Mike Walsh on building businesses for the 21st century @ IRI CPG Summit, Orlando-FL...

As I am recovering from the 2 months of prep-work that culminated in IRI’s premier annual event last week in Orlando, I was thinking of some of the keynote speakers and this guy Mike Walsh popped up in my mind. Mike is a self-described “globally renown (ed) futurist and keynote speaker on future trends, innovation and how to build companies for the 21st century. BTW Mike if you read this, not sure if you noticed the typo on your home page meta id descriptor, I know it is nit-picking but Google indexer  has already picked it up with the typo J.

So in his very entertaining presentation, he had these things he calls “mind grenades” (basically key takeaways) and two stood out-

1.       If your kids had your job, what is one thing they would do differently? First I thought, is he asking us to bring the Crayola set or the Wii to work (depending upon how old your kids are)? Then as I thought more, it made perfect sense. Mike's point was to recruit the next generation of thought leaders and see how they would approach your tasks from their vantage view. Cool.

2.       What is something that your customers do today that drives you crazy? (Hmm, where do I start?) So the point here is that the points of friction between the service you are trying to provide somebody and how they are trying to consume it is an opportunity for innovation, and therefore, engagement. Freakin awesome! (and simple, why didn't I think of this??).

My two cents- every business today and in the future needs to create a “simplicity filter”- a device or process that takes every product or service you design and score it- a plus for features that make it simple and a minus for things that make it complex. If the pluses are not twice as many (at least) as the minuses, pull it off the market. Life is getting increasingly complex and if your product adds to that complexity rather than taking away from it, you are doomed from the get go...

IRI CPG Blog Post: Surf’s up! Time to Ride the Online Video Wave?

Posted on the IRI CPG Blog a couple of weeks back about the traction Online Videos have been getting in the industry in direct competition to traditional TV advertising.

The post highlights 3 reasons to get in on Online Videos today:

1. Efficiently enhance your message reach on traditional TV
2. Test your TV campaigns
3. Reap early adopter benefits

Check the original post out here.

Employee Strategy: (in?) Flexible Work Program @ Yahoo!

This past week Yahoo! HR head purportedly issued a memo revoking work-from-home arrangements for employees. If the "internal" memo at the above link is to be believed, the HR Head, among other reasons cited "Speed and quality are often sacrificed when we work from home" as being one of the reasons for the change. Holy smoke! If this is true, then essentially this is an  admission on HR's part that in this day and age when telecommuting is a way of life, they have failed at instilling a corresponding performance management culture that can leverage this awesome advancement in work culture to happen in a 100 years. With the right performance tracking processes and communciations protocols, telecommuting can increase productivity several fold. I say this because I am surrounded by people who do this every day (including myself) and everybody is working well over the mandated 8-hour workday, actually getting stuff done. So if this is all true (I still don't believe it), then Yahoo! just admitted they failed at getting telecommuting right. Corporate culture is a two-way street, the company has as much a responsibility of creating an atmosphere of accountability as well as trust as employees have of being diligent. Every CEO probably has at least one decision they are going to regret for the rest of their career and, if this is really her decision, Marissa Mayer may just have made the one that will top her "I wish I had thought this through a bit more" list!

SetFocus: Revisiting your 2013 Marketing Playbook

 It is halfway into Q1 2013, as you do a reality check of your fiscal year AOP with marketplace conditions, here’s a little cheat sheet on what you need to know as a marketer in order to beat the plan.

The U.S. Economy in 2013…

General consensus among economists is that of weak to moderate growth in early 2013, and a stronger recovery coming in the later half from the Housing sector, but there are other headwinds at play that could have a dampening effect early in the year, including the debt ceiling debate (once again), expiring tax cuts and spending reductions (collectively known as the “fiscal cliff”). On Jan 23, the “No Budget, No Pay Act” temporarily suspending the Debt Ceiling until later in the year, but without congressional action this issue will resurge before year end if there is no budget adopted by Senate by then. The recurrence rate of this issue is taking a toll on consumer confidence and capital investment/job creation, as indicated by low readings of the Michigan Consumer Sentiment- this indicator, has been exceeding consensus expectations for the last couple of months – today’s reading at 76.3 is above expectation of 75, but still well below the low 80 readings going into 2012 year end.

On the positive side, there’s some indication including forecasts from The World Bank Commodity Price Forecast, of lower commodity prices in 2013, which can provide some tailwinds[1]. The DOE also predicts lower gas prices in 2013[2], which generally helps consumption by freeing up disposable income and driving shopping trips up.
The Employment report in February (for January) came in a bit below expectations at +157K, which is lower than the previous revised number of +196K- 2012 average growth was 181K/month.

What does this mean for your 2013 Marketing Strategy?

If economic uncertainty continues building up into mid-2013, then marketing strategy early in the year should emphasize your value proposition, focusing on share growth through Trade and Consumer promotion investment. Any relief in costs from favorable commodity pricing changes should be passed through 100% to consumers. Advertising focus, both online and off-line, should be on lower funnel that aims to increase conversions by “nudging” consumers sitting on the fence on your brands and retaining existing consumers that may be vulnerable to competitive promotional incursions. Paid Search is especially a good way to get in front of consumers one step before the purchase decision. Paid Search importance is going to be even greater in driving conversion with Product Listing Ads (Google Shopping’s new rich ads functionality[3]).

As the economic uncertainty abates towards mid-2013, focus should shift to longer-term brand building and differentiating your brands to reduce dependence on promotions through strong upper funnel advertising activity. Later in the year is also a good time for new product launches as consumers tend to be more open to trial under lesser economic uncertainty. This shift to shoring up brand equity should help position your portfolio for a strong finish to 2013and create a strong momentum into 2014.

---

[1] http://www.worldbank.org/prospects/commodities

[2] http://www.eia.gov/forecasts/steo/

[3] http://www.istrategyconference.com/app/media/whitepapers/Products_Up_Whitepaper_en.pdf

Hurricane Sandy and Income Inequality debates..

Came across this article on Reuters from Pulitzer-prize winning columnist David Rohde "A Hurricane's inequality". The article points out how even a natural disaster like Hurricane Sandy affected the rich and the poor differently and how the event highlighted income disparities in New York. The author used examples like the rich evacuating to hotels while service folks continued servicing. He then goes on to point out that "Last year the wealthiest 20 percent of Manhattan residents made $391,022 a year on average, according to census data. The poorest 20 percent made $9,681".

While I appreciate the point he is making, I am not sure the analysis is entirely fair. First of all the fact that everyone, irrespective of being rich and poor should have been able to retreat to safety. I view the fact that service folks continued servicing as a failure of the City authorities to enforce safety measures- businesses had no business (no pun intended) keeping employees back beyond a certain point.

That said, the income disparity between the top vs. the bottom quintile shouldn't be surprising based on economic behavior. The top 20%'s earnings being high is an artefact of NYC's ability to attract highly skilled labor that commands a wage premium, which in turn creates an abnormal demand for a secondary market of relatively lower skilled labor (nannies, waiters etc). Urbanization is known to create income inequalities for this reason- cities tend to attract from cheaper labor markets (immigrant, students etc). This is partially related to the Kuznets curve effect:

Except that the inequality continues to rise exponentially due to a free inflow of unskilled labor that is willing to compete on price with existing unskilled labor. Comparing top-bottom quintile income disparity in a city that is only ~400 Sq miles yet boasts 1.2 Trillion dollars in GDP is pointless- there is an extreme division of labor and a continuous supply of labor (skilled and unskilled) that is more than willing to compete on price. Profits/income are inversely correlated to competitive intensity, labor markets are regulated in order to contain this profit-maximizing behavior within rational limits. Now what is worrysome is that based on New York State's minimum wage and a 40-Hour work-week, the lowest wages should be ~$15,000 p.a, the fact that it averages $9,681 in the bottom quintile could indicate a significant number of the labor market working below minimum wages, which probably reflects a failure in enforcing minimum wage discipline.

Is your Vision damaging your business?

…it is if your business planning cycle is typically 3 years or lesser. The longest planning horizon for most businesses entails new product development or acquisitions at around the 3-year horizon mark and marketing activities like advertising communications and pricing/promotions are typically planned annually.

Brands aren’t built overnight and sustainable brands need an evolving strategy that will navigate economic cycles that are a lot longer than 2 or 3 years, in fact typical economic cycles are 7+ years.

What you are missing out on is an opportunity to understand how your customers are adjusting their consumption behavior as the economy waxes and wanes. Granularity of information flooding researchers in recent years has motivated business strategy to be focused on maximizing short term profits and opportunities. Don’t get me wrong, short-term planning is important- the short-term is the bridge to the long-term and public companies are answerable to shareholders in the short-term. At the same time the most sustainable brands and businesses are the ones that have the information and experience to help them adjust to economic changes. In that respect, Businesses need to be like Neural Networks- learn and adapt based on past experiences, while adjusting to newer paradigm shifts. While lifestyles evolve and change much more rapidly today than they did 10 years back, there are some consistencies that business managers need to take into account especially if they are in the B2C domain.

For example how people adjust to economic upheavals, what spending categories do they curtail during a downturn and which ones do they prioritize coming out of a downturn. If you compare the growth in Retail spend data by segments from the U.S. Census Bureau from 2004 to the spending from 2011 (2 years post the respective recessions), you will notice some remarkable consistencies. The top 3 segments by growth vs. prior year in both cases were Building Materials, General Merchandise and Restaurants, while Electronics, Apparel and Sporting/Music stores were bottom segments.

How cool would it be if you could predict how your customers are going to change their consumption preferences in a sluggish economy and an expanding economy, what trade-offs in terms of share of wallet would they make as the size of their wallet shrinks or expands? And how cool it would be if you were able to anticipate these changes in consumption preferences and adjust your product portfolio, assortment and marketing/pricing strategies accordingly? So one would think it is easy for businesses to compare what their customers did in the Great Recession vs. the 2001 Recession, but you would be surprised even with big data how few companies have less than 5 years of data readily accessible for analysis. However different we are today compared to 10 years back, some elements of history do tend to repeat and if you chose not to learn from history you may well be condemned to repeat it.

Redefining Risk-Free...

For the longest period of time the classic proxy for the theoretical risk-free rate has been the 3-Month U.S. Treasury Bill, this may have to be re-thought given the U.S. debt-crisis that just got "resolved" today. The crisis brought home the realization that the U.S. Ecoomy, far from being infallible, is actually vulnerable in it's present state.

The longer-term ramifications of both the crisis itself and the solution that was agreed upon today are going to be profound. The United States has re-discover its place in the global economy instead of relying on past laurels, and soon, while the other developed nations still look to it for economic leadership and haven't realized that this need is more psychological than anything else...