Misalignment

I heard the most remarkable thing the other day from none other than the brilliant Alan Greenspan. When questioned about his feelings about the current financial crisis, he said (I’m paraphrasing a little here) that he believed that self-interest in protecting shareholders would keep corporate executives from taking unnecessary risk.

First, with the increased deregulation, encouraged by Mr. Greenspan himself, there was less exposure to risk.

Second, and more importantly, executives of public companies generally are not incented on long-term corporate health. Instead, the focus is on short-term corporate gains. Shareholders are different from investors. Investors take a stake in a company with, generally, an eye toward the long-term. Venture capitalists are excused from this consideration, as their main function is to get companies in a position to sell. Shareholders, on the other hand, buy shares hoping for them to perform a certain way before selling them again for a profit.

Thus, executives are compensated by their ability to maximize that value. That is what drives their self-interest.

If you want to mitigate your risk as a shareholder, create a compensation plan for the executives that adequately reflects that desire. But that will only work if you are more concerned with the long-term health of the company and not the quarterly profits. That means sacrificing a little now to build something for later.

As we have learned from the current crisis, there simply aren’t many willing to do that.

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Be Timely

So I’m standing in front of my house this weekend, watching the kids scooter around, when we’re suddenly accosted by various people passing out flyers. One gentleman asked me if he can share some information about a local candidate. I shuffled some papers around so I could grab the brochure. Once I had it, I noticed that another candidate’s flyer was tucked inside. There was no mention of a two-for-one from the guy. I just chuckled and turned away.

As I made my way inside, I looked at the tag-along and noticed that the date stamped on the back was 2006. I get the efficiency, since it was a re-election campaign. In fact, I almost applaud it. There’s only one (major) problem. A lot has changed in the last two years—far too much to just recycle what you’ve already done. By simply reusing your old stuff you are saying one of two things: either you are too out-of-touch to recognize that things have changed, or you haven’t done what you said you were going to do the first time, so you just say it again.

The same goes for any business. A consistent message is key. Beat it like a rented mule, especially if it is good and on target. But also recognize that as you produce, address issues and evolve, you move along and tackle the next set of problems.

I don’t, by any means, advocate that you should craft your message around the latest trends. Doing so would signal that you aren’t committed to who you really are. And if you’re not committed, why should anyone else be? Being timely and consistent with your message reinforces your brand. It shows your audience that you are focused on addressing the needs of your constituents (customers, consumers, employees, etc.).

Constant reinforcement of your message is necessary for solidifying your brand. Incorporating timely needs into that message is critical to building a long-term brand.

Not Sure What They Are Selling

I’ve been seeing a number of different car commercials lately, but, other than the obvious, I’m not really sure what they’re selling. Some examples:

  • GM, yet again, is offering employee pricing on its vehicles. This year, they attempt to couch it in terms of an anniversary. This is something they have been doing since around 2000, and they pull the trick out whenever their sales are in the dumps, which seems to be most years. If your vehicles weren’t relevant before, resurrecting a bad sales idea isn’t going to change that. Sell your cars on their merit, not the fact that you’ve been overpricing and underdelivering.
  • VW seems to think that German engineering is best expressed through black Beetle acting as a talk show host. Saying that you have German engineering doesn’t make it good—the engineering itself does, however. Tell me what it means and what I can expect to experience from it.
  • Mitsubishi has introduced a new engine, yet doesn’t feel the need to explain to anyone what makes it unique or at least different. When you spend that kind of R&D money, market the heck out of the result.
  • Ford has introduced a new box on wheels with so-so EPA estimated mileage, touting it as something people should desire. Two things: one, average or slightly above average EPA estimated mileage isn’t enough, you have to do something revolutionary; two, most of us don’t care one lick what the EPA estimates the mileage to be in a vacuum on a treadmill with no friction, we care about the actual mileage from driving on real roads.

When you are marketing a product, no matter what it is, you have to focus on the actual features and benefits. If you don’t have any, save your money and reputation and stop selling it. Focus your energy on creating something that actually creates a point of differentiation. Be unique. Serve a market others ignore. Make a positive difference. But don’t, under any circumstances, try to treat your customers like gullible fools. That is the quickest route to irrelevance.

The Window Can Be Dangerous

People want to know. Maybe not everything, but most things. There is still some bliss associated with ignorance, particularly for those messier details. So, companies are putting more of themselves “in the window”, showing the world how they function and what they actually do.

When you put yourself there, honesty and openness rule the day. With that honesty, innocent mistakes can be forgiven. Companies that insist on the constant spin that everything is perfect need only one thread to see it all unravel. Simply look to the individuals and organizations that quickly find themselves cowering in disgrace.

At the same time, having that type of transparency, especially for a company that has been around for a while, requires that you have your act together. Let me offer a personal example.

Traveling home from a business trip last week, I stopped at a familiar vendor (they have stores across the country with a good reputation) to grab a sandwich for the flight. I placed my order and could watch the staff just to the side making the sandwiches and wraps. The line of people waiting for their food grew, yet the workers showed absolutely no sense of urgency. They also looked as though they didn’t really know how to make what they were selling. They ran out of most types of bread, even though that is their specialty. And they fulfilled the orders out of sequence.

All of this is happening before 6 PM on a Friday in one of the country’s busiest airports.

There were other problems as well: inconsistency in calling out the finished order to patrons; other staff not stepping in to help; a manager trying to decide with another manager which one would stay and which would go to the other location in the terminal. And yes, everything took place in plain sight.

Take a lesson. Get your processes and procedures in place. Train your staff to be customer-centric. Create a sense of urgency in fulfilling customer needs. Then, put it in the window for all to see.

Oh, and if you’re worried about your competitors stealing your ideas, fear not. Out-execute them, and you’ll stay ahead of the game.

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Losing that Loving Feeling

When an organization really connects with people, something special happens. A bond forms. A mutual respect and admiration drives the relationship. The organization is driven by its passion to deliver its product and exceed all expectations.

It does it so well, people talk. And their friends make a connection. And they talk. And their friends connect. And it continues.

The organization grows and expands. Then they find themselves facing a difficult choice: seek to appeal to an even broader audience and reap tremendous rewards or stay true to your roots and forgo the potentially big payoff.

Starbucks chose the former. Eight years ago, I wrote a case study advocating for free Wi-Fi in their shops and a focus on a music partnership. They did some of it (my case study was not the reason why) as well as several other things that diluted who they were. They even went so far as to print out customers’ orders on stickers and put them on the cup where the baristas’ scribbles are supposed to go. That was the true sign that the end was near.

The news surrounding the number of pending store closures and associated layoffs, then, comes as no surprise. They broke their connection to their core audience. And while they had a good run, they lost track of who they were and are paying for those sins.

When faced with the opportunity to grow and expand, look closely at what that will do to your identity. Does it fall in line with who you are? Is it the natural evolution of your business? Or is it an attempt at the quick score? Are you diluting your brand and what it stands for?

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Lessons from a Bike Saddle

I’ve come to realize that managing the life cycle of a product or brand is similar to riding a bike. It’s about shifting gears appropriately and making adjustments in rough terrain. Let me explain.

Starting your ride    

Start your ride in a comfortable gear. You’re warming up, getting the kinks out, checking to make sure you are ready for what lies ahead.

Uphill

The secret to a successful climb is to keep pedaling. Keep yourself moving forward, in a lower gear, which allows you to pedal faster. You may lose a little speed on each revolution, but you will go further and with greater efficiency. The same is true for your brand. When you launch, you want something that is ready to go. It’s tempting, then, to wait until your growth starts to slow before making any real changes.

You are better off to make smaller tweaks as you grow, using that momentum to grow even more. Roll with the changes, not against them. It is much too difficult to restart up a hill when you are in that higher gear—making one large, sweeping change versus smaller ones along the way.

Plateau

At some point, you’ll reach the peak, and sales will start to plateau. Here’s where you shift gears, again. This time, you are slowing down the pace of change, increasing the efficiency of your investments.

Downhill

When you find your sales in a precipitous decline, just coast. Spend as little as possible. If you have an opportunity to change course and start back up a hill or along another plateau, start pedaling in that direction.

Rough Terrain

There may be times you find yourself going over some rough terrain. It is crucial to remain vigilant, making slight changes quickly so as not to lose your balance or veer too far off course (unless you got off course in the first place).

The real key is to remain in efficient control of what you are doing, not fighting against yourself or overusing resources. Because properly managing a brand is just like riding a bike.

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Recanting a Rant

Yesterday, I started to rant about the hoops I was jumping through to cancel an account. I am going to say that, on the surface, I was getting ahead of myself. Any company has a right…no, a duty…to know why a customer wants to leave. The best way to do that is to offer various avenues for the customer to offer feedback. Let them tell you via phone, e-mail, online response form, whatever makes them happy. Remember it is all about them.

So, getting back to my original rant, I called the company, as they required, to cancel my account. As I predicted, they tried to make me an offer to stay. Here’s the thing. The offer was a special deal for people that don’t really use the service that much. And it’s not offered as an option on their website. In other words, it’s an act of desperation to keep a customer on a continuity program.

When a customer wants to leave because they don’t see the value in your service, you either have to show them the actual value you are providing (which they didn’t) or make some other real change. But if the customer has to work harder than they deem necessary, there won’t be any value to them, regardless of what you do.

The customer comes first. And you have to meet his needs on his terms. Companies that are too strict in their one-sided agreements (like credit card companies and mobile phone providers) are going to see a high level of churn because the customer feels he is being screwed. That’s just the way it is. Treat the customer with respect and honor his wishes. If you wouldn’t put up with one of your policies, get rid of it. Chances are the people you serve won’t put up with it either.

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