THE ENTERPRISE
Topics for this week are varied--but then so is our country and world Let's tackle Energy, Labor, Brands and the Economy. How's that for a full plate?
First of all, a helpful hint for all of you Verizon Wireless users--one I discovered accidentally. Periodically you should "tell your Verizon phone to check for new tower locations and program them into its network memory." What? Right--I called and asked them, and they confirmed it. Simply dial *288 and when you can choose an option, choose menu Option 2...then wait (it will tell you to wait) for the tone that means your phone is now updated. The result: better network coverage for you.
---Labor
Big labor is coming apart. Unions have been useful in the past to keep workers from being abused by powerful employers. There are even some cases where Unions are useful today. BUT, in many more cases Unions are accelerating the loss of jobs for their members. How? By increasing indirect and direct labor costs (faster than productivity improvements can support) and limiting the flexibility of companies to react to market and competitive changes. Things happen really fast these days. Tom Peters once quoted an executive who predicted there would be only two kinds of companies in the 21st century--"The quick and the dead." Big labor has become what it was formed to fight--a bureaucratic behemoth wielding power without concern for the consequences. Look for its decline to continue.
--Energy
Want more electricity? Want it at reasonable prices? Sure. That's why nuclear power is making a HUGE comeback. The technology is more refined and safer than ever. Oil/gas/coal may be king for now, but watch nuclear power generation grow exponentially in the next two decades--both here and in China--and maybe later on, in India. Other than concerns about providing a source for nuclear weapons material, India needs nuclear power badly. China already has nukes and it is sucking up oil far faster than can be sustainable long term. Over the next 1-2 decades, the nuclear age will again become the rage, as it should. Solar, wind and other alternative power sources are clever, but cannot be commercialized at economic levels to do what rejuvenated nuclear power plant growth can do--take away the power of OPEC.
--Brands
In an era when differentiation is harder than ever to come by, and knock-offs get to the market on the heels of the originator, the power of strong brands can make the difference. There is a problem, however. Leading retailers are creating their own brands by hooking up with well-known designers. This puts immense pressure on the brands who exist in that same space. The message for them: Innovate or die--and do it fast. Remember the old "ready, aim, fire?" Now it is "aim quick, then fire, fire, fire."
Incumbent brands, like those on the recently published Top 100 Global Brands (Business Week August 1, 2005), must drive innovation faster and harder than ever. That means closely monitoring lifestyles of consumers, and listening to what customers, and especially end-user consumers want, think, feel, and will pay for. A few tidbits from that listing:
7 of the names are "new" led by UPS, Google, and the lightning fast-response Spanish retailer, Zara.
8 of the top 10 are still US brands, but the list is more "global" than ever.
9 are financial services companies thanks to consolidation after consolidation--"money still talks."
10 are car companies--NOT including GM or any GM brand--even Cadillac; but Hyundai made the list!
--The Economy
It's fine--for now--but just "for now." The Fed needs to pull back on the interest rate rises at 4%, or there is a danger it will have done too much. Short term yields and long term yields are going to be almost equal--and that is an decidedly unusual, and probably unhealthy situation. US housing is still a bubble that needs to be deflated before it bursts. Housing (and related materials/products) drives a lot of US production and is really overheated. PLus, the leading economic indicators have turned negative and stayed that way. Conclusion: the rest of this year is OK. Watch out for 2006. It will get delicate, and the economy could sour a bit--or worse--especially if the Fed keeps raising interest rates.
With that encouraging note, remember that smart managers manage all the time like they are facing dangerous times--because they are. Spend wisely and well, and stay real close to the market and customers. In the US, consumers and housing are keeping things going. If either slows down a lot, times will get tough--really fast. Stay loose. In this case, forewarned is forearmed.
Best, John
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