Immersion Active presents Ageless Marketing

Howard Schultz's Starbucks Tale, Onward, Is a Page Turner

I think that few people in the marketing game really understand the art and science of branding. If that were not true we wouldn’t see the biggest and sharpest agencies in the country launching a New Coke or “It’s not your father’s Oldsmobile” campaign. But one person who does understand what branding is all about is Howard Schultz, the co-founder of Starbucks.

In his new book Onward, Schultz clearly shows a deep understanding of brand husbandry.  Prior to the Crash of 2008, when Starbucks was flying high on Wall Street, Schultz, who had retired from the CEO position,  knew something was not right with the Starbucks brand. He revealed so in a now famous email to Starbucks management that was leaked in February 2007.

In reading what for me was a page turner I almost felt as though I was in Howard’s living room hearing him talk about Starbuck’s running off the track and his efforts to put it back on course. It has all the makings of a business classic written from a highly humanistic point of view.

An Interesting Read: In Praise of Dissent

Catch this article in Ode, a fascinating magazine devoted to "intelligent optimists." The article has nothing to do with the central theme of this blog, but everything to do with life. If you have ever read About under my signature picture with a mule named Dusty, you have a clue as to why this article appealed to me. I dedicate this posting to all of you out there who have what it takes to avoid groupthink. As we move into this next decade you may find the tests of your will against those immobilized by the status quo increasing. As I indicated several posts ago we are in for changes taking place at warp speed in directions beyond most people's imaginations a decade or so ago. So -- damn the torpedoes, full speed ahead.

Why Do Relatively Few Women Make a Big Name in Business?

Quick: Name the five most famous books written by women on the subject of management. Tick. Tick. Tick. Tick. Tick.  Bzzzzz. You lost out. Sorry.

Let’s try an easier question. Aside from Marrisa Mayer, Ursula Burns, and Carol Bartz (to take out the easy ones) name five leading women in tech.  Tick. Tick. Tick. Oh, forget it.

Where are all the women in this age of gender diversity in the workplace, especially in tech?

Women supposedly account for more new businesses than men do. According to the Kaufman Foundation which studies such matters, between 1997 and 2002 U.S. women-owned firms grew in number by 19.8 percent, compared with a 10.3 percent growth rate firms overall.

During the same period, however, women-owned firms recorded lower survival numbers, as well as lower numbers for size, growth, earnings and profits. The data suggest that women-owned firms are smaller and less growth-oriented than men-owned firms.

What’s behind these disappointing numbers?

First, let me answer why I’m writing about gender and the workplace. I started looking at the topic in connection with a new book I’m doing. It’s hard to find women’s names that resonate in the business community like those of Peter Drucker, Gary Hamel, Tom Peters, Michael, Porter, Jim Collins, John Kotter, and Warren Bennis and so on and so on.

Then, a Fast Company article appeared in my email today on “The Most Influential Women in Technology.” The number of influential women in tech is shockingly small. Women as a founder or co-founder account for less than 10 percent of all tech startups.

I’ve read that women have greater challenges getting credit, that they still must learn to play by rules laid down by men, that they have to face social stigmas associated with women who abandon family  for career, and other reasons why fewer women make it really big in the business world.

Alicia Robb, Kauffman Foundation senior research fellow said, "The interesting thing about women entrepreneurs is that many of them may be purposely starting businesses as a lifestyle choice. The number of women-owned businesses growing faster may reflect that women are going into business as a viable way to move out of the traditional employment market and gain flexibility. It's hard to know if those kinds of businesses are where they want to be or if they would like to grow faster."

In other words it is not fair to women (or men, for that matter) to compare them on equal terms. Women often start businesses for different reasons than men do. And probably by virtue of lower testosterone levels they generally pursue business less competitively.

Do we see women who are as competitive as any man? Of course – but not as often because women are indeed different. Their brains work differently and they have characteristic values that weigh in heavier in their decisions than they do in men’s decisions. For example, research shows that women tend to be more collaboratively-minded than men are. Men are more likely to make a go of it on their own.

One thing I’m seeing is that while women’s influence in tech may be what some would call appallingly low, women’s influence on the business ethos in general is growing and men’s is ebbing. Perhaps from the standpoint of what’s good for society, maybe women’s influence on corporate behavior is more important than on corporate growth. I’ll get into more detail in my next post on this topic because it affects every aspect of business from employee relations and product design to marketing and customer servicing.

Strategies for Surviving and Thriving in Challenging Times

Strategic Action #5 for Surviving and Thriving:
Operate with Transparency

Last month millions were horrified by a clandestinely filmed video of animal abuse at the Westland/Hallmark Meat Co. in California. The video showed cattle too sick to walk on their being prodded with electrical shocks and forklifts toward their place of slaughter.

Under USDA rules no meat from animals unable to walk on their own can be lawfully sold for human consumption.

Westland/Hallmark president and CEO Steve Mendell declared in a press release:

“Words cannot accurately express how shocked and horrified I was at the depictions contained on the video that was taken by an individual who worked at our facility from October 3 thru November 14, 2007

. We have taken swift action regarding the two employees identified on the video and have already implemented aggressive measures to ensure all employees follow our humane handling policies and procedures.”

One can only speculate whether Mr. Mendell was really shocked and horrified – or whether his shock and horror was over his operations being secretly filmed. However, with the ubiquity of the Internet, murder will out – no pun intended.

No more can we blithely assume that any action we take that is observed by another person will not ever show up on the Internet.

Welcome to the Age of Transparency.

Companies that Raj Sisodia and I write about in Firms of Endearment have learned that transparency is not as fraught with risk as hierarchically organized command-and-control organizations and their lawyers have long believed.

In the first place, an ethos of transparency is a vaccine against the kinds of executive cupidity seen in such iconic scandals as those represented by the names Enron, WorldCom and Tyco.

However, beyond that, an ethos of transparency strengthens employee loyalty and productivity. Privately-owned sneaker maker New Balance shares an uncommon amount of production and financial data with employees. This enables employees to gauge their performance. It’s apparently a more effective way of inspiring workers to higher performance levels than supervisors’ criticisms and commands.

New Balance makes more than 30 percent of its shoes in the U.S. with plans to increase that percentage. That is impressive given that sneakers can be made in China for 1/14 the hourly wage New Balance pays its U.S.workers. However, New Balance’s U.S.factories are the most productive sneaker producers in the world. Much of the reason for this, according to New Balance CEO Jim Davis, is the transparency of his operations to employees.

Organic grocer Whole Foods publishes everyone’s salaries to avoid corrosive rumor mongering about who is paid what. JetBlue teaches employees how to read the company’s financials so that they can better appreciate their contribution to its bottom line.

A felicitous consequence of operating with transparency internally is that employees do the same with customers, thus building greater trust between company and customer.

Transparency responds to rising expectations for authenticity in producer-consumer relationships. After enduring many decades of exaggerated company claims, customers are turning off in ever greater numbers to unauthentic messages. Additionally, everyday whole armies of consumers post go online to tell their stories of gaps between a company’s claims and its delivery.

A useful guide to operating with greater authenticity is Joe Pine and Jim Gilmore’s new book, Authenticity. Click on the book cover in the left column  to be teleported to Amazon where you can read about Authenticity.
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If you have the stomach for it, watch a PETA (People for the Ethical Treatment of Animals) film about animal abuse that has turned untold numbers into either vegetarians or customers of companies like Whole Foods who only buy meat and dairy products from producers that have been certified as humane. The PETA video underscores the decline of corporate secrecy which is making transparency less and less an option. To borrow from Google, "Don't be evil" because sooner or later you'll be found out if you do.

 

 

 

Strategic Action #5 for Surviving and Thriving:
Operate with Transparency

Strategies for Surviving and Thriving in Challenging Times

Strategic Action #3 for Surviving and Thriving:
Adapt Your Life to Web 2.0 (Part 2)

The Role of Collective Intelligence

Experts own the world. No other classification of human mental output holds more sway over our lives.

Experts appear with predictable regularity in courtrooms, congressional hearings, corporate retreats, academic symposia as well as in our personal lives in the personages of doctors, lawyers, financial planners, spiritual advisors and a plethora of other roles.

Recently, the role of experts in our lives has been coming under sharp questioning. James Surowiecki’s book, The Wisdom of Crowds argues that “large groups of people are smarter than an elite few, no matter how brilliant – better at solving problems, fostering innovation, coming to wise decisions and even predicting the future.” (From the front piece.)

The subject of the collective intelligence of groups of people is garnering growing interest. How is it possible that input from random aggregations of people can often outdo a gaggle of PhDs in choosing the best course of action in an undertaking?

James Shanteau offers some answers to that question in an online article, Competence in Experts: The Role of Task Characteristics.

Presumably, experts in a particular subject area enjoy considerable consensus among themselves. However, Shanteau’s research indicates that in a number of fields agreement among experts falls below 50 percent. These fields include stock-picking, livestock judging, and clinical psychology.

Raj Sisodia, my co-author of Firms of Endearment, and I were struck by how much FoEs strive to tap the “wisdom of the crowds” – that is, to enlist the collective intelligence in their organizations in problem solving.

Most companies do not permit collective intelligence to develop. It cannot thrive in the hierarchical social structures most organizations have. After all, people called CEOs, COOs, CFOs, CMOs and the like are a company’s in-house experts. Lowlifes on the front lines have neither the knowledge nor the thinking skills need to forge wise decisions.

Most companies are organized like a machine. They are made up of various moving parts that somewhat predetermine the general nature of outcomes. Each part has a designated function. The role of management is to see that each part is doing what it’s supposed to do, and to keep the moving parts working in harmony.

However, there is a better way to organize and operate a company. Instead of organizing a company artificially like a clockwork mechanism, organizing it more naturally as a complex adaptive system permits the wisdom of the crowds to form and express itself.

Like the self-correcting, self-organizing characteristics of Wikipedia, companies that are organized and operate along the lines of a complex adaptive system have an ability to make course changes far faster than mechanistically organized companies. They also more quickly spot and exploit new business opportunities.

Everyone agrees that the scale and pace of change that companies face today is unprecedented. Surviving and thriving have never been more challenging. On the other hand, so also are the opportunities unprecedented. And the companies that are being most successful in developing new business opportunities tend to be those that operate as complex adaptive systems that tap the wisdom of the crowds that flows from the operation of collective intelligence.

Finally, for a company to enjoy the greatest success in adapting to Web 2.0 (see th previous post), it is necessary to become less of a mechanistically organized and operating company and more of a complex adaptive systems organism. Hierarchical, command and control organizations are highly incompatible with the free-flowing, open source nature of Web 2.0.

 

 

 

Strategic Action #3 for Surviving and Thriving:
Adapt Your Life to Web 2.0 (Part 2)

The Role of Collective Intelligence

Strategic Action #3 for Surviving and Thriving:
Adapt Your Life to Web 2.0 (Part 2)

The Role of Collective Intelligence

Strategic Action #3 for Surviving and Thriving:
Adapt Your Life to Web 2.0 (Part 2)

The Role of Collective Intelligence

Surviving & Thriving Strategy in Challenging Times

Strategic Action #1 for Surviving and Thriving:
Create Insanely Happy Employees

Napoleon famously said that an army travels on its stomach. Could it be that companies travel on the happiness of their employees?   

Google’s employees are insanely happy. It ranked #1 in Fortune’s 2008 Best Companies to Work For list. Google was also #1 in 2007. It is an insanely successful company. You can also access the list at The Best Companies to Work For Institute, which is Fortune’s partner on the subject. You can get a lot of insights on that site on how to create insanely happy employees.

Creating insanely happy employees is the # 1 surviving and thriving strategy for challenging times. But that should be about the biggest duh you could ever come up with. Insanely happy employees create insanely satisfied customers.

Is there a better strategy for marketing than one that creates armies of loyal customers who keep coming back and who can’t stop telling relatives, friends and others how great the company is?

We talk about Google and 29 other companies that strive to create insanely happy employees, insanely devoted customers, insanely responsive suppliers, insanely embracing communities and insanely rich investors in Firms of Endearment. 

The list of benefits companies get from insanely happy employees is long; but here's a sampling: higher productivity, lower employee-related costs per dollar of revenue, higher repeat business from customers, lower marketing costs, typically higher share price earnings ratios, and quicker recovery in economic downturns.

If you work for a company that doesn't have a plan to create insanely happy employees, be an insurrectionist and get the movement going. If you are a supplier of marketing services to a company that doesn't have insaenly happy employees, be an agitator and tell your contacts the money they spend with you will get them further if they have insanely happy employees.

In short, become an evangelist for the insanely happy workplace and you'll get through whatever hard times lie ahead in great shape!

On Collaborative Stakeholder Relationships

In Firms of Endearment we extolled the virtues of the stakeholder relationship management (SRM) business model that guides the companies we identified as “firms of endearment (FoE.”

After reading Jody Gittell’s The Southwest Airlines Way I have come to believe that we should abandon the term “stakeholder relationship management.” In its place I offer “collaborative stakeholder relationships” (CSR).

Southwest doesn’t manage its relationships with stakeholders. It collaborates with them. From unions to staffers who clean planes, Southwest's management fosters a collaborative relationship with its stakeholders.

The word “manage” suggests pretensions of control. Southwestern Airlines will have none of that. Instead, as the subtitles of Gittlell's says, Southwest uses "the power of relationships to achieve high performance." Relationships tend wither and grow weak when one party tries to "manage" the relationship.

I’ve always had problems with the term “management” in another context. In the mid-1990s, the term "customer relationship management” came into vogue and became the core concept of a new information industry based on storing, analyzing, retrieving and using customer information to increase "share of wallet." CRM gurus Don Peppers and Martha Rogers enthusiastically championed CRM as the most important event in marketing since P.T. Barnum invented advertising.

But CRM was not about managing customer relationships. It was about managing customer data in order to more effectively exploit customers. The very term "share of wallet," coined by Peppers and Rogers, betrays the intention to exploit rather than to serve.

In contrast, FoEs strive for share of heart. They fervently believe that if they interact honorably with customers, customers will reward them with loyalty, which in fact is likely – though not necessarily – to increase share of wallet.

I’ve often written that proponents of CRM would project greater authenticity if they changed the term to “customer data management (CDM), for in all truth that is what CRM is all about.

I’ve thought the term customer relationship management verges on arrogance. No company is going to manage my relationship with it. Whether I have a relationship with a company is entirely up to me. FoEs realize that it is the same with stakeholders.

An economist that was introduced to an MIT MBA class as an expert in aviation explained Southwest’s extraordinary financial success to its having no unions to contend with. In fact, Southwest is one of the most heavily unionized airlines. But unlike the other big airlines, Southwest views unions as partners, intentionally collaborating with them for mutual benefit.

And so it is with all the companies we identified as firms of endearment – they all view stakeholders not as objects of managed relationships but as collaborative relationships. Henceforth I shall speak not of teh stakeholder relationship management business model, but of the collaborative stakeholder relationships business model. I would appreciate readers views on this change in business nomenclature.

The Little Grocery That Is Surprising the Big Guys

The big grocery chains stock typically stock around 40,000 items. Trader Joe’s Stocks around 6,000 items in 12,000 to 15,000 square feet – less than a third as much floor space as a typical Kroger’s or Safeway.

If you are not familiar with Trader Joe's, you would do well to learn how this quirky company whose owners have never taken a dime out of it and never put a nickel into it have nurtured it into a $2 billion dollar business that translates into about $1,100 per square foot, twice that of traditional supermarkets.

Along with Whole Foods, Wegman’s and Costco, Trader Joe’s made the cut in our new book, Firms of Endearment as an exemplar of the stakeholder relationship management (SRM) business model that is somewhat pushing CRM (customer relationship management) to the side.

Business Week is carrying a story on Trader Joe’s this week. Click over to the story. It’s a good read. Also, check out the blog post on Trader Joe’s at C. B. Whittemore’s blog, Flooring the Customer.  You’ll likely be glad you did. She offers  an excellent presentation of the Trader Joe’s philosophy. That philosophy squares with the profile of every company that we described as FoEs in Firms of Endearment.

It's the CULTURE Stupid

I’ve just gotten into Jody Gittell’s The Southwestern Way. So far I like what I’m reading. It’s not a new book – it came out in 2003. But somehow we over looked it when doing our research for Firms of Endearment. Southwest, of course, is an FoE.

Ms. Gittell does a fascinating comparison between American Airlines and Southwest. American, like the other legacy airlines, has tried to copy in at least some regard the “Southwest Way.” The only problem they’ve encountered is that they don’t get the Southwest Way.

They have tried to copy the mechanical aspects of the Southwest Way – ramp procedures, baggage handling, reduction of types of aircraft and so on. But none has altered their culture.

While pilots and baggage handlers look at and talk to each other, no such thing happens at the other airlines that are socially organized by status position based on one’s job.

Gittell sums up the Southwest culture early in the book by saying the company’s social organization is based on shared goals, shared knowledge and mutual respect. At Southwest, the goals to which everyone subscribes are few and simple: on-time departures and arrivals, no lost luggage and smiling, happy customers. The other airlines may say they have the same goals, but no team identity exists to make them realizable.

At Southwest, every employee has a basic understanding of everyone else’s job and knows how they fit into the total picture. Legacy airline employees are pitifully ignorant of what employees not in their own line of work really do.

At Southwest, everyone talks to each other with respect. The people who clean the p[lanes are literally regarded as being just as important to the realization of shared goals as the pilots are.

One might think that with Southwest’s enviable record of 36 years of unbroken profits (some legacy airlines have been in bankruptcy two or more times), that someone in the other airlines would have figured out how Southwest Airlines does it. It’s not complicated. One word accounts for Southwest’s becoming the most successful airline in aviation history: “It’s the CULTURE, stupid,” as Bill Clinton’s leading political strategist James Carville might say.

Einstein famously said, “Not everything that can be counted counts, and not everything that counts can be counted.” Business managers are generally so accustomed to discounting what cannot be measured that they fail to take into account what really makes for success.

How does one measure culture? Certainly not with the certainty one measures ROI or ROE. Yet, in our research of companies we hold out as exemplars of the stakeholder relationship management business model, we came to the conclusion that culture is more accurately predictive of future performance than last year’s financials.

Ms. Gittell says that the real reason Southwest has been so successful is that it uses the power of relationships to achieve high performance. This is how it has created a cohesive, single culture. Most companies have multiple cultures. There is an executive culture and a product development culture. Then there’s a marketing culture and a sales culture. The, like so many stands of “junk” DNA tiny microcosmic cultures surrounding cliques of only a few people swirl around in company venues.

In short, most companies don’t have a culture. They are socially fragmented agglomerations of individuals, all looking out for themselves as priority number one. Few realize that a socially cohesive organization is the best way to serve everyone’s interests. Just ask the maintenance people and flight attendants at Southwest who became millionaires working for the company they LUV (Southwest’s ticker symbol).

No Meetings, No Schedules, No Kidding

In Firms of Endearment I wrote about a style of management that I called ironic management. By that I mean actions taken that by conventional logic would produce undesirable results but in fact yield felicitous results. Two examples I cite:

· FoEs decentralize decision-making, but do so in ways that increase rather than decrease top executive influence at all levels of a company.

· FoEs typically pay frontline staff above norms in their category. Rather than increasing cost of sales, this often reduces the percentage of a revenue dollar that goes to wages.

Now comes FoE big box retailer Best Buy with an extraordinary example of ironic management.

As reported in the December 11 issue of Business Week, Best Buy is radically reshaping the workplace by shifting to a “results-only work environment” (aka ROWE) that is “smashing the clock” as the BW article is entitled. Gone are fixed schedules, mandatory meetings and regular work hours.

Still a work in progress not yet spread across the entire company yet, ROWE has seen an average 35%+ rise in ROWE worker productivity since 2005. Voluntary turnover has plummeted 52% in logistics and an astonishing 90% in Best Buy’s online operations.

According to the research we conducted for Firms of Endearment, should the economy take a turn toward anemic performance in the next year as some are predicting, Best Buy’s ROWE program should give it an advantage over its competitors: FoEs tend to weather economic downturns better than their competitors because greater confidence placed in employees seems to increase a company’s ability to adapt to economic downturns.

Interestingly, 14^th-ranked (in annual sales in the U.S.) Home Depot has moved in a totally opposite direction under ex-Jack Welsh GE protégé Bob Nardelli. His militaristic command and control style of management that initially cut costs and improved efficiencies to strengthen the bottom line has played out its usefulness. Nardelli’s impact on company morale has been disastrous my many accounts after the “family atmosphere” fostered by Home Depot founders Bernie Marcus and Arthur Blank.

While the jury is still out on the long-term efficacy of Best Buy’s free-spirited ROWE approach – the antithesis of command and control management – it appears at this time that investors are going to be happier with Best Buy’s future performance than Home Depot’s performance.

It’s a different world than the one anticipated by traditional management theory. Ironic management is the wave of the future. Control and command management that treats employees as expendable units is OUT. Collaborative and caring management that draws forth creative solutions from employees at all levels of employment is IN.

Read the Business Week article, Smashing the Clock. You are likely to be astonished by this notable example of ironic management.