Shift to Inconspicuous Consumption– New Norm for Consumer Buying Behavior: Less Flaunting– Wealth, Income, Power…

Inconspicuous consumption is the purchasing of goods, services… that conveys a lower socioeconomic status… the inconspicuous consumer doesn’t want to impress anyone. In fact, what they really want is for other people to think of them as being lower on the socioeconomic totem pole than they really are. This is partially a desire not to flaunt one’s good fortune and it’s also a security measure, the idea being that one will be less likely to be robbed if one doesn’t act or appear rich…

In contrast, conspicuous consumer spends money to impress people and to ensure that others are well aware of the spender’s socioeconomic status… Conspicuous consumption is one of the oldest ideas in consumer behavior… As Thorstein Veblen noted over a century ago in his book– Theory of the Leisure Class– in which he coined the phrase ‘conspicuous consumption’– spending lavishly on expensive but essentially wasteful goods and services is ‘evidence of wealth’ and ‘failure to consume in due quantity and quality becomes a mark of inferiority and demerit’…

Being millionaire is becoming commonplace… The newly wealthy are often desperate to affirm their status by conspicuously consuming the favored brands of the already rich… According to James Lawson; price of entry for much of what traditionally was available to the top 0.001% is now far lower… and a sorry dilemma for an observer is– How do I know if the person who is driving a Ferrari owns it or is just renting it for the weekend? Demand for luxury items is soaring in emerging economies, such as; Russia, India, Brazil, China…

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The emerging consumers have a big appetite for the top luxury brands– and the owners of those brands are increasingly keen to oblige… According to Virginia Postrel; conspicuous consumption is much more important when people are not far from being poor… Yet rather than abandoning status anxiety, the way the rich seek to display their status may simply be getting more complex. As inequality grows again in rich countries, some of the very rich worry about consumption that is so conspicuous to the masses that it may provoke them to try to take their wealth away…

But perhaps the true symbol of exalted status in era of mass luxury is– conspicuous non-consumption. This is not just a growing tendency of the very rich to dress scruffily, drive beaten-up cars, as described by David Brooks in ‘Bobos in Paradise‘, but it’s showing that you have more money than you know how to spend… So, for example, philanthropy is increasingly fashionable… However, since the new philanthropists are keen to demonstrate that their giving produces results, this does not quite meet Veblen’s threshold of being a complete waste of money…

In the article Rise of Inconspicuous Consumption by Jonathan A. J. Wilson, Giana M. Eckhardt, Russell W. Belk write: Since Veblen coined term ‘conspicuous consumption’– the wisdom has been that wealthier consumers seek to distinguish themselves by flaunting their wealth via luxury consumption, which is unaffordable to main stream consumers. But, there is evidence that there is an evolving diminution of the term ‘luxury’ and it’s having a reciprocal effect on the appeal of conspicuousness at the upper end of the market– that is, the ‘conspicuousness’ of a brand will increase its price, to a point; then, it tends to decline…

This suggests that the consumers who can afford truly high-end brands (who are not price sensitive) are tending to prefer inconspicuous consumption… This shift from conspicuous to inconspicuous is a signal that can be seen in luxury brands, e.g.; Louis Vuitton uses their subtle ‘V’ in the knitted pattern of a sweater, rather than its former ubiquitous, easily identifiable logo…

In part, it’s an effort to differentiate the high status consumers from over-the-top conspicuous consumption of the nouveaux rich, and aspirational consumption of lower status consumers who tend to weaken a brand image by consuming more mass market versions of luxury goods… Also, in some urban societies there are increasing attitudes to sacrifice less visible ‘necessities’ like– food, medical care, adequate shelter…

In order to afford more visible ‘luxuries’ like– designer clothes, mobile phones, watches… and, for those who cannot afford to make these sacrifices, there are– knock-offs… All these trends dilute the status ‘signaling’ ability of luxury goods… and points toward a need to understand how to develop, manage brands– inconspicuously… and, challenging the conventional understandings of the importance of conspicuousness… There are economic forces, social trends… that are leading to rise of inconspicuousness and we must begin to understand how consumer constructs, such as; luxury, buying habits… are being redefined.

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In the article Inconspicuous Consumption by Richard Nicholls writes: Ostentatious is not a favored behavioral mode for many consumers who cannot afford serious quality in their lives. Competitive individualism is not the social force it was, which quietly expresses a savoir-vivre, and makes many markets viable… and there are many specific objects, goods, services… when procured, displayed… scream story of personal success, e.g.; drive Porsche to work, call friends using Vertu Constellation Quest Luxury smart phone, wear Dior three-piece in silk champagne, carry one’s stuff in Fendi handbag, summer in one’s home in Saint Paul de Vence…

These and many others goods, services… are a very emphatic symbols of wealth, and (arguably) sophistication… these are not your softly spoken, just-trying-to-get-through-the-day possessions. They invite the stare and perhaps the envy of others… They deny the need for careful humility in life… It was once a widespread conviction that such consumer impulses were absolutely vital to the performance of markets…

To the extent that consumption can be competitive, i.e., that people would like to buy things which they could, with pride, show to others who did not, or could not, own them… So companies happily keep inventing– new styles, creating new definitions of luxury, churn consumer tastes to fresh expressions of personal elevation… However, now in this modern era, we know from research data that only around 20% of people agree that: I try to buy things I know no-one else owns…

The outcome is a culture in which ‘luxury’ can be enjoyed for its intrinsic merits; it does not need to glitter, glow… in the company of others… The trend of inconspicuous consumption is competitive individualism, but it’s not the force it was in past decades… Here are some reasons:

  • Power of the environmentalist ethic: Over the last generation, the argument that a society over-consumes, wastes too many resources, guzzles scarce energy, has hit the cultural target. Even to take a lot of long-haul holidays is not so brag-able in a polite, green company…
  • De-stressed culture of social mobility: There are fewer outright snobs on the streets, in shops… There is just not the same pent-up demand for proof, branded proof… that a person has made a successful transition upwards into a different level of wealth…
  • Assumption of unstable economics: The recession and its aftershocks has shaken the optimism of even the most robustly prosperous middle-class homes. It’s now, as a result, more crass to vaunt out loud how much you recently paid for your– suit, car, holiday…  Around 70% of people even in the higher income segment were agreeing that: I shop around extensively to get the best deals… It’s just not cool to be a thoughtless spendthrift. Instead social approval is now won by showing what a skilful and focused shopper one is. Meanwhile, large banker bonuses seem odious to many…

In the article Rediscover Inconspicuous Consumption by Rich Cronin writes: For the balance of the last century, most people bought what they needed (and occasionally what they desired), but they made a concerted effort not to draw too much attention to those purchases. Families at all economic levels informed their children that it wasn’t what you could buy that mattered, but how you took care of what you already had.

The common wisdom taught that with a little scrubbing, some whitewash, and a few pots of geraniums, the most modest of shacks could be turned into a charming cottage… However, by middle of the 1980s, many people began to be seduced by new, aggressive forms of advertising and over-the-top– ‘Lifestyles of the Rich and Famous’– television programs that told us we deserved– ‘to have it all’– and having it all was happiness…

Now thirty years later there are occasional signs to indicate that some people may finally be getting their fill of ‘stuff”… If this is true (not simply as byproduct of a sagging economy or aging population), but, perhaps the dawn of a new anti-conspicuous consumption movement… It’s clear that over-buying and flagrant flaunting of material goods has become commonplace, and it’s spreading like a virus across the globe… Before the self-indulgence fever and over-the-top acquisition bug infects everyone… take a deep breath, step back, discover inconspicuous consumption…

Some experts suggest that consumers are over-consuming and there are no signs of let-up… According to kirstendirksen; consumers have developed culture of consumerism complete with a new vocabulary, e.g.; shop until you drop, retail therapy, impulse buys, binge buyers, conspicuous consumption… also new addictions, e.g.; shopping binges, compulsive shopping, shopaholics, addictive spending… Few consumers are immune and for some it’s a real problem… A European Union survey found that 33% of consumers displayed a high level of addiction to– rash, unnecessary consumption…

According to Jonah Berger and Morgan Ward; people choose products, services… to communicate a desired self-identity, characteristic… Brands assist the signaling process through– visible logos, explicit patterns, e.g.; Nike’s swoosh, Burberry’s plaid, Apple logo… all facilitate communication and allow others to make desired inferences about the user-wearer.

Such explicit identifiers are common, but one might expect less overt signals for lower-priced goods, for example; consumers may want other people to know when they bought ‘Armani’ shirt, but they might not want to broadcast it when they bought an item from Wal-Mart… Thus one might expect more explicit branding, such as; visible brand names, large logos… imprinted on more expensive goods…

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Researchers have examined– how ‘publicly visible consumption’ communicates a social identities and– how marketers adorn products, services… with logos, labels… to enable the signaling process, which then fuels the consumers desire to keep-up with the ‘rich and famous’… However, what they found was– although true for mass consumers– the more discriminating consumers preferred more subtle– signs, labels… even though they may be more difficult to identify…

According to Richard Nicholls; inconspicuous consumption is not necessarily a depressive force inside markets. The demand for quality is still systemic but quality does not need to be over-stated… The numbers of people who are moved to express their personality through what they– buy, wear… is low– not in the numbers they were in the past decade; perhaps, consumers are more relaxed… In this setting, it’s instructive to view the vitality of the modern renting markets for luxury goods, such as; designer fashions, sports cars, jewellery…

Many consumers believe that they just don’t need to own, show their goods, services… on the same level as the 20th century model… In fact, this trend fuels the debate about– how to sell, what to sell… in a changing less-visible class-defined society– it’s less full of as many consumers who either want to boast, or are nervous about making social gaffes… Inconspicuous consumption is a powerful and permanent-looking consumer attitude, which requires even more subtle communication imagery…

Bad Business Leaders– Incompetent, Clown, Arrogant, Dunce, Shady..: Most Companies are Clueless at Picking Leaders…

Bad business leaders is a serious problem in many businesses, organizations… at all levels of management, globally… According to Gallup surveys; only one-in-five (18%) of those currently in management roles demonstrate a high-level of talent for managing others, while another two-in-ten (20%) show a basic talent for it…

Still, this means that organizations are missing-the-mark, with high-level managerial talent, in 82% of their hiring decisions, which is an alarming problem for a business’ sustainability, employee’s engagement, and the development of high-performing business cultures… This basic flaw and inefficiency in picking leadership talent costs companies hundreds of billions of dollars, annually…

Gallup’s study included; hundreds of businesses and organizations, and it measured the engagement of 27 million employees and more than 2.5 million work-units over the past two decades. No matter– industry, size, location… they find that executives are struggling to unlock the mystery of why performance varies so immensely from one work-group to the next. Performance metrics fluctuate widely and unnecessarily, within most companies; in no small part from lack of consistency in how people are managed…

It’s common practice that most companies promote workers into managerial positions because they seemingly deserve it, rather than because they have the talent for it… The good news is that sufficient management talent exists in every company, but it’s often hiding in plain sight… For too long, companies have wasted time, energy, and resources hiring the wrong managers, and then attempting to train them– to be who they are not… Nothing fixes the wrong pick…

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Businesses that get it right, however, and pick managers based on talent– thrive and gain a significant competitive advantage… But, according to James Baldock; bad management traits can be like dirty socks, you don’t want them but you leave them somewhere and forget about them until you randomly have their stench.   Unfortunately, people often hold onto their bad traits and characteristics to the point of disaster, destruction… Maybe this sounds a little too dramatic, but bad business leaders’ traits can be as obvious as a– serious anger problems, and right through to the subtle issues of passive aggressive, disorganized…

According to Mike Myatt; a leader not capable of managing or not fully invested in their team won’t have a team– at least not an effective one. Real leaders are accountable, but leaders that are not accountable ‘to’ their people will eventually be held accountable by’ their people… It’s the culture, stupid– forget this and all other efforts will be dysfunctional… remember the saying; ‘talent begets talent’, well it’s true, but also talent that aligns with the organization culture produces better results than talent that does not… According to Abraham Lincoln; nearly all men can stand adversity but if you want to test a man’s character, give him power…

In the article Traits of Bad Business Leaders by Major Jeffrey Ferguson writes: We tend to focus on character traits that make great leaders and we hear them time-and-time again, e.g.; integrity; sacrifice, values, selflessness… But what about character traits of bad leaders? This is the other side of leadership that is rarely discussed, studied… certainly we can all can think of someone we would call a bad leader… According to Barbara Kellerman; there are seven character traits, flaws… which consume a person and arguably make them a bad leader… consider the following:

  • Incompetent: They lack the will or skill, or both, to sustain effective action. The reasons for incompetence are too numerous to list, but include a lack of education experience expertise, drive, energy ability to focus, flexibility, ability, stability and maturity… just to name a few.
  • Rigid: They are stiff and unyielding, and unwilling or unable to adapt to new ideas, new information or changing times.
  • Intemperate: They lack self-control. He or she is surrounded by people who are unwilling or unable to intervene. Typically, intemperate behavior plays out in private. When the behavior is exposed, it’s often personally or professionally destructive
  • Callous: They are uncaring or unkind. The needs, wants, and wishes of the members of the group or organization are ignored or discounted by this type of leader.
  • Corrupt: They lie, cheat, steal… to such a degree they put self-interest ahead of public or group interest. Sadly, corruption is like a virus and no organization is immune. The path of corruption is easy to follow, and the benefits are great.
  • Insular: They minimize or disregard health and welfare of those outside their group or organization for which they are responsible… One group competes against another for scarce resources. The insular puts group’s interests ahead of the common interest… But, isolation is not in the best interests of the group or the organization, overall…
  • Evil: They commit atrocities and uses pain as an instrument of power. The harm done to members of the group is severe and can be physical, psychological or both.

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In the book Why Smart Executives Fail by Sydney Finkelstein writes: How do high-flying companies become complete failures… It turns out that all the senior executives at these companies have specific habits-traits in common; I called them– ‘habits of spectacularly unsuccessful executives’… and these habits should be early warning signs (i.e., cautionary tales) to other so-called, ‘unbeatable’ companies:

  • See themselves and as dominating their environment: This first habit may be the most insidious, since it appears to be highly desirable. Shouldn’t a company try to dominate its business environment, shape the future of its markets and set the pace within them? Yes, but there’s a catch: They vastly overestimate the extent to which they actually control events and vastly underestimate the role of chance and circumstance in their success… leaders who fall prey to this belief suffer from the illusion of personal pre-eminence…
  • No clear boundary between their personal interests and corporation’s interests: Like the first habit, this one seems innocuous, perhaps even beneficial. We want business leaders to be completely committed to their companies, with their interests tightly aligned with those of the company. But digging deeper, you find that failed executives weren’t identifying too little with the company, but rather too much. Instead of treating companies as enterprises that they needed to nurture; failed leaders treated them as extensions of themselves…
  • Think they have all the answers: Here’s the image of executive competence that we’ve been taught to admire for decades; a dynamic leader making a dozen decisions a minute, dealing with many crises simultaneously, and taking only seconds to size up situations that have stumped everyone else for days. The problem with this picture is that it’s a fraud. Leaders who are invariably crisp and decisive tend to settle issues so quickly they have no opportunity to grasp the ramifications. Worse, because these leaders need to feel they have all the answers, they aren’t open to learning new ones…
  • Ruthlessly eliminate anyone who isn’t completely behind them: Leaders who think their job is to instill belief in their vision also think that it’s their job to get everyone to buy into it. Anyone who doesn’t rally to their cause is undermining the vision. Hesitant managers have a choice: Get with the plan or leave… The problem with this approach is that it’s both unnecessary and destructive. Leaders don’t need to have everyone unanimously endorse their vision to have it carried out successfully. In fact, by eliminating all dissenting and contrasting viewpoints, destructive leaders cut themselves off from their best chance of seeing and correcting problems as they arise. Sometimes leaders who seek to stifle dissent only drive it underground. Once this happens, the entire organization falters.
  • Consummate spokespersons, obsessed with the company image: You know these leaders; high-profile executives who are constantly in public eye. The problem is that amid all media frenzy, accolades… their management efforts become shallow and ineffective. Instead of actually accomplishing things they often settle for appearance of accomplishing things… Behind these media darlings is a simple fact of executive life: Leaders don’t achieve a high level of media attention without devoting themselves assiduously to public relations. When leaders are obsessed with their image, they have little time for operational details.
  • Underestimate obstacles: Part of the allure of being a leader is the opportunity to espouse a vision. Yet, when leaders become so enamored of their vision, they often overlook or underestimate the difficulty of actually getting there… And when, it turns out, that the obstacles they casually waved aside become more troublesome than they anticipated, these leaders have a habit of plunging full-steam into the abyss.
  • Stubbornly rely on what worked for them in the past: Many leaders on their way to becoming ‘spectacularly unsuccessful’ accelerate their company’s decline by reverting to what they regard as tried-and-true methods. In their desire to make the most of what they regard as their core strengths, they cling to a static business model. They insist on providing a product to a market that no longer exists, or they fail to consider innovations in areas other than those that made the company successful in the past. Instead of considering a range of options that fit new circumstances, they use their own careers as the only point of reference and do the things that made them successful in the past…

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While many people are endowed with some good leadership traits… however, very few people have the unique combination of talent needed to help a team achieve excellence in a way that significantly improves a company’s performance… In William Shakespeare’s play– ‘The Winter’s Tale’; the ‘clown’ (leader) is not very bright (he’s easily duped). But overall, the clown’s job is to help inject a bit of levity (by way of his dim-witted antics) into the play (i.e., the business), which is what Shakespeare’s ‘rustic’ clown figures tend to do… While the clown doesn’t have much going on in the brains department, he is a player (i.e., a leader)…

According to Mike Myatt; it’s important to realize– just because someone holds a position of leadership doesn’t necessarily mean they should. Put another way, not all leaders are created equal… The problem many organizations seem to suffer is a recognition problem– they can’t seem to recognize good leaders from bad ones…

However, this recognition issue is easier said then done, maybe there should be a test– Is there a simple test that can quickly determine an executive’s leadership ability? The short answer is ‘yes’, but keep in mind that simple and fast aren’t always the same thing as being effective: There are a plethora of diagnostic tests, profiles, evaluations, assessments… that offer insights into leadership ability, or a lack thereof.

The problem is that they are overly analytical, very theoretical, very often subject to bias… If business has troubles identifying leaders or has shortage of leaders, you don’t have testing problem– you have a leadership problem… And, one of the primary responsibilities of leadership is to create more, better leaders, managers… at all levels-of-management…

Ailing, Failing Business– Rethink Basics, Revise the Recipe: Tough Times Require–Tough Measures, Tough People…

How do I fix an– ailing, failing business? Is it salvageable? Can I work harder, work smarter, and push through the difficult issues? According to Jeff Haden; think like a firefighter… ignore the business plan, which is often little better than a fantasy… Instead put all the attention on reality; sales, revenues, expenses, operations, cash flow… Focus on people; when a once-successful business is struggling, it’s almost always a people-related issue; leaders, management, employees… always start with people…

Often times, failing businesses have a very narrow view of what they think the problem really is. You can’t fix a failing business without looking at the big picture. Throw out the magnifying glass and focus on the wide angle… Business is too complex to assume that any one issue is the sole cause of a business’ shortcomings… According to Mark Zarr; our natural tendency is to hunker down and focus on the parts of the business that we know best. We tend to believe that the littlest things will revive the business if we can just perfect them. The more desperate we get, the more engorged the determination is to focus on some of the most obscure things, thinking that a fine detail-single relatively small issue is dragging the business down…

However, there is an upside; more than anything else working for a failing business teaches you about yourself. You learn what you’re really made of. What you’re capable of doing when everything’s on the line and everyone’s counting on you… Yes, troubled companies really are gold mines. They’re great opportunities to step-up, reach-out, take risks, and test yourself… You gain confidence from successes and wisdom from failures. Most of all, you’ll grow into whatever it is you’re capable of becoming… According to James Hurley; running a company is like reading a road map; a business is lost when it doesn’t know where it’s going, but equally lost when it doesn’t know where it is, now. In difficult times, strip the business model to basics; be ruthless, be honest, be clear, focus on core values… 

fail thIn the article Have You Worked for a Failing Company? by Steve Tobak writes: Nothing will prepare you better to lead, then working in a failing business– working for troubled companies brings out the best (and worst) in people. It creates strong, resilient, adaptive leadership… it’s what you learn by working for a company that has to slug it out with the market leaders, while on a shoestring budget… Here are a few pointers:

  • How to drink from the fire hose without drowning: When the business is understaffed, underfunded, and losing money every quarter, nobody’s going to wait around for management to figure things out… Customers have better things to do. So do competitors. These days, markets are constantly changing. Everything moves at lightening speed. There’s always too much information and never enough time to breathe. Better get used to it.
  • You can find a home: If there’s a test for knowing if you’re in the right place, it’s when the company you work for is in deep trouble and everyone’s got to– sacrifice, pitch-in, fight… If you still love getting up in the morning and going to work under those conditions, then you’ve found a home.
  • Know what great leadership really is: Chief executives don’t usually get fired when things are going well. They get canned when times are hard and the board figures out what they’re really made of– and it falls short of their expectations. When business is floundering that’s when the rubber meets the road. That’s when you can really tell if the company’s leadership has what it takes: guts, smarts, and most of all, resilience.
  • How to win no-win situations: When you’re outmanned and outgunned, you always end up having to troubleshoot seemingly impossible problems. When you’re pushed so hard that your back is up against a wall, that’s exactly when you’ll rise to the occasion and do the best work. That’s right: Necessity really is the mother of invention.
  • Guerilla warfare: Let’s face it: You don’t learn how to be scrappy, how to be crafty, how to do more with less, while working for the industry leader. You learn all that by working for an upstart that has to scrape and claw for every point of market share and every product feature with a fraction of the resources that the big guys have.

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In the article Four Most Important Words in Any Organization by Bruce Johnson writes: If you were to make a list of the four most important words in a business or organization, what would they be? It’s an interesting question. If you were to narrow down a business philosophy to just four words, what would they be? According to Dave Wheeler; the four most important words in any organization are: What do you think? I love the simplicity and power contained in those four simple words…

As leaders, we so often get stuck in the– It’s my job to have all the answers… or, It’s my job to come up with solutions to problems… But, we often forget that the primary job of a leaders is not to have all the answers, but to leverage time, talent, resources, intellectual property of the people in the organization, such that they get the answers, ask more questions, achieve results… Even more, when we ask: What do you think? A leader is doing so much more than just asking a question. For example:

  • You’re giving people respect (I value what you have to say, which is why I’ve asked).
  • You’re training people to be solutions creators (I want you to help solve this so you can do this in the future).
  • You’re bringing new ideas into the mix (not giving in to your own biases, prejudices).
  • You’re creating buy-in (since people tend to own what they help create).
  • You’re creating relational capital.

In the article Fix Your Failing Business by Mark Zarr writes: Fixing a failing business starts with you ‘the leader’. You have to step back, look at the big picture and honestly evaluate– what is going wrong, and right… This does not mean that you beat yourself up, but it does mean that you need to step up and take responsibility for the business. The buck stops with you, so if you’re– emotional, irrational, fearful, hopeless... then there is nowhere to go but down… The most common mistake that failing businesses make is to close the purse strings and stop investing (i.e., it’s investing, not spending)…

Many leaders are afraid of making hard decisions and choices because they cost money– leaders must ad fuel (i.e., investment) to the business if you want to fix it– ultimately you have two options: Do nothing and close the doors… or, Find the problems, design a solution and move forward… There is no small fix… and, just changing minor details (e.g., limit travel, reduce phone usage…) will never fix anything.

Businesses fail because of large problems, not from minor issues– and solving large problems is a team effort and everyone on the team must contribute and say; What they think? Leaders must listen, lead, and implement a realistic action plan… The good news is–with effective leadership, full team participation and commitment to move forward, there is good chance that you can fix a failing business, and turn it back into a thriving enterprise, instead of an all-consuming nightmare...

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In the article Failing Business Doesn’t Need a Turn-Around Plan by Dan Waldschmidt writes: Most businesses don’t need a turnaround strategy… They might need more sales, better marketing, happier customers, fresh product ideas… But a turnaround probably isn’t on that list. Frankly, if you can do ‘turnaround’, then you probably aren’t in that much trouble. If you can pivot. If you are jive. Then turning around is really just about managing priorities, executing on a plan, and taking responsibility for actions and results throughout organization… If you need help, it’s not because you are turned around. It’s because you’re lying on the ground. You just got crap kicked out of you– you’re  lying on the ground… broken, bleeding, half-dead, barely kicking… even with all this pain– the answer isn’t despair or hopelessness…

It’s leadership, action plan, execution… and, despite all the problems you can overcome but you must act now, for example: Forget about turnaround: Focus on ‘get-up’… the job is just to ‘get-up’… be realistic, don’t pretend that you’re better off than you really are… don’t blame people for silly mistakes… make better decisions… do more things right..

The truth about disaster is that it takes time to rebuild… it takes guts to put in the hard work… to keep going even when you don’t feel like it… But, that’s the job of a leader… to help those who are weakest make it across the finish line ahead… If you can do that, you won’t just have pulled off a ‘turnaround’, but you have changed the lives of those around you… You can do it… Get-up, Go-forward…

Get primal: Start with the basics– start with what you know works… Nothing fancy, just the basics… Even if a business is doing well on most levels, one major problem can lead to its decline. Or, a combination of multiple minor problems can end up being too much for a business to handle. It’s difficult for any business– to survive, to grow, to prosper; it takes capable leadership, adequate financing, well-defined goals, effective business practices, and more than a little bit of luck…

According to Grant Cardone; when the business is ailing don’t lose heart… there are steps you can take to turn the business around, before it’s too late, for example: (1) Get the real scoop; experience your business, first hand, become a customer… (2) Sell the staff; turn the staff into ‘ideal’ customer-centered employees– problem solvers, disciplined people who initiate on their own– all the things that HR puts in employment ads… (3) Take one hill; rallying the troops around a specific, achievable goal… focus on one hill (i.e., one problem, one issue…), then execute– take that one hill, then another, and another…

Each victory helps improve business, employees morale, customers satisfaction, stakeholders equity… it’s the road for improving an ailing, failing business

War for Retail Shelf Space; Battle for Shelf Placement; Fight for Slotting Fees: It’s All About– Pay-4-Space, Position, Leverage…

Shelf Space: Imagine the customer’s mind as a crowded supermarket shelf. Where does your retail brand sit? Are you front and center? Do you take pride of place at eye level? Are you next to the market-leading brand? Or are you an also-ran, relegated to a dusty spot near the floor? This is one way to think about ‘positioning’, a concept popularized by Al Ries and Jack Trout in their best-seller book–‘Positioning: The Battle for Your Mind’

According to Ries and Trout; positioning is not what you do to a product. Positioning is what you do to the mind of the customer– that is, you position (place) the product in the mind of the customer… According to Jon Bird; positioning is often a two-horse race; that of the market leader and the aspirant (or in less well-defined category, the market leader and the rest)… To position a brand well, you need to know who you are targeting, and you require absolute clarity about what you stand for vis-à-vis the competition…

Shelf space may very well be the most precious real estate in the consumer-retail value chain; in some categories, as much as 80% of all purchase decisions are made at the point of sale. Regardless of how much effort went into– product design, promotion… the ‘shelf’ is the point where the consumer meets– the retailer, the brand, the product…

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Yet, very little is known about the interaction between the — retailer, brand, consumer… In fact, many crucial shelf space questions are still difficult for many retailers and vendors to answer other than just on the basis of gut instinct, e.g.: How much is the store’s shelf space worth? What products and brands would make the most profitable use of the space? What products and assortments drive the greatest growth at the shelf? How do I make sure that these are the products that customers want?

According to Simon Harper; better data about product performance enables retailers to make better stocking decisions. Better stocking decisions, in turn, make it easier to build a strong relationship not only with vendors but also with consumers, as well. Stocking the right products in the right places is a good way to engender consumer loyalty toward both the store and the brand. Everyone wins with good shelf space profitability metrics, e.g., store earns a reputation for carrying a strong assort­ment of goods that are always available, and vendors can focus on stocking product lines that are recognized as winners…

Economics of Retail Shelf Space Practices: Slotting fee, slotting allowance, pay-2-stay, pay-4-space… is a fee charged for product placement on retail shelves. The fee varies greatly depending on the product, vendor, market conditions… For a new product, the initial slotting fee can vary substantially, e.g.; for regional cluster of stores– it could be several thousands of dollars, whereas in high-demand markets– it could be several hundreds of thousands of dollars… In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees…

According to a Federal Trade Commission (FTC) study; the practice of slotting is ‘widespread’ in the retail industry. Many business earn more profit from agreeing to carry a vendor’s product than they do from actually selling the product to retail consumers; although, there are disagreements, for example: According to some retailers; fees serve to efficiently allocate scarce shelf space, they help balance risk of new product failure between vendors and retailers, they help vendors signal private information about potential success of new products, and they serve to widen retail distribution for vendors by mitigating retail competition…

However, according to some vendors; slotting fees are a move by retailers to profit at vendors’ expense. Some experts argue that slotting fees are unethical, since they create a barrier to entry for small business that don’t have cash flow to compete with large companies… Slotting fee  arrangements have become increasingly important and common in many retail sectors, e.g.; supermarket, drug stores, bookstores,  music stores… In addition to payments for stocking products, slotting payments are made for special displays or preferred locations, such as; end-of-aisle displays in supermarkets, placement of books on tables in bookstores, promotion of particular songs at listening posts in music stores…

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Some industry experts say that these allowances raise consumer prices… more important, small vendors are being crushed by the practice. But the Federal Trade Commission (FTC) says it has not challenged slotting allowances because it lacks evidence that they are anti-competitive in a universal sense or harmful to consumers… According to Greg Shaffer; slotting allowances, include a broad range of expenditures, e.g., ‘slotting fees’ for new products, pay-to-stay’ fees to remain on shelves, ‘facing allowances’ to increase space or improve position and ‘street money’ for aisle displays…

No one knows precisely how much retailers collect in slotting allowances, but some estimates range between $6 billion and $18 billion a year… According to Marianne M. Jennings; this practice is sort of under the table and sort of not, but the practices seems to be growing… Some retail chains have flat fee, e.g., $5,000 for product introductions and other retailers may have a graduated fee schedule tied to location with ‘eye-level’ slots costing more than ‘knee-or ground-level’ spots.

Spaces at ‘end-of-aisles’ bring high fees because they guarantee attention… Retailers argue that the allowances are necessary to manage the 20,000 or more new products that compete every year– among 50,000 or more items carried by some retailers… According to Edie Clark; about 90% of new products fail or get withdrawn every year, so the issue is who absorbs the cost of failure…

In the article Shelf Space Payments, Retail Bargaining Power by Josh Wright writes: Contrary to the ‘retailer bargaining power’ theories, slotting payments are consequence of the competitive process between vendors and retailers to create highly profitable sales through– the allocation of premium shelf space… This competition between vendors for promotional shelf space is expected to have two main effects: (1) increased  shelf space relative to the space they would have without the payment.. (2) change in the distribution of products on the shelves themselves…

The data support the theory that shelf space allowances are increasing retail shelf space demand despite the fact that fee sizes have increased over time… The data also suggest these practices are part of robust competitive process, and typically the payments are passed on to consumers. Also, the data shows that large vendors make shelf space payments not only to large retailers, but also small retail niche players with trivial market shares, which is inconsistent with the ‘retailer bargaining power’ theory of slotting…

In fact, slotting practices provide retailers with more flexibility to limit shelf space thereby increasing competition between vendors, and thus enabling retailers to increase fees… For example; retailers may grant vendors– exclusive or partial exclusive contract– for committing 85% of a select space for a specific brand in exchange for increased slotting fees. Also, the exclusivity arrangements are an important mechanism for retailers for promoting a specific vendor brand, which can increase the value and base price of the retailers’ shelf space…

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In the article Shelf Management and Space Elasticity by Xavier Drèze, Stephen J. Hoch, Mary E. Purk write: Indeed, one of the many challenges facing retailers is how to properly allocate shelf space to the multitude of products they sell. A typical large retailer can carry more than 45,000 different items or ‘stocking keeping units (sku’s)’ on an everyday basis..

A typical chain may take on one-third of these new items each year. Each new product adoption is accompanied with uncertainty regarding the most appropriate location for its display and the optimal amount of shelf space to allocate. Retail shelf space is valuable real estate… Most vendors are willing to pay significant premiums to obtain preferred retail locations on both a promotional and everyday basis. And retailers are more than willing to accommodate vendors for the right price.

Vendors spend 45-50% of their promotional dollars on trade promotion, and the vast majority used to secure feature advertising and display space in the form of– front-walls, end-caps, wings, in-aisle gondolas… In many, but not all product categories, retailers routinely charge slotting allowances when taking on new products. Although these fees help to defray costs of adding (and deleting) an item from the system, they also cover the retailer’s opportunity costs for allocating shelf space to one item over another. Some retailers supposedly even charge slotting fees to keep existing items on the shelf…

Vendors want to maximize sales, profits… of their products and, as such; always want more and better space to be allocated to their brands. Retailers also want to maximize category sales, profits… regardless of brand identity; and they must carefully allocate a fixed amount of shelf space in the best possible way…

Some of the hottest real estate in the country these days is on retail store shelves. Shelf space allocation is a serious issue in retail business. It’s an important tool for attracting customers’ attention, but getting a product on the shelf is no guarantee that it will sell… According to Daniel Lohman; product placement is key; once you get on the shelf the goals should be to gain optimal product placement, and increase holding power… it’s critical to protect your shelf presence, strengthens the brand image, create additional holding power for future growth...

According to Steve Holland; slotting allowances have become commonplace in the retail industry. Right now it’s just part of the way that business is done… Retailers say they need these fees to offset the high failure rate of new products… Also, a retailer or wholesaler can’t afford to tie up a warehouse slot or shelf space on items just because the vendors introduced them to see if they’re going to sell, or not…

According to Bob Schmitz; most of the so-called product introductions that retailers see, frankly, aren’t truly new at all. They’re a new flavor, new size, or new form of a similar product... Behind the deluge of new products is insecurity, i.e., companies introduce more products because there is less likelihood that any one of them will be a success. The idea is to get the product funnel very big on the early end, and do a lot of test marketing and evaluation, hoping that low percentage of success will not work against you…

According to a FTC study; a rough estimate of the slotting allowance required for a nationwide introduction of a new product– assuming that a nationwide introduction would require distribution to 85% of retail outlets and 85% of these outlets would receive a slotting fee– the data suggest that cost could range from a little under $1 million to over $2 million, depending on the product category…

Better Mousetrap–Myopia; Build It, They Will Come… Baloney! Business Reality– Better, Is Not Good Enough Anymore…

A wise man once wrote: If a business builds a better mousetrap, the world will make a beaten path to their door… Well, that’s not exactly what Ralph Waldo Emerson said, but it’s close enough… ah, build a better mouse trap, yes; it’s a business goal to build a better mouse trap– and not just different mouse trap but a ‘better’ mouse trap… but, ‘better’ is relative: Better for whom? Better for what? Why should consumers care?

According to Steve Denning; once upon a time, business could succeed by building a better mousetrap, but the world has changed– Building a better mousetrap is not good enough anymore and businesses that don’t recognize it will not survive– now, business success requires a synthesis between understanding markets, new technology, design, simplicity… Now, it’s the principles of ‘radical change’ management that matters– it’s different way of thinking, speaking, acting, interacting with the world… it’s a very different ballgame from the old-school of build a ‘better mousetrap’ management…

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According to Bob Ford; better mousetraps are built every day, but waiting for the world to line up at the door is just wishful thinking… Introducing step-change innovation is much more than just technology itself; it involves establishing a compelling vision that encourages people to get on board… and for many businesses the status quo prevails and innovation never gets a chance…

The mousetrap way of thinking has at least two severely limiting assumptions: First, it assumes that the answer can only be found within just the technology… Second, it defines goals in terms of the solution (‘how’) rather than in terms of the consumer needs (‘what’).  This way of thinking is an obstacle to the development of newer, better, more effective… ways to meet consumers’ needs. In fact, it often doesn’t meet the consumer’s needs at all… innovation that starts with analysis of the consumer’s real-life needs (‘what’) can often allow innovators to devise more successful solutions than innovation that starts by assuming a better version of an existing technology (‘how’)…

In the article Myth: Just Build a Better Mousetrap by Steve Denning writes: This isn’t a new style of management– ‘build a better mousetrap’ is indeed old-school. It’s quite different from the ‘radical change management’ being practiced now by truly innovative businesses, for example:

  • First: Building a better mousetrap embodies an inside-out mindset; it means thinking about producing a product from within the firm, rather than thinking outside-in, which is thinking about the people who are going to use the product and what would delight them. The inside-out perspective characterizes the 20th Century thinking, whereas the outside-in represents the shift in power from buyer to seller, which characterizes the new business reality… According to Professor Ranjay Gulati; firms with an inside-out mindset are much less resilient than those that adopted an outside-in mindset, basing everything on understanding customers’ problems, wants, needs…
  • Second: When the goal is producing a product, the management approach tends to be old-school– top-down control management. A product is an output, i.e. a thing. You can set up reliable systems to produce outputs… By contrast, ‘delighting the customer’ is an outcome, not an output… It’s not something that top-down control management is capable of accomplishing. Top-down control management was designed to deliver products efficiently. To generate the outcome of ‘delighted customers’, you need self-organizing teams focused on the customer’s experience…
  • Third: Delighting customers can only be approached by trial and error– work has to be organized in short cycles through dynamic functional linking, rather than through traditional hierarchical bureaucracy, which is used to produce the ‘better mousetrap’, utilizing efficiencies of scale…
  • Fourth: Organizational values have to change. If the goal is simply to build a better mousetrap, the task of management becomes simply that of building it as efficiently as possible… It’s a focus on continuous improvement– In effect, the mousetrap must keep getting better for customers to be delighted… By contrast, ‘delighting’ by focusing on the customer’s needs, experience…
  • Fifth: Communications must change. You can’t delight customers by communicating in top-down commands, which is also dispiriting for employees… You need horizontal adult-to-adult communications.
  • Sixth: Businesses need to be systematically measuring whether customers are, or are not, being delighted and adjusting their actions accordingly.

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In the article If You Build It, Will They Come? by David Power writes: Many growth companies make the mistake of launching new offers before they understand the market… They believe the value of their new offer will be so obvious to customers that all they need is a great engineering team and a predatory sales force and they can race their idea to market. This build it and they will come approach to product development is also known as technology in search of a marketIt’s the business equivalent of oil well wildcatting — the high stakes search for oil in unchartered territory.

As a business model, it’s terribly capital inefficient… Businesses often confuse new technologies with new markets… The notion of technology in search of a market is an expensive risk that businesses can avoid by answering two simple but enlightening questions: 1) Who is the customer? 2) What business problem do we solve? If a company cannot answer these questions, it may have a technology but not a market. There are two arguments for building a product before validating a market…

  • First-mover advantage: If we don’t launch it now, someone else will emerge as the category leader… This worked for Facebook but not for ESPN’s Mobile Phone, HP ‘s tablet computer, Solyndra’s solar panels, and countless other half-baked new offers… Furthermore, being the first mover guarantee– does not guarantee success…
  • Customers don’t know: Steve Jobs made clear; We don’t do market research. Our goal is to design, develop, and bring to market good products… and we trust, as a consequence that people will like them… Similarly, Henry Ford once said; If I’d asked customers what they wanted, they would have said ‘a faster horse’… Every century we get a genius or two like Ford, Jobs… Unfortunately, most innovators are not as gifted, and there are many more examples of technology in search of a market that fail…

In the article Build a Better Mousetrap by Claude Whitacre writes: Of course, ‘mousetrap’ is a metaphor for a new product, service… I just picked mousetraps because it was catchy… Great marketing is fundamental – imperative for finding out what people want (i.e., what problems they want to solve), analyzing the size of the market (i.e., understanding demand for the solution), understanding competitive forces (i.e., seeing what else is trying to solve the same problems)…

Whereas, biggest issue with build a better mousetrap approach are the assumptions, e.g.; there is a market for your better mousetrap, and all the keys are aligned– right market size, competition, timing, price, performance… However, the basic assumptions are counter to a highly innovative and competitive market environment… it’s everything in business, but in reverse order… Some points to watch:

  • Do people really want a better mousetrap? Is there something about the mousetraps sold now that people don’t like? For example, do people get their fingers snapped by the tripping mechanism? Do they hate the idea of picking up a dead mouse to dispose of it? Is it the sight of the dead mouse? The smell? Just the idea of mangling a perfectly innocent mouse?
  • Is the market growing, or shrinking? Are there more people buying mousetraps than last year? If so, you have an opportunity to ride the wave with a slightly cheaper version of the current mousetrap. If number of mousetraps sold every year is sharply declining, is it because there is something better out there? If not, building a better mousetrap, with dwindling demand, is a sure way to failure…
  • Do people really want to kill mice? Would a more accepted product be one that repels mice? How about something that repels mice, and gets rid of the smell (assuming that dead mice smell) at the same time? Is that something people want? How about a way to treat the wood or insulation so that mice hate the taste, and won’t come in at all?

In the article Building a Better Mousetrap by A. Blanton Godfrey writes: Companies that fail to create a competitive advantage definitely face a survival struggle. Just trying to do exactly the same things as the competition, but only a little bit better, is a tough strategy with which to succeed… According to Jack Welch; Innovate or die-In these challenging times, the statement has more relevance than ever… However, we often misunderstand innovation. Far too many people think only product innovation matters, and they forget that we can also be incredibly innovative in production, distribution, marketing, service…

Many times I’ve heard people state emphatically: If we don’t come up with new products, we’ll be out of business– What nonsense… Many of the most successful new companies during the past decades haven’t really created new products– just new ways of producing, distributing… those that already exist. Innovation isn’t just about breakthrough thinking, new products– often, it’s simply understanding better ways to produce something, distribute something or make it easier for the customer to use the product… Innovation comes in many forms, but it’s often innovation that drives long-term success…

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Myth of the mousetrap is perhaps the most damaging myth about business: It gives the impression that building a good product or even just a better product than the competition is the majority of what it takes to build a business… According to John Seiffer; that’s just not true; yet the comfort of believing it forces countless businesses to endure the pain of failure despite having a good, great, or superior product…

According to David Burkus; the ‘mousetrap myth’ is perhaps, of all the myths of innovation, the most stifling to innovation because it doesn’t concern generating ideas, rather it affects how ideas are implemented. It’s not enough for an organization to have creative people; it must develop a culture that doesn’t reject great ideas. It’s not enough for people to learn how to be more creative; they also need to be persistent through the rejection they might face…

Creative ideas, by definition, are novel and useful but it’s hard to see the usefulness in new ideas when you’re judging them with an old mindset… As leaders, it’s especially important to remember our inherent bias against creativity and make sure when we judge creative ideas, we aren’t using their novelty as an excuse to dismiss their usefulness

According to Joseph L. Driscoll; there is so much happening ‘on the inside’ of a business that we forget about what’s happening ‘on the outside’… Build a better mousetrap and the world will beat a path to your door: In business, nothing could be further from the truth…

So, go ahead; build a better mousetrap if you are so inclined, but to build a ‘better business’ remember, Jack Welch’s comment: Innovate or die…

Debunk the Cliche– Government Should Run Like a Business: Ignorance About the True Missions of Both These Enterprises…

An often-repeated cliché–government should run like a business–reveals ignorance about what either government or business or both, really are… According to Seth Masket; business exist to turn profit… conversely, government exists to provide the public– goods and services– government is inherently an unprofitable enterprise… It’s totally different mission statement… Not only does government have a different mission, it’s accountable to far more people than just shareholders, employees, customers…

According to Charlie Kufs; government can employ many of the same tools as the private sector, such as– goal setting, process, analytics… but performance measures must be different… You can’t apply private sector benchmarks to government performance… According to Eric Zorn; business and government are not only two different professions, but they have opposite goals…

The proper goal of a business is to earn a profit. If it also does some social good or produces a socially useful product, that’s great, but it’s icing on the cake. Profit is the goal, and a business person is judged on the profits made… The goal of government, on the other hand, is to– deliver services, fight wars, stamp passports, pave streets, end recessions, collect taxes… If the government can do this efficiently and at a minimum cost, that’s great, but again, it’s icing on the cake… Government leaders are judged by whether they deliver the services, not by whether they make a profit doing it… Business leaders and political leaders do different things and success in one doesn’t qualify a leader to do the other…

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Government shouldn’t be run like a business– not even a good business– because it’s not a business… Government should be run like a good government… According to Brandon Jubar; business can stop providing an unprofitable service, but the government cannot stop providing its services… Governments must figure out how to make things work, regardless of unfavorable rules, onerous regulations, or non-existent budgets… At the most basic level, that means that if a service isn’t being effectively and efficiently provided to the citizens, than it needs to be fixed…

According to Jim Mintz; those who advocate that public sector managers should operate like their private-sector counterparts without understanding the context of how political and administrative institutions function are clearly misinformed. There is no question that there are opportunities for government to adopt business practices from time to time, but government is not a business and those who continually argue for government acting like a business are offering a misguided solution… According to John T. Harvey; does it make sense to run government like a business? Short answer is ‘no’…

Bottom line– the Constitution was designed to make the federal government less efficient through– separation of powers, partisan political system, need to serve everyone (not just profitable ones),  maintain- nurture public trust… All of these responsibilities work against operating government like a business… Here’s novel idea– let’s operate government like a good government…

In the article Government Should Run Like a Business–Not Way You Think by Eric Schnurer writes: Government is everywhere and it’s an enterprise in serious trouble… If governments were private businesses, they would be facing the prospect of either takeover to ‘rescue’ them, or death in highly competitive marketplace…

However, many businesses have qualities of de facto government, e.g.; top-down decisions, no consumer voice, little transparency, trampling of individual rights like privacy, and no viable means of escape… So it’s not too big a stretch to say that governments face pretty much the same challenges as many businesses… In order to sustain viability, all enterprises must– satisfy their customers by serving them well, improve and innovate their products and services, and most important develop and maintain a high-level of trust…

Any enterprise that ignores these realities will eventually ‘go out of business’ — whether or not it’s a government or business… In many ways there are strategic and operational overlaps and most enterprises require the same basic ‘business plan’, for example:

  • Resize the enterprise to current realities — stop the bleeding, cut fat, get existing operation on stable footing. Then, start thinking about the future — or, more accurately, the present that’s already arrived while the enterprise remained stuck in the past…
  • Redesign the enterprise, its products, services, and organization, to meet current and future demand — you wouldn’t keep selling buggy whips if people wanted cars…
  • Redefine and reposition the enterprise to compete effectively against new competitors, new markets, globally…

In the article Should Government Run Like a Business? by Jeff Neal writes: We have heard people for years arguing– government would be much better off if it could just get its act together and operate like a business. If they did, the government would be more efficient, customer (taxpayer) service would dramatically improve, the cost of government (and taxes) would be lower… and it would be a much better world… Yes, the government could adopt some business-like practices to improve how it operates, but the fundamentals of running a business are not the same as running government. Businesses exist to return value to its stakeholders…

Growth is one of the most powerful drivers for a business: It pushes the business to learn, innovate and become more efficient… to find new lines of business, new products, untapped markets and new goods and services and ways to deliver them, better… It’s a powerful force that drives the best (sometimes the worst) of business… The purpose of government is not to grow itself… The factors that drive business and those that drive government are fundamentally different, and it’s neither possible nor desirable for government to operate like a business…

Good businesses know how to squeeze costs and eliminate under-performing lines of business. They watch the bottom line and make the hard calls necessary to let the business thrive. Critics say government is too full of bureaucrats to do that… However, reality is that some parts of government do operate very much like a business, for example; some government agencies/departments operate on a fees earned basis, and they do– reduced costs, improved services, consolidate-eliminate underperforming or obsolete activities… but unfortunately, in most case, it’s not enough…

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In the article Should Government Run Like a Business? by Tom Egelhoff writes: Government is a lot like an octopus. Some arms work better than others. Due to the lack of competition, and the ability to spend what they don’t have, it makes government extremely inefficient, in most cases… You could try to run government like a business, but where is the incentive to improve? If you run the department under budget you won’t get as much next year, so the incentive is to spend every single dime before next budget... Whereas, business must watch every penny and run mean and lean. Business invests its surpluses; government spends it… Business conserves; government waste is undeniable…

Business rarely has overlapping policies and procedures… Whereas, government, for example, has 126 separate agencies that administer some type of poverty programs… Business investors tend to vote out boards of directors that send the company in the wrong direction. Voters, for some strange reason, keep sending the same board of directors back to Washington every 2, 4 years… The question is probably not; Should government be run like a business? The question should be; Can we ‘stop’ doing business as usual in government?

In the article Signs You’re Running Your Business Like Government by Andy Birol writes: Nothing irks private business more than the federal government, and the impact of taxes, regulations, and government shutdowns compounds the apparent waste, inaction and irresponsibility in how leaders run the country… Many businesses say; if I ran my business like the government, I would be out of business…

But, some business people ‘do’ run their companies far too much like government — and, far too often, they ‘are’ in danger of going out of business… When griping about government, just be sure you are not running your business the same way… Here are five signs that your business is looking too much like the federal government:

  • Leadership is paralyzed to make hard choices that require sacrifice by everyone and impacts pet projects and sacred cows. Rather than make token changes by terminating one underperforming employee or shaving 5% off of a training budget, is it time to outsource an entire department or shut down an unprofitable product line?
  • Leaders and employees have become self-entitled to benefits, perks and rewards they haven’t earned. Despite shrinking gross margins, is your company still buying season tickets, guaranteeing bonuses, or traveling first class when the business is running on empty?
  • Company has become unaccountable or oblivious to unhappy customers, employees or bankers whose satisfaction is critical to the company’s profitability. Is your firm walking away from those making new demands instead of meeting them?
  • Managers are in denial of shifts in customer tastes, increased costs of doing business, or whether vendors are responding to your firm’s needs. When your firm accepts that its business is changing, can it react and respond– or does it believe its future will mirror its past?
  • Company is too distracted by what is happening at home or in the community to get the job done. Is your leadership taking extended vacations, overly focused on social causes, or a fixture on the golf course?

The argument that businesses are necessarily more efficient is a sweeping generalization, and simply being in the private sector does not guarantee being– effective, efficient, competitive… According to Aubrey Bloomfield; government can often be dysfunctional, but so can business… making government operate more like a business is not the solution and it ignores the distinct priorities of government…

According to Tom Newell; routinely citizens decry the inefficiency of government. Why, they ask, can’t it be run more like a private sector company? Indeed, privatization– the decision to contract out government operations to private, profit-making firms– is the darling of many who have given up on government doing things right or just assume that private sector can do it faster, better, cheaper

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According to Mark Shields; if, in fact, the decision was made ‘to run government like a business’, then which particular business would be the best model? How about Merrill Lynch or Bank of America? How about JPMorgan or Goldman Sachs? Citigroup could be a possibility, and please give some consideration to General Motors… Enron is probably not the role model we’re looking for… Nor is Lehman Brothers or even WorldCom.  Or maybe one of those defense contractors that have piled up cost overruns on weapons programs of $billions…

According to Eric Schnurer; there is no sugar-coating facts that we need to make tough choices for more effective, efficient, fair… government. However, the answer lies neither in attempt to have– government should run like a business, or preserve government as we came to know it in the 20th century, nor trying to tear it down and roll it back to imagined 18th-century ideal…

But government must be more competitive in 21st century… To do that, we need to– reinvent, reposition… government for 21st-century’s challenges, opportunities… Abe Lincoln said it well: government must be… of the people, by the people, and for the people…

 

Power of Unabated Innovative Freedom– Innovation Without Boundaries– Permissionless Innovation: Genius or Foolish?

Permissionless Innovation is the ability to create and deliver innovative services and products on the Internet without receiving prior permission… According to Tom Termini; permissionless innovation means the Internet serves as global platform on which anyone can experiment with new, unorthodox ideas without need to secure authorization from anyone…

According to Adam Thierer; permissionless innovation means the tinkering and continuous exploration that takes place at multiple levels—from professional designers to amateur coders; from big content creators to dorm-room bloggers; from nationwide communications and broadband infrastructure pro­viders to small community network-builders. Permissionless innovation is about the creativity of the human mind to run wild in its inherent curiosity, inventiveness… In a word, permission­less innovation is about  ‘freedom’...

Freedom to build a new mousetraps, or the next Google, Facebook, Amazon… whether better or not, it’s critical for continued success of the Internet… The next great digital revolution will only happen if we preserve the fundamental value that has thus far powered the information age revolution– permissionless innovation— the free­dom to experiment and learn through ongoing trial-and-error experimentation… and, without the need for permission…

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Unfortunately, while many Internet pundits and advocates often extol the permissionless innovation model for the infor­mation sector, they ignore its applicability outside that context… That’s unfortunate, because we can and should expand the permissionless innovation model into the physical world, too. We need the same revolutionary innovative approach to new technologies for all economic sectors, whether based on soft–information economies  or hard–industrial economies…

The so-called ‘Internet of Things’ is a prime example– it’s emerging and promises to usher in profound changes that will rival the first wave of Internet innovation… The Internet of Things (IOT) is viewed as being synonymous with ‘smart’ systems, such as– smart homes, smart build­ings, smart health, smart grids, smart mobility… According to Steve Lohr;Internet of Things’ will be the billions of digital devices, from smartphones to sensors in homes, cars and machines of all kinds, that will communicate with each other to automate tasks and make life better…

According to Cisco; 37 billion intelligent things will be connected and communi­cating by 2020. Thus, we are rapidly approaching the point where everyone and everything will be connected to the network… According to ABI Research; estimates that there are more than 10 billion wirelessly connected devices in the market today and more than 30 billion devices expected by 2020… The benefits associated with these developments will be enormous…

According to McKinsey Global Institute; estimates the potential economic impact of the IOT to be $2.7 trillion to $6.2 trillion per year by 2025… According to IDC estimates; this market will grow at a compound annual growth rate of 7.9% between now and 2020, to reach $8.9 trillion… The biggest impacts is in health care, energy, transportation, retail… However, the next mega-wave of innovation will only take place because of the default posi­tion– ‘innovation allowed’ or ‘permissionless innovation‘… In other words, no one should have to ask permission from anyone for the right to develop new technologies, platforms…

In the article Permissionless Innovation: Comprehensive Technological Freedom by Adam Theirer writes: The central fault line in most modern technology policy debates revolves around the question of ‘permission’, which is framed as: Must the creators of new technologies seek the blessing of public officials or others before they develop and deploy their innovations?

How that question is answered depends on the disposition one adopts toward new inventions, and there are two conflicting attitudes: One disposition is known as the ‘precautionary principle’, which generally refers to the belief that new innovations should be curtailed or disallowed until their developers can prove that they will not cause any harms to individuals, groups, specific entities, cultural norms, or various existing laws, norms, or traditions…

The other vision-attitude can be labeled ‘permissionless innovation’ and it refers to the notion that experimentation with new technologies, business models… should generally be permitted by default and unabated, and if problems develop they can be addressed later… This is a grand clash between these two mindsets in almost all major technology policy discussions…

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Many argue that policymakers must unapologetically embrace, defend– permissionless innovation— not just for the Internet but for all new classes of technologies, platforms… e.g., ‘Internet of Things’ (IOT), wearable technologies, smart cars, autonomous vehicles, commercial drones… Many believe that ‘precautionary principle’ thinking is increasingly creeping into policy discussions for disruptive type technologies and urge to regulate them, preemptively…  which is driven by concerns for– safety, security, privacy…

Most agree that many of these concerns are valid and deserve serious consideration, however, many also argue that if precautionary-minded regulatory solutions are adopted as control, in a preemptive attempt to head-off these concerns, the consequences will be profoundly deleterious for innovation…

More important, a central consequence becomes: Living in constant fear of hypothetical worst-case scenarios– and premising public policy upon them– means that best-case scenarios will never come about… When public policy is shaped by ‘precautionary principle’ reasoning, it poses a serious threat to technological progress, economic entrepreneurialism, social adaptation, long-run prosperity…

In the article Permissionless Innovation Is Potentially Dangerous by Greg Scoblete writes: Permissionless innovation refers to the notion that experimentation with new technologies, business models… should generally be permitted unabated… and if problems develop they can be addressed later. In other words, it’s better for– innovation, economy, quality of living… if business interests are privileged over the individual’s interests in matters of privacy or security against potential threats, unless threats are ‘compelling’…

There’s certainly a compelling case to be made for this kind of freewheeling approach across many technological categories, and some experts specifically singles out the emergence of connected devices, i.e., ‘Internet of Things’ (IOT)… as area where permissionless innovation should be allowed to flourish unabated… But, here the issue isn’t simply consumer privacy, but security… and there are rising calls for preemptive regulatory controls on IOT technologies based on various safety, security, and especially privacy rationales… If the ‘precautionary principle’ mentality wins out and trumps the permissionless innovation ethos, which has already powered the first wave of digital revolution, it will have profound ramifications…

Preserving and extending the permissionless innovation ethos to the ‘Internet of Things’ is not about– corporate profits, or assisting any particular technology, industry sector, or set of innovators… Rather, it’s about ensuring that people continue to enjoy the myriad benefits that accompany– an open, innovative information ecosystem… However, is this enough when we’re talking about the inherent vulnerabilities posed by IOT? In this instance, we’re not talking simply about the selling of — intimate personal data, but about the fundamental security of devices that are used to protect, regulate… homes, business…

According to the ‘Trusted Computing Group’; IOT systems typically are designed without much, if any, security, yet they function much the same as the equally vulnerable mobile devices, PCs... However, IOT technologies continues to be developed without regard to serious protection for security, safety, privacy… It’s difficult balancing act– permissionless vs. precautionary principle… and for now, judging by the brisk pace of IOT development, it seems that the balance of power favors permissionless innovation

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Most Internet applications are the results of grass-roots innovation, start-ups, research labs… No permit had to be applied, no new network had to be built, and no commercial negotiation with other parties was needed… The easier the creation of innovation is free of coordination and permission-asking, the faster the new businesses are created… According to David Young; given today’s technological dynamism, the ability to innovate without having to seek permission from regulators at every step along the way is critical to the continued success of the Internet and must be preserved…

According to Leslie Diagle; permissionless innovation is not about fomenting disruption outside bounds of good behavior; permissionless is a guideline for fostering innovation by removing barriers to entry… This makes permissionless innovation an inseparable part of the Internet… Of course, all this freedom should not be seen isolated from societal structures: It’s freedom that operates within the boundaries of civil behavior, rule of law…

According to Leslie Daigle; the phrase ‘permission-free innovation’ is used to describe how the Internet differs from, e.g., closed telecommunications networks, where only local operators can  build, deploy, offer new services… within a stringent regulatory (permission-requiring) regime…

Permission-free innovation is not just about technology, or fomenting disruption outside the bounds of appropriate behavior; permissionless is a guideline for fostering innovation by removing barriers to entry… The ability to innovate, create… is the heart of human-kind, and the catalyst for global business growth, prosperity… and unprecedented social interaction… a direct result of permissionless innovation…

 

Redefining Social Media ROI– Apply Relevant Metrics to Justify, Manage… Business Cases: Measure Things That Really Matter…

Social media ROI– businesses don’t do social media to be social, they do social to grow sales, revenues… Yet, according to ‘Social Media Today’; 70% of online businesses that utilize social media don’t bother to measure ROI (return on investment)… According to Megan Marr; it’s very shocking to discover that the majority of online businesses are conducting social media completely in the dark with no clues as to how it contributes to success of their businesses…

To be fair, it’s not entirely their fault – social media ROI is a difficult beast to tame and some say that measuring the ROI of social media simply can’t be done– Like traditional billboard advertising, some businesses  put-up social media campaigns and hope for the best, trusting that something good will come of their efforts.

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Part of the reason that measuring social media ROI is so difficult is that many businesses try to measure social media success through the social channel, examining metrics such as; ‘likes’, ‘tweets’… which are almost impossible to monetize… also, most businesses are more concerned with website analytics, such as; visits, subscribers, downloads… But, these don’t relate to the bottom line, which may confuse many business  executives who think in terms of traditional ROI… On the other hand, many experts think that measuring ROI in social media is just a waste of time…

According to John Heggestuen; many brands are moving away from metrics that purport to measure ROI on social media… They’ve realized that social media isn’t– a transactional engine or sales machine, so they’re dropping half-baked indicators that gauge secondary effects, such as financial return… Instead, new metrics evaluate social media strategies, such as; audience-building, brand awareness, customer relations… but again, these indicators are very difficult to monetize…

In a report by ‘BI Intelligence’ they indicate that social media strategies are evolving and rapidly changing, as follows:

  • Decline of ROI metrics: Between 2010 and 2013, the percentage of businesses using a revenue-per-customer metric on social media went from 17% to 9%, according to the February 2013 CMO survey. The percentage tracking conversion rates also dropped, from 25% to 21%.
  • Even as the vogue for ROI indicators fades, social media budgets are ballooning: On average, businesses expect to devote 9% of their budgets to social media in 2014, and 16% by 2018, according to the same survey.
  • Exceptions: Of course there are exceptions to the move away from ROI. Some social commerce applications and direct response campaigns will achieve measurable results on Facebook, or other social networks. And the end of the ROI-fever definitely doesn’t mean that all metrics can be thrown out the window…

In the article Social Media and ROI by Olivier Blanchard writes: If you are having trouble explaining or understanding social media ROI, then here are some pointers:

  • You are asking the wrong question: Do you want to know what one of the worst questions dealing with the digital world is right now? This: What is the ROI of Social Media? It isn’t that the idea behind the question is wrong. It comes from the right place. It aims to answer two basic business questions: Why should I invest in this, (or rather, why should I invest in this rather than the other thing?), and what kind of financial benefit can I expect from it? The problem is that the question can’t be answered as asked: Social media in and of itself has no cookie-cutter ROI. The social space is an amalgam of channels, platforms and activities that can produce a broad range of returns (and often none at all). When you ask; What is the social media or ROI? The question is too broad; too general. It is like asking what the ROI of email is. Or the ROI of digital marketing. What is the ROI of social media? I don’t know… what is the ROI of television? If you are still stuck on this, you have probably been asking the wrong question.
  • So what is the right question? The question is not; What is ROI of social media? but rather; What is ROI of [insert activity here] in social media? To ask the question properly, you have to also define the timeframe. Here’s an example: What was the ROI of [insert activity here] in social media for Q3 2013? That is a legitimate ROI question that relates to social media…
  • The unfortunate effect of asking the question incorrectly: What is ROI of social media? asks nothing, everything at once. It begs a response in interrogative: Just how do you mean? The vagueness of the question leads to many interpretations of the term ROI– from being a simple financial calculation of ‘investment vs. gain from investment’ to becoming any number of made-up equations mixing unrelated metrics into a mess of nonsense… They measure nothing…
  • Pay attention: Don’t think of ROI as being medium-specific; think of it as activity– specific. Are you using social media to increase sales of your latest product? Then measure the ROI of that. How much are you spending on that activity? It doesn’t really matter where you measure your cost to gain equation, e.g., email, TV, print, mobile, social… it’s all the same. ROI is media-agnostic. Once you realize that the measurement should focus on the relationship between the activity and the outcome(s), the medium becomes a detail: ROI is ROI, regardless of the channel or technology or platform… That’s the basic principle. To scale that model and determine the ROI of the sum of an organization’s social media activities, take your ROI calculations for each desired outcome, each campaign driving these outcomes, and each particular type of activity within their scope, then add them all up. Can measuring all of that be complex? You bet… Does it require a lot of work? Yes…
  • ROI isn’t an afterthought: Think about what you will want to measure ahead of time, what metrics you will be looking to influence. Think more along lines of business-relevant metrics than social media metrics, such as; ‘likes’, ‘follows’… which don’t really tell you a whole lot…
  • ROI doesn’t magically lose its relevance because social media is about ‘engagement’: If your business is for-profit and you are looking to use social media in any way, shape or form to help your business grow, then all questions regarding the ROI of investing in social media activity are relevant. Whereas, concepts, such as; Return on Engagement, Return on Influence, Return on Conversation… are all bullshit. Nice exercises in light semantic theory, but utterly devoid of substance, but they are not in any way substitutes for Return on Investment (ROI)…
  • ROI isn’t relevant to every type of activity: Not all social media activity needs to drive ROI. As important as it may be to understand how to calculate it and why, it is equally important to know when ROI isn’t really relevant to a particular activity or objective… Social media’s value to an organization, whether translated into financial terms (ROI) or not, is determined by its ability to influence specific outcomes. This could be anything from the acquisition of new transacting customers to an increase in positive recommendations… In other words, for an organization, the value of social media depends on two factors: (1.) The manner in which social media can be used to pursue a specific business objective… (2.) The degree to which specific social media activity helped drive that objective… In instances where financial investment and financial gain are relevant KPIs, this can turn into ROI. In instances where financial gain is not a relevant outcome, ROI might not matter one bit… Knowing when and how ROI matters (or not) will, (a.) help you avoid costly mistakes… (b.) hopefully help you make smart decisions when it comes to assigning precious resources and budgets to specific social media/business programs…

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In the article ROI in Social Media –Where Does it Belong? by Steve Woodruff writes: It’s silly to ask; What’s the ROI of Social Media? Instead, we should ask; What’s the potential ROI of this or that specific social media tactic or campaign? Because you don’t measure the ROI of an assumed cost of doing business… You don’t ask for the ROI of a medium; you determine if that medium/channel/approach is going to be a viable and potentially profitable place to be.

Then you create a strategy… That’s why we should instantly dismiss the question; What’s the ROI of Social Media? It’s exactly the wrong question… However, once a specific strategy is defined and measurable tactics developed, then you move into ROI territory… But then again, as alternative, you can always take comfort in the ‘return on doing nothing’…

Social media’s value is not accountable as a ‘money-in-vs.-money-out’ model but rather as a ‘squishy metrics’ model, such as; user engagement, building trust, growing reach, gain insights around user behavior… Also, social media has other values that are not easy-to-quantify, and measuring results, such as; ‘growth’ year-over-year may be more important than measuring an activity, such as; ‘likes’…

According to Scott Allen; asking– What’s the ROI? It’s not a bad question. Surely, if you’re going to investment money on something in the business, it should generate some kind of return… or at least reduce some visible and measurable loss… However, the value of social media that’s immediately visible and measurable is just the tip of the iceberg… The bulk of the social media benefits-values are below the water line, and not represented in the major corporate social media initiatives, but in daily process of helping every employee do their job more efficiently, effectively… You must start looking at social media as a tool, and then you’ll begin to realize its real-full power… which is the 7/8 that’s below the water…

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According to Robert Mansson; the matter of measuring ROI within social media is still questioned by many people, but it’s an absolute  necessity to measure the effectiveness of an investments within a company… Although social media involves the use of business resources, it’s not easy to understand exactly how to measure its effectiveness… Some experts suggest– divide it into phases or, even better yet, into campaigns… But, what ever the approach there must be a ‘start time’ and ‘end time’…

According to Robert W. Joseyln; I’m a numbers guy and I would never make a financial investment without knowing what the ROI is, or likely to be at a later point in time, and then what it actually was– such that I can determine whether to stick with the investment, or not… Social media isn’t about directly selling something; it’s about– building, maintaining relationships…

When it comes to an ROI on social media, I am constantly told to just believe it, without proof… When I ask for proof, it’s as if I’m publicly committed some crime… But I’m still waiting for proven ROI results beyond a one-off anecdotal success… Then, only when I see a measurable ROI, will I be a true believer in social media for business– until then I have doubts on its real value in business…

As Winston Churchill once said; however beautiful your strategy is– you must, even occasionally, see tangible results…