below are some highlights from the very interesting panel discussion …

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re: Dell’s Social Media Goals
1 | Enter into conversations with customers everyday in every major language
2 | Address any form of customer dissatisfaction head-on knowing that not everything will be solved and some of Dell’s weaknesses will be exposed
4 | Encourage "crowd sourcing" as the next step in listening to customers
5 | Use video to personalize the Dell story
[John Pope, digital media senior manager]

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re: Dell’s Beginning Blogging Efforts
Contrary to perception, Dell didn’t start blogging because of Jeff Jarvis. However, Jeff’s rants did help Dell realize there were customer service issues the company needed to address.

In April of 2006, Michael Dell charged Dell to proactively find dissatisfied customers in the blogosphere and connect them with someone at Dell who could help them. By July, Dell had launched its blogging efforts.

Dell stumbled with the initial launch of their Direct2Dell blog. They listened to feedback on how to improve it, namely adding links in posts linking to other bloggers. Dell adjusted and in some cases apologized for making a mistake.
[Lionel Menchaca, digital media manager]

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re: Changing the Tone of the Conversation about Dell
At the low point in 2006, Dell calculated at least 50% of the online conversation about Dell was negative. Today, Dell calculates the negative online conversation percentage number has been reduced to 23%. Dell doesn’t attribute all its blogging efforts to stemming the negative online conversation, but they are confident that blogging has helped.
[Lionel Menchaca]

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re: “Wins” in the Blogosphere
90% of the time Dell enters into a conversation, it “wins.” A “win” happens when (a) you enter the conversation and just thank someone for giving their opinion and (b) when you weigh-in on a negative thread with clarification of facts and the negativity subsides.
[John Pope]

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re: Dell’s Process for Posting on the Direct2Dell blog
Lionel serves as “editor-in-chief” for the Direct2Dell blog. As the editor-in-chief, Lionel balances three areas when it comes to topics the company chooses to blog about:
(1) content/ideas from Dell’s cadre of bloggers
(2) comments from Direct2Dell readers … if a topic emerges from readers, then Dell knows it needs to blog about that topic
(3) the need to add Dell’s voice to an online conversation that directly or indirectly impacts Dell.
[Lionel Menchaca]

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re: Moderating Comments
Dell moderates comments on the Direct2Dell blog. On busy weeks, Dell receives up to 400 comments. Well over 90% of those comments get posted following a quick look-see. Dell uses common sense guidelines when deciding which comments to moderate. Dell’s three common sense rules are:
(1) No profanity
(2) No direct attacks on Direct2Dell readers
(3) Anything addressing legal issues are not posted,
[Lionel Menchaca]

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re: IdeaStorm
The Direct2Dell blog changed how the company viewed online customer conversations. In the past, Dell wasn’t comfortable with participating or reacting to the conversations happening online about the company. However, the company now understands the importance of participating and reacting to the online conversation … so much so that … directly soliciting ideas from the online community was the next step in Dell’s social media strategy.

In Febuary 2007, Dell launched IdeaStorm — which is, simplistically speaking, an “online suggestion box” inviting people to offer ideas on how Dell can improve its products and services.

One unique aspect to IdeaStorm is Dell is now able to close the loop with feedback from customers. When customers post ideas on IdeaStorm, Dell is able to follow-up with posts/comments explaining that the company heard them and explain what Dell is doing in response.

Dell views IdeaStorm as a way its product development team can co-create products with customers. Pre-installed Linux on Dell computers was one of the first ideas generated from IdeaStorm that Dell product developers worked with customers to co-create and introduce to the marketplace.

There are about 35 other ideas Dell has put into action as a response to listening to feedback from customers on IdeaStorm.
[Caroline Dietz, online community manager for IdeaStorm]

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re: Lessons Dell is Learning from IdeaStorm
While there have been many successes with IdeaStorm, Dell is still adapting to how this initiative is changing the culture at the company. Being more transparent and sharing company information isn’t a cornerstone of the Dell corporate culture. However, IdeaStorm requires a certain comfort level with being open and forthcoming that Dell employees are adjusting to. Clearly, Dell’s participation in the online social media world is having an impact on its company culture.
[Caroline Dietz]

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re: Dell EmployeeStorm
As a result of the success IdeaStorm has had in generating ideas from customers, Dell has launched EmployeeStorm to generate ideas and comments from its 88,000 employees. A by-product has been employees are learning to become more comfortable sharing ideas and adding comments that they are now more willing to participate in IdeaStorm.
[Caroline Dietz]

More EGM (Employee-Generated Media)

In the preceding post I mentioned how accounting firms are using Employee-Generated Media (EGM) in the form of short videos to help recruit new employees.

How about this instance of EGM … the just-published HOW STARBUCKS SAVED MY LIFE.

Michael Gates Gill, a former ad-exec, dropped out of the corporate rat race and found happiness while working a $10.50/hr job as a Starbucks Barista. Michael chronicles his self-discovery story in HOW STARBUCKS SAVED MY LIFE. (Read an excerpt here.)

It’ll be interesting to see how (or if) Starbucks embraces this book as an act of “employee-generated media.” Having a book on the market extolling the virtues and values of a company treating its employees well can only help in the recruitment of new employees.

On a side-note … Gill’s Starbucks story is remarkable, but not isolated. There are numerous stories of corporate refugees finding solace as a Starbucks Barista. I recall one such corporate refugee parlaying her Starbucks Barista job into being a Starbucks Zone Marketing Director.

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Learn more about Michael's story:
>> USA TODAY article
>> NY Times article
>> WSJ Journal review
>> Reveries article

EGM Anyone?

The marketing world is learning to become more comfortable with CGM (consumer generated media) and with Citizen Marketers. Now we also must learn to become more comfortable with EGM -- Employee Generated Media.

The Wall Street Journal reports the Big Four accounting firms are using "Employee Generated Media" to help gain an edge in the ever-competitive campus recruiting scene. Josee Rose writes ...

"To lure candidates steeped in Facebook and YouTube, the Big Four are turning to the Web. Deloitte & Touche asked employees to make short videos about their experiences at the company. The videos were a way 'of taking the aspects of social networking and experimenting on how you can use the new tools of today to move forward into a workplace of the future,' said Cathy Benko, chief talent officer. About 400 videos were made, and the 14 best will be posted on YouTube and used on campuses.[source]

Is it a scary for you to consider having employees make short videos about the experiences at your company? Are you afraid of what they will say? Are you afraid they will be off-message and off-brand? If so, sounds like you have some work that must be done to improve the employee experience at your company.

Kevin Carroll quote

Kevin Carroll is a dynamic speaker, inspiring author, and social change agent. At the In-HOWse Designer Conference (Austin, TX), Kevin closed the three-day affair with a playful presentation that included this money quote ...

Conducting a Marketing Physical to Ensure Brand Health

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NOTE: The post is meant more for attendees of the In-HOWse Designer Conference (Austin, TX).

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On Monday, I delivered a presentation titled, Conducting a Marketing Physical To Ensure Brand Health.

The following is the presentation description that appeared in the Conference materials ...

It's time to give your business a marketing physical. This may sound strange, but it's just like going to your own doctor and getting a physical for yourself. The doc takes your vital signs, asks probing questions, and conducts a few key exams. You learn what may be affecting your health, and then you adjust your day-to-day life based on the results in an effort to ward off serious illnesses.

Why not do the same for your brand or business?

John Moore shows you how to conduct your marketing physical to diagnose and treat common marketing ailments like anemic sales, poor brand complexion and marketing obesity.

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To view the slides, simply click the forward button below:

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RSS Readers ... click here to view the presentation.

Why is Everyone Smiling

"Call centers are traditionally commodity businesses with very low margins, high turnover, and low morale. We're the complete opposite. We have profits that are four to five times higher than other call center companies. And we have a fraction of the normal attrition."

Paul Speigelman | CEO, co-founder of Beryl

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Beryl operates call centers for hospital and health care providers. So when you call a hospital in the middle of the night, chances are you’ll be talking to a nurse at a call center and maybe a nurse from Beryl. This not a glamorous business but it is a necessary business.

As Paul says in the above quote, call centers are a commodity business where pay is low and turnover is high. Yet Beryl has managed to grow with zest and zeal that belies the fact it is a commodified business. Beryl has grown to become a $25-million dollar with over 300 employees.

Since it competes in a margin-challenged industry, Beryl can’t afford to pay its employees more than its competitors. According to a Dallas Morning News article, a new Beryl call center employee makes no more than $22k. An experienced Beryl call center employee may make as much as $35k.

In the same article, Paul explains instead of paying employees more per hour, Beryl spends “hundreds of thousands of dollars a year” to make the workplace more fun and enjoyable. They throw parties for employees, take field trips during the day, conduct a murder mystery game that has employees spending weeks solving whodunit.

And Paul, the CEO, finds new ways to humiliate himself in front of employees. At one company party he might be dressed up as a matador roller skating around the gala. Or he could take on all comers in a game of one-on-one basketball during the NCAA March Madness Tournament.

You can learn all about Paul’s management philosophy and business beliefs in his recently published book, WHY IS EVERYONE SMILING? Bo Burlingham, of "Small Giants" fame, wrote the foreword to the book and he gushes about the special company culture at Beryl.

One of Paul’s key management practices is “Employees should always expect fun just around the corner.” Below are ten practices Paul believes can ensure that fun is just around the corner for employees. You’d be wise to read them and act upon them. (You’d also be wise to read Paul’s book.) Enjoy…

WAYS TO MAKE EMPLOYEES SMILE Paul Speigelman | CEO, co-founder of Beryl

Give Employees a Voice
We have the Better Beryl Bureau, a group of 15 co-workers from all facets of the organization responsible for enhancing our culture.

Pay them Fairly
Money is not the only source of motivation, but the lack of a fair pay structure can quickly lead to dissension.

Recognize and Reward
Leaders must personally let people know that they appreciate them. Peer-to-peer recognition is equally valuable. We encourage peer recognition certificates and hold quarterly drawings for winners who receive cash prizes.

Offer Opportunities for Advancement
Look first within the ranks when a position becomes available. Provide opportunities for training and mentoring to help people grow personally and professionally.

Support Out-of-the-Box Semantics
Our HR department is the ‘Department of Great People and Fun, and its director is the ‘Queen of Fun and Laughter.’”

Infiltrate the Workplace with Fun
Look for opportunities to celebrate and make them festive.

Walk the Walk
If you're having a down day, don't let it show. If you can't disguise your feelings, stay home. Just as laughter is contagious, so is a frown.

Send a Handwritten Note
It's even more appreciated today than it was two decades ago.

Let Down your Guard.
Don't be afraid to sit in the dunk tank during a family picnic or don a costume in a celebration.

Open your Heart
We have created a formal program so that co-workers can inform us about events in their lives or the lives of their peers, and we find appropriate ways to be there for them when they need us.

SOURCE: Dallas Morning News article | Sept. 4, 2007

a Must Read Manifesto

I’m tired of slogging through business books hoping that somewhere within the far too repetitive pages I’ll find a few money quotes. I continue to believe most 250-page business books can be slimmed down to a svelte 25-pages without losing much. That’s why I'm a big fan of ChangeThis.

Since 2004, ChangeThis has been making me a smarter marketer through its trove of quick-read manifestos. ChangeThis is chock-full of pamphlet-sized business books with just enough information and just enough inspiration to help me make things happen at work.

The latest manifesto I’m high on is THE SECRETS OF MARKET-DRIVEN LEADERS. In 16-pages, Craig Stull, Phil Myers, and David Meerman Scott share practical advice on how businesses can be more successful by being market-driven rather than being just customer-driven, competitor-driven, or sales-driven.

It’s a smart read with lots of money quotes. For example, here is a cut ‘n paste snippet from the 7 Secrets of Market-Driven Leaders section of their manifesto. Enjoy...

7 Secrets of Market-Driven Leaders

SECRET #1: Work as a Trusted Advisor
People in market-driven companies largely ignore the competition. And they most definitely do not care about technology for technology’s sake. Instead they focus a majority of their energies on the problems that buyers are willing to spend money to solve.

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SECRET #2: Build from the Outside-In
Market-driven leaders understand the complete picture of market problems before building products. they develop solutions in the context of the total customer experience.

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SECRET #3: Simple is Smart
Whenever market-driven leaders create products or solutions—for potential new customers, existing customers, or even new markets—it is always in the context of creating a simple solution to the problems people have.

The best companies create solutions that are narrow and deep. they organize around a single market problem and solve it completely with a solution that to the buyer seems simple, obvious and most importantly handles all the related tasks in one easy step.

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SECRET #4: Leadership is Distributed
At industry-leading organizations focused on a market-driven approach, company operations are driven from the business unit or product management level. Leadership is distributed. Why? Because the business unit leaders and the product managers who work there are the people who are closest to the marketplace and best understand the problems buyers face.

Winning companies recognize it is better to distribute leadership and to employ a bottom-up strategic planning process that drives the business forward than it is for functional senior managers to collaborate on decision making and push new strategies, processes, and plans out to the organization.

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SECRET #5: Stop Being a Vendor
In our experience working with thousands of technology companies, we’ve watched a sequential decline each year in the level of “trust” between vendors and customers. We’ve learned that the most successful organizations … embrace the discipline of being a problem solver and solution-seller instead of a vendor.

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SECRET #6: Marketing with a Big “M”
Industry leaders understand that marketing is more than just “marcom” (marketing communications) and that the role of marketing involves much more than just creating a message and delivering that message with the tools of advertising and public relations.

Companies get into trouble when they throw bucketfuls of money at the promotional aspects of marketing such as advertising, tradeshows, PR, media relations, analyst relations, and the like without paying due attention to the problem identification, market definition, and product management aspects of marketing.

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SECRET #7: Measure Only What Matters
Successful companies don’t fall prey to the typical requirements of the C-suite, investors, boards, industry analysts, and Wall Street for managing the minutia and death by metrics. the problem with measuring marketing activities is that too many companies have trained their employees to measure the wrong things. Market-driven leaders measure only what matters.

(AUTHORS: Craig Stull, Phil Myers, and David Meerman Scott)

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ACCESS the FULL MANIFESTO here

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Natural Evolution of Products

Tom Fishburne gets it. His marketing-minded comics are piercingly poignant. Especially this one:

UPDATE | Terra Bite Lounge

Earlier this year we talked about the pay-what-you-want honor system of Terra Bite Lounge in Kirkland, WA. This is the coffee shop where there are no prices for the coffee drinks, pastries, and sandwiches. Instead, customers pay whatever amount they feel is appropriate.

The Wall Street Journal today gives us an update on Terra Bite Lounge. The honor system seems to be working just fine. According to the article, daily customer counts at Terra Bite average around 200 with each customer paying $2 or $3 per order.

Let’s keep in mind the owners of Terra Bite Lounge aren’t getting rich from this coffee shop—their café breaks even. However, the owners aren’t doing this to get rich. Instead, this endeavor is more an experiment in the greater good of public honesty.

The owners of Terra Bite explain the reasoning behind their voluntary payment this way…

Terra Bite is not only an experiment into the level of public honesty, it is also a visible demonstration of that high level of honesty. I think that has some secondary benefits.

In my life, there have been times when I've felt like being good and honest, and other times when I've felt cynical. When I have felt cynical, it was usually because I felt that I was surrounded by corruption. On the other hand, when I feel that people around me are good, I feel more like being good.

Well, by existing, Terra Bite demonstrates to the public that they are surrounded by a high level of honesty. I believe that helps reduce the general level of cynicism, even for those that never visit Terra Bite.

The cafe chains base their business on the popularity of coffee. We do also; but we also base it on people's notion of wanting to be good. I believe that this personal notion of "I am a good person" is quite universal; even people who we don't regard as good -- someone in prison, say -- is often there not because they don't have an ethical system, but because they acted out too strongly on their ethical system. So I believe we're on solid ground basing a business on that. READ MORE

Refreshing to hear, eh?

Pricing Tells a Story

Storytelling in marketing is nothing new. In All Marketers are Liars (Seth Godin), we learned that all marketers tell stories and the best marketers tell stories customers believe. Seth goes on to explain that stories are shortcuts to understanding what a product/service is all about.

While reading the August issue of Inc. Magazine, I ran across the line you read in subject header: PRICING TELLS A STORY. Per Sjofors, managing partner at Atenga, is credited with saying that chewy line. He's right ... every price has a story.

There’s a story behind why Air Jordans are so expensive. By buying a pair of Air Jordans, a middle-aged rec-gym b-ball player can Be Like Mike. There is also a story behind the ultra-inexpensive Starbury shoe. The Starbury shoe story tells us we do not need to get caught up in all the hype and dole out a fortune for a pair of basketball sneakers.

There’s a story that goes along with the price for dining at PF Chang’s. You revel in the experience of enjoying family, friends, food, and attentive service from the PF Changs waitstaff. But there is also the story of paying for an equally-tasty and less expensive meal at Pei Wei. The pricing story Pei Wei tells us is about delivering great Asian-inspired food without the pretense of a full-service restaurant like its sibling, PF Chang's.

There’s a story behind Wendy’s 99-cent Jr. Bacon Cheeseburger. Might not be an interesting story, but a story nonetheless. The Quadruple Bypass Burger from the Heart Attack Grill has an interesting story to go along with its higher price. We’re talking a hamburger experience of eating 8,000 calories and if you and your arteries can survive the gluttony, you’ll be wheelchaired out to your car by a nurse-attired Heart Attack Grill employee.

Pricing is one of the shortest shortcuts a company can take in telling a story about its products. So ... what story is your pricing telling customers?

The Real Web 2.0 Bubble

By way of Brian Oberkirch, we learn of the real Web 2.0 bubble. We're not talking about the Web 2.0 bubble economy but rather, the bubbling-over of Bubble Quote logos. (Oh my!)

Trevor Elliot arranged the following chart of Web 2.0 Bubble Logos and added some smart commentary...

"As a catch-all symbol, the speech bubble is tough to resist. It contains what everyone wants to say about the 'new' web: user-generated, communication, collaboration, commenting, social media, community, self-published, my voice, our voice, rating, ranking, sharing and the rest.

But, it’s over. The day has come to pronounce from far and wide – 'Attention all startups, it’s a bad idea to hang your ID hat on a speech bubble. Just don’t.'" [MORE]

(1) Espresso Shots of Business Wisdom

This is the first episode of ... ESPRESSO SHOTS OF BUSINESS WISDOM. In this series, I plan to share some easy-to-follow business advice. Each episode will be less than five-minutes long and will share some actionable business knowledge nugget I've picked up through the years.

Since the SlideShare "slidecast" feature is so easy to use, I'll probably continue using it to shares these business wisdom espresso shots. To watch, simply push the play button below. Enjoy.

RSS Readers ... click here to watch.

The Age of Speed

In a twist on my Biz Book Money Quotes series, I'm highlighting one of the most lucid and poignant examples of how to find focus to achieve results that I've ever read.

In Vince Poscente's newest book, THE AGE OF SPEED, he shares a worthwhile story on what tightrope walking can teach us about focus. GOOD STUFF. Enjoy.

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RSS Readers ... click here to view the presentation.

The BusinessMakers Radio Show

Many of you probabkly know Erica O'Grady, i-everything savant. But, you might not know that she does side work for The BusinessMakers Show airing on 950-AM KPRC in Houston, TX. (She's their on-the-road reporter filing interviews with business makers.)

Back in May, Erica caught up with me at the Webvisions Conference (Portland, OR) and recorded this interview. We talked about the business and the branding of Starbucks Coffee & Whole Foods Market,

For highlights of our conversation ... GO HERE TO LISTEN.

No Business Leader is Perfect

Is it unrealistic for us to expect businesses leaders to be perfect? Are we setting ourselves up for disappointment by expecting businesses leaders to flawlessly deliver every single time? As employees, customers, and shareholders are we expecting perfection when perfection is unattainable? Is that fair of us?

I’m not trying to make excuses for when businesses leaders fail us. But failure happens. No businessperson is perfect. Yet, we seem to expect businesses leaders to be perfect all the time.

John Mackey, co-founder/CEO of Whole Foods Market, messed up BIG-TIME. No doubt about it. He failed employees, shareholders, and many customers. We now know Mackey is far from perfect. But was it realistic for us to expect him to be perfect?

No business leader is perfect. NONE. Business life is a game of progress, not perfection. No business leader will ever be perfect. It’s an impossibly unattainable goal. But while that goal is unattainable, the most admired, respected, and trusted business leaders always aspire to reach perfection. They always make progressive steps to improve their decisions made and how their business connects with stakeholders. Sure, they will stumble along the way. But the true measure of a business leader is how they recover and forge ahead making progress along the way to overcome their mistakes.

Just like no business leader — no person is perfect. NO ONE. As people we also mess up BIG-TIME. We constantly make bad decisions that harm others. We disappoint friends. We betray people’s trust. We cannot achieve perfection. Doesn’t mean we should give up and not try. The most admired, respected, and trusted people I know make progress every day to improve themselves and their relationships with others. And when people see progress being made, they are willing to forgive mistakes.

Thank goodness people are so forgiving. Otherwise, I wouldn’t have any friends. I’ve pissed off enough people in enough ways to not have friends. Lucky for me, people are forgiving. I still have some friends. Lost some along the way—but the ones I still have are great.

John Mackey (and Whole Foods Market) will recover. I think employees, shareholders, and customers have it in their hearts to forgive him for messing up big-time. It’ll take time though as well as diligent, proactive, and compassionate action from Mackey and Whole Foods to make progress in earning back trust from its stakeholders.

In GOOD TO GREAT, Jim Collins says one factor that determines which companies go from being good to being great is how they deal with adversity. He says that many of the good-to-great companies he studied faced a company-defining crisis. According to Collins, what separates the winners from the losers is how they confronted and responded to the crisis …

“The good-to-great companies faced just as much adversity as the comparison companies, but responded to that adversity differently. They hit the realities of their situation head-on. As a result, they emerged from adversity even stronger.”

John Mackey is regarded as a respected and admired business leader. How he and Whole Foods Market confront and respond to this unfortunate crisis will determine if they can continue down their path in becoming a great endearing and enduring business. I think they can and will.

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This essay was repurposed from an earlier blog posting.

Interesting Survey of iPhone Buyers

Despite the hype, despite the activation issues, and despite the myriad drawbacks, buyers of the iPhone are a very happy bunch. So says a recent study from Interpret of 200 iPhone buyers.

According to the study, 90% of iPhone buyers surveyed are either extremely or very satisfied with the phone and 85% of them will recommend the iPhone to a friend.

Other interesting tid-bits from the survey include:
>> 30% of iPhone buyers are first-time Apple customers
>> 50% of iPhone buyers switched cellphone carriers
>> 35% of these switchers paid, on average, $167 to make the switch
>> iPhone users are expected to pay $35 more in monthly service fees

Sprint Drops “Demon” Customers

Sprint recently sent 1,000 subscribers a termination notice. These were not dead-beat customers who hadn’t paid their cellphone bills. These were customers who paid their bills on-time but called the Sprint Customer Service department all-the-time.

The terminated customers called the Sprint Customer Service department an average of 25 times a month complaining about billing charges and/or technical issues. In the letter to these disposed customers, Sprint said, “The number of inquiries you have made to us … has led us to determine that we are unable to meet your current wireless needs.”

While the idea of firing customers is counter-intuitive, it’s not new. In the book ANGEL CUSTOMERS AND DEMOM CUSTOMERS (2003), authors Larry Selden & Geoffrey Colvin advocated businesses fire their least profitable customers ("demons") so the business could better focus on satisfying their most profitable customers ("angels").

In an online article, Geoffrey Colvin explains the rationale behind his thinking…

”In our experience across a wide range of industries, companies typically find that the best 20 percent of their customers account for 150 percent of total profits! The worst 20 percent typically lose money equal to 75 percent of profits, while the remaining 60 percent of customers account for the rest. Knowing which customers are angels and which are demons presents an enormous opportunity.

Once you know the true profitability of your customers, you can figure out the reasons behind the numbers. For your unprofitable customers, you'll have to face the reality that you're not offering them a compelling value proposition - a way of meeting their needs so well that they'll reward you with handsome profitability. You'll have to devise new, better, value propositions for them, which our experience shows you can probably do. As a result, you'll start to turn those unprofitable customers into profitable ones, which typically creates a substantial swing in the business's overall profitability.

In the end, you may find that a small percentage of customers just cannot be made profitable. By the time you've figured out who they are, you'll understand very well why they probably aren't worth keeping.”

With over 53,000,000 subscribers, Sprint will feel no pain over losing 1,000 "demon" customers.

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UPDATE ...
Via Seth, by way of gadgettell, we get a look at the letter Sprint sent its "demon" customers:

Tasty Quote on Leadership

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Someone could write, and probably has written, a book on the differences between a Boss and a Leader. However, this quote sums up nicely (and succinctly) the major difference ...

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SOURCE: New York Times Sunday Magazine | Generally Speaking | July 1, 2007

The Financial Impact of a Strong Brand Reputation

According to Communications Consulting Worldwide (CCW), if Wal-Mart were to have the brand reputation of Target, then its stock price would increase 4.9% and its market capitalization would increase by $9.7 billion. CCW also estimates that if drugstore chain CVS had the reputation of its chief rival, Walgreens, then CVS’s stock would increase by 6.9% and would add $3.9 billion to its market cap.

Whoa!

It’s no secret that a strong brand reputation has a halo effect within the consumer marketplace and financial marketplace. What’s new is the ability to more precisely measure a brand’s reputation in order to predict how changes in brand’s reputation will impact the company’s stock price.

In this MUST-READ BusinessWeek article, we learn that CCW has constructed a model which is able to link the positive/negative attributes of a brand’s reputation to the rise/fall of its stock price.

Southwest Airlines is a client of CCW and the brand reputation of Southwest is very strong. However, CCW estimates Southwest could improve its stock price 3.5% resulting in increasing its financial market value by $300 million by tweaking its consumer messaging. To accomplish this, Southwest would need to downplay its low fares messaging and instead, highlight its far-reaching routes and frequent schedules. Southwest has followed CCW’s direction and although airline stocks have fallen 15%+ in 2007, Southwest’s stock is only down 5.0%.

Having a predictive model to determine the stock price impact of marketing messages can only help marketers at Fortune 1000 companies to better design and better sell-in their programs.

If you are interested in learning more about how brand management is reputation management, read THE 18 IMMUTABLE LAWS OF CORPORATE MANAGEMENT by Ronald Alsop. It’s a worthy read from way back. You can also read this excellent summary of Alsop’s book.

To further entice you to read the Business Week article, take a look at this graphic. It is sure to intrigue the marketer in you.

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Vetting Net Promoter

Last we checked in with Tim Keiningham, SVP at IPSOS Loyalty and co-author of LOYALTY MYTHS, was in December of 2005. At that time I posted some riffs on his LOYALTY MYTHS book.

Keiningham’s book debunked over 50 commonly accepted loyalty marketing practices, one of which was Fred Reichheld’s NET PROMOTER score. In discrediting Reichheld’s NET PROMOTER score, I felt his reasoning was more argumentative then constructive.

Tim emailed me today sharing his recently published article in the Journal of Marketing vetting the Net Promoter measurement. This time around, the reasoning from Tim and his co-authors is much more constructive than argumentative.

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For some of you we need to backtrack with a quick backstory …

Fredrick Reichheld’s Net Promoter measurement contends companies no longer need to rely on expensive studies and complex statistical models to measure customer loyalty in hopes of increasing sales. Instead, a company only has to ask its customers one question: “How likely is it that you would recommend [company x] to a friend or a colleague?" Knowing the answer to this one question allows a company to easily interpret where it stands in creating net promoters (evangelical customers) which in turn lead to sustainable, profitable growth.

Reichheld so strongly believes in the Net Promoter measurement that he says it is “the single most reliable indicator of company’s ability to grow.” His contention is backed by research done on select companies showing a strong correlation between a company’s growth rate and the percentage of its net promoters. According to Reichheld, “The more ‘promoters’ your company has, the bigger its growth.”

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With this paper, Tim and his colleagues set out to bring reasonable doubt to the claim by Reichheld that the Net Promoter score is the “single most reliable indicator of a company’s ability to grow.” To scientifically and statistically debunk the Net Promoter score, the authors attempted to replicate Reichheld’s findings using similar data and similar methodology.

I’ll pass on boring you with all the wonky research methodology used because you can read about it in the paper. Instead, here’s the gist of the paper’s findings …

“We find no support for the claim that Net Promoter is the ‘single most reliable indicator of a company’s ability to grow.’

The clear implication is that managers have adopted the Net Promoter metric for tracking growth on the basis of the belief that solid science underpins the findings and that it is superior to other metrics. However, our research suggests that such presumptions are erroneous. The consequences are the potential misallocation of resources as a function of erroneous strategies guided by Net Promoter on firm performance, company value, and shareholder wealth.”

So statistically speaking, the Net Promoter score may not be the “single most reliable indicator of a company’s ability to grow.” Okay … got it … after all, that’s a HUGE claim to make.

However, the Net Promoter score is still ONE indicator of a company’s ability to grow.

And as a marketer, I feel it’s safe to assume the more evangelical customers a business has talking up its products and services to others … the greater likelihood the business is growing and not declining. If all I have to ask, as a marketer, to determine this likelihood of growth, is to ask customers how likely is it that they would recommend this business to others ... SIGN ME UP.

That’s just my take. Read Keiningham’s research paper and decide on your own.

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UPDATE: Tim Keiningham provided more insights in the comments section.

Peet’s CEO Speaks

photo from flickr

I’ve always admired Peet’s Coffee — even when I was a die-hard Starbucks marketer. On market trips to California I would always bring back a pound (or two) of Peet’s whole bean coffee. And every Christmas I would order Peet’s Holiday Blend to compare with Starbucks Christmas Blend.

Peet’s has managed to maintain its coffee authenticity all the while growing at methodical pace. Peet’s authenticity stems from Alfred Peet who is regarded as the “grandfather of specialty coffee” in the US.

Alfred Peet’s story is remarkable. His father was a coffee roaster in the Dutch village of Alkmaar. In 1938, when Alfred was 18 years-old, he began helping his father roast and blend coffee beans. During WWII, Alfred was forced into a German labor camp. By 1948, Alfred left his domineering father and spent time in Java and Sumatra. While in the Indonesian Islands, he gained an appreciation for exotic, full-bodied Arabica coffee beans. In 1955, Alfred found himself working for a coffee importer in San Francisco. Eventually, he became unsatisfied with the poor quality of coffee the importer was roasting and selling.

Finding himself unemployed in 1965, Alfred Peet decided to open up his own coffee shop roasting and selling high-quality coffee. Peet’s Coffee & Tea opened for business on April of 1966 in Berkley, CA. (It was a few years later when three coffee-loving friends opened up a coffee shop in Seattle, WA selling Peet’s coffee. That coffee shop was then known as Starbucks Coffee Tea & Spice.) [source material from UNCOMMON GROUNDS, Mark Pendergrast]

So the authenticity Peet’s Coffee & Tea has is real … and today, the company is publicly-traded with 150 locations (mainly in California).

Patrick O’Dea has been the CEO of Peet’s since 2002 and in an informative interview with Fortune magazine, O'Dea shared some perspective on how Peet’s competes in coffee world dominated by Starbucks.

FORTUNE: How do your stores compare with Starbucks?

O’DEA: “We're fundamentally different from other coffee shops. Our average sales for stores open at least three years are $1.3 million, which compares to about $1 million for a Starbucks. Of that, $500,000 comes from sales of whole bean coffee and tea. When you walk into our stores, you will find a bean counter with 32 bins of fresh beans, and we scoop to order. You can also order a beverage, which accounts for the other $800,000. We sell a lot more straight-up coffee than Starbucks does. We do have a blended cold drink line called Freddos, but we sell very few beverages in our stores that don't contain coffee. Our prices are about 10 percent higher than Starbucks.”

FORTUNE: What do you make of Starbucks' [chairman] Howard Schultz's recent memo warning against the "commoditization" of the Starbucks brand?

O’DEA: “I think whenever you get that large, there is always pressure to continue to drive comp-store sales. But you have to be careful about how you go about doing that. We are indifferent to where you buy your coffee - in the grocery store, via home delivery or in our stores. As a result, we do not report comp-store sales because that would cause us to do unnatural things. Even though 68 percent of our business is from retail stores, we don't view ourselves as a retailer.”

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For more … read the Fortune Magazine interview.
For much more … read the dissection Paul Williams and I did on the Howard Schultz memo noted above.
And for much, much more … read the WHAT MUST STARBUCKS DO? manifesto.

The Surfer’s Code

Last month I participated in the SIMA SURF SUMMIT 10. It’s a gathering of Surf Industry-types involved with the commerce and culture of the surfing lifestyle. As with most conferences, there were keynote addresses, happy hour get-togethers, and sharing of best practices. Unlike most conferences, the Surf Summit didn’t begin at 7:45 am and attendees weren’t dressed in traditional business attire. The day’s agenda began at 1:00 pm so attendees could catch the morning waves. And dress-wise, boardshorts were prevalent while khakis were absent. (Nice change of pace for me.)

For those not hip to the surf and skate culture business, it’s a $5.5B dollar industry that has formed loyal beyond reason relationships with men and women customers of all ages. The aspirational appeal of surfing has fueled much of its growth. While not everyone has access to the surf, everyone does have access to the surfing lifestyle thanks to apparel retailers/brands like Quicksilver, PacSun, Zumiez, Reef, Volcom, Mada, Sanuk, Nixon, and others. Overall industry sales are growing at a 13.0% year-over-year rate which means something meaningful is going-on with the surf/skate culture.

Shaun Tomson, surf legend and surfing entrepreneur, kicked off the conference by sharing the true school mentality of what it means to respect the surfing culture. When addressing the beginnings of the surf culture business, Shaun made it clear that the businesses which emerged in the late 60s and 70s were created by surfers for the sole reason of generating enough cash so they could get back in the water. That’s right … to live in order to surf, surfers created businesses selling shirts, shorts, and other stuff — all for the sole purpose of being able to spend more time catching the stoke from surfing.

To learn more about the true school mentality of surfing and how it applies to personal/professional life on land, you should read Shaun Tomson’s book, SURFER’S CODE: 12 Simple Lessons for Riding Through Life.

Go ahead and dip your toes into the water of Shaun’s book by flipping through this short Money Quotes presentation…

RSS Readers … click here to view the money quotes

The Languages of Customer Service

Korean entrepreneurs in Los Angeles have long-since learned conversational English. Now they are also learning conversational Spanish as a way to deliver better customer service and to increase sales. From a Wall Street Journal article we learn…

“More than a courtesy, the language exchange is born out of economic necessity. Korean immigrants here often open liquor stores, garment factories and other small businesses that don't necessarily require English language skills to run them. Their employees, by and large, consist of another group of recent immigrants who don't speak English -- mostly Mexicans and Central Americans. The upshot: Many Korean business owners figure it's more urgent to learn Spanish than it is to master English.” [source]

This learning of different languages to improve customer service reminds me of a Starbucks company campfire story...

In the late 1990s, an enterprising Starbucks store manager noticed that more and more deaf customers were frequenting her store. At first, this store used paper notes and awkward hand motions to communicate with these customers. But the store manager wanted to make these deaf customers feel more welcomed in her store so she, and a handful of her staff, began learning sign language. By learning a different language to speak with these deaf customers, this Starbucks store became a hub for the local deaf community. Business increased, customer respect increased, and customer loyalty increased all thanks to learning a different language customers were speaking.

The Wal-Mart and DELL Relationship

This leaked Wal-Mart Brand Positioning document has given me new insights into DELL’s decision to sell desktops in Wal-Mart.

As we know, DELL prides itself on forging direct relationships with customers be it directly over the phone or directly over the Internet. A by-product of this direct relationship is people are able to get quality customer service to help them make the best decision possible in buying a computer that costs less because the middle-man retailer has been cut out of the equation. (And yes, DELL has had/is having its own struggles in delivering quality customer service.)

We all know Wal-Mart isn’t known for its customer service and the leaked brand positioning analysis highlights this challenge. Wal-Mart struggles to offer excellent customer service from its store associates when selling complicated, higher-dollar electronics. As noted in the report, “People don’t go to Wal-Mart to shop, the go to Wal-Mart to buy things as quickly as possible.”

The report goes on to say that Wal-Mart shoppers believe Best Buy is a smarter choice when it comes to buying higher-dollar electronics like HDTVs and computers because Best Buy employees are able to provide shoppers with product knowledge to help them make a more informed buying decision.

Here’s what this relationship between Wal-Mart and DELL really boils down to … Wal-Mart is an “OR” company and DELL is an “AND” company.

When given the choice between offering low prices OR high-customer service, Wal-Mart has chosen to offer low prices. On the other hand, DELL has always answered this question differently. DELL has purposely chosen to offer low prices AND offer high-customer service through its direct relationship model.

Because Wal-Mart is an “OR” company and DELL is an “AND” company, I question the strategic viability of this relationship. Maybe a partnership with a like-minded "AND" retailer such as Best Buy, CompUSA, or Fry's would be a better strategic fit for DELL.

NOTE: I evoked Jim Collins' "Tyranny of the OR" and "Genius of the AND" thinking into this post.

Fascinating Wal-Mart Brand Analysis

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Today’s NY Times shares fascinating insights into the Wal-Mart brand from a leaked brand analysis report. (Access the article from the nytimes.com site or from here.)

The report was conducted by Wal-Mart’s then agency-of-record, GSD&M, and according to the NY Times, this report, "... offers a rare glimpse of the concerns that are buffeting Wal-Mart’s retailing empire, from its flagging corporate reputation to the ‘near catastrophic’ economic pressures faced by its working class consumers.”

For example, this report shares insights that Wal-Mart shoppers know other retailers offer smarter choices in a variety of revenue-important product categories. The report outlines the following …

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Smart and illuminating fodder for all us marketers. I was surprised to find a copy of this GSD&M prepared Positioning Report for Wal-Mart (pdf) available on the NY Times website. Go upload and get the download on branding insights into the world’s largest retailer.

Expect to read more from me in the days to come after I've had a chance to fully digest this Wal-Mart Positioning Report. And if you have thoughts ... chime in with comments.

The Strategy Paradox … say what?

I wanted to enjoy Michael Raynor’s THE STRATEGY PARADOX … but didn’t. Raynor is at the forefront of strategic business thought as a Distinguished Fellow with Deloitte Research and having co-written the classic book, THE INNOVATOR’S SOLUTION. He has lots of smart stuff to share. Unfortunately, Michael Raynor’s book is chock-full of too much business speak gobbly-gook for this marketer to comprehend.

After reading page 16, I gave up. I couldn’t understand the basic principles behind the book because Raynor’s reliance on using business speak gobbly-gook hindered my understanding.

I’ve read the following paragraph multiple times and still struggle to understand what Raynor is trying to communicate. This paragraph is supposed to serve as the summary for the book. However, it serves better as a prime example for how Raynor hinders understanding. Read for yourself and try to make sense of Raynor’s business speak gobbly-gook.

“The strategy paradox arises from the need to commit in the face of unavoidable uncertainty. The solution to the paradox is to separate the management of commitments from the management of uncertainty. Since uncertainty increases with the time horizon under consideration, the basis for allocation of decision making is the time horizon for which different levels of the hierarchy are responsible: the corporate office, responsible for the longest time horizon, must focus on managing uncertainty, while operating managers must focus on delivering on commitments. This is the principle of Requisite Uncertainty. A critically important tool in applying Requisite Uncertainty is Strategic Flexibility, a framework for identifying uncertainties and developing the options needed to mitigate risk or exploit opportunity.”[pg. 16, THE STRATEGY PARADOX]

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Huh? What was that all about?

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Well … as a public service project, I’ve spent time translating Raynor’s business speak hieroglyphics into everyday words. Some particulars might have been lost in translation so feel free to improve upon my translation in the comments section.

Businesses must make decisions today despite not knowing what the future will bring tomorrow. The business solution to this today/tomorrow paradox involves separating out the need to better understand year-over-year future uncertainties from the need to handle the day-to-day business activities.

Businesses can better anticipate and act upon uncertainty by having “strategic-thinking” employees focused on the future and by having “tactical-doing” employees dedicated to managing the business on a day-to-day basis.

The process of overcoming the today/tomorrow paradox involves having “strategic-thinking” employees creating multiple scenarios of what the future may bring. From there, detailed menus of next-step options should be developed and when one of the future scenarios becomes reality, “tactical-doing” employees should act upon the appropriate next-step menu option.

Big Boxes Becoming Smaller Boxes

The Wall Street Journal ran an interesting article yesterday on reasons why big box retailers like Best Buy, Circuit City, Home Depot, and Office Max are opening smaller locations.

In particular, new Best Buy and Circuit City locations are 30% to 40% smaller in size from the stores they opened a decade ago. The majority of Best Buy locations are 45,000 sq. ft. but new locations are no more than 30,000 sq. ft. And new Circuit City locations will be 20,000 sq. ft., down from their past average of 34,000 sq. ft.

“With more consumers buying entertainment online, Circuit City stocks 30% fewer CDs and DVDs at its smaller stores than in larger ones, primarily by keeping fewer of each title on hand. Meanwhile, televisions require less storage space now that prices are plummeting on flat-panel TVs. Likewise, laptop computers have increasingly displaced larger desktop machines. "Frankly, in most of our categories...the devices are getting smaller," Circuit City Chief Executive Officer Phil Schoonover said on an April 4 conference call with investors.” [source]

The article also mentions how big box retailers “… now need smaller structures to penetrate fast-growing suburbs, rural areas and gaps between their larger stores -- places that can't support one of their superstores.”

Hmm … can’t help but revisit the RadioShack situation. What if Best Buy or Fry’s Electronics were to wrestle control of RadioShack locations? I wonder what they would do with 2,000 sq. ft. of selling space? Could they make better use of RadioShack’s locations? Could they make RadioShack relevant again?

ReFocusing RadioShack

With all the recent RadioShack chatter here (and here), Kevin from Mine the Data blog wants to know what I advocate RadioShack doing to remain relevant. Let’s begin answering this by pointing out something Adelino said in the comments, “Cost cutting is not a sustainable strategy for growth.” Well said Adelino.

At some point, RadioShack needs to focus on its strengths and not its weaknesses to grow sales. RadioShack should stop trying to sell Plasma TVs and start focusing more efforts on being the “eclectic electric hardware store.” Their strengths are being known for selling most any electrical do-hickey needed to make something work.

I advocate RadioShack refocusing its efforts to become a convenience store version of Fry’s Electronics. They should sell only the most-popular, most-obscure, and most-needed electrical gadgets/gear to make our stuff work.

Would you buy a Plasma TV at RadioShack? Would you buy a Cell Phone package at RadioShack? I wouldn’t. I would buy those somewhere else like Costco for the TV and the Sprint store for the cell phone.

However, I would buy USB 2.0 cords, blank DVDs, replacement power cords for my Laptop and Digital Video Camera, etc. at RadioShack. Not sexy stuff but stuff we consumers need in order to make our gadgets work today.

In a way, this strategy of focusing on being a convenience store version of Fry’s is like going back to the future for RadioShack. Will this strategy drive mondo sales? Maybe not mondo … but it is sure to drive consistent sales and make RadioShack relevant again.

That's my quick take ... what's yours????

RadioShack: Profits Up, Sales Down

We’ve read the satirical take on RadioShack. Now let’s read about the actual take on RadioShack. The company released its Q1’07 financials yesterday and reported:

• Net sales fell 14.5% as same-store sales struggled, falling 9.2% due to "the highly promotional nature of our business in the first quarter last year."

• Profitability jumped as new management focused on cost-cutting and better inventory management to stem the sales slide.

• Because of increased financial discipline, RadioShack was also able to increase cash on hand, reduce debt, buy back shares, and improve cash flow.

SOURCE: Motley Fool article.

Warning Signs for Mergers & Acquisitions

Recently I’ve shared posts on The Myth of Market Share and Six Keys to Organic Growth. If you found those posts to be worthwhile, you’re sure to find this interesting …

In the April 28th edition of the Wall Street Journal, London Business School Professor, Freek Vermeulen shared the following warning signs that an acquisition/merger may not work as planned.

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Warning Signs for Mergers & Acquisitions

1. Preoccupation with Bigness
“Many managers see acquisitions as a relatively easy and quick way to increase a company's size, compared with the painstaking process of organic growth.”

2. Deal-Happy Executives
“Some executives can become preoccupied with making deals -- and the thrill of selecting, chasing and seizing a target.”

3. Lack of Experience with Acquisitions
“When a company with little acquisition experience does undertake an acquisition, employees of the acquired business often find that the company is intolerant of different ways of doing things, which can lead to serious integration problems and employee turnover, among other things.”

4. Fast-Track Integration
“Acquirers often seem to develop a preference to either completely and quickly assimilate a target (to avoid a lengthy integration disturbance) or to leave the acquired unit autonomous (to avoid disrupting existing systems and processes).”

5. Off-Strategy Rationale
“A strategic rationale to combine two companies should explicitly state how the merged enterprise will be able to accomplish something in the marketplace that neither company could have achieved alone.”

6. Too Much Attention on Selecting the CEO
“Sometimes the single biggest hurdle in a deal is the question of who will be in charge after the merger. Such negotiations indicate that the logic for a deal may have more to do with advancing the careers of executives, rather than advancing the value of the combined companies.”

7. Belated Discovery of Synergies
“Sometimes, a company mysteriously uncovers extra value in a transaction when the potential seller's rivals are starting to outbid. That's a sign to company directors and investors that executives might be at risk of committing value to a deal which the company won't be able to recover.”

8. Initiation of a Deal Comes From Outsiders
“When the deal is initiated by an intermediary, however, extra care should be taken to analyze the strategic rationale. Investment bankers, for instance, may attempt to initiate deals where the benefits to the acquirer are unclear.”

SOURCE: Wall Street Journal article | ”Bad Deals” | April 28, 2007

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How Does RadioShack Still Make Money?

RadioShack is a $4.5 billion-dollar business with over 6,000 locations world-wide. The company’s heritage is rich but recently, RadioShack CEO Julian Day admitted he has “no idea” how the company makes money.

After assuming the CEO role at Radio Shack nine-months ago, Day initiated a comprehensive audit to better understand the company’s operational infrastructure, its financial drivers, its marketing strategies, and its customer base. Despite the research, Day is still unclear about the company’s allure.

Julian Day’s theories as to why RadioShack still makes money include: consistently exceeding the needs of Wedding DJs around the globe and the multiplier effect of unredeemed RadioShack Gift Cards stored away in people’s wallets.

In a revealing interview with The Onion, Day confided, "I'd like to capitalize on the store's strong points, but I honestly don't know what they are."

As Day continues to search for the answers to why RadioShack still makes money, he only uncovers more questions. Added Day, "I may never know the answer. No matter how many times I punch the sales figures into this crappy Tandy desk calculator, it just doesn't add up."

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Mucho kudos to BusinessPundit for the hook-up. This satirical piece from The Onion is a hoot! (I loves me some business satire.)

When Does Access Become Excess?

When is big too big? When does convenience crossover from being pleasing to being annoying? When does ubiquity eclipse scarcity? When does access become excess?

I’ve struggled with this access/excess question for years and am no closer today to finding an answer.

Is having nearly 90 million units in the hands of customers excess access? Is having 170+ million albums in the hands of customers excess access? Is having 44+ million weekly customers visit 14,000+ locations in 39 countries around the world excess access?

I dunno.

When a publicly-traded 41 year-old company with 140 retail locations expands into a new market, does that constitute excess access behavior? John Winsor laments that Peet’s Coffee & Tea has become “just another coffee shop” because it now has opened a location in Boulder, CO.

Did American Apparel become just another clothing retailer when it opened up a store on Pearl Street Mall in Boulder?

When does access become excess?

The Venom of Crowds

BusinessWeek runs the voodoo down as it relates to how ranting against brands online through blogs and other means has become something business must address. Snippets and recommendations from this must-read article (sub. req’d) include:

“In the beginning, the idea of this new conversation seemed so benign. Radical transparency: the new public-relations nirvana! Companies, employees, and customers engage in a Webified dialectic. Executives gain insight into product development, consumer needs, and strategic opportunities. All the back-and-forth empowers consumers, who previously were relegated to shouting at call-center minions. Venom can be a great leading indicator.”

“Trashing brands online can also be high theater. Rats cruising around a Greenwich Village KFC/Taco Bell on YouTube. MySpacers busting their employers' chops. Faux ads bashing the Chevy Tahoe as a gas-guzzling, global-warming monster. Millions of people watch this stuff—then join in and pile on. Is it any wonder companies lose control of the conversation?”

“When the Web turns against them, executives are faced with the problem of how to manage the blowback. They have two choices: ignore the smaller furies and hope they won't metastasize, or respond outright to the attacks. It's rarely a good idea to lob bombs at the fire-starters. Preemption, engagement, and diplomacy are saner tools.”

To avert a public-relations disaster on the Web, BusinessWeek recommends businesses …

1. ENGAGE CRITICS. "Create a blog so you can strike back quickly. Establish ground rules, and filter nasty, anonymous comments."

2. BE VIGILANT. "Hire a team of media experts to troll for bad news, rumors, and trends. Know what influencers are saying about you at all times."

3. JUMP IN AND OPEN UP. "Address anything that could turn into a bonfire immediately. Replace "no comment" with transparency, candor, and humility."

4. DON'T OVEREACT. "Let tiny spasms of venom go. They'll disappear under the relentless pileup of new information.

5. STAY PROFESSIONAL. Respond to personal attacks for strategic reasons, not psychological ones. Don’t use the Web for therapy.

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source: BusinessWeek | “Web Attack” by Michelle Conlin | April 16, 2007

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The Six Keys to Organic Growth

Last month I shared snippets from a book dispelling the “Myth of Market Share.” At the same time I was reading Edward Hess’ book, THE ROAD TO ORGANIC GROWTH.

As a businessperson, I much prefer using existing products and processes to drive sales through acquiring new customers and getting current customers to buy more, more often. That’s organic growth as opposed to buying growth through buying a competitor (ex. HP buying Compaq) or buying into a new market (ex. Coca-Cola buying Odwalla).

In THE ROAD TO ORGANIC GROWTH, Edward Hess takes a Jim Collins-like approach to find 22 businesses that epitomize the organic growth model. With research backed by a comprehensive study, Hess set forth to explain the underlying qualities these 22 businesses have in common. Hess whittled his findings into a list of Six Keys to Organic Growth.

Below is a cut/paste synopsis of Hess’ findings. It’s interesting fodder for all us marketers. Enjoy.

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The Six Keys to Organic Growth

“Growth achieved through a commitment to customer satisfaction, employee engagement, and core profitability—organic growth—is a smart long-term strategy for any company. Organic growth represents the underlying strength and vitality of the core business.” (p. 1)

“Our investigation found that [high-organic growth] companies generally possessed the six keys discussed below.” (p. 20)

1. An Elevator Pitch Model
“High growth companies have a simple, understandable business model that their employees can understand and execute—none has a complex or sophisticated strategy.” (p. 70)

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2. Instill a “Small Company Soul” into a “Big Company Body”
“High organic growth performers have a small-company soul housed in a big-company body. A small company soul is entrepreneurial, with employees having ownership of the customer, being held accountable for results, and sharing in the rewards of those results.” (p. 81)

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3. Measure Everything
“One of the six keys to building a consistent high organic growth company is measurement—of everything. The 22 companies on the organic growth index (OGI) list track a variety of metrics—financial, operational, behavioral—to understand which areas of their business are not performing as efficiently as possible, and then they take action to shore up those numbers.” (p. 97)

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4. Build a People Pipeline
“All the high-growth companies have a high management and employee retention, high employee loyalty, and high employee productivity as compared with their competition. Employees in these companies ‘own’ their results and their careers, and most even own part of the company. These companies’ management teams are frequently home grown, with long company tenures.” (pgs. 22, 117)

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5. Leaders: Humble, Passionate, Focused Operators
“Rather than being overly confident about their success, at high organic growth companies, leaders are frequently paranoid about complacency, arrogance, and hubris. Although many leaders are very wealthy, for the most part, you would not know this from their dress, their office, their demeanor, their attitude, or any outward appearance. Few of the leaders, if any, take credit themselves. There is a sincere respect for line workers, where many had begun their careers.” (pgs. 139, 140)

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6. Be an Execution and Technology Champion
“The high-organic companies generally do not have unique strategies, products, or services, nor are they market-leading innovators. But they are execution champions—day after day, they have figured out how to get consistent high-quality performance from their people. These companies use technology to drive efficiencies across their value chain. To them, technology is not a service function; it is an operational function.” (pgs. 23, 161)

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source: THE ROAD TO ORGANIC GROWTH (Edward D. Hess)

Chilly Sales at Chili’s

According to the Wall Street Journal, Chili’s "… is mired in a sales rut and could post its 12th straight negative same-store-sales period this month.” Ouch. One financial analyst went so far as to describe Chili’s situation as “treacherous.” Double ouch.

Can’t say we should be surprised given the surprising HMOs (hot marketing opinions) y’all shared about Chili’s in my “Would You Care” series.

Comments ranged from Chili’s being forgettable because they are just another generic casual restaurant to folks saying that they visit Chili’s not for their food, but for their convenience. In other words, Chili’s is boring. And boring is the last thing you want your business to be.

Here’s a not-so-boring takeaway quote from pg. 50 of Seth Godin’s book on being remarkable, PURPLE COW …

“The lesson is simple—boring always leads to failure. Boring is always the most risky strategy. Smart businesspeople realize this, and they work to minimize (but not eliminate) the risk from the process.”

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UPDATE: Did you know Chili's has a MySpace page? They do. And with it, they give away tickets to their 535,000 friends to super-secret concerts. Heck, even their Secret Shows marketing program has its own MySpace page. Does this make Chili's un-boring?

A Vital Jack Welch Quote

“Too often we measure everything and understand nothing. The three most important things you need to measure in a business are customer satisfaction, employee satisfaction, and cash flow. If you’re growing customer satisfaction, your global market share is sure to grow, too. Employee satisfaction gets you productivity, quality, pride, and creativity. And cash flow is the pulse—the key vital sign of a company.” -- JACK WELCH --

source | CONTROL YOUR DESTINY OR SOMEONE ELSE WILL (Noel Tichy, 1993)

The Myth of Market Share

The recent merger activity between XM/Sirius and Whole Foods/Wild Oats has me thinking about market share business goals. An influential book I read on this subject is THE MYTH OF MARKET SHARE: Why Market Share is the Fool’s Gold of Business (Richard Miniter, 2002).

Below is a cut/paste remix summary of the book. If you like this remix summary, go buy the book.

”Market share is treated like an article of religious faith, unquestioned and unquestionable. Virtually every study on market share simply assumes a direct connection between market-share growth and profitability.” (pg. 25)

“But the pursuit of market share, once market share is made the centerpiece of corporate strategy, can lead to other questionable moves. Executives and managers often find themselves ‘forced’ to make a series of risky decisions—deep discounts, cheap financing, and unprofitable or thinly profitable sales—just to defend or boost market share. These actions reduce profit margins, erode brand identity, and harm the long-term health of companies.” (31-32)

“The alternate philosophy may sound basic and uncomplicated, but it works. It’s called profit leadership. Profit leaders think about customers, not competitors, and thing about next quarter’s opportunities, not justifying last quarter’s market share.” (12)

“Let me be clear. I am not saying that companies should ignore market share, although it would probably not hurt them if they did. Market share should simply be seen as a by-product, a secondary effect of pursuing a company’s core mission. Market share is not an advantage, by itself. It is the result of a sustainable competitive advantage, not the cause.” (14, 15)

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source | THE MYTH OF MARKET SHARE

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No Business is Perfect

Is it unrealistic for us to expect businesses to be perfect? Are we setting ourselves up for disappointment by expecting businesses to flawlessly deliver every single time? As customers, are we expecting perfection when perfection is unattainable? Is that fair of us?

I’m not trying to make excuses for when businesses fail us. But failure happens. No business is perfect. Yet, we seem to expect businesses to be perfect all the time. One poor encounter with a company’s customer service rep sets many of us off into a rage against that business. One misstep by a company spoils everything for many of us. A series of cancelled flights and thousands of stranded customers can trigger a major backlash. (Yep, I’m talking JetBlue here.)

JetBlue messed up BIG-TIME. No doubt about it. They failed their customers in unimaginable ways. We now know JetBlue is far from perfect. But was it realistic for us to expect JetBlue to be perfect?

No business is perfect. NONE. Business is a game of progress, not perfection. No business will be perfect. It's an impossibly unattainable goal. But while that goal is unattainable, the most endearing and enduring businesses seem to always aspire to reach perfection. They always make progressive steps to improve their business and how their business connects with people. Sure, they will stumble along the way. But the true measure of a company is how they recover and forge ahead making progress along the way to overcome their mistakes.

No person is perfect. NO ONE. As people we also mess up BIG-TIME. We constantly make bad decisions that harm others. We disappoint friends. We betray people’s trust. We cannot achieve perfection. Doesn't mean we should give up and not try. The most endearing and enduring people I know make progress every day to improve themselves and their relationships with others. And when people see progress being made, they are willing to forgive mistakes.

Thank goodness people are so forgiving. Otherwise, I wouldn't have any friends. I've pissed off enough people in enough ways to not have friends. Lucky for me, people are forgiving. I still have some friends. Lost some along the way—but the ones I still have are great.

I think JetBlue can recover. I think customers have it in their hearts to forgive them for messing up BIG-TIME. It'll take time though as well as diligent focus from every JetBlue employee to make progress in earning back trust and friendship from customers.

In GOOD TO GREAT, Jim Collins says one factor that determines which companies go from being good to being great is how they deal with adversity. He says that many of the good-to-great companies he studied faced a company-defining crisis. According to Collins, what separates the winners from the losers is how they confronted and responded to the crisis …

“The good-to-great companies faced just as much adversity as the comparison companies, but responded to that adversity differently. They hit the realities of their situation head-on. As a result, they emerged from adversity even stronger."

JetBlue is considered a good airline. How they confront and respond to this crisis will determine if they can ever progress to becoming a great airline. Time will tell if JetBlue can make the good-to-great leap.

The DNA of Wal-Mart

I’ve already gushed about Bill Marquard’s business strategy book, WAL-SMART. In the book, this former Wal-Mart executive explains because of Wal-Mart’s unbridled success, this mega-retailer has forever changed the game of business from sourcing to distribution to pricing to inventory methods to merchandising. It’s now up to companies today (and tomorrow) to deal with doing business in the world that Wal-Mart has created and redefined.

Since Marquard spent time at Wal-Mart in the late 90s responsible for developing the company’s strategic planning processes, he has a very unique understanding of the company’s DNA. In the book, Marquard shares five key cultural underpinnings that make Wal-Mart the company it is. (Good stuff!)

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1. FOCUS
“No firm of Wal-Mart’s scale has ever applied the energies of so many people to so narrowly defined a project: discount merchandising. Unlike other large firms, Wal-Mart executes a single-business strategy and executes it across four store formats [Wal-Mart, Wal-Mart Supercenter, Sam’s Club, and Wal-Mart Neighborhood Market]. It doesn’t confuse people by launching many strategies for many businesses. Other companies hoping to succeed in the Wal-Mart economy need to develop the same genetic compulsion.” (WAL-SMART, pg. 91)

2. CORRECTION OF ERRORS
“Wal-Mart’s correction-of-errors philosophy stands in stark contrast to the habits of most corporate cultures. Correction of errors isn’t aimed at placing blame. Correction of errors focuses on the problem, not the person. Correction of errors is all about identifying ways to improve customer experiences, merchandise, processes, cost structure, and the company from within—before competitors beat Wal-Mart to it.” (pg. 92)

3. CONSTRUCTIVE PARANOIA
“This is an intentional attitude to avoid smugness and complacency. As remarkable as it seems in such a successful organization, the assumption by people at Wal-Mart is that the monster of defeat lurks just around the corner. They have good reason to make this assumption, or course. In the world today, the durability of competitive advantage is measured in months, not years. If no outside challenge shakes the complacency of Wal-Mart managers, DNA dictates that the company create its own constructive paranoia.” (pgs. 95-96)

4. THRIFT
“Frugality was one of the most enduring and unmistakable imprints Sam Walton left on Wal-Mart. The most important way that Wal-Mart perpetuates this gene is by modeling thrift from the top. In the home office, employees buy their own coffee and use both sides of sheets of paper. On the road, employees bunk two to a room. They stay in budget hotels with free breakfast buffets, not luxury accommodations. The company, not the employee, keeps frequent-flyer miles.” (pgs. 97-98)

5. A "WE CAN MAKE IT BETTER" ATTITUDE
“Whereas correction of errors focuses on Wal-Mart’s own internal performance improvement, ‘we can make it better’ focuses on other companies’ ideas—that is, imitating them and going one better. Like other companies, Wal-Mart has often succeeded through a fast-follower strategy. Believe it or not, Wal-Mart has never actually created a new store concept. It followed Kmart into discount stores, Price Club into warehouse club stores, Meijer and Carrefour into supercenters, and combo supermarket and drug stores everywhere into Neighborhood Markets. It did them all one better.

Sure, Wal-Mart innovates, too. But deep in its DNA are genetic instructions to borrow the best of everything elsewhere.” (pg. 100)

source: WAL-SMART (Bill Marquard)

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An Experiment in Coffee Honesty

Have you heard about Terra Bite Lounge in Kirkland, WA? It’s a coffee shop that sells coffee drinks, pastries, and sandwiches based entirely on the honor system. Yep, there are no prices for anything Terra Bite Lounge serves customers. The expectation is that customers will voluntarily pay whatever amount they feel comfortable paying.

The founder of Terra Bite Lounge, Ervin Peretz, knows his coffee shop must attract enough honorable customers to offset those customers who will abuse the voluntary pay system. Currently, Terra Bite Lounge serves about 80 customers a day with each paying, on average, $3.00.

Hmm … this social experiment sounds a little familiar.

In Freakonomics we learned about Paul “Bagel Man” Feldman who setup a bagel business built totally on the honor system. Feldman would deliver bagels to offices and leave a money drop box with the expectation that people would pay for the bagels they ate.

According to Freakonomics, the honor system worked for bagels. The payment rate for Feldman’s bagels hovered at nearly 90%.

Feldman kept copious notes on bagel sales data and some of his conclusions are fascinating. For example…

• When the weather is pleasant … people pay at a higher rate.
• When the weather is cold, rainy, windy … payment declines sharply.
• During the holiday weeks of Christmas and Thanksgiving … payment is lousy.
• But, during the holiday weeks of Labor Day and 4th of July … payment is strong.

Because Feldman’s bagel customers were office workers he was able to draw interesting conclusions about how workplace morale affects payment. The more sweeping conclusion was: The better workplace morale at a business, the greater the payment rates. And more interestingly, Feldman came to believe higher-paid executives cheated the bagel honesty system more than did workers lower on the corporate ladder.

It’ll be interesting to learn if Feldman’s bagel honesty findings jibe with Terra Bite’s coffee honesty findings. And given Feldman's data that cold and rainy weather adversely affects volunteer payment, it’ll be super-interesting to know how this honesty system plays in the cold and wet Seattle-area.

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For more on Terra Bite Lounge, listen to this NPR story and read this sum-up from Tim Manners. For more on Paul Feldman’s bagel business, read this excerpt from Freakonomics.

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Surviving and Thriving in the Wal-Mart World

In the late 90s, Bill Marquard worked deep inside Wal-Mart as a strategic thought-leader. Besides his first-hand Wal-Mart experience, Bill also spent 17 years at Ernst & Young, did a stint as the EVP/Chief Knowledge Officer at Fleming, and served eight-years as an adjunct professor of finance at Northwestern’s Kellogg School of Management. (So, he has some business chops to speak of.)

Bill has written a brilliant book, WAL-SMART, which sheds new light on Wal-Mart’s business DNA and how companies can profit in the Wal-Mart world we live in.

Marquard reasons Wal-Mart has changed the business landscape not just now — but forever. And if competing businesses fail to recognize how Wal-Mart has changed the rules of doing business, then Marquard says these businesses are choosing to lose. Businesses choose to lose because they fail to address how Wal-Mart has conditioned expectations from competing businesses, suppliers/distributors, employees, and local communities.

Wal-Mart has conditioned competing businesses to focus on executing competitive advantages besides the strategy of low prices.

Wal-Mart has conditioned suppliers/distributors to expect relentless pressure to continuously reduce costs so that lower prices can be brought to market.

Wal-Mart has conditioned employees to be content with meager wages, meager benefits, meager recognition, and meager growth opportunities.

Wal-Mart has conditioned local communities to expect the promise of new jobs and the need to give tax concessions in order to have mega-companies setup shop in their community.

To profit in this Wal-Mart world, Marquard argues, businesses must design and execute a comprehensive strategy that addresses competitive advantage, suppliers/distributors, employees, and local communities.

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Competitive Advantage
According to Marquard, businesses today must choose to differentiate, emulate, and then dominate.

Differentiate by saying “yes” to areas that the dominant player in your category says “no” to. Meaning, choose to sell more local products, deliver better customer services, find ways to be more convenient to customers, bring niche products and services to market, and enhance the in-store customer experience in ways the dominant player doesn’t.

Emulate by choosing specific areas from which to plug ‘n play from the dominant player. For example, JetBlue emulated Southwest’s low price strategy but differentiated themselves by enhancing the customer’s in-flight experience with leather seats and free Direct TV.

Dominate by establishing yourself as the obvious number two player in your category. Distance your business from every other competing business striving to take your place as the number two business behind the leading big dog business.

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Suppliers/Distributors
To thrive in the Wal-Mart world, Marquard says vendors must make specific choices on what to leverage, how to invest, and where to diversify as it relates to supplying big dog businesses.

Suppliers/distributors must decide which strengths to leverage from the dominant player. For example, the most successful vendors leverage Wal-Mart’s huge terabytes of sales data to better understand sales movement trends at store, regional, and global levels.

Marquard advises vendors to invest in building strong brands to rebalance the scales in favor of the vendor so that the big dog businesses need you more than you need them. Instead of the vendor having to “push” products through the dominant player’s pipeline, a strong brand can flip this relationship to where the giant retailer “pulls” your products through the pipeline.

Vendors must make the important decision of deciding where to diversify so they do not face the problem of relying on sales from one big dog business. Suppliers/distributors who are reliant upon any one business for a significant percentage of sales are running a major risk of placing too many eggs in one basket. To diversify, Marquard advises vendors to develop and/or acquire unique products to supply businesses in different markets and different channels.

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Employees
Marquard contends for businesses to profit in the Wal-Mart world, they must serve employees by knowing how to reward them, impassion them, and grow them.

Rewarding employees through compensation should differ depending on the go-to-market strategy of your business. If your business requires employees to have extensive product expertise and superior customer service skills, then these employees should be rewarded with higher wages. Conversely, if your business strategy requires employees to have fewer skills then their wages should be lower.

All companies wanting to succeed in the Wal-Mart world must also impassion employees by offering inspiring perks beyond strict paycheck compensation. Businesses need to go beyond fulfilling financial needs of employees to also fulfilling their emotional needs.

Growing employees is about also fulfilling their intellectual needs by offering programs that encourage education to help them during their life at work and their life away from work.

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Local Communities
Successful companies in the Wal-Mart world find ways to endear themselves to the communities they do business in by knowing where to belong, which local activities to align themselves with, and how to engage local citizens.

Belonging is about finding the right places within a community to participate in order to do the greatest good. It’s about finding the right charities and causes to align with that sync, in some meaningful way, with the values of your business. And, it’s about finding the best ways to invite citizens to join the business in making the community stronger.

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I’m guilty of overly simplifying the smart thinking of Bill Marquard’s WAL-SMART book. Hopefully the above summary intrigues you enough to wander over to the WAL-SMART website to learn more.

If you are responsible for managing business activities of any retailer or any supplier/distributor, I implore you to read WAL-SMART. It’s chock-full of smart strategy musings which will help you better compete against any big dog dominant company in your competitive set. WAL-SMART is a worthwhile read!