The beauty of blogging...editing, adding and revising later.
Tesco has hustled, for lack of a better word, in its 90 year history. For my American cronies Tesco is a blend of Sam's Club and Walmart with an added luxury goods component. With their aggressive pricing strategies, ongoing redefinition of customer, promo's, and expanded business model, many wonder what's next? Will Tesco simply run out of technological ideas and fall victim to major competitors? Will it find that it cannot grow any further and if so how will it maintain its market share if it cannot grow? Furthermore, does its difficulty penetrating the Chinese market mean it should not try again or hope for business there in the future?
To briefly address China, companies all over the world struggle to enter and survive in China as well as India, which is equally important and worth mentioning as it has over 1B in population. The solution for all companies seems to be time. China and India are not so receptive to hounding, begging, or sneaky tactics to enter their economy, there is not much Tesco can directly do. Rather, Tesco must focus on impressing Asia by keeping the company lean and mean in Europe. Tesco should direct its attention to its e-commerce and think of ways to slash $9.95 grocery delivery fees to entice the American customer and to further slash delivery prices in the UK to keep the loyalty up. Perhaps Tesco should look to Africa or Brazil for further expansion.
In any case, Tesco has a rich history of perseverance and innovation, if they want to stay in the game they will find a way.
Tuesday, June 22, 2010
Casa del Libro
Who: Casa del Libro, only large bookstore chain in Spain. plan: to expand into the an international reference for books published in Spanish. the company belonged to Planeta, the primary editorial group in Spanish.
What: should executives decide to scrap the original system that was well on its way to being functional, though expensive and needing ongoing maintenance or should they opt for a the new, simple and cheap model?
Where: Spain
When: mid 90's Casa del Libro teamed with AOL to sell books online, by the late 90's they decided to develop a new virtual company from scratch. in 2000 they begin developing an elaborate, expensive system and by 2001 are in need of cost cutting measures.
Why: because of changes in the economic and political environment post the bursting of the tech bubble and 9/11, Planeta altered its aggressive growth plan and focused on cost control.
How: Casa del Libro was faced with how to decide between two opposing yet feasible options in order to shave costs yet remain competitive. The first choice was to remodel and maintain the existing, complex, best in breed platform (Sun machines, 4 servers with 2 CPU's, running in Solaris/Unix operating system, database manager, Vignette 5.6 for content and e-commerce support, and Excalibur v5.3 for the server). The second new platform option was simpler and considerably cheaper (Microsoft tech on HP servers, powered by Windows NT, with SQL Server as database engine, and MSFT Commerce Server 2000 as e-commerce app).
As a manager the cheaper and simpler model would win out in Casa del Libro's case.
In a downgraded industry it would be necessary to do some quantitative analysis, specifically risk analysis for a best, worst and most likely scenario in order to go beyond intuitive feelings that the cheaper system under Microsoft would be a better investment. Investing in a risk consultant would be a logical short term investment. After running a few scenarios through Monte Carlo Simulation the results would be more tangible and justified. Another way to select the best project quantitatively would be to again create possible outcomes using a decision tree and running a sensitivity analysis. In the end the cheaper, simple structure must win out given the ephemeral nature of technology. In five years to ten years it is likely both systems will be outdated, to invest in the cheaper, simple model does not mean compromised quality it says more that you are being cautious about the industry outlook and weak economy and that you will be ready to invest once again in a new or adjusted system in the future. If you commit to the laborious, expensive platform, it sends a message that while you want to have the best, you are being unrealistic in an industry that will likely slow due to technology trends and changes or simply from a weak economy. Sticking to the old platform reveals some rigidity and stubbornness to continue with a system that exhausts your financial resources.
In summary the most relevant criteria to make the decision:
1) macro/micro econ view in the short and long term
2) market analysis, where are book sales going? what technologies may keep book sales down, time on the internet, movies, tv, video games? are there any technologies that could replace physical books?
3) industry analysis, what about a competitor like Amazon? what about some of the big book store chains in the US that may push to expand aggressively?
4) company sensitivity to time and money, forecasting in the short term and long term
What: should executives decide to scrap the original system that was well on its way to being functional, though expensive and needing ongoing maintenance or should they opt for a the new, simple and cheap model?
Where: Spain
When: mid 90's Casa del Libro teamed with AOL to sell books online, by the late 90's they decided to develop a new virtual company from scratch. in 2000 they begin developing an elaborate, expensive system and by 2001 are in need of cost cutting measures.
Why: because of changes in the economic and political environment post the bursting of the tech bubble and 9/11, Planeta altered its aggressive growth plan and focused on cost control.
How: Casa del Libro was faced with how to decide between two opposing yet feasible options in order to shave costs yet remain competitive. The first choice was to remodel and maintain the existing, complex, best in breed platform (Sun machines, 4 servers with 2 CPU's, running in Solaris/Unix operating system, database manager, Vignette 5.6 for content and e-commerce support, and Excalibur v5.3 for the server). The second new platform option was simpler and considerably cheaper (Microsoft tech on HP servers, powered by Windows NT, with SQL Server as database engine, and MSFT Commerce Server 2000 as e-commerce app).
As a manager the cheaper and simpler model would win out in Casa del Libro's case.
In a downgraded industry it would be necessary to do some quantitative analysis, specifically risk analysis for a best, worst and most likely scenario in order to go beyond intuitive feelings that the cheaper system under Microsoft would be a better investment. Investing in a risk consultant would be a logical short term investment. After running a few scenarios through Monte Carlo Simulation the results would be more tangible and justified. Another way to select the best project quantitatively would be to again create possible outcomes using a decision tree and running a sensitivity analysis. In the end the cheaper, simple structure must win out given the ephemeral nature of technology. In five years to ten years it is likely both systems will be outdated, to invest in the cheaper, simple model does not mean compromised quality it says more that you are being cautious about the industry outlook and weak economy and that you will be ready to invest once again in a new or adjusted system in the future. If you commit to the laborious, expensive platform, it sends a message that while you want to have the best, you are being unrealistic in an industry that will likely slow due to technology trends and changes or simply from a weak economy. Sticking to the old platform reveals some rigidity and stubbornness to continue with a system that exhausts your financial resources.
In summary the most relevant criteria to make the decision:
1) macro/micro econ view in the short and long term
2) market analysis, where are book sales going? what technologies may keep book sales down, time on the internet, movies, tv, video games? are there any technologies that could replace physical books?
3) industry analysis, what about a competitor like Amazon? what about some of the big book store chains in the US that may push to expand aggressively?
4) company sensitivity to time and money, forecasting in the short term and long term
Sunday, June 20, 2010
Enterprise Resource Planning
Analogous to the nervous system, an ERP (Enterprise Resource Planning) system connects the limbs of a company. See the image below for clarification.
Does the ERP structure follow company structures or are companies structuring themselves around the model? Well, the answer is it really depends.
The ERP structure came in '90 following the MRP (Materials Requiring Planning) structure that was quite successful in organizing companies in the manufacturing industry. ERP went beyond the MRP structure in that it aimed to integrate all core aspects of a business. ERP extended the traditional model to include different industry sectors and company sizes.
Because the ERP structure is relatively new across industries, some older, established companies have ignored the need for an integrated, automated structure to streamline company operations. Smaller companies have in many cases avoided the ERP structure based on costs and need. On the other hand, many companies small and large have embraced the ERP, realizing the potential for smoother business operations and quicker turnover. Adopting the ERP to an existing framework has proved to be a very uncomfortable process; between costs, time and employee education the road blocks can out weigh the final result. So back to the original question who should be adapting who...the companies adapting to the ERP structure or the ERP bending to fit the company?
For young companies the most feasible idea is to adapt to the ERP, ideally from inception. The question for them is how much to spend? Prices seem to vary and for a small company the price elasticity is high. I do not know enough on the competitors and open versus closed sources to understand variations in price, this is a topic that needs exploring. Main competitors do include SAP, Oracle, MSFT and in the open source world Red Hat and Open Bravo.
For older, larger, more rigid companies adopting an ERP, customization may be a more practical though costly approach. Companies with greater financial resources are in a position to pay a premium to adapt a system to match their usage needs.
In basic research of boutique, luxury, clothing brands it is unknowable as to how many companies have integrated ERP systems into their businesses, but in my fashion luxury experience, brands were missing a centralized system and it was clear they were not selling at optimal levels. PLM (Product Lifecycle Management) is the system that one brands boasts, Elie Tahari. Londan based label, Paul Smith, has implemented a unified communication system, Office Communication Server, but this seems like only a partial ERP system similar to that of CRM (see above). Another downfall about getting the luxury sector to invest is probable incompatibility with third party manufacturers and stores. How do companies that have poored ample resources into an ERP structure get along with companies who are still operating in the Stone Age or using a different system altogether?
There is no question as to whether or not an ERP is needed. It is. To be competitive in a technological and global age, company departments must communicate and work together via a structured, tangible system to be most effective. Little was mentioned on the process or difficulty of bringing in an ERP system on board, simply for the sake of time, but know that it is a daunting task. With rapidly changing technology an ERP that took years to adopt and/or perfect could be outdated, requiring more resources. As technology improves the integration, maintenance processes must improve as well as compatibility among businesses and industries.
The ERP structure came in '90 following the MRP (Materials Requiring Planning) structure that was quite successful in organizing companies in the manufacturing industry. ERP went beyond the MRP structure in that it aimed to integrate all core aspects of a business. ERP extended the traditional model to include different industry sectors and company sizes.
Because the ERP structure is relatively new across industries, some older, established companies have ignored the need for an integrated, automated structure to streamline company operations. Smaller companies have in many cases avoided the ERP structure based on costs and need. On the other hand, many companies small and large have embraced the ERP, realizing the potential for smoother business operations and quicker turnover. Adopting the ERP to an existing framework has proved to be a very uncomfortable process; between costs, time and employee education the road blocks can out weigh the final result. So back to the original question who should be adapting who...the companies adapting to the ERP structure or the ERP bending to fit the company?
For young companies the most feasible idea is to adapt to the ERP, ideally from inception. The question for them is how much to spend? Prices seem to vary and for a small company the price elasticity is high. I do not know enough on the competitors and open versus closed sources to understand variations in price, this is a topic that needs exploring. Main competitors do include SAP, Oracle, MSFT and in the open source world Red Hat and Open Bravo.
For older, larger, more rigid companies adopting an ERP, customization may be a more practical though costly approach. Companies with greater financial resources are in a position to pay a premium to adapt a system to match their usage needs.
In basic research of boutique, luxury, clothing brands it is unknowable as to how many companies have integrated ERP systems into their businesses, but in my fashion luxury experience, brands were missing a centralized system and it was clear they were not selling at optimal levels. PLM (Product Lifecycle Management) is the system that one brands boasts, Elie Tahari. Londan based label, Paul Smith, has implemented a unified communication system, Office Communication Server, but this seems like only a partial ERP system similar to that of CRM (see above). Another downfall about getting the luxury sector to invest is probable incompatibility with third party manufacturers and stores. How do companies that have poored ample resources into an ERP structure get along with companies who are still operating in the Stone Age or using a different system altogether?
There is no question as to whether or not an ERP is needed. It is. To be competitive in a technological and global age, company departments must communicate and work together via a structured, tangible system to be most effective. Little was mentioned on the process or difficulty of bringing in an ERP system on board, simply for the sake of time, but know that it is a daunting task. With rapidly changing technology an ERP that took years to adopt and/or perfect could be outdated, requiring more resources. As technology improves the integration, maintenance processes must improve as well as compatibility among businesses and industries.
Saturday, June 19, 2010
So what happened to 'Dude You're Getting a Dell'??
Many attribute Dell's fall from grace to its insensitive customer service policies which were largely magnified in tech celeb, Jeff Jarvis' blog in '05.
Back in the fall of 2000, Dell released a brilliant ad campaign featuring Steven, a goofy kid able to persuade his parents and others to buy a Dell. By the way I cannot resist mentioning Steven's fate (aka Benjamin Curtis), in 2003 he was arrested for purchasing pot in LES, he's been m.i.a. since.
I remember buying my first laptop before college in the summer of 2001, after consulting a techie friend I chose Dell. The feeling of owning my first laptop was indescribable, I felt important, powerful, "Duuuude, I got a Dell!!" My first Dell Inspiron lasted 4 years, my second Dell Inspiron lasted 4 years and my third Dell Studio, well it's nearly 1 and a half years. For me it is not that I am a Dell fanatic there is just no other company that has convinced me to switch and I cannot go Mac yet, pride will not let me. While I have known about Dell's general demise through diminishing shelf space and lack of gripping campaigns (Justin Long was a good attempt), I have no idea how it's happened. In basic Google research two main causes emerge, however, for the sake of appealing to a powerful authority I will focus on Jeff Jarvis and the consumer's voice, as this cause is the one in which we are in control of and need to address daily as future business and political leaders.
Few facts on Jeff Jarvis:
1) American journalist
2) creator of Entertainment Weekly
3) 9/11 experience (live reporter) leads him to early blogging
4) BuzzMachine, his blog
So Jeff is an aberration, a blogging baby boomer, blogging years before most knew what blogging was. It is summer 2005 and following a slew of vicious blogs against Dell after purchasing a lemon, Jarvis burns the brand. The tech world is shocked by Jarvis' power as a blogger and moreover shocked by Dell's ignorance and lack of foresight in handling customer complaints. Dell replies, creating an in house blogging position, filled by Lionel Menchaca, a 14yr Dell veteran. Where was Lionel when the nasty complaints were coming in? After the incident (Jarvis was refunded) BuzzMachine's traffic doubled to nearly 10,000 daily visits. Jeff set a precedent, his blog did lasting damage and suddenly the blogging world had tangible evidence of a new channel in which the consumer could be heard and felt. Today among thousands and thousands of blogs we realize Jarvis' triumph over Dell came largely through his credibility and large following and while blogs give individuals virtual voices, most are not heard. To be clear, giving an unknown a virtual voice did not change the landscape, it was giving a credible voice a virtual mic that gave him power unlike ever before!!
How should Dell have handled Jarvis' blogs? Is it clear Dell knew fully of Jarvis' posts throughout the summer of 2005? Dell like every other company was aware of customer dissatisfaction, but what I do not understand was their trite, passive approach to dealing with customer issues. The company with all the young appeal of "Dude, I got a Dell." to "We're aware of the problem and we're seeking a solution." is where I get confused. Was there no one in the Dell ranks that suggested a company blog or at least someone who could follow the blogging community and spread the word at work? Why was Micheal Dell at the start of the rumors over poor service not directly addressing customer issues publicly and talking about the setbacks and ways the company was working to overcome the issues? Dell's handling or rather mishandling of early rumors in 2005 is similar to an accountant who cannot balance her checkbook. Why were the corporates hiding? What was so wrong with being forthcoming about product issues? A simple answer, a big company with many issues and too many employees too close to the problems to have perspective, also fear of a tumbling stock price and lower bonuses. Michael Dell's problem was not that he was unaware or even underestimated the power of blogging, it was his inability to convince the public he was on top of the issues.
The second blow to Dell's reputation that deserves mentioning and may be more of the reason for a hit in stock price came at the end of 2005. Dell in 2004 had emailed Intel, complaining of expensive and slow parts leading to being uncompetitive in the market. This email as mentioned in Intel's antitrust suit, may have been interpreted as a threat to switch to AMD as a part source. With Intel controlling a huge part of the processor market any complaints may have given them incentive to cut volume deals with a more loyal customer and major Dell competitor, HP. Ultimately, HP proved to be able to outperform Dell based on manufacturing costs. Coincidence, mmmm I think not?!
The exercise for companies today is the same as it was 100 years ago. They must deal with customer satisfaction, unless of course they are Intel and control the market, in which case they need to focus on evading antitrust suits. Dell lost site of pleasing its customer and the blog left a nasty wound, one that may have cost Dell its life in the end. Companies must follow their customers, if customers are blogging, they must be there. If customers are going to the moon, they better offer deals when they get there.
Facebook in 2 years?
You know technology is up for discussion when the long term horizon is two years. In thinking about Facebook's future for weeks now, I continue to remind myself that Marc's vision is evolving and much simpler than many imagine.
To begin on the subject I have to mention that I went to school with one of the founders. In fact he was one reason I avoided signing up for years. I just was not a fan, he was not so nice. I am happy I got over it. He actually left the company at the end of '08 to start his own project. An interesting fact is that many departures occurred around that time, for reasons unknown, I imagine growing pains.
Facebook is a company run by young folks who are trying to figure it out, they simply do not have all the answers, if any answers at all. There are no collaborations with the CIA or bundled data being sent off to nefarious corporate teams looking to snare consumers. Well at least not yet. Maybe when the founder turns 31 his motives will change, activist Jack Weinberg's quote in San Francisco's Chronicle in '64 never dies. People have a tendency to give the founders of Facebook enormous amounts of credit presupposing they have a master plan of world domination. While I agree that the team of 1600 has altered the way in which we communicate, to which we owe some praise, we need to remember they are human and fallible.
Facebook will continue doing what it has been doing only the rate of users will grow proportionally more than in the last 6 years combined. I forecast membership will more than double in two years. This may sound like an astronomical figure, but if 400 million users have any pull and every user encourages just 1 person to join, 1B does not seem too far off. Once Facebook reaches this volume it will be interesting to see how they will keep users updating their profiles and status.
One trend I see among Facebook users, especially within the older demographic (Aunts and Uncles are my source) is that once they join Facebook, quite often their account remains inactive. An inactive account is one that is not updated in a month. I wonder how many of the 400M current users are inactive. Like anything else, Facebook is simply a tool, you have to work to stay in touch with your friends, post pictures, content and update your profile. The people who were not big on communicating in the past realize after a time that Facebook does not mean they will be great communicators. Facebook is only as effective as its user and perhaps that is one of the company's greatest strengths. Users have to explore on their own to figure out the site and its potential. Even deleting your account is not obvious, you must dig to delete your profile. Facebook gives its users autonomy and leaves their profile content up to the imagination. As much as Facebook's future appears bright, many many users may become inactive over the years for various reasons. How will Facebook keep its user hungry to share and engage?
A partial answer to my question may lie with the 1M developers on FB who work to give users what they want in addition to the 1000 engineers. Follow the users and they will take you where you need to go. The CEO is all about customer satisfaction, if the users are not happy than we need to go back to the users...'takin it back to the roots'. This attitude will keep Facebook on top. The social plugin's and Open Graph make it tough for any internet user to ignore the site, regardless of interest or expertise.
Facebook's current platform rests on four pillars, .com (personal profiles, business pages, and group events), mobile (2x's more active than the website), www (social plugins and Open Graph) and devices. The company has been profitable in the last 8 quarters netting profits largely from advertising, which represents a very small share of potential revenues. Will they try to grow the rev slice of the pie? If so how? Through Games, apps, devices, business engagement. I am not well versed enough to comment on this, if they continue to exploit the advertising in the next two years the company will do just fine. Beyond that time frame changes may be necessary to keep ROE high.
As a Facebook employee stated, Marc's focus is speed of the site, scalability and uniqueness (not comparing himself to competitors or others). Marc's open and honest policy along with humility, unless it's all a front, will keep Facebook on its trajectory.
A final topic both confusing and intriguing mentioned by a fellow colleague is Facebook becoming a social search engine. Google recently bought Aardvark for $50M in February, a Facebook application...is this disruptive to Facebook and Microsoft's relationship? How will Google integrate this application into its cloud? Is Google aiming to further develop the app for Facebook to fully integrate? Will Google be the fact search and Facebook be the social search? Or will this seemingly friendly purchase and collab end bitterly with Aardvark being shutdown like Dodgeball or Facebook losing its app and Google's cloud growing ever more ominous. I would like to see Google and Facebook be like Sonny and Cher...I Got You Babe!!!
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