Telling It Like It Is

THE ENTERPRISE--The Bigger They Are, The Harder They Fall

THE ENTERPRISE

CONVENIENT MEDIA BLINDNESS/MUTENESS
I am amazed at the mainstream media. It was screaming for the heads of everyone in the White House in the Joseph Wilson-Valerie Plame "leak" case.  Now most major news networks have buried the news that the "leaker" was not Karl Rove, not VP Dick Cheney, but rather, Colin Powell's deputy secretary of state, Richard Armitage--and that special prosecutor Patrick Fitzgerald knew it all along.  And he let  the controversy rage on.  Let's prosecute him.

THE BIGGER THEY ARE, THE HARDER THEY FALL
That's a cliche' from the boxing world, but applies to business and government too.  Nature has proven that trees can't grow to the sky, and companies that get too big suffer some of the same problems of big old trees.  Another characteristic of our country has been a tendency for both government and special interest groups to make targets of large successful companies.  Wal-Mart is suffering from both at the same time, plus a number of other competitive problems.

ONE FORMULA DOESN'T FIT ALL
Wal-Mart is withdrawing from Korea and Germany.  it's business model just wasn't competitive in those two countries.  It is being beaten by Carrefour in China, perhaps because Carrefour has had a longer time to learn how to develop in under-developed markets.  Wal-Mart is under attack in various states for its non-union posture, its wage and benefit structure and it's zoning/new store location practices...and more.  Bottom line:   It's hell being a dominant market leader.  Everybody is shooting at you, not just competition.

PARALYSIS BY ANALYSTS--NOT MERCHANTS
Meanwhile, there may be the beginning of Wal-Mart losing its market/customer sensitivity.  There are many things in business that can be formulatized and analyzed, but there is also the merchant's "touch," and instinctive, subjective assessment of what does (and doesn't) excite consumers.  As it grows, Wal-Mart's relentless push for lower prices (often from Chinese and other faraway sources) has become an obsession.  Hordes of bright young buyers know how to crunch the numbers.  How many of them know how to visit stores, look at the merchandise and merchandising and "tweak it" just so--to please its consumers. 

CUSTOMIZATION BY FORMULA IS TRICKY
For almost a decade, it has used a "Store of the Community" merchandising system to tailor mix to buying habits and consumer demographics.  Now Wal-Mart claims it will develop a half-dozen unique formats targeted to the consumer profiles shopping those stores.  If any company has a database capable of doing that, Wal-Mart does.  I wonder how it will handle store like the one on Morse Road (East side of Columbus) very close to Easton (the areas premier lifestyle shopping center).  Easton traffic consists of very upscale shoppers, frequenting stores like Nordstrom, Crate and Barrel, Henri Bendle and most of the Limited's assortment of stores (Limited's HQ is less than a mile away).  BUT--the actual traffic in the Wal-Mart just 1/4 mile south is decidedly lower-middle income and heavily minority families.  How do I know?  I shop both places and see it--more clearly than any computer could tell me.  Do they?

THE BIGGEST JOKE--GM + FORD
Anyone who has studied math learned that adding together two large negative numbers yields and even larger negative number.  Is the analogy clear?   I almost died laughing at the prospect of GM & Ford talking about agreeing on anything--except that both are in deep trouble.  Both have costs that are too high, legacy costs that are "millstones around their necks" and too many brands of not-exciting-enough vehicles.  Those things they have in common.  The other thing they have in common is that both are burning through cash, and taking too long to "bite the bullet" and really make themselves over ... into competitive car companies.  So let's cooperate?  On what, a discount on bankruptcy counsel?  A plea for government aid?  (Maybe!)

GM & FORD--BRANDS TO KEEP AND BRANDS TO KILL--ASAP
Everybody says both have too many brands of cars and trucks and combination vehicles.  OK, I agree.  here is my lineup of which ones to keep and which ones to kill.
GM--keep            kill (or sell off)                 FORD--keep    kill (or sell off)
Chevrolet                Pontiac                            Ford              Mercury    .
Saturn                    Saab                                  ----------        Jaguar    .
Buick (cars/xv only) Hummer (model for GMC)  Volvo            ---------    .       
Cadillac                 ----------                               Lincoln(fewer models)    .
GMC (Lg. SUV & trucks only)                           Land Rover (SUVs only)---------.       

Anything Pontiac either is already or can be merged with Saturn models.  Jaguar is a great old brand, but the new/small "Ford-like Jags" are not fooling anyone--they are re-badged Fords.  Mercury has been dead a long time, and no one noticed.  Sell the Saab brand back to the Scandinavians or to Subaru (whose platforms are under 1/2 of the Saabs anyway).  And who is Hummer kidding?  Send the big ones back to the Army and make the smallest one a "model" in GMC's line.   Standardize the inside parts (drive-trains, engines, electronics, etc.) and customize the outside parts for each brand's image and identity (and customers).

SLASH COSTS, CLOSE PLANTS, CUT PEOPLE, AND DEALERSHIPS
IF both could do this FAST, they could strip millions (maybe billions) out of their costs in overhead and duplication of plants, capacity, tooling, maintenance, dealer organizations, etc. etc.  The only thing they might want to work together on is to put the arm on the US Government to carry part of the financial impact of what must be done--either tax credits (but there is not profit to tax) or special pension arrangements (but the line will form to the left, led by the airlines for that one.

WHY DO THIS?
Because if no one prunes an overgrown tree, it eventually falls over and dies of its own bulky and weight...which is what is about to happen.  But will anyone do this?  I doubt it.  Big trees fall in storms all the time, then they get cut up.  Only a few are "managed" and pruned to extend their lives.  I wish it were otherwise, but nature--and global competition--is a harsh master.  If we do not learn from our mistakes we are destined to repeat them.  Remember that line?!  It is only too true.

Best, John

PS:  US major airlines are living in a temporary, but similar problem.  There are too many, unless more of them merge or collapse.

THE ENTERPRISE-TENTH REUNION CONFERENCE FINDINGS

THE ENTERPRISE

This was a special week, as we held our Tenth Annual Reunion Conference, and spent 2-1/2 days discussing a topic that seems to be on everyone's mind: The Future of Work.  What will Americans (that's us) do in the next ten years?  How will we compete?  Or will we?  Where have all the good jobs gone?   What new ones will spring up?  And what kind of people will get them?

THE DEATH OF THE AMERICAN DREAM
There is a big debate in the media and among politicians about the "bifurcation" (a word we used a lot) of American workers (and for that matter, politicians.). Are Americans all that much better or worse off?  It depends on which statistics you want to use to support your position. American wage earners are paying a lower percentage of wages in taxes than they did 5-6 years ago (3.3% vs. 3.6%), but that isn't the whole story.

MORE STUFF & MORE DEBT & MORE SATISFACTION AND MORE ANXIETY
Americans have more amenities in their homes than ever before too:  TV, Cable, TIVO, Air Conditioning, Dishwashers, iPods, Cell Phones, etc., etc.  Those same Americans also have more credit card debt than ever; more households have two wage earners (in the minority of households where there are two wage earners).  Workers compared to surveys in the 1970's are MORE satisfied with their work than they were then.  Unions a much weaker--down from 20% of American workers as members to about 12% and many of those public employees.

(Sidebar:  If Unions were formed to "protect workers rights" isn't it interesting that the growth area for Unions is public employees?  What might we conclude about that?  The governments they work for are as likely to abuse them as the old time "bosses?")

NO ARGUMENT--PLENTY TO WORRY ABOUT
Old time, cradle to grave jobs and the benefits that went with them are gone.  They are victims not of malicious management, but of global competition spurred on by rapid change, explosive growth of the Internet and information/communications technology, and the need to compete.   Old jobs paying (temporarily) high wages are leaving the US and being replaced by new economy jobs, requiring new knowledge and paying less money.  That's a fact; face it.

NOTE TO POLITICIANS STARTING TO CAMPAIGN FOR ELECTION:
No politician or government agencies can create jobs unless they do it with your tax dollars.  They can (temporarily) tilt the playing field in your favor, but just like "water finds its level" this will not "hold back the tides of global competition."  What Americans have to do is what they have always done:  learn to make the best of it and find new ways to compete, work and earn part of a growing pie that they help grow (instead of fighting for part of a shrinking pie).  What politicians (those who get elected) can do is to CREATE AN ENVIRONMENT THAT IS FAVORABLE TO CREATING THE KIND OF JOBS THAT CAN AND WILL STAY IN THE USA.  The free enterprise system--owners, managers and workers--has to take over.

2nd NOTE TO POLITICIANS AND VOTERS
This is not rocket science.  A budget can only be balanced one of two ways:  spend less or tax more.  If you don't tax more and do spend less, you go into debt.  (American households have an average of $8000 of credit card debt and the US government's debt is proportionally about that bad too.)  To create growth, the US must deploy the capital its companies have into better places that competing countries.  This is something the US has historically excelled at doing.  Now it the time to do it in both the private and public sectors.
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THE TENTH REUNION CONFERENCE FINDINGS;
I'd need more space that this to describe the wealth of discussion topics, brilliant moderators and profound conclusions reached at this year's conference.  In deference to conciseness, I will share four primary conclusions that were reached:

FOUR POINTS ABOUT THE FUTURE OF WORK IN AMERICA
1) More attention must and will be given to the integration of personal and work lives, and the successful new leaders of the next decade will be those who emphasize and build upon this fact.  The leading edge companies are choosing leaders on this basis.

2) There are two primarily different kinds of thinkers: sequential thinkers (thinks of tasks in order, takes directions and performs them in sequence--like a "river" flows) and simultaneous thinkers (sees the big picture, and understands where all of the pieces fit, then undertakes things accordingly-more like a "big lake" with lots of currents).  Some people can move back and forth, but everyone is "primarily" one or the other--yet both are needed.  The new global competition requires that directions be planned by "simultaneous" thinkers who make strategy and supported by "sequential" thinkers who execute that strategy.

3) Speed and technology will both drive and enable what happens in the next decade, moving and changing faster than ever, in circumstances that are often more complex than ever and beyond many people's imagination in some cases.

4) Since the turn of the 20th-Century, self-employment fell from 90%+ to a low of 5-10% in the 1980's (the measurements are necessarily imprecise) and is now strongly on the rise again, passing through the 20% range and perhaps in the 30% range as displaced workers return to an employment model of the past.  We are becoming a nation of tradesmen (and women) again...and the "Long Tail" (from the book of that name) is providing a wealth of niche opportunities for those courageous enough to try "plying their trade" to support themselves and their families.  The old saying "what goes around comes around" takes on new meaning.

This is heavy stuff, as I said, arrived at after much debate and deliberation--but it is important beyond belief.   Whether you think about it or not, and assuming you care about it, this is your future--and mine--and out children's.  IF YOU HAVE THE EAR--OR THE ADDRESS--OF YOUR LEGISLATOR, PLEASE SHARE THIS WITH HIM/HER.  We will be creating a longer version of the Four Points to share with them in the next few weeks.

Until then, study this carefully and consider it well.   I hope you find hope and faith for the future in the conclusions we reached.

Best, John

THE ENTERPRISE--From Football to Light Bulbs

THE ENTERPRISE

FOOTBALL AND LEADERSHIP
For those who don't know that I live in Columbus, OH, this was a big weekend.   Our Ohio State Buckeyes went down to Texas, led by coach Jim Tressel and QB Troy Smith, and came home a winner, in spite of having to replace 9 of 11 defensive starters.  Those who saw the game here last year in which Texas won on a last minute pass play know that OSU outplayed Texas then too, but OSU's  dropped pass in the end zone cost them the win--and perhaps a shot at the National Championship.  This year, it's all in the Buckeyes' hands.  Everyone will be gunning for them, but that is as it should be when you are Number One.

BEING ON TOP--YOU'RE THE TARGET
That is a good segue to the world of business and politics.  Being number one, or the record holder, or the leader makes you a target for all the wannabees--and any one who can talk a better game.  It doesn't matter if you're Dell or Disney--everyone will be after you, and if you don't keep finding a way to attack and play a better game, you'll start losing.  In politics these days, playing that better game is a whole different story.  I had to chuckle as I made a Freudian slip typing something about  the Democrats theme in an email to a friend--It is supposed to be "Time for a Change--A New Direction"...but I typed it as: Time for a Change--NO Direction. 

AN ABSENCE OF IDEAS--BEYOND CRITICISM -- "Hindsight is not a strategy."
Perhaps that is the apt phrase for any opponent (not the least of these is the Howard Dean led left-leaning Democrats) when they criticize everything and yet seem to have no better idea of what to do that they ever did.   Just wait until the current leadership stumbles...is their strategy.  The scary part is, so far, it's working!  I have a retired friend who is deathly afraid of a change in the White House.   He contends that the radical elements around the world are afraid of the aggressiveness of President Bush, and if he is replaced by an "Appeaser", in his words, "all hell will break loose, here in the US."

A GREAT BOOK FULL OF IDEAS--Jim & Joe Swartz' "Seeing David in the Stone"
That's another great segue.  My friend Jim Swartz and his son Joe (and with other family members contributing) have finally published their book "SEEING DAVID IN THE STONE."  I've seen this book grow, shrink, morph and evolve over almost a decade while Jim and his family chipped away carefully  at the "stone" (like Michelangelo must have) until the result is a slim, concise and brilliant book of just under 200 pages.

I have read it in several of its forms, and the final one is a brilliant combination of covering a wide range of ideas, yet not "beating any of them to death."  When I read the final version, here is what I said to Jim by email for use in his promotional materials:

---"This book distills the wisdom of the ages and presents it as a life-changing potion.  It is entertaining, and the messages are unforgettable. ...one of the few books that change the reader's life by its insights--it changed mine and it will change yours.  It's a masterpiece, a legacy for generations to come.  Seeing David in the Stone is the must read book of its era."

I can't be much more complimentary than that, and I meant it.  Go get it (amazon.com has it), and I'll bet you'll be telling your friends and colleagues about it.  Just the first twenty pages are worth the price, and there are 160+ more great ones after those.

A GREAT MAGAZINE ARTICLE (in Fast Company, Sept. 2006)--Charles Fishman's "How Many Light Bulbs does it take to Change the World?  One: and You're Looking at It."
I've been in touch with Charles for several years, since he called to interview me for his first Wal-Mart article in FC several years ago.  I've written in here about his book The Wal-Mart Effect too.   Charles Fishman is one of those rare journalists that can seek out a good story and then make it better and more interesting.   Wouldn't you like a chance to help yourself and help change the world.   I would!  And I have.  I now have about 15 of these bulbs in use already and will be replacing another 7-10 soon.

How?  Go spend $8 and buy three compact fluorescent light bulbs and replace 3 incandescent bulbs in your house or office.  It's not even worth waiting for the incandescent bulbs to burn out--the payback is that fast.  According to Charles in his article, if every American household bought just ONE and replaced a 60W. incandescent, the energy savings would power a city of 1.5 million people!  (yes, you read that right). 

All the political harangues about energy independence don't consider that there are many known technologies, like this one, that can dramatically reduce America's energy usage--and hence--its dependence on foreign (OPEC) oil.  Throw in a few tighter restrictions on auto and truck mileage to get soccer moms out of their gas-guzzling behemoth SUVs (and you too Rush Limbaugh), add a little realism about drilling offshore and in the ANWR, and voila'--America doesn't have to support Islamic  (or Latin dictator) extremist nations with its oil purchases.

So there you go.  In one issue, we have moved from football and leadership to politics to a couple of really great reading resources and a way to save money and energy--and save the world.   See you next week, after hosting my Tenth Reunion Conference--Changing the Way American Works--The Future of Work.   Whew, no wonder I'm tired.

Best, John

THE ENTERPRISE--Labor Day Ramblings

THE ENTERPRISE

THE ECONOMY IS BUMBLING
But it's not all that bad.  Fed policy has raised a lot of concern, but doesn't seem that far off base.  There is a drop in productivity, but that is typical of the late stages of a recovery, so it is not a big problem per se.  There will be continued moderate inflation--until the surges in commodities of the past 18 months get passed on to consumers--or not.  Profit  growth will slow, but not stop, although the slowdown in housing is troubling.

CONSUMER CONFIDENCE IS TUMBLING
Consumer spending still higher than the growth in income.  How?  The consumer debt load is still growing albeit more slowly.  e.g., The tab owed on credit cards for 25-34 year olds averages $5200, that's one example of how.   For all US households it averages over $8000, so if you are paying yours every month, several other households have really big unpaid balances.  The billions in home-equity loans taken over the past few years is another. Gas prices are down, but don't expect to see $2 gas.  That's just too low to be realistic--and it will not bode well for the economy if you do see that low a gas price.

HOUSING IS STUMBLING
Growth in the sales of new houses and existing houses has stopped and reversed.  House inventory is way up--over 6 mo. supply and climbing.  Mortgage interest rates are up, but still not all that high.   What has really stopped is all the new home purchase/sale by speculators "flipping" houses.   This was making up more than a quarter of all home sales last year--clearly an unsustainable situation.  The larger concern about the housing slowdown is that it will ripple through employment and sales of all the durable items that go into houses.  That will be a big ripple and hit lots of companies and market segments hard.

DELL IS FUMBLING
The once revered computer maker seems to be making all the wrong moves.  Forget the stock option debacle and laptop battery recall.  Dell failed to pay attention to a shift in what consumers wanted to buy, where and how.  One possible reason is that it became too internally focused.   If companies don't shift to match the changing value choices of consumers/customers, they get into these kind of predicaments.  HP/Compaq is now gaining share selling computers at retail, like the electronic consumer products they have become--at $300-900 retails.  Apple is on a roll, growing profitably by market leading innovations (outside-in thinking) and outstanding customer service--to (guess who)--its consumers!    DUH?

COMPARISONS ARE MIND-NUMBING
Two decades ago, we used to set one of our Huffy bicycles next to Nike shoes and Oakley sunglasses and ask which seemed like it should be the most/least expensive.   Answer: the Oakleys (a few ounces of stylish plastic) were priced highest; the NIkes (a couple of pounds of trendy leather and rubber sewn together) were next;  and the Huffy Bike (30 pounds of steel structure, drive/breaking mechanisms, rubber, vinyl, padding and nearly 300 parts) cost the least. Hmmm.  Now let's do it in terms of today's products--a Dell Personal Desktop Computer,  a Treo or Blackberry Phone/PDA or an Apple iPod.  The answer:  all 3 cost about the same at $299+/-.  Logical?  No.  Reasonable?  Maybe.  Innovation pays--big time.   Selling products by the pound may be OK for meat cutters, but not for product companies.

PRESIDENT BUSH IS HUMBLING
Finally, more than ever, perhaps too late...he is still "staying the course" but with a new found tendency to be a bit humbler and willing to admit past errors.  Who got to him?  Perhaps a year of 30% approval ratings, and nearly every Republican running for office this fall all got to him--finally.  As far as the "War on Terror" goes, you might want to read the attached email, to see how one American felt.

AND I AM MUMBLING (& RAMBLING)
I am concerned about the nuclear aspirations of Iran and Korea because their ideology is so far from ours and their leaders are fanatics of two different types.  What makes me pause, however, is wondering how we would have reacted if  older, stronger European countries had tried to tell us what we could and couldn't develop in the way of weapons systems.  I doubt we'd have accepted that kind of pressure well, either,  So why are we surprised that leaders in iran and Korea feel that way--whether we think they are rational or not.

As to the Middle East and Hezbollah, Hamas, Palestine, Israel, Iraq, etc., these religious sects have hated each other for centuries.  They clearly think it is fine to commit murder by suicide bombing, hiding weapons in mosques and homes to make any attack into a huge public relations issue, and so forth.  We neither understand them (deeply) nor agree with them.  We also cannot change them--or even manage them.  We must think clearly about what outcome are in our best interest and strive to attain those, whether they are "Politically Correct" or not.  I just wish our politicians would realize some of these point, that our press would try to help rather than subverting our efforts, and that our lack of strong, unified leadership in the Federal government would get fixed.  It is the scariest of all these issues.

Finally, last night, as I emailed the manuscript for my book "The Complexity Factor" to the publisher, I realized how overloaded we all are with complexity--in business, in global politics  and in our personal lives--and how confused we are on what to do about it all.  I guess the first step is to realize, admit and accept that these problems exist.  Only then can we get down to the hard work of fixing them.

That's my Labor Day weekend rambling.  I hope you had a wonderful weekend.

Best, John