In Times Like These


“Food and energy companies have learned a lot since the 1970s about how to deal with public indignation over soaring commodity prices. Now, all that knowledge may be put to the test.

“Crude-oil prices have tripled since 2004, pushing gasoline to more than $4 a gallon in some markets...

“Archer Daniels Midland Corp., the country's largest ethanol producer, is fighting to avoid being portrayed as the villain in rising farm-product prices…

“Energy and food companies may spend less time in the spotlight today because their output commands a smaller share of people's pocketbooks than in decades past. Gasoline, for example, currently accounts for about 5.4% of household budgets, down from 7% to 8% in the early 1980s.

“For the first half of the 20th century, food spending accounted for at least 20% of Americans' disposable income, according to the Agriculture Department. That percentage dropped to 13.6% in 1974 and has been slightly below 10% this decade. Indeed, as the U.S. becomes more prosperous, extra household earnings are more likely to be spent on flat-panel televisions, casino junkets or college tuition than on food…

“Adam Sieminski, chief energy economist at Deutsche Bank, has been trying to calculate how much oil prices would need to rise for consumers world-wide to feel as alarmed as they did in 1980, when crude soared to a then-unheard-of price of $40 a barrel.

“If one adjusts for constant dollars… oil at $100 a barrel today would be comparable, he says. But if one also adjusts for the somewhat smaller bite oil takes out of personal income -- as people have become more energy efficient -- it would take a price of $135 to $150 a barrel to produce the dislocations caused by the 1980s price spike.

“Another new factor at play: the public's increased familiarity with commodity-price volatility. The sudden price run-ups of the 1970s were especially jarring because they came after at least two decades of relatively stable prices. People who had become very accustomed to paying about 29 cents a gallon for gasoline suddenly saw prices increase by that amount in a matter of months.

“By contrast, modern consumers are all too familiar with gyrating prices. We may grumble when prices soar. But we don't regard each spike as an assault on our general sense of order.”

(“Fat Profits Test Public-Relations Skills.” George Anders. Wall Street Journal: April 30, 2008. pg. B.1)


AND EVERY GENERATION feels that it is living through times of unprecedented dislocation. So once again and again, it is our feelings that drive policy, not the bare facts.

See, think, feel, act.

Would You, or Wouldn't You?


“You might suppose that the stars are in near-perfect alignment for major reform of CEO pay. The mammoth pay and disastrous performance of Countrywide Financial's Angelo Mozilo, Citigroup's Chuck Prince, and Merrill Lynch's Stan O'Neal should be enough to make the public furious. Each CEO departed with $100-million-plus compensation after misadventures with subprime mortgages. Now add the economic slowdown to the mix; ordinary Americans are worried about making ends meet while failed pooh-bahs rake it in. Then throw in one more element -- a presidential election. Put it all together, and how could change not be imminent?

“The answer is that whatever remedies reformers enact, corporate boards can always find a way to pay the boss whatever they like. Over the past 25 years CEO pay has risen regardless of the economic or political climate. It rises faster than corporate profits, economic growth, or average workforce compensation. A recent study by the compensation consulting firm DolmatConnell & Partners found that CEO pay in the companies of the Dow Jones industrials increased at a blowout 15.1% annual rate over the past decade.

“A more sensible alternative to the current compensation system would require CEOs to own a lot of company stock. If the stock is given to the boss, his salary and bonus should be docked to reflect its value…

“Meanwhile, let the reformers battle on. One of the most prominent, Nell Minow of the… Corporate Library, which rates board effectiveness, says, ‘My colleagues and I have found that there is no more reliable indicator of investment, litigation, and liability risk than excessive CEO compensation.’”


(“Rewarding Failure.” Geoff Colvin. Fortune: April 28, 2008. pg. 22)

AND ENRON'S MANAGEMENT were the smartest guys in the room.

And who has the power -- the smart? the lucky? the wise? the fool? the favored? Where would you stand?

No Touch, No Feel, No Sense


“For Mattel Inc. and its flagship icon Barbie, chasing the ever-changing tastes of American girls is turning out to be more difficult than expected.

“Amid a rare quarterly loss reported Monday, the El Segundo, Calif., company reported flat world-wide sales for the Barbie brand. That reflects a 12% decline in the U.S., repeating a pattern the company struggled with last year...

“Mattel's struggle to breathe life back into the buxom blonde, more than a year after problems in its Barbie business surfaced, shows the ongoing challenge the toy industry faces in attracting the fickle attention of young girls. In many of last year's Barbie lines, for example, the company sought to modernize the doll with more electronic features.

“‘We're seeing an ever evolving and changing girl,’ said Chuck Scothon, senior vice president of Mattel's girls division. ‘I think there's more competition for girls' attention,’ he said, citing items like consumer electronics.

“Yet some of Mattel's attempts to address the competition posed by iPods and other electronic items has only confused its young customers. The recent Magic of the Rainbow, a fantasy doll marketed under the Barbie brand, doubled as a remote control, came with a CD-ROM game and featured wings that fluttered at the push of a button. ‘Girls asked -- is this a doll?’ said Mr. Scothon. ‘We put too much in.’ …

“Mattel is looking to make Barbie over with a series of changes to simplify. ‘We're looking for a simple doll and a better aesthetic as opposed to being overly innovative,’ said Mr. Scothon…

“Mattel also is hoping to find a rainmaker in its Web site, BarbieGirls.com, a meet-and-greet online world that has attracted 11 million users. So far the company has struggled to convert the free site into an active source of revenue. A $60 MP3 player that unlocked additional online features proved a disappointment at retail, and Mattel is phasing it out.”


(“Corporate News: As Barbie Sales Slow, Mattel Looks to Simplify Its Iconic Line.” Nicholas Casey. Wall Street Journal: April 22, 2008. p. B.3)

WHO IN THE WORLD thought of turning Barbie into a remote control? Oh... a middle-aged man. Of course!

Throw more technology at the problem; that always works!

Certainly, we can't have a male executive getting to know what little girls like to play with.

Outstanding is Standing Out


“As corporate America gets greener, Earth Day is following the path of Valentine's Day, Easter and Christmas, and turning into a corporate marketing opportunity. But instead of advertising chocolates or toys, companies are selling themselves and their greenness -- and often, the biggest marketers are those with sizable carbon footprints.

“This week, for instance, Anheuser-Busch is airing four new television ads as well as print ads featuring employees "discussing the company's commitment to the environment," according to a news release. Anheuser-Busch, whose beer cans often end up littering roadsides, has operated a large aluminum-can recycler for 30 years and has other environmental programs.

“Similarly, Accor North America, a unit of Paris hotel group Accor, which operates Novotel, Motel 6 and other chains, has declared this week "Earth Guest Week," with fluorescent-bulb and battery-recycling programs, organic food on restaurant menus, free parking for hybrid cars at the Sofitel in Los Angeles, and other initiatives…

“So many eco-friendly marketing messages are piling up that it no longer is clear whether companies jumping on the environmental bandwagon get much advantage for doing so, marketing experts say. Instead, a green marketing campaign now is standard operating procedure for big companies.

“‘Every company is out there touting 'we're green' -- it's the new requirement for being a good corporate citizen,’ says Allen Adamson, managing director of WPP Group's branding consultancy... ‘The noise level is so high now,’ he says. ‘The first few people into it had some benefit. Now it's a cost of entry.’ …

“The eco-friendly push has created a surge in the number of green-related trademark applications, according to an annual study of trends in trademarks... Last year, more than 2,400 applications were filed for logos or phrases that used the word ‘green’ … About 900 applications were filed for the word ‘clean,’ and the prefix ‘eco’ also was hot. The popularity of ‘eco’ doubled in 2007 from the year earlier to 900 new applications...

“It is ‘green gridlock with multiple companies filing for almost-identical marks at nearly the same time,’ says Glenn A. Gundersen, chairman of Dechert's trademark practice.”

(“Firms Use Earth Day to Show Their Green Side; Eco-Friendly Messages Fill the Air, but Are They Being Heard in the Din?” Betsy McKay and Suzanne Vranica. Wall Street Journal: April 22, 2008. p. B.7)


WHILE EVERYONE WANTS TO THINK outside the box, I keep wondering where is the box... ? What box... ?

Maestro, Guru, Savant


“As the drug industry wrestles with major challenges, some top companies are turning to a new kind of executive for help: strategy master.

“Over the past six months, at least four large U.S. drug makers, including Johnson & Johnson and Pfizer Inc., have created top-level executive positions tasked with overseeing company strategy, with titles such as senior vice president of strategy. In some cases, they report to the chief executive.

“Their responsibilities, which vary from company to company, include identifying new business opportunities, overseeing the cost-cutting programs that have spread through the industry and improving coordination among company divisions.

“The drug industry's embrace of strategy masters comes as companies are under pressure. Sales and profit growth have been slowed by generic competition, research stumbles and increased government scrutiny of pricing, marketing practices and drug safety. Many large pharmaceutical companies are laying off workers and closing plants to save money, while seeking new medicines that can sustain profits. A strategy point person might help set priorities and allocate resources more efficiently.

“It is a bit early to know what difference these strategy chiefs are making, and companies are fairly tight-lipped about what they are up to...

“At least two drug companies, Eli Lilly & Co. and Wyeth, named strategy executives a few years ago. In the more recent wave, J&J in November created an Office of Strategy and Growth. Its mission is to identify new business opportunities in health care that are distinct from its current businesses of pharmaceuticals, medical devices and consumer products. J&J has indicated one new potential opportunity is in health-care information technology…

“In the past, strategic decisions often were made by individual business divisions, said Matt Gurin… Hay Group vice president. Now, companies are concluding that priorities need to be set at the top ‘to try to get a bigger bang for their buck.’”

(“Drug Firms Employ Strategy Masters.” Peter Loftus. Wall Street Journal: April 14, 2008. p. B.5)


WHERE IS THE CEO? Where are operating leaders? Are they in touch with their environment? Aren't they seeing where things are going? Don't they have a feel for, and a sense of, strategic possibilities? Can't they think more broadly?

When strategy is decoupled from tactics and operations, how can we help but wander?

Who will save us???

An Investment Banker As CEO?


“While radical corporate transformations are sometimes necessary, gutting a company and then rebuilding it is just as risky as it sounds.

“Former Thomson SA Chief Executive Frank Dangeard found that out the hard way. Over the past eight years, he engineered an audacious makeover at Thomson. He dumped the Paris-based company's unprofitable TV business, which made RCA- and Thomson-branded sets and picture tubes, and he bought dozens of small companies to create a 5.6 billion euros ($8.8 billion) provider of set-top boxes, DVDs and video-production services. He also cut more than two-thirds of the work force and reduced the size of the executive team. By last summer, more than 80% of the company's 23,000 employees had joined since 2001. Then the Canadian-born, Harvard-educated investment banker declared the hard work of assembly finished…

“But Thomson's latest transformation was extremely unusual in its scope and speed, and it left the company disjointed…

“Mr. Dangeard envisioned creating a ‘one-stop shop’ of digital-content equipment and services for cable and telecommunications companies, movie studios and TV channels. The theory was that a broadcaster purchasing a set-top box for high-definition television, for instance, might also hire Thomson to edit its TV shows or take over its production department.

“Inside the company, though, the changes were overwhelming. So many of the top 300 executives were new in 2005 that when 20-year veteran and Chief Operating Officer Didier Trutt was introduced to them, he barely knew any, Mr. Collis says...

“Each unit typically sold only its own products -- often under its own brand -- even when a different part of Thomson offered a related product. Some units, like Technicolor, preferred buying equipment and technology from outside the company, rather than using those developed by Thomson's research-and-development labs…

“Analysts remained skeptical. Many had long questioned whether there were benefits to housing Thomson's varied parts under a single corporate roof. They said there was no evidence that companies wanted to buy all of Thomson's offerings from a single vendor...

“Mr. Dangeard says Thomson's customers like the breadth of the company's offerings, even if they don't take advantage of them. He says Thomson would ‘lose credibility’ with customers if it broke itself up. In announcing Mr. Dangeard's departure, the board said that it was sticking to the strategy of making Thomson a world leader in ‘video solutions.’”

(“How Remaking Thomson Cost Its Chief His Job.” Phred Dvorak & Leila Abboud. Wall Street Journal: April 14, 2008. p. B.1)

BUYING AND SELLING BUSINESSES is the easy part, contrary to the view of it as "the hard work of assembly."

The hard work, the heavy lifting, is being in touch with customers and employees.

With no evidence to support their theory of revenue synergies, and no sense of touch nor feel for their core constituencies, the board fires a sacrificial CEO and persists in his strategies.

So once again, change may be vital, but it always is costly, risky and threatening.

Communication and Collaboration, Yes. But Rigor... ?


“Executives say they are harnessing a new Web tool, called prediction markets, to transform the idea pipelines inside their companies. Companies like the InterContinental Hotels Group, General Electric and Hewlett-Packard are using prediction markets to try to improve forecasting, reduce risk and accelerate innovation by tapping into the collective wisdom of the work force.

“Like blogs and wikis, prediction markets can spur communication and collaboration within a company. Yet they add rigorous measurement to business forecasts, like estimating the sales of a new product or the chances that a project will be finished on time.

“Corporate prediction markets work like this: Employees, and potentially outsiders, make their wagers over the Internet using virtual currency, betting anonymously. They bet on what they think will actually happen, not what they hope will happen or what the boss wants. The payoff for the most accurate players is typically a modest prize, cash or an iPod.

“The early results are encouraging. ‘The potential is that prediction markets may be the thing that enables a big company to act more like a small, nimble company again,’ said Jeffrey Severts, a vice president who oversees prediction markets at Best Buy…

“For years, public prediction markets have been used for politics, like the Iowa Electronic Markets and Intrade, where buyers and sellers bet on which candidate will win a particular race. And there are prediction markets where people place bets on news events (Hubdub, among others), video game sales (simExchange) or movie box-office receipts (Hollywood Stock Exchange).

“These markets have often been more accurate than professional pollsters or market researchers. The idea is that the collected knowledge of many people, each with a different perspective, will almost surely be more accurate than an individual or small group or even experts…

“Today, analysts say, there are dozens of major corporations testing these markets. The companies include Google, Cisco Systems, GE Healthcare, General Mills, ArcelorMittal, the world's largest steelmaker, and Swisscom, a large telecommunications company.”


(“Betting to Improve the Odds.” Steve Lohr. The New York Times. April 9, 2008. pg. 1)

ILLUSIONS OF RIGOR now haunt credit markets. Swelling confidence led to a confidence crisis, a confidence game.

Grow very, very wary when they tell you they have it all figured out.

Can You Relate?


“Compared with other forms of human interaction, online social networking is really not all that social.

“People visit each other's MySpace pages and Facebook profiles at various hours of the day, posting messages and sending e-mail back and forth across the digital void. It's like an endless party where everybody shows up at a different time and slaps a yellow Post-it note on the refrigerator.

“Now a new wave of Silicon Valley companies is bringing live socializing back into a medium that has, in the parlance of the technologists, grown overly asynchronous.

“Vivaty, a start-up based in Menlo Park, Calif. , is creating 3-D virtual chat rooms that people can add to the Web pages and social networking profiles on the sites where they spend most of their Internet time…

“With videogame-like precision, they can then navigate that virtual space, which may feature their Facebook photos hanging from the walls and a YouTube video playing on a widescreen TV. Up to 15 others can choose avatars and enter the same room at the same time for text-based live socializing…

“Similar online services like Second Life and games like World of Warcraft have existed for years. But they are not accessible through a Web browser. Instead they require users to install large and cumbersome programs and have plenty of Internet bandwidth for a satisfyingly immediate experience…

“The entrepreneurs and investors behind… ‘live Web’ companies say that the intermittent socializing on most Web sites ignores the primal human instinct that once drove people to the town square and now brings them into real-world social groups to watch the Super Bowl or the latest episode of ‘Battlestar Galactica.’

“‘A lot of basic human communication needs have been lost in this age of siloed, one-to-one communications,’ said Roelof Botha, a partner at the venture capital firm Sequoia Capital. ‘At the end of the day, we are a social species.’ …

“[Keith] McCurdy from Vivaty said he did not expect these live services to travel far across the generational divide. The younger video-game generation ‘has more craving for contact,’ he said. ‘They are using their computers for emotional experiences, and a video-game experience is more emotional than looking at a blue and white Facebook page’.”

(“Online Chat, As Inspired By Real Chat.” Brad Stone. The New York Times. March 31, 2008. pg. 1)


TOUCH IS A KEY SENSE in managing strategically. When we are in touch with others, we develop a sense of feel that unlocks insight and understanding.

See them think. Hear them breathe. Connect with them in person.

Ephemeral Data, Real Need?


“The digital revolution has spawned billions upon billions of gigabytes of data… By 2011 the digital universe of ones and zeros will be 10 times the size it was in 2006.

“But the downside is that much of this data is ephemeral, and society is headed toward a kind of digital Alzheimer's…

“Data is ‘the natural resource for the Internet age,’ said Francine Berman, director of the San Diego Supercomputer Center... But, she added, ‘digital data is enormously fragile.’ …

“For all their qualities, electrons can seem awfully feeble when compared with a good old-fashioned book. ‘With the right kind of paper and the right kind of stewardship,’ Dr. Berman said, ‘you can keep a book for 100 years or more.’ The interface is as simple as it gets: open the book and look at the page...

“No one is suggesting that we try to hold on to every bit of data lingering in every obsolete corner. Choices must be made about the kind of material that should be kept fresh and accessible for 5 years, or 50, or 1,000 …

“Dr. [Brian] Lavoie said… ‘you can have the most elegant technological solution to the digital-preservation problem, but if there's no economics underpinning it, then there's no solution at all.’ …

“Dr. [Margaret] Hedstrom said, ‘the issue is about losing the ability, in a systematic way, of being able to preserve anything.’ … People think that because the cost of storage is dropping ‘we can save everything,’ she said. ‘But that's based on a naive view of what 'everything' actually is.’ …

“She said she was thrilled, therefore, to see serious projects coming from the National Science Foundation and heartened that many approaches were being considered. ‘If everybody's doing the same thing, we might all be making the same mistake’.”


(“In Storing 1's and 0's, The Question Is $” John Schwartz. The New York Times. April 9, 2008. pg. 1)

SEE A GAP. Fill a need. Be distinctive.

What's Good? What's Bad?


“More chief executives are spurning bonuses earned for fiscal 2007. Their voluntary cutbacks, most common among financial companies affected by the mortgage meltdown, don't always assuage demoralized staffers and unhappy investors. And they can stoke anger about other executive-pay practices.

“The heads of at least eight major U.S. companies -- ranging from Bear Stearns Cos. to Zions Bancorp -- turned down last year's bonus, while a ninth requested a shrunken one…

“It isn't unusual for bosses to slash their rewards when business sours. But a sacrifice by otherwise well-paid chiefs rarely impresses the rank and file, says Edward Lawler, director of the Center for Effective Organizations… In some cases, it ‘lowers the credibility of the CEO,’ he says. Corporate leaders are more likely to win favor when they insist their bonuses be shared with troops…

“Warner Music Group Corp. CEO Edgar Bronfman Jr. refused a bonus for the year ended Sept. 30, after receiving a $6 million bonus the prior year. He asked the board pay panel to put the funds into the bonus pool ‘for employees other than executive officers,’ its latest proxy said. Warner swung to a loss for the year. Its shares declined more than 60%.

“Mr. Bronfman turned down between $1.35 million and $1.8 million, based on the range of bonuses awarded to fellow top officers. Warner's compensation committee said in its proxy that it offered bonuses despite the poor results because of ‘unexpectedly challenging conditions in the recorded music industry.’ Will Tanous, a Warner senior vice president, says the company's operating performance was strong, with U.S. sales increasing even as overall industry sales fell 10%.

“Mr. Tanous says some employees viewed Mr. Bronfman's gesture as ‘a morale booster’ …

“Declined bonuses don't always please disgruntled investors. That was clear at Washington Mutual… where CEO Kerry Killinger was eligible for a $1.19 million bonus last year. He told analysts that he wouldn't accept the bonus because of the company's poor results…

“Mr. Killinger was eligible for 32.6% of his bonus, because the company achieved 32.6% of its 2007 goals for certain earnings, expenses and customer-loyalty measures… The foregone award will count toward Mr. Killinger's post-retirement benefits, because he earned the money.

“That's ‘a bait and switch,’ insists Richard Clayton, research director of CtW Investment Group.”

(“Theory & Practice: More CEOs Are Saying No (Voluntarily) to Bonuses; Mortgage Crisis Spurs Wave of Turndowns; Not Everyone Is Happy.” Joann S. Lublin. Wall Street Journal: April 7, 2008. pg. B.6)


WHERE ARE OUR EYES? What performance criteria are we watching? What is excellent performance? Is it unidimensional? What is reward-worthy? What is to be incentivized?

The company lost money; shareholders lost 60% of their holdings, yet a sales increase is trumpeted. And for facing challenging conditions a CEO should be rewarded? Or, for yielding a bit a CEO thinks to be heroic?

How disingenuous are they? How distracted are we?

Good News for the Fearful & Brave


“With $39 billion on hand from the sale of Alcon Inc., Nestle SA will be in the market for acquisitions as part of its strategy to bulk up its fast-growing nutrition business…

“It is a tough time to be running a food company. Commodity prices have been rising, the competition for shelf space at retailers is brutal, and as the economy sours, consumers pull back on their spending. So far, Nestle has been navigating well; it recently raised its 2008 sales forecast and said its cost-cutting programs and large size were helping it weather current conditions.

“Dealmaking to adjust Nestle's portfolio of brands has been a hallmark of Mr. Brabeck's decade as CEO. He has been cutting products and brands that don't meet his profit and sales expectations. He shed lower-margin staples like some frozen foods and purchased more premium brands like Dreyer's ice cream. He has also pushed Nestle aggressively to develop foods that have nutritional elements, viewing those as commanding higher prices at retail and also benefiting from demographic trends like aging consumers.

“The cash from the Alcon deal gives Nestle firepower to finance any future acquisitions at a critical time: The global financial crisis has made credit harder to come by, even for investment-grade-rated companies like Nestle. Nestle's strategy is the latest evidence that some corporations, known as strategic buyers, see opportunity in the turmoil in the mergers and acquisitions market. For companies that can ride out the financial and economic storm, there may be opportunities to pick up businesses from struggling rivals on the cheap, at a time when once-fierce competition from private-equity buyers has disappeared.”

(“Cash May Feed Deal Appetite at Nestle.” Dana Cimilluca and Jeanne Whalen. Wall Street Journal: April 8, 2008. pg. B.1)


REMEMBER WARREN THE WEALTHY: “Be brave when others are fearful, and fearful when others are brave.”

Are we prepared to move forward? Or, are we forced into retreat?

Our world is a construction of our choices.

Seeing Anew


“In the early days, fortunes changed swiftly for Autodesk... Indeed, the San Rafael company has been on a roller coaster for much of its quarter-century history. The low point of Autodesk's ride occurred during the height of the Internet boom, when it embarked on a fateful shift in sales strategy. The company turned its back on the so-called channel partners that had long sold its engineering software and instead branched out into selling new services online. The lure of selling without the support of resellers turned out to be wrong for products as sophisticated as those in Autodesk's portfolio...

“Then Autodesk made a move that sent it on a climb that has lasted five years. The company found and nurtured a hidden asset that would reverse its fortunes and cause the top line to grow from $824 million in 2003 to $2.17 billion in 2008 with profitability growing more than 10 times...

“Autodesk is among a handful of companies that have been able to revive a core business by discovering and harnessing hidden assets -- in this case, undervalued customer segments… Making the most of hidden assets is an approach that has worked as successfully for companies nearing their natural limits to growth, as it has for companies that need a new strategy. In addition to discovering an undervalued customer segment, companies can find hidden customer assets by discovering an untapped influence they may have over a specific group of customers or reevaluating proprietary information that can be used to alter, deepen, or broaden the customer relationship...”


(“Autodesk's Turnaround Secret; How the CAD software maker reinvented itself by refocusing on its customer segments, product differentiation, and a new sales model.” Chris Zook and George Cogan. BusinessWeek.com. April 1, 2008)

WHAT LURES US away from the heart of our work? What tempts us to turn our back on our home base?

How can you see that which has been overlooked?

Periodically, return to your original foundations. Question your current assumptions. And see if you may have wandered away from seeing clearly.

Conventional Wisdom or Distinctive Differentiation?

“Autodesk represents one of the most dramatic examples of how a company has made the most of a hidden customer asset. In the late 1990s, Autodesk made a series of moves it would live to regret. The company decided to expand beyond the design tools that had been the keystone of its success and instead add services and products that were neither part of its core business nor natural adjacent businesses. Autodesk also decided it could save on costs by selling to its customers directly and over the booming Internet, instead of through its network of resellers. ‘The company had adopted a Hail Mary strategy, trying lots of new and different things, often throwing business analysis and [proven] practices to the wind,’ says CEO Carl Bass.

“The strategy backfired. Not only were the new offerings unsuccessful, but the company also learned -- the hard way -- that its resellers were better at selling its products than Autodesk was. Performance plummeted, and Autodesk knew it needed to change. But the how-to wasn't obvious. Like many other companies, Autodesk didn't know where it was falling short with its customers and where it could differentiate itself by developing new products and services.

“In a 2004 survey of 259 executives worldwide, Bain & Co. found that for many, there is a huge gap between perception and reality when it comes to serving customers. Among respondents, 80% of executives thought they were doing a good job of delivering ‘very differentiated’ products and services. But when we compared this belief with a similar sample of their customers, only about 8% said they thought their suppliers were highly differentiated. “

(“Autodesk's Turnaround Secret; How the CAD software maker reinvented itself by refocusing on its customer segments, product differentiation, and a new sales model.” Chris Zook and George Cogan. BusinessWeek.com. April 1, 2008)


TO BE OUTSTANDING, we must stand out.

When everybody knows something... where do you go?

oops!

“FairPoint Communications Inc. completed its purchase of Verizon Communications Inc.'s wired telephone lines and high-speed Internet service in northern New England, and was promptly punished by investors.

“FairPoint's stock fell 12%, or $1.24, to $9.02 in 4 p.m. composite trading on the New York Stock Exchange.

“Goldman Sachs analyst Jason Armstrong added FairPoint to his ‘sell’ list and said the multibillion-dollar deal will push risk ‘materially higher.’

“Wall Street's reaction came as FairPoint CEO Gene Johnson touted the deal's closing in New York as catapulting the North Carolina-based phone company into one of the nation's largest.

“‘This is a great day in our progression. Many dedicated employees have worked tirelessly to achieve this milestone and I am ever grateful,’ Mr. Johnson said. ‘The result of our efforts is the creation of the eighth-largest telephone company in the United States’."


(“FairPoint Closes Verizon Deal and Sees Shares Fall.” Wall Street Journal. April 1, 2008. pg. B.2)

RISK not only comes with increased leverage in a slowing market, but with complexities heretofore not perceived.

Not My Fault!

“Citigroup Inc., as it unveiled the final in a flurry of internal organizational changes, appears to be getting started on a restructuring of its board.

“The banking giant said in a statement on its Web site that its board ‘is actively seeking new directors’ and is placing a ‘particular emphasis on expertise in finance and investments.’

“The board has been criticized by shareholders and, in private, by some Citigroup executives. They are frustrated with the board's failure to sound the alarm as the bank piled up big risks in the years before the credit crunch hit, saddling Citigroup with more than $20 billion in losses since last summer.

“The board has few members with experience in financial services. Only two outside directors -- Richard D. Parsons, Time Warner Inc.'s chairman, who ran a New York thrift in the early 1990s, and Robert L. Ryan, who was a Citibank vice president from 1975 to 1982 -- have any banking background. Mr. Ryan, Medtronic Inc.'s chief financial officer, joined the board last year.

“Citigroup spokeswoman Christina Pretto said the board ‘has diligently carried out its responsibilities, including with respect to issues surrounding mortgage-related exposures.’ She added that the board is ‘highly experienced with a unique knowledge of the company, and regularly reviews and unanimously supports’ Citigroup's planning process and Chief Executive Officer Vikram Pandit's strategy.

“Robert E. Rubin, the former Treasury secretary who is chairman of Citigroup's executive committee, has been singled out for sharp attacks. Some investors and executives say Mr. Rubin, who was the chief advocate of naming Mr. Pandit as CEO in December, deserves blame for Citigroup's larger appetite for risk-taking in recent years...

“Mr. Rubin, however, is unlikely to step down from the board anytime soon, said a person familiar with the matter. He has defended his role by noting that he isn't responsible for any risk-management or trading functions at Citigroup.”

(“Citi Seeks Finance-Savvy Directors.” David Enrich and John Flowers. Wall Street Journal. April 1, 2008. pg. C.3)


WELL, WE MIGHT FEEL REASSURED that board decisions are unanimous (in support of strategies with which they have no experience).

And we are reassured that a former U.S. Treasury Secretary has nothing to do with "risk-management or trading functions." We wouldn't want him gumming up what we really want to do.