Monthly Archives: May 2007

Lenovo has Serious Shipping and Fulfillment Problems

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So much for my love of the Thinkpad. I ordered a new z61t a month ago. In that time, I’ve had three shipping date changes, at least one outright lie from a Lenovo rep telling me the delay had been resolved, and now my latest "estimated shipping date" is 3 more weeks away, with zero confidence in anything Lenovo says. This is apparently a tradition at Lenovo. They give a great promotion on a good product–mine was $400 off the retail price–and then claim all sorts of reasons why consumers have to wait months to get their computer. The shipment was held up by customs. Our screen provider had a production problem. We’re backordered on cases.

The result is not only a lot of angry customers, which I can’t imagine will do any good for the Lenovo brand, but real costs in lost orders and heavy traffic on their customer service lines. Since Lenovo keeps changing the ship date, and has lied to me about the ETA, I’m now dedicated to calling them everyday, letting my speaker phone keep me company with hold music until I get a live rep, and then peppering them with questions about why my laptop hasn’t shipped, and why can’t they give me a straight answer. I imagine that’s replicated many times over by other unhappy customers.

I’d cancel the order, but it was a good deal, and I can hold out on my desktop without any problem. I’m just disappointed that Lenovo is turning out to be such a lame company that it can’t even get its logistics in order.

When Security Increases Exposure to Risk

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I’ve published the full post of this story at my MarketingRev site. Please check it out. I think it’s important enough for wider dissemination.

I’m a customer of a little company called CountryWide Financial, a holding company of various financial and banking services, including insurance, mortgage, commercial loans and capital markets. Actually, they’re one of the largest financial companies in America, with many thousands of customers who trust them to safeguard personal data. Like many financial companies, CountryWide frequently changes and upgrades its security policy for handling online transactions. But the latest upgrade ensures that I will never use the CountryWide site again to handle transactions, and it’s an issue that has enormous impact for marketers who are charged with safeguarding customer relationships and brand image, if not directly responsible for customer data.

Read the full post.>>

When Good Performance is Trumped By PR

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Victor Cook has a couple of interesting posts on his blog about the reign of Carly Fiorina at HP. In them, he details the performance of HP during Fiorina’s tenure, and the interesting paradox that although HP was migrating toward a more effective conversion of marketing expenses to revenue, its stock value and credibility on Wall Street was taking a major hit. Cook’s financial framework for enterprise marketing suggests that when marketing expenses are optimally leveraged to create maximum earnings, market value should climb, and in many years of analysis and refinement of the framework, that usually turns out to be the case. HP under Fiorina was an anomoly. Cook had noted the paradox at the time, when he was teaching a course that featured a competitive analysis of the desktop computer industry, but he didn’t have a good explanation for it.

Fiorina recently published a memoir of her tenure at HP, during which she undertook to "reinvent HP", most famously by merging with Compaq, which sparked numerous high profile conflicts with board members and a famous proxy battle with Walter Hewlett. It ultimately led to Fiorina’s dismissal. The book has received mixed reviews, lauded for its depiction of the struggles of a woman climbing to the top of the corporate ladder, criticized in some quarters for its one-sided view of internal struggles, and questioned for the completeness of its description of the successes and failures of performance, as in this review from BusinessWeek.

At one point in the book, Fiorina says the only "clouds on the horizon" were stock price weakness and sniping in the press. But underlying both was a larger problem: credibility. Not only did Wall Street analysts doubt the CEO had the operational skills to deliver on her goals, but they’d grown distrustful of her projections as well. HP slipped up and missed quarters—and missed big—on too many occasions. Analysts often felt she was trying to sell them a story, rather than giving a conservative view of the company’s capabilities. In the book, she even slips into this mode in one small way. Fiorina cites a 13% one-day jump in HP shares in mid-2000 as proof that Wall Street was buying into her view. She leaves out that the pop was due to the sale of most of HP’s remaining shares of spinoff Agilent Technologies.

But ultimately, the picture that emerges sheds some interesting light on the Enteprise Marketing Framework, and the strengths and weaknesses of the way in which market value for any business is ultimately determined. It seems fair to say that, based on the numbers Wall Street uses to measure performance, Carly took HP through a chaotic transition that undermined the perception of performance. But the measurement of performance by Wall Street’s standards is notoriously short-term. By another standard–by the standard of Enterprise Marketing Efficiency–Carly’s performance was quite good, and set the stage for longer term gains, which appear to be paying off. However, Carly was not able to make that case in a way that Wall Street would accept. Because she didn’t have the right framework? Because she couldn’t articulate her strategy in financial terms? Because she was unpopular? Because she was a woman?

Reality may hold some measure of all those explanations. But it’s clear that not only are competing models of financial performance viable, non-financial inputs like public relations, internal relationships, and intangible perceptions of credibility can all play significant roles in ultimately determining market value. What fascinates me, personally, is that the Enterprise Marketing Framework showed a strength in HP that was not evident in the whirlwind of chaos surrounding the merger with Compaq.   

   

The CMO’s Lament

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Fast Company has just published an article tantalizingly titled "The Most Dangerous Job in America". They’re not talking about Alaskan crab fishermen. They’re talking about CMOs–the corporate job with a life-expectancy of 23 months. They try to make it sound like news, but this story has been the same for the past seven years. Each time someone decides this is a story, they trot out the pundits and experts to explain how marketing is more important than ever, and each time they come up with diabolical reasons why everyone else just doesn’t get it.

Maybe the CMO post should be acknowledged simply as the "fall guy" job in the C-suite. If the numbers turn down and CEOs need to make changes, the first instinct certainly won’t be to step aside themselves. Getting rid of the CFO might spook Wall Street, while changing a COO or CIO could disrupt operations. Dumping the CMO seems easy in comparison.

All I can say is boo hoo. I’m sorry, but this whole frame that marketers are somehow unfairly maligned is pure fiction. I’ve been ranting about this for years. If Wall street isn’t spooked by a CMO being fired, then there’s something wrong with the CMO, because they can’t demonstrate their ability to create value for shareholders. And that’s the root of this problem. The profession is broken, and no one is stepping up to fix it. Not the AMA. Not the DMA. Not the business schools still teaching marketing as marcom. Not any of the myriad peer groups and organizations that abound with marketers more worried about where they’re going to find their next gig than getting up to speed with the new requirements of enterprise marketing.

The CMO title in America is more aspirational than anything else.By my rough but educated estimation, about 8-12 percent of the marketing executives in the US deserve the title. The rest are falling behind because they can’t keep up with the new requirements that demand a strong grasp of business fundamentals, finance and technology, in addition to the traditional expertise of branding, product marketing, channel marketing, DM, PR and customer service. Yeah, it’s a big portfolio. And it takes a smart and motivated marketer to grasp what they need to do to find direction in the middle of chaos. Shifting the blame doesn’t help.

So what’s it going to take to get the CMO off the endangered-species list? Perhaps a clearer definition of the position and what’s expected–which is a job for the CEO.

Isn’t that ironic. The profession charged with defining and positioning the corporation, can’t even define and position itself. Make the CEO do it, and maybe you’ll last 24 months. Good luck with that. It’s times like this that make me think of Darwin. If you want to see real change, just wait for the current generation to die off. The 23-month life expectancy is Darwin in action.

Has Google Lost its Way?

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There was an article in the Financial Times yesterday quoting Eric Schmidt, CEO of Google, about the company’s current focus and its vision for the future. It’s an interesting bit of insight if you read between the lines, and may be an indication of the point at which Google has lost direction in the headlong pursuit of continuing monster growth.

Search is today’s major Internet battleground because an overwhelming portion of user tasks on the net initiate with search. Search is now an integral part of most major marketing strategies, and is at the center of online advertising. Google, already the leader in text advertising, recently won a bidding fight with Microsoft to purchase DoubleClick, the leading broker of banner advertising. That in turn has launched speculation that Microsoft will make a bid for Yahoo! just to keep up.

This battle is all about the revenue available from online advertising, and the continuing growth from online advertising is focusing ever more aggressively on ads targetted at specific users based on contextual, behavioral and historical personal data. Simply put, the more Google knows about you, the more they can charge for ads. And that desire to gather more and more data about you is at the heart of Google’s forward-looking strategy. This isn’t a surprise–privacy groups have been raising red flags about Google’s collection of personal data for some time, and the purchase of DoubleClick, including its own massive database of users, has sent privacy advocates into a tizzy.

What is a little surprising is how the CEO of Google framed this move as part of Google’s vision of the future. Schmidt said building a bigger database of personal data is key to Google’s expansion and the  "logical extension" of its celebrated mission to organise the world’s information.

"We are very early in the total information we have within Google. The algorithms will get better and we will get better at personalisation."

Later on, he says:

"We cannot even answer the most basic questions because we don’t know enough about you. That is the most important aspect of Google’s expansion.”

Now hold that thought that while I digress for a moment about what’s wrong with search engines. The problem with search engines is that you have to already know something about what you’re searching for in order for a search to be effective. This is critical not only for framing an effective search expression, but it’s even more critical for understanding the results. If, for example, you know absolutely nothing about Direct Response Marketing, other than the search term, you’ll have very little foundation to determine which results to put faith in. Should you believe the top search engine responses, which are vendors? Should you believe information from a Multi-Level marketing organization? From the AMA? Search engines provide no context for helping a user make such determinations of credibility or relevance.

So, while Schmidt says Google is early in it’s evolution, I couldn’t agree more. Search engines aren’t really all that great in organizing the world’s information so that it can be accessed in meaningful ways. I wish there were a statistic, for example, on abandoned searches. I bet the number is significant. But in looking forward to how Google should grow to address that challenge, I think we start to see where Google is really headed.

We already have an analog for effective searches that are personalized for the user. They’re called librarians. If you walk into a library and ask for a particular bit of information, the librarian is trained to ask a very small set of incisive questions to narrow down your search to identify the most reliable source for that information–without ever gathering personal information about all the other things you’re interested in. Google doesn’t want to do that. They’re married to the magic box where you just type in a word, and presto, you get tons of answers, relevant or not. Their idea of evolution is to gather so much information about every person that comes into the library, that they don’t have to ask you any questions, they can divine what you want based on your profile.

It doesn’t take much of a genius to figure out that asking two or three questions is a lot more effective than trying to store a massive profiling database to predetermine the answers. But it turns out that massive profiling database is where the money is for Google, because advertisers salivate over being able to precisely target their ads, and in turn to measure your response.

And this is where it gets down to brass tacks for Google. It’s not really about providing the best access to the world’s information for its users. If that were the case, it would emulate the thousands of years of history we have with libraries, and build a model where a few incisive questions lead to the right answer without a massive profiling of every breath you take. Instead, Google is all about organizing the world’s information about users, because that’s how it pays the bills.

Personally, I don’t have a problem with contextual heuristics that are used to actually help users find what they’re looking for–the kind of technology companies like Baynote provide. I think it’s a valid business model, but it doesn’t require the creation of massive profiling databases that store personal information. Why isn’t Google pioneering that kind of technology? Because it doesn’t come with $Billions in revenue. What I see happening with Google is a fork in the road when they choose to prioritize either the relevance and experience for the user trying to find information, or for the advertiser trying to find buyers. It’s really a question of who Google chooses to elevate as its true customer. From my position, it looks like they’re leaning toward the advertisers as their customers, and the search user as the raw materials for their business. I’m sure it’s good for Wall Street, but Main Street is starting to wonder about their privacy. In the end, that will eat into profits and brand equity.

 

Signs of The Media Meltdown

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I’ve been struggling with the ground-level reality of media transformation over the past couple of weeks, working out the details of a business model, advertising structure and platform for MarketingRev. I’ve been a little shell-shocked by the practical obstacles and some of the attitudes I keep running into among people dealing with rapid and disruptive change. Let’s just say a lot of people who have a long history in traditional media are not all that hunky-dory about what’s happening to their beloved fourth estate.

The bottom line is that traditional media is against the ropes. Advertising dollars are peeling away from print, television and radio, and advertising dollars are growing online. The problem is, the size of the growth online is only a fraction of what’s being lost in traditional media, which means old line companies can’t simply shift online to save their butts. It’s more like falling off a cliff.

A lot of people from traditional media are not too happy about the state of affairs. But I can’t help noticing how their responses to the situation highlight precisely why they’re in this predicament in the first place. Resistance to change–and a skewed perspective on reality. We have mainstream media pundits continuously writing off bloggers as "not journalists"–as shrill, opinionated, trigger-happy typists. They refuse to examine much less embrace the incredible power of distributed eyes and ears–many of whom are, actually, journalists–because it undermines their own power to determine the agenda. If you think blogs are by definition lightweight, here’s one recent example of how lightweight the media is compared to an informed and passionate blogger.   

Then we have major media executives blustering about how they haven’t even begun to fight.

"The Googles of the world, they are the Custer of the modern world. We are the Sioux nation," Time Warner Inc. Chief Executive Richard Parsons said, referring to the Civil War American general George Custer who was defeated by Native Americans in a battle dubbed "Custer’s Last Stand". "They will lose this war if they go to war," Parsons added, "The notion that the new kids on the block have taken over is a false notion."

But my favorite recent quote is from Sean McManus, explaining why Katie Couric is taking CBS for a nosedive in the ratings.

“Maybe we underestimate the huge shift this represented,” Mr. McManus said. “It was almost a watershed event to have a woman in that chair.” He added, “There is a percentage of people out there that probably prefers not to get their news from a woman.”

Yeah, that’s it. It’s a woman problem. Not a problem with one of the biggest media companies trying to replace a serious newscast with a $15M creampuff. Not a problem with traditional media vastly misreading what the public wants to consume as news. But this is the epitome of why traditional media is melting down. People know they can’t trust the shiny representation of reality that is packaged to improve consumption. And now they have alternatives.

Turning Coke’s Brands into Bonds

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Victor Cook shows once again the potential for marketers with a strong financial framework to contribute real value to corporate strategy, in a recent post about Coca-Cola’s options in maximizing the value of its brands. Most marketers, when they think about Coca-Cola, think about the myriad ways in which Coke has accelled in branding. After all, when you take away the label, it’s just sugar water in a can–sugar water that lends Coke a nearly $120 Billion market cap.

Many students of marketing understand the tremendous intangible value of the Coca-Cola brand, and even business students were impressed when Coke was able to valuate their brand as a $5 Billion line item on their balance sheet. But this is child’s play compared with the kind of strategy that emerges when you mix the idea of brand value with financial instruments like bonds.

As Victor lays out in an earlier post, there is a precedent for companies to monetize the value of their intangible brand assets by issuing bonds. David Bowie did it by issuing a bond backed by the royalties of his song catalog, and Sears evolved the concept by creating a holding company into which they transferred the ownership of their major brands–like Crasftman and Kenmore–which licensed the use of those brands back to Sears for a fee.

As Victor points out, the understanding of the word bond is a classic example of the gap between marketing and finance:

The meaning of the word "bond" is symbolic of the huge gap between the language of corporate finance and traditional marketing. In corporate finance "bond" is a noun. As used in the article "The New Alchemy At Sears" in the April 16, 2007 issue of Business Week.

In traditional marketing "bond" is a verb describing the relationship between a consumer and a brand. If you were to search the Internet for the phrase "Brand Bonds" before this Business Week issue hit the news stands, most of the returns would refer to the traditional marketing definition.

But the power of such financial concepts in the hands of able marketers takes on new meaning. In his latest post, Victor lays out a strategy for leveraging the concept of brand bonds to free Coca-Cola from a significant conflict between their tangible and intangible assets and operations. He lays out a strategy in which Coca-Cola would aggregate the large stable of secondary global brands and sell them to a non-subsidiary holding company, which in turn would issue bonds based on the royalties of those brands, and license them back to Coke for global commerce. He makes the argument that such a strategy would allow the market to more ably determine the value of the Coca-Cola brand, and would allow Coke to elvate the value of both their operations and brands as separate entities.

It’s a bold and interesting idea–especially when you consider that it emanates from a marketing mindset. Not exactly the marketing mindset that currently permeates business, but certainly one we should cultivating.  

 

Obama Stumbles into Social Media

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The netroots are on fire this morning after a major theatrical event in the world of social media and politics. As I’ve said many times, politics is the most important analog to business when it comes to social media evolution. What is happening there is a vision of the future for social media in business. And this debacle with Obama is an object lesson.

The story is that some time ago an Obama fan set up a MySpace site devoted to the presidential candidate and his campaign. He secured the MySpace Url www.myspace.com/barackobama, and started building a clearly labeled "unofficial" site for the campaign. Obviously the Obama brand has some legs, and the site started to build a large network of MySpace friends. Eventually the campaign connected with the grassroots fan, and made some requests of him to fix up the site, edit some content and nix some of the "friends" in the MySpace network that might be embarassing to the campaign. The site owner agreed, and thus started a closer working relationship between the site owner and the campaign. Such a close working relationship, in fact, that it quickly became a second demanding job to keep up with the growth of the site and the campaign’s momentum.

140,000 MySpace friends later, the campaign started getting nervous about having such a prominent outpost on the Web run by someone not associated with the campaign. And they started seeing greater value for the site as MySpace began creating more political content and promotions to spotlight MySpace members like Obama and Hillary. So dialog began between the two parties about how to transition control of the site to the campaign. A lot of he-said, she-said arises now, but the apparent picture is that the campaign asked the site owner for a price to take over the site, and he asked for $39,000, plus a cut of advertising revenue from the traffic he had built. Up to now, this was all work he done as a fan, but it was a substantial amount of work–and in the world of high-priced campaigns, building a social network of 140,000 isn’t trivial, even if Obama has a lot pull-through.

The campaign allegedly responded without a counter-offer–only the claim that they didn’t have any money. Hard to believe given their record campaign contributions, and somewhat odd since they had asked for a price. What followed became an ugly use of power. The campaign decided they could take control without payment, simply by pressuring MySpace and claiming that someone was squatting on a URL they had the rights to–the URL after all was ~/barackobama . So MySpace blocked access to the site’s creater, and handed it over the Obama campaign, no questions asked.

Now it is a PR and social media nightmare for Obama. Much of his support in the blogosphere is screaming foul, and comparing the campaign’s tactics to Karl Rove’s–not a kind comparison for a liberal Democrat.

You can read more about the whole debacle here. Suffice it to say, whatever the site was worth, the PR problem would certainly have been worth $39k to avoid, and points out one more shining example of how the fundamentals have changed. This is precisely the kind of tactic that social media has evolved to spotlight and spread like the Bubonic Plague. And it’s incredibly ironic that the campaign was not able to see the obvious consequences–it wasn’t only the kind of strong-arming that lights a fire in the world of social media, it was carried out *in* the social media environment. Talk about stepping on a rake…

Take note, businesses. These kinds of PR crises can be avoided.