September
27, 2007 - Distribution Channel Commentary (DCC) # 101
Greetings:
If you
know what these commentaries are about, go to "TOPICS" below;
otherwise, read on.
·
A FREE SERVICE
The
Merrifield Consulting Group, Inc. (www.merrifield.com)
is offering this opt-in periodic (formerly weekly) commentary service that is
now being posted at www.merrifield.com.
(Past DCC’s are all posted there.)
·
SHARE THE
KNOWLEDGE: ADD OTHERS (OR, DELETE ME!)
To make
this free service continue to happen, we must reach more individuals who
care about making independent distribution companies/channels more effective. If
you know of others who might like to receive this service, please: forward
this commentary on to them; encourage them to email karen@merrifield.com to have her
add their email address to our list; or, send them to our web site. If
you don’t like this type of mail, ask to be deleted, and we actually will.
·
RE-PUBLISHING/RE-PURPOSING ANY COMMENTARY
CONTENT? YES YOU MAY!
Just let
us know by email what you want to do, give us some credit and point them to our
web site. We are delighted to have a number of: trade associations; channel
publications both printed and on-line; software firm publications; buying
groups; and university programs that have all found re-purposing applications.
Some just post the entire commentary on their site, others will post excerpts
with their preface remarks. We’re flexible; the answer is "yes",
what’s the question?
TOPICS:
1.
THEMATIC
QUOTES.
2.
ECONOMIC
WOE =NECESSITY = MOTHER OF INVENTION: CATALYSTS?
3.
THINK
BIG, BUT ACT SMALL WITH EVERY EMPLOYEE.
4.
THE PROS
AND CONS OF PRIVATE LABEL LINES: SEMINAR.
5.
HOW TO
GET A FEW MORE LIKE THIS UNITED AIRLINES PILOT?
6.
HOW TO
RIDE THE ON-DEMAND, SOFTWARE-AS-SERVICE WAVE?
7.
EXPERIMENTS
IN SOCIAL NETWORKING (e.g. LINKEDIN.)
1.
THEMATIC
QUOTES
“I'm shocked, shocked to find that gambling is going on in
here!” Captain
Renault
(Played by Claude Raines in the 1942 film-of-the-year,
“Casablanca” )
“You can't handle the truth! Son, we live in a world that
has walls. And those walls have to be guarded by men with guns. Who's gonna do
it? You?.... And my existence, while grotesque and incomprehensible to you,
saves lives”
Col. Jessep
(Played by Jack Nicholson in the movie “A Few Good Men”)
"A journey of a thousand miles must begin with the
first step” Lao
Tzu
“The Real Heroes of Business : ...and Not a CEO Among Them.”
(Title of a great book, now in paperback by Fromm and
Schlesinger)
“Not if, but when: the future is Saas” ASPnews.com
(SaaS = software-as-a-service; aka, “on-demand computing”)
“It’s a new brand world…if you aren’t creating your own
brand, other people and companies will do it for you.” Tom Peters
2.
ECONOMIC WOE
= NECESSITY = MOTHER OF INVENTION: CATALYSTS?
As I write these thoughts (9-26-07), the “durable goods
report for August” was just released. The demand “plunged” by the largest
amount in seven months (4.9% versus a consensus forecast of 3.5%). This follows
by a day three other reports that declared that:
·
U.S consumer
confidence fell more sharply than expected
·
Existing home
sales fell by 4.3% while inventory increased to 10 months supply
·
Year-over-year
home price deflation for 10 metro areas dropped 4.5% in July
But, the Dow-Jones closed up at day end, and conventional
wisdom is that the rest of the global economy is so strong that the US may not go into a recession.
In the biggest picture, however, I believe that the global
credit bubble that has been growing ever faster since 2002 is now unwinding.
This liquidity bubble in turn created many other bubbles: housing; stock
markets around the world; bonds; commodities; infrastructure construction in China and India; leveraged buy outs; underwater auto trade-ins and trade-ups; art; etc.
In the midst of this unwinding process that started with
credit market freezes this summer, Alan Greenspan has been shamelessly plugging
his book in which he – like Capt. Renault in Casablanca –was shocked to
discover that in late 2005 there was systemic abuse (gambling of a sort) going
on in the home mortgage lending pipeline. I wonder what he was thinking when:
·
He cut the
federal funds (interest) rate from 5% to 1% between April ’01 to June ‘03
·
Mortgage debt
growth accelerated to 10.4% in 2001; 13.0% in 2002; 12.5% in 2003; and 14.9% in
2004 when…
·
Every player in
the mortgage origination pipeline had gotten to the point where they were facilitating
nothing-down, interest-only, no-proof-of-income ARMs to 25 year old kids buying
houses unseen through “internet wholesalers”.
In time, more people may come to understand how the
central banks pumped up the global money supply and credit bubble, but what
should businesses do – right now – to reinvent their respective value
propositions in order to not participate as fully in any economic downturns
that might be affecting their industry? Companies tied into new home
construction have: 1) frozen all expenses; 2) laid off people; 3) few have
realized that there is excess capacity that can’t survive a prolonged downturn
and needs to be merged and downsized again; but, what beyond that? Each company
in each industry has its own unique combination of conditions out of which they
must see new value creation pathways.
We could try exhortation tactics to compel our troops to
try harder, smarter and bolder. Here are a few resources to check out:
·
With a tip of
the hat to one of my clients, who chooses to remain anonymous, here is a link
to a youtube video that should give any sales force a laugh and at least a
temporary lift. It splices together scenes from the movie, “A Few Good Men”,
and has a clever actor spoofing Col. Jessep’s (Jack Nicholson’s) “you want the
truth” riff. Here’s the link: http://www.youtube.com/watch?v=0OTgb3KO7QM
·
If your
business is in a more scary dive – as many who are tied into new home
construction are – and if you are more of a philosophical person, you might be
able to borrow some ideas from “The Scary Times’ Success Manual” at this link:
http://www.strategiccoach.com/downloads/prb_scaryTimes.pdf
·
If you want to
get right down to the nitty-gritty of what indivisible, simple concepts a company
culture must articulate, embrace and reinforce to increase corporate capacity
for change. Please see these links: http://www.merrifield.com/articles/1_16.asp;
and http://www.merrifield.com/articles/MakingChangeHappen.pdf.
As helpful as some or all of this stuff might be, it runs,
however, into a paradoxical situation within most human brains. We need big
ideas and emotional pushes to bust out of habitual thinking, but simultaneously
most of these new ideas are threatening enough to our amygdala (a-MIG-duh-luh)
– the fight-flight-freeze, emergency response center within the reptilian part
of our triune brain – that our effective action is the equivalent of “writer’s
block”. We know what we want to do and why, we just can’t seem to get going, so
we do what we have always done a little more frantically until the internal
emotional storm from the change stimulus dissipates. Then, we keep fine-tuning
the past at our normal energy levels.
Are many of our employees afraid to change, don’t confess
it and just stall or work harder at the past? How can we test this hypothesis?
Here are two company-wide experiments:
1.
Announce a
wellness program. State that:
a.
Health is the
first wealth.
b.
We all know
what we have to do to get healthier and why.
c.
If we can first
change to improve our health for our own selfish benefit (and the company
bribes), then we should be able to next collectively change our business
habits/practices to improve all stakeholders’ economic benefit.
d.
Charts will be
put up on the wall to track progress and rewards for every employee.
And, watch it bomb. Many won’t sign up (and quietly resent
the entire program; who wants to be reminded about their bad health
habits/conditions?). Of those who do, many will fizzle out. And, of the few who
do get decent results and incentives, how sustainable will their new habits and
results really be?
2.
Announce that
in order to take the company to the next level, every employee will have to
give a 2-5 minute presentation to everyone else on what they will do to make
themselves a more effective bottom-line builder for the company. This will bomb
too.
a.
How many people
will have writer’s block about what to say?
b.
How many people
would rather die than make a public presentation including some of the field
sales people who are suppose to be good at talking on their feet?
c.
How many of the
courageous ones who can compose something credible and present it well will
actually be able to make change happen, especially if everyone else around them
wants to continue to fine tune the status quo?
So, how do we solve the change paradox? We need to conceive
and execute bigger value creation ideas, but too many of us will freeze up. Read
on in topic #3.
3.
THINK BIG,
BUT ACT APPROPRIATELY SMALL FOR EVERY EMPLOYEE.
When it comes to rethinking a company’s strategic options
and tactics, this commentary series has not been light on “big” recommendations
or systems for generating big new ideas.
·
Many readers
have bought and successfully deployed many of the concepts and plays that are
in our revolutionary, total-corporate-reorientation product entitled: “High Performance
Distribution Ideas for All” (see the middle of our homepage for more on this;
it’s even guaranteed!).
·
If you go to the
link at sentence-end, you will find one of our web site “exhibits” that
summarizes in one page, two different systems for rethinking a company’s total
go-to-market value proposition: http://www.merrifield.com/exhibits/Ex5410X10.pdf.
·
We have posted
an annotated slide show that further explains the two, strategy-rethinking
systems in the exhibit above plus highlights from the book “Blue Ocean
Strategy”. In this 19-slide “show”, you will find that “new product
introductions” get, on average, zero results while breakthrough results in
commodity industries come from changing 5 to 8 of the 10 innovation levers as
iPod and Starbucks have done. Here is the link: http://merrifield.com/articles/BlueOceanIdeas.pdf.
·
In our last
commentary (#100), we pointed readers to www.dealingwithdarwin.com. The
slide show at that site will help to get readers focused on the right
innovation categories that are best suited for the realities of where our products/services
are in their respective life cycles.
Although
these concept-generation tools can help to yield big, good ideas for
reinventing our business, why bother if we are too scared to confront and try
to transform our biggest losing account into a winner. This is an account that
buys so many small transactions from us that both of us are losing 10’s of
thousands of dollars in potentially unnecessary transaction costs. And, what
about the troops who say: “Aye, aye sir, it will be done!” How many individuals
have a true track record for successful, sustainable change?
Assuming
that every long, great journey begins with a small-as-necessary, first step,
how can we ask small, positive questions about doing incremental changes that
are so small that who ever is affected doesn’t have a freeze reaction? For the
best how-to book on how to do this, I heartily recommend a simple, but powerful
read: The Kaizen Way: One Small Step Can Change Your Life by Dr. Robert
Maurer. And, I must also thank and recognize the chap who recommended the book to
me, Rod Fallow, the principal of Swagelok Sunnyvale (in CA).
The author
is a psychologist on the UCLA medical school staff who has been a lifelong
student of personal excellence. He has distilled some science, business (no six
sigma stuff) and psychology into a simple, engaging read punctuated with some
compelling personal change stories. A woman, for example, who is caught up in a
tough life scenario is a physical wreck, but decides that she could “march in
place for one minute during a commercial while watching TV each evening”. The
incremental health-improvement step may seem laughable to some, but once she
said with enthusiasm “I can do that” a new mental door and pathway opened in
her mind. Would we be surprised if she started marching during more commercials
for the full two minutes? And, each time we go through a positive thought or
action, we start to create new neural and chemical pathways that start to
support what we are proactively doing instead of resisting the new.
After
reading this book, you will understand how to meet every employee at their own
personal psycho-dynamic intersection edge at which they could begin a
non-threatening first step on what could become quite a journey of change. Once
we get every employee thinking positively about change that means something to
them and is possible - because it isn’t psychologically threatening - we are on
our way to making the bigger stuff happen.
4.
THE PROS AND
CONS OF PRIVATE LABEL LINES: SEMINAR.
Private
label sales volume has been growing rapidly - at the expense of traditional brand
name goods - in many distribution channels. We have followed this trend in both
the commentary series and an article. If, for example, you google:
Merrifield.com + “private label” you will find links to some of that material
on our web site. Plus at our site under the “articles” button, you will find
two articles: one reports on the wooden bedroom furniture, private-label
disaster for that channel at this link: http://www.merrifield.com/articles/2_25.asp.
The other
summarizes some eye-opening trends for global sales of private labels of which
50% are not profitable – on a total economic analysis basis – for the
non-manufacturers who develop and sell them. Here’s the link to that article: http://www.merrifield.com/articles/1_19.asp.
A fellow
distribution channel consultant and friend of mine, Bill Wade, is producing a
conference on the “pros, cons and pitfalls of private labeling” to be held
November 12-14 at Northwood University in Midland, Michigan. It is open to
players from all channels, although it may have a significant percent of the
attendees from both the after-market auto and truck parts channels in which
there has been a lot of private label pain. For more on this conference, and a
registration form either hit the document button on our home page or contact kholiday@wade-partners.com.
5.
HOW TO GET A
FEW MORE LIKE THIS UNITED AIRLINES PILOT?
On August
28th I read a WSJ article on a United Airline pilot, Capt. Denny
Flanagan, who has for sometime gone to extreme measures to please the
customers. Here are links to that WSJ article and a blog commentary on the same
Captain:
http://online.wsj.com/article/SB118826634834410559.html?mod=travel_left_column_hs
and http://www.churchofthecustomer.com/blog/2007/08/how-to-create-a.html.
From one
point of view, we might ask, why does he bother? What can one super, hustling
pilot matter to a huge lethargic airline that may often not have the best:
flight times, seat availability, prices or service from tens of thousands of
other employees who really just don’t care that much?
From
another point of view, we might realize that whether it really has any
long-term effects on the airline, Capt. Flanagan might be doing all of this
stuff, because he finds it fun and enjoys the positive vibes he gets back from
the customers and others (like blog coverage on the net).
The
stories reminded me of the ones that had been collected in a classic book first
published in 1994, now republished in paperbook entitled: The Real Heroes of
Business…and Not A CEO Among Them by Fromm and Schlesinger. Back in ’94, I
had already spent a lot of research and hands-on practice in developing personnel
systems for: recruiting, hiring and retaining natural, service-oriented front
line people. The “Real Heroes..” book was a catalyst for me to start helping
clients define “heroic acts” for “target customers” along with “how to” methods
for teaching all employees to make breakout and breakthrough service acts
happen for at least those few, great target accounts.
For most
mature businesses that are in turn selling customers in mature industries, it
is a reality that less than 5% of all of the existing, potential customers are
perpetual innovators that will generate about 80% of the growth in the profit
pool that the seller and its competitors will fight for.
Starting
tomorrow, why shouldn’t every company: 1) define who those target customers
are; 2) educate all employees on how to make a difference with “whatever you
want, proactive service acts” for these few accounts; and start team-selling
them too? And, in the longer term, every service business (or division) should
rethink their personnel systems to hire more people who naturally enjoy being
good, creative service providers like Capt. Denny Flanagan.
6.
HOW TO RIDE
THE ON-DEMAND, SOFTWARE-AS-SERVICE WAVE?
Back in
2001, Gartner Group published one of its “hype cycle” charts which had a technology
called “application service provider” (ASP) at the peak of the hype wave before
it was projected to descend into “the trough of disillusionment and gradually
become a viable, mainstream technology on “the slope of enlightenment” by about
2007. For a latest version of this chart which has many technologies charted on
it with “ASP” now on the slope of enlightenment (not all six year out forecasts
by Gartner work out so well), here is a link:
http://www.enterpriseinnovation.net/cms_img/GG%20HypeCycle%202005.jpg.
If you
were able to find “ASP” on the chart, you would have noted that it is now
billed as “Software As a Service (SaaS)/ASP”. You can Wikipedia the two terms to
find out why the “on-demand computing” industry started swapping out SaaS for
ASP in 2005 to reflect true changes and improvements in all of the technology
that underlies being able to use software residing somewhere else - for your
personal use - through your browser.
Most of us
are using SaaS without really thinking about it: google maps and apps,
facebook, webinar services, collaborative software sites (like www.near-time.com, a client), etc. Many
business web sites will weave other web services like map directions right into
their sites. And, many software application companies will now offer us the
opportunity to either buy a packaged, software application that we can put on
our PC or just rent the service through our browser in which case our personal
information is stored somewhere out there “in the cloud”.
A majority
of “large company” CIOs and CFOs now know what SaaS is and means, and they are
proactively planning on using more SaaS applications in the future. The
sequence of applications that might be adopted start with quite small, narrow,
specialty types of applications and grow. At the other extreme, few big
companies are envisioning outsourcing their main enterprise software solution
(ERP for “enterprise resource planning”) to some SaaS solution. Every forecast
that I have seen for the growth rates for SaaS usage have been very high. Most
companies will find many ways to blend better use of their legacy ERP systems
and SaaS applications in the next few years.
There is,
however, one stand alone, SaaS company, Netsuite, that is offering a complete
ERP solution aimed at small companies that have standard needs (little to no
customization). I think that their platform has big potential within distribution
channels in which a channel captain (manufacturer opening new distributors; or
a de facto master distributor) could integrate supply chain benefits (think:
Walmart-type continuous replenishment; myAmazon type web interactivity for end-users;
etc.) into the Netsuite platform. Then, small distributors/dealers/rep agencies
could dramatically lower their total cost for information needs while achieving
breakthrough supply chain benefits over all other competitors stuck with
super-sophisticated, in-house systems to which supply chain integration is
complicated.
If anyone
out there is intrigued by this vision, let me know. I’m working on a few pilot
projects in different channels for this vision and would be happy to share my
thinking.
7.
EXPERIMENTS
IN SOCIAL NETWORKING (e.g. LINKEDIN).
If you
have teenage or college kids, you may have noticed how Facebook has taken over
their world. The site was founded by Mark Zuckenberg 3 ½ years ago; he was
offered $900MM for selling it to Yahoo last year, but turned them down. He now
seems wise, because Microsoft, Google and others are negotiating to buy 5% of
the company for $500MM which is an imputed value of $10B.
There are
other “social network” sites including one for business movers and shakers
trying to network called LinkedIn. After about 5 people had sent me invitations
to “link in” to their contact list, I decided to sign up and do so. “Social
networks” are now on my radar screen.
LinkedIn has
gotten mixed reviews in on-line discussions that I have checked out. Clearly it
is only a “tool” which will have value that will vary with how well some one
knows how to use it for appropriate occupational strategies. With a good
strategy and good skill, then the quality and quantity of contacts should start
to “scale” or matter. Right now, my space is static, and I’m purely reactive. I
haven’t tried to proactively link to anyone else.
If any one
out there has any suggestions for how I might better use this tool or want to
link in to my space that would be fine. Otherwise, if you would like to link in
to me, that would be fine. For now, I am an equal opportunity employer of any
would be networkers.
Looking
down the road, though, I think that all employers will have to figure out how
to better engage and educate new employees who are now 22 or younger. They
clearly are a wired, want answers and action right now, next generation. I can
imagine that today’s teachers and professors are noticing changes in how their
students learn by the quarter. Let’s continue to watch this social networking
and collaborating trend that is exploding upon all aspects of our society very
quickly.
Bruce
bruce@merrifield.com
