Leadership - The Peggy Noonan Way

Wow - my apologies to my regular readers - it's been some time. Hopefully, you receive this via RSS feed, so you'll appreciate my selective posts. I've got quite a few things that I'd like to comment on within the coming weeks, but #1 on this the list is this OpEd from Peggy Noonan --> http://online.wsj.com/article/SB10001424052748704415104576066180967679912.html In "The Captain and the King", Peggy discusses leadership, and I love it:

It's a great mistake when you are in a leadership position to want to be like everyone else. Because that, actually, is not your job. Your job is to be better, and to set standards that those below you have to reach to meet. And you have to do this even when it's hard, even when you know you yourself don't quite meet the standards you represent. A Captain has to be a Captain.

Being great requires sacrifice, and often, leadership is not a choice. You are "thrust upon it". How do you handle those situations? If you can plan for those - and I think you can - you need to be ready to take the reins in a big way when you have an organization in need.

The Brand Called You

As part of 2011 planning, I was conducting some brand research, and came across a truly classic career/branding article online -- Tom Peter's Fast Company article "The Brand Called You" --> http://www.fastcompany.com/magazine/10/brandyou.html

What a truly classic personal growth article! It's almost 13 years old, but it could have been written today. There are a number of important takeaways, and for those of you considering your career, your growth path, and your personal brand, they are well worth remembering.

Here are my takeaways:
1) Figure out how to create a distinctive role for yourself (wherever you are).
2) You're not defined by your job title -- and don't let it confine you.
3) Identify your differentiators -- what do you stand for, and what do you do that adds value?
4) Everything you do matters -- the voicemail messages, the emails, the personal interactions
5) You are a leader.
6) Today's work is project based.
7) Test the market to find your value.

Drilling down
As I give myself the prescribed gut-check (are you giving yourself "a steady diet of more interesting, more challenging, more provocative projects?), I can't help but think that what Tom really nailed here is the role of "project world".

Exploring your background should lead to a set of "projects" you've executed that you can use to evaluate your progress. Do you have those? It's time for me to take a step back, but the power of placing your background into those projects is clarity. The ability to clearly identify the part you played, the value you were able to provide, and the linkages to the "greater good".

Here's to hoping you are truly able to find the challenges you deserve within the environment you operate within. That's engagement.

Pitfalls of the "High Potential"

Please forgive the posting delay, there have been a variety of great topics worthy of mention here, but time has been tight. After a recent review of The Conference Board website however, I wanted to share a great article on career growth, from two IMD professors.

Article here --> http://budurl.com/HiPoArticle

The unfortunate truth is that often academics miss critical nuances around how the real world operates, but I found their insights spot on. Since you can read the article yourself, I wanted to pull out some nuggets within their commentary that I found most useful:

1) Cultivate the most productive working relationship with your boss. Although this goes without saying, it can be an easy one to forget -- particularly if your timeframe in a specific role is "temporary". Understanding preconceived notions -- from your manager, your counterparts, and subordinates -- can help you address them and add value more quickly.

2) Managing a sense of "entitlement" -- in both yourself and others. This is funny (and a little sad at the same time), but research indicates that "the current generation’s mean narcissism score approaches that of a celebrity sample of movie stars, reality TV contestants, and famous musicians". Do you have an inflated sense of self-importance, and is it impacting the perception that others have about you?

3) The "temporary" assignment mindset. I alluded to this one earlier, but unfortunately, many companies design assignments (and incentives) in a way that prevents an employee from ultimately being accountable for the decisions that they make. This happens in job rotations and can also happen in situations like merger integrations or other extraordinary events. As the authors allude -- this not only impacts business results -- it can impact morale and social interaction when people are disconnected from the consequences of their decisions/behavior.

Good Investing Commentary -- Wanted to Share

Here's a brief, well written market review that I receive for free each month (for the month of October): Monthly Market Review - October 2009

I don't recall how I came across this review, but aside from being a great resource, it's tied to some really well done marketing for Agile Investments, which is an ETF Portfolio Management organization. These groups have been popping up relatively frequently, and are worth investigating if your looking for someone to manage a set of ETFs to support an index investment approach.

Building a Better Network

Read a really great article in yesterday's WSJ on "How to Be a Smart Protege", which presented some excellent ideas - for anyone trying to develop a mentoring relationship - or frankly any type of professional relationship. Some of the key concepts and the ideas presented are recounted here.

Key concepts:
1) Don't seek just one mentor, seek many. Build a "developmental network".
2) "Relationally savvy" individuals are very good at building these networks - and we can learn from them.

"Savvys" are successful because they:

• Aren't shy about initiating and maintaining contact with people that can support their development.
• Are expert at recognizing when colleagues are interested in becoming mentors
• Put a lot of work in at the start of a relationship with a mentor to make sure it is successful
• Come prepared for meetings with their mentor, and follow up/keep them up-to-date
• Share information -- they are open, sharing, and trusting
• Make it mutual - good mentees find ways to add value to the relationship
• Are personable - they're simply easy to get along with
• Have a positive attitude - see relationships as an opportunity to "build bridges"

Anyway, take the time to read this one. There's great advice in there for mentees, mentors, and anyone that could be more thoughtful about the value that they give to and receive from others.

LINK: http://online.wsj.com/article/SB10001424052970203937504574252141852898888.html

Webinars Now! - Best Practice

What's your take on webinars? Do you use this 1 to many medium to increase sales?

Another older article I want to address as I clear things off my desk... Worthwhile? You decide, I only blog to add value...

Some facts from B2B magazine, 10/08:

• Webcast market 2014 - 3.4Billion - reach "more people for less"
• If you can't go face to face...webcasting is an excellent way to reach your audience...
• Webinars "allow you to engage in a conversation at a deeper level with customers."
• And you can track participation extensively!

Best Practices:

• Identify targets and create content just for them.
• Send invitations well in advance.
• Engage & monitor your audience.
• Don't make a sales pitch. "Don't make someone come hear you talk about you, you have to make it about them."

Wow, this last point - is there a clearer way to say it? Maybe I'm being hypocritical as a blogger, but these concepts aren't mine -- I'm just bringing them to my humble reader's attention...

• Last one, which I consider "numero uno" -- Follow Up - Give this some context. But within reason, what else really matters... If you have something to say, why not say it? Don't make someone do all the work on their own. This is known as The Close...

Recommendations to CMOs

Greg Welch, a consummate marketer (who happens to place CMOs), has the following advice... which I mention later rather than sooner as I get back on track with my postings....

Courtesy of Ad Age (1/26/09 - ok I'm digging through old piles):

• Lead from the Front "Reassure your team of the broader mission, progress to date, and plans for the future....Obviously, honest and authentic leadership works best."
• Be a Translator "Explain your agenda & determine how you can deliver tangible business value -- inspire trust & build trust, you need everyone's support. This sounds trite, but assess the value of the CMO role, and leverage it!
• Tap into the wisdom of your firm. Innovation happens from within -- it's just a function of your ability to listen. If you ignore the thoughts of others -- it's YOUR loss.
• Knock on the CEOs Door - Candid assessments from the King are always key - ensure your vision is the same, your career depends upon it.
• Take calculated risks. "Great CMOs take action." Move quickly - pick a pilot to champion, and move from there...

Why Marketing ROI Still Flounders...

A recent study executed by Lenskold Group and Marketsphere highlights an interesting disconnect that occurs as organizations attempt to measure marketing performance. Companies want to measure the effectiveness of their marketing efforts, but they don't budget for it. This is a problem that I've encountered throughout my career, and it's worthy of discussion.

As reported, although 79% of marketers indicate that need for measurement of marketing effectiveness has increased, only about 25% of them had actually budgeted for it. For highlights and the report itself, go here -> http://www.lenskold.com/content/2009mroistudy.html

This problem is pervasive, what are the root causes? Obviously they are complex, but here are some gaps to consider as you attempt to put these measures in place.

Measurement by Tactic
Certain tactics are simply much more difficult to measure than others, so attributing a return to them is tough. Some I've struggled with -- advertising and trade shows. You can cite sales tied in part to the activities, but attribution directly to them is questionable. You end up with "management by anecdote".

Cross-functional Dependencies
You need to tie the work of your sales teams to the marketing activities you execute, but you don't have the authority to mandate their compliance. I basically want to know how many sales calls, RFPs, and new revenue dollars result from a specific effort, but many sales organizations often don't track those things. Or to put it more precisely, sales will often fail to attribute any of those items to something that a marketing activity may have helped them achieve.

Cost of Measurement
Determining the "ROI on ROI measurement"can in itself be elusive. You can make a set of assumptions about lift that can be achieved by allocating dollars to higher-return efforts, but when you determine the data and system support that you will ultimately need for your ROI "inputs", it can be daunting. Leadership has to take the "long view" to reap the incremental annual payoffs -- in contrast to the quarterly reviews their investors require.

I could go on (e.g. team skill set gaps, complexity of sources, etc.), but instead I'll make a recommendation -- start small. Go through the pain and effort of performing the ROI exercise just once, on a meaningfully sized amount of spend, and share that with your CEO. The light bulbs will begin to go off...

Washington's Mis-guided View on Keynesian Economics

In this well written Op Ed by Dick Armey (former econ professor, House of Representatives majority leader, etc.), Armey argues on the misguided nature of government spending a la Keynes: http://online.wsj.com/article/SB123371237124446245.html

I find it hard to argue that government can be consider a more efficient mechanism for monetary distribution, and spending as "stimulus" than the individuals within the market that the government is meant to serve. In addition to being a very inefficient means of distribution, programs of the type established by this legislation also have a tendency to remain long after their stated necessity. One can hope for a better outcome, but historical precedent is not on our side...

Also, a reader's posting in response to Armey's post, which applies some additional context around Keyne's thinking:http://online.wsj.com/article/SB123431666974071129.html

As it turns out, Washington has an interesting way of putting economic theory into practice, and more often that not, it's a poor substitute than more sound, clearly defined prescriptions...

2009 Index of Economic Freedom

Yesterday's WSJ featured an Op Ed presenting this year's Heritage Foundation/WSJ Index of Economic Freedom, which can be accessed here: http://www.heritage.org/index/

This index is intriguing, and is a great tool that is useful in a number of ways. If you haven't seen it, take a look.

One contention that Terry Miller (one of the co-editors) makes is that there is a strong "positive correlation between economic freedom and national income". As proof, he points out that "...the freest countries enjoy per capital incomes over 10 times higher than those in countries ranked as "repressed"."

So what do you think?

Some tidbits worth exploring:

• The methodology: http://www.heritage.org/index/pdf/Index09_Methodology.pdf
• The executive summary: http://www.heritage.org/index/pdf/Index09_ExecSum.pdf

Insights from Citigroup's CFO -- Making a Function Strategic...

On a recent Charlie Rose, Citigroup's CEO Vikram Pandit, discussed the future of his bank after the government's recent 40B+ infusion. In describing the future for his bank, and the core approach they use, he indicated the global reach of Citi, and the core functions necessary to execute --- a strong risk management function, a strong treasury function, and strong leadership - in particular the CFO and CEO roles. Ultimately, he justified Citi's decision to keep current management in place by saying that each of those functions and roles are solid within Citi today. In referencing the CFO, Vikram was speaking of Gary Crittenden.

Gary was recently interviewed for Business Finance magazine, and he had some really interesting things to say. Some insights that I'd like to share with you here, from this article:
http://businessfinancemag.com/article/serial-cfo-0903

The insights he shared...

On the value of his strategy consulting background:
"...the primary skill is to understand what the levers are that will influence the financial performance..." for a given company --- those levers change based on the type of company you consult for, but the "...finance is common."

On how you move a function into a more strategic role:

• "...the first step is to make sure that the way people spend their time is dedicated toward higher-value activities."
• "...put all the less-value added information together and put it into a few locations" --- this allows one "to do things in a very common way with common processes, where we can measure and control the quality around each of those processes"

The results of those moves are two-fold:

• "...costs go down because you're doing it with lower cost resources, and as a result you're able to do it with fewer people and you can now get scale effects that you didn't have before".
• "The second thing is that the quality goes up at the same time -- because now you are doing things in a controlled environment, with process control measurements."
• He calls it moving to "more of a fact orientation." (I like that).

On the justification and approach:

• You take the dollars you free up and invest a portion of the savings into developing a more "forward-looking organization"
• You move from current state, to anticipating "what's going to happen in the future"

"This is where the real value is, so how do we do a better job of anticipating how the environment is going to change and making sure that the business is properly positioned for how the environment is going to change."

He also mentions pieces that are relevant in terms of managing talent. By essentially, making it a great place to work, facilitating job rotation, and providing opportunities for career progression. Things all entirely consistent with comments recently made by CMO recruiter extraordinaire Greg Welch in a recent BMA speech: http://bmachicago.org/dec3luncheonreport.lasso

Applicability to Marketing

So if you'll allow me a little latitude here, I would say that regardless of the function --- whether it is finance (in this instance) or marketing --- moving a function from tactical to strategic involves the same steps. Essentially, identifying and simplifying process, moving to achieve cost savings via economies of scale, and then migrating roles to higher order activities. And managing talent is foundational...

Ultimately, these steps secure your talent, and free up your team to examine the existing environment, and perform the anticipation that Crittenden mentions -- the type of critical review of circumstances that lead to better decisions, and competitive advantage.

What Obama Means for America

Although I am reluctant to discuss politics in professional settings, and I don't necessarily feel comfortable discussing my preference, it is hard to argue that America's perception on the world stage hasn't dramatically improved now that Obama has been elected.

Case in point: A close friend, Nigerian born and a London resident (a shout out to you Theo), told me that "only in America can an African-American man, of Kenyan descent aspire to, and achieve the Presidency". In addition to staying up until 5am UK time to watch the election and Obama acceptance, he ended up giving his staff the day off . They were all tired - and exuberant - from watching US election results. His remarks were representative of those I've received from several friends from abroad.

I am certainly proud to be an American, now more than ever. In a country that speaks of equality and justice, we have now clearly illustrated to the world that "when it matters" truth and transparency prevail. Regardless of your political affiliation, it is hard to argue that this outcome is not positive for America, our relations on a world-wide stage, and our ability to engender and affirm the value of freedom.

More on Anna Schwartz...

In today's NYT, Ben Stein speaks more fo Anna Schwartz: http://www.nytimes.com/2008/10/26/business/26every.html?ref=business

As you'll recall from one of my posts a couple of days ago, Anna had some harsh words for the Fed's handling of the economic crisis, namely their inconsistent reaction to the financial situation of various firms -- i.e. Lehman vs. AIG.

In addition to praising her insight, Stein laments her lack of a Nobel. As an economist I respect, it's nice to see this open admiration for Schwartz and her work from yet another talented economist, Stein.

Buffett's Opinion in the New York Times

In last week's NYT, a great opinion piece by Warren Buffett: http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&oref=slogin

As part of his opinion, Warren makes a number of important points, which I want to summarize for you here:

1) No one can determine the direction of the market
2) Betting against America is a mistake
3) Holding cash vs. equities long-term is a bad decision

Now to this last point, I'll pull a couple of comments directly from Warren, and tie it to some recent research from the AAII, which indicates that those that face retirement need to remain in equities to meet their long-term retirement needs.

As Warren states:

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

So, congratulations to those that had the foresight to move into cash prior to the crisis, but the question for them now becomes "When do I get back in?" ---And the real key to success in investing is to know both when to buy AND when to sell. Warren approaches this in an important way, by simply owning the stocks "forever". For those of us that don't necessarily feel like we have that luxury,it's still instructive.

Now to reference a study mentioned in January's AAII (American Association of Individual Investors) Journal article "Choosing the Right Mix: Lessons From Life Cycle Funds ". Although the article is about life cycle funds, it discusses a "consensus opinion" on asset allocation, which follows:

Allocation by Age Group:

• Ages 20 to 40: Allocate about 90% of your financial portfolios to stocks.
• Age 40 to retirement: Decrease the stock portion steadily to about 50% or 60%.
• During retirement: Decrease the stock allocation by 2% per year for at least the first five years after retirement; high-yield bonds should be only a small fraction of the fixed-income portfolio.
• All ages: Maintain a stable exposure to international stocks of between 15% and 30% of the stock portfolio.

For some, this suggested allocation may seem excessive. Beginning retirement with 50-60% of your investments allocated to stocks? Yes. The logic is this -- the most significant investment gains come from the compounding of investments that takes place in later years.

Warren at 70+ years knows this inherently, yet it's a lesson that some retirees will need to take to heart, and unfortunately, it will mean increasing the risk they will have to bear. For those that are currently tied in equities within this market, they may have no other choice.

On the Fed, the Crisis, and Leadership

In my opinion, definitely the article of the week in todays WSJ Opinion page, via interview with Anna Schwartz: http://online.wsj.com/article/SB122428279231046053.html

Schwartz co-wrote (with Milton Friedman) the seminal treatise on the role of the Fed in the Great Depression, A Monetary History of the United States, and at 92 is still an active researcher at the National Bureau of Economic Research. In the interview, she discusses the current economic crisis, its root causes, and en route to those topics alludes to a "tragic flaw" of leadership. I'll summarize and comment on those here.

The Current Economic Crisis and the Root Cause
Today's problems are based on a fundamental loss of trust -- "...a lack of faith in the ability of borrowers to repay their debts". The liquidity problems that have existed are essentially a symptom of that distrust, as banks cast doubt on their fellow banks ability to effectively value their balance sheets. Whether it is due to complexity, accounting, or simply negligence --- banks don't want to lend to each other because they are not comfortable that they will be repaid. This is a critical point that Schwartz very effectively articulates.

In Schwartz' words "...firms that made wrong decisions should fail... You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works better when wrong decisions are punished and good decisions make you rich."

The Arbitrary Fed
Schwartz continues:

I think if you have some principles and know what you're doing, the market responds. They see that you have some structure to your actions, that it isn't just ad hoc... And the market respects people in supervisory positions who seem to be on top of what's going on. So I think if you're tough about firms that have invested unwisely, the market won't blame you. They'll say, 'Well, yeah, it's your fault. You did this. Nobody else told you to do it. Why should we be saving you at this point if you're stuck with assets you can't sell and liabilities you can't pay off?'

So what's the point? The point is that the Fed made a decision to bail out AIG, yet they let Lehman fail. Not only did they decide against letting the market work, they did so in an inconsistent manner, a situation that makes investors very nervous. Why? Because essentially, inconsistency leads to yet more risk - risk that can't be priced, just like the complex financial instruments that are also tied to this crisis.

Leadership Implications
Based on this discussion, some leadership takeaways...

First, leaders need to know what they are doing or be able to find those that do -- and manage them. My faith in Paulson is strong on this point, but who really knows.

Second, act in a principled, consistent manner. Whether you are a company participating in the market, or the government, or a business leader -- make sure that everyone "knows where you stand". Does everyone understand the principles that you believe in? Oh, and by the way, manage and perform to those...

So, essentially, in specific roles it's important to broadly communicate principle, philosophy, and intent, and then follow through (aka setting and managing expectations).

Here's to hoping that the Fed ultimately finds the way. It may be hard to blame them for "pulling out all the stops" to get the US through this crisis, but here's to hoping that they 1) identify a rational, consistent direction 2) that they communicate it clearly and 3) that they stick to it. Our financial futures may indeed depend upon it.

On Buffett...

Ah, Warren Buffett. In addition to investing philosophy, what can he teach us? How about fact-based decision-making and the art of contingency:

http://online.wsj.com/article/SB122403066764234719.html

In Carroll's review of "The Snowball", a biography of Warren Buffett by Alice Schroeder, she walks through Buffett's ability to take "a close look at an investment's intrinsic value, making a brutal evaluation of its risks, and calculating a margin of safety. The book also underscores the importance of learning from failures. The Buffett-Munger approach is to "invert, always invert. Turn a situation or problem upside down. Look at it backward. What's in it for the other guy? What happens if all our plans go wrong? Where don't we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead."

A great way to look at investing --- and any other problem for that matter...

Leadership & The Military

I'm way behind on postings, so this is a little belated.

In this recent article in the WSJ, a little insight on leadership in the military by way of a review of the book by Peter Masoor "Baghdad at Sunrise": http://online.wsj.com/article/SB122360872142722167.html

Point of reference -- Peter Mansoor, is former Col. Peter Mansoor, commander of the U.S. 1st Brigade Combat Team, and in this book he outlines his experiences in Iraq during key periods before, and during, the Surge. Importantly (for me anyway), is his assessment on the role of leadership in the military; he defines the necessary brand of leadership in a very specific way. As the article and his book discuss "counterinsurgency requires above all else good leadership". To quote reviewer Moyar:

Like Gen. Petraeus and many other veterans of Iraq and Afghanistan, Col. Mansoor believes that the Army must alter its personnel policies to promote leaders with the attributes and knowledge required by counterinsurgency. Instead of rewarding technical and tactical competence, he asserts, the personnel system should reward "those who can think creatively, lead change, and understand information warfare and the asymmetric battlefield -- those who are flexible and adaptive." As for indigenous leadership, he believes that the U.S. can help the Afghans as it helped the Iraqis, by influencing command selection, mentoring leaders and partnering directly with local elites.

(The bolding is my own). So, does war not represent the penultimate application of leadership in crisis? And doesn't true leadership in business require flexibility and adaptability above all else? Is that something our leadership communities teach today?

My relatively uninformed answer would be no, but to hear the identification of these characteristics clearly stated, and from a formidable and recognized leader in his own right, is refreshing. Building the right "reflexes" as a leader is an intangible that few development programs have been able to truly accomplish. Is this the traditional "nature vs. nurture" argument, or is there a way to engender this flexibility through situational curricula?

Today's WSJ Interview w/Intel CEO Paul Otellini

Some great insights from today's WSJ "weekend interview" with Intel's CEO. The article discusses Paul's experiences as he rose to the CEO role, and discusses some of his key learnings from former Intel CEOs - Gordon Moore (of Moore's Law) and Andy Grove among them.

Link: http://online.wsj.com/article/SB122246860358480579.html

A couple of insightful nuggets worth referencing:

From Andy Grove - "Ask why, and ask it again five more times, until all of the artifice is stripped away and you end up with the intellectually honest answer."

From Otellini - "A CEO's main job, because you have access to all the information, is to see the need to change before anyone else does."

It's always interesting to me that such an opportunity continues to exist today to implement true "fact-based decision-making". Grove's quote is really a manifestation of that, and of the need to truly investigate to identify root causes and get all the facts. Said like a true engineer..

Via Grove - a leader needs to truly dig to uncover all the salient facts, and via Otellini, a leader needs to be able to divine the future based on those available facts. And a last point, as illustrated by Craig Barrett (a third former Intel CEO) - leadership ultimately dictates decisiveness, and the courage of conviction.

Another political post, and a couple of other topics...

Although I'm an Obama fan (but not necessarily a supporter), I got a kick out of some recent comments from Bill Clinton, which the Financial Times outlines here (may require free subscription):
http://www.ft.com/cms/s/0/650508a0-739a-11dd-8a66-0000779fd18c.html

So the net-net, in a veiled reference to Obama, Clinton imparted the following:

"Mr. Clinton caused fresh agitation Tuesday when, in remarks at a convention fringe event, he seemed to suggest the Democrats had made a mistake in choosing Mr Obama as nominee.
He said: “Suppose you’re a voter, and you’ve got candidate X and candidate Y. Candidate X agrees with you on everything, but you don’t think that candidate can deliver on anything at all. Candidate Y you agree with on about half the issues, but he can deliver. Which candidate are you going to vote for?”"

Now, depending on how you look at it, that's either a particularly astute comment or sour grapes. What it does do for me, however, is articulate some of the concerns that I have about Obama as a President.

Without indicating my preference, does it make sense to say that how you react to that question helps you determine how you vote in the upcoming election?

On another note, I wanted to post an Ad Age link to an article on CMOs emerging to the CEO role, but because I don't have a subscription with this Crain publication, I couldn't do it. Let me see what I can do, because it had some good insights which I want to share with my readership here. If worse comes to worse, I'll summarize for discussion in an upcoming post.

CMO Pay: Who Gets What

Alright, forgive the delay since my last post. The new job has enveloped me, but I'm going to commit now to a once a week cycle, so please check back for more solid content in the future.

As an on-again, off-again reader of Ad Age, I returned to it recently and found an article on CMO pay fairly intriguing. The article, "CMO Pay: Who Gets What", was a result of the magazine's collection of publicly available information on 2007 pay packages for CMOs.

The table of the top 100 available pay packages is located here:
http://adage.com/datacenter//datapopup.php?article_id=129916

At this point, no real comments, other than to say, "more power to them." As one of the most fleeting executive roles, these folks should definitely be compensated for the risk that they undertake in these positions. One can only hope that the appreciation for this role continues to rise, and that pay within the marketing function continues to increase as well... :)

Leadership in Transition

On Friday, the University of Chicago's Graduate School of Business conducted their annual Management Conference, and I had the opportunity to hear Dr. Harry Davis speak. His session, titled "Leadership in Transition", discussed the qualities necessary for those undertaking transitions --- be they organizational, career, and/or personal. Here are the key insights.

The three biggest "hurdles" to conducting a successful transition are:

• Rigid Identity - becoming too closely identified with a particular role, expertise, or specialty in a way that inhibits one's ability to evolve beyond it
• Contextual Blindness - the inability to adjust one's management philosophy based upon the transitional culture and/or environment
• Impatience - not being willing to 1) wait for the team or organization to recognize the situation and/or changes necessary or 2) take the time to build the necessary consensus to execute

His recommendations:

1. Take the time to consider and evaluate multiple viewpoints
2. Be suspicious of goal-directed agendas
3. Practice listening skills
4. Reconnect with core values and behaviors that really matter to you
5. Let go of previous identities

Amazon's Bezos on Innovation

From the most recent Business Week ranking on innovative companies comes this brief interview with Jeff Bezos, CEO of Amazon (ranked #11 on BW's list): http://www.businessweek.com/magazine/content/08_17/b4081064880218.htm?chan=magazine+channel_special+report

There are some really worthwhile gems in Jeff's comments --- specifically his insistence on customer focus, his belief in commitment to ideas, and his insight into why organization's innovations fall short. These points provided here...

On perceptual risk:

"I believe you have to be willing to be misunderstood if you're going to innovate. That's actually a serious point. If you're going to do something that's never been done before—which is basically what innovation is—people are going to misunderstand it just because it's new."

If your considering a real innovation, have you built in this expectation into your mindset? Is your group committed enough to an idea to weather this period of uncertainty?

On organizations' failure to focus on the customer:

"Companies get skills-focused, instead of customer-needs focused. When [companies] think about extending their business into some new area, the first question is "why should we do that—we don't have any skills in that area." That approach puts a finite lifetime on a company, because the world changes, and what used to be cutting-edge skills have turned into something your customers may not need anymore. A much more stable strategy is to start with "what do my customers need?" Then do an inventory of the gaps in your skills."

How instructive! We all know intuitively that the need to evolve is critical in today's environment, but have organizations internalized that? Up to this point, can we really blame them? What a massive cultural shift and commitment to learning that entails!

This last comment really alludes to the importance of the connection between successful innovation and true strategic alignment within an organization. If a company is not philosophically committed to evolving in fundamental ways, there is a considerable risk that the most relevant ideas may be dismissed because they don't align with current skill sets.

Ultimately, sustainable competitive advantage is derived from a firm's ability to truly identify customer needs, align their innovations with those needs, and ultimately undertake those innovations by developing the skills they need to effectively execute them. A very tall order...

Book Review: The Best Service is No Service

Some quick pointers from a book review I read in WSJ, thought the points were worth citing here, and you can make your own decision on the book itself (see review here: http://online.wsj.com/article/SB120908736988443809.html).

The book, written by former Amazon cust service exec Bill Price, indicates that since most companies track the wrong customer service metrics (wait time, number of rings before pickup, etc.), their key execs are "in the dark" about how poor their service really is --- "The standard across most service operations is to report and track how quickly things were done, not how well they were done or how often, or why they needed to be done at all."

The book's solutions:

• Change the metrics - some examples - CPX "contacts per order", contacts per unit shipped, contacts per transaction, contacts per customer
• Avoid creating a need for a customer to contact the company in the first place - "Don't just ask how long it took to help the customer, ask how often the customer needed help and why
• Hold weekly operations meetings (over the right metrics) - use meetings to zero in on root causes and solve problems
• Charge the cost of customer support back to the product teams that created the need for it

Having worked closely with a group that manages these functions, I can say that most of these have been done in the past, and may even be standard practice in most organizations. But the opportunities really do lie in "aligning incentives", and finding a way for an "offending group" to bear the cost of the service is an interesting approach.

The other thing that I've seen, and this is reflected in Larry Bossidy's book Execution, is that a lot of the operational meetings can get side tracked relatively easily. When causes are multi-faceted, tasks are assigned, and the rigor around execution and repair ultimately suffers. This is more a function of leadership than the management routine itself however. Just some things to think about...

Cisco's John Chambers on Collaboration

Great interview via FT.com with John Chambers of Cisco: http://www.ft.com/cms/8a38c684-2a26-11dc-9208-000b5df10621.html.

Some insights from John:

• On the role of the CEO: to communicate externally, and accurately represent the culture and direction of their organization; most CEOs today are "command and control" and the future will require moving beyond that..., successful leadership requires the ability to effectively change.
• On the importance of collaboration: it is critically important to future productivity growth - we are really doing it "1to1" today, we need to move beyond empowerment to true group decision-making and "collaboration enabling different business models"
• Enabling collaboration: new networking tools will truly enable better collaboration - video conferencing, telepresence, blogging, wikis, social networking, etc. - John provides a great example of using video coupled with wikis and bookmarks to internally disseminate information

Two primary thoughts on this interview.

1. On collaboration: Although John doesn't deeply articulate how this will evolve, he does talk about using a variety of tools that Cisco uses (and sells) and then speaks about the importance of adding discipline and process. Since collaboration really represents another opportunity for sustainable competitive advantage, digging deeper to understand successful collaboration methods is a worthwhile exercise...
2. On communication: As an important enabler of collaboration, John does a great job of illustrating the use of video mail in conjunction with other tools (at 9:04 of the interview) - worth a listen).

Some critical questions:

• How does an organization reach the appropriate communication level internally and externally - to enable collaboration (internally), differentiate effectively (externally), etc.?
• How does an organization best utilize technology to enable that communication?
• Assuming the communication is in place, how does a firm move beyond that to build and institutionalize true collaboration?

Obama and the capital gains tax

I don't talk politics on this blog, that's simply not its intent. I do, however, speak about economics on occasion, and even tax policy, and that's what I'll do here. Although I won't share my preference for the presidential race, this post will point you to a commentary referencing Barack Obama's stated views on taxation from the most recent Democratic presidential debate, from yesterday's WSJ: http://online.wsj.com/article/SB120847505709424727.html.

Although Barack (and Hillary) have both indicated that they will not raise taxes on households that make under $200 - $250k a year, both are talking about raising the capital gains tax, which does indeed raise taxes, and impacts over 100 million households directly (including mine). In addition a higher tax rate, the real kick in the pants is the fact that an increase in this tax actually reduces overall tax revenue, which directly undermines the overall goal of the tax in the first place. As the commentary reveals:

• Lower capital gains taxes actually increase tax revenues considerably (this is because lower rates stimulate liquidity throughout various asset classes).
• 79% of all tax returns reporting capital gains came from households with incomes below $100k.

These are facts gleaned from actual results of former tax policy and '05 tax returns (most recent data available?). The commentary closes with an explanation of Obama's additional desire to raise the cap on wages subject to payroll tax beyond the most recent '07 cap of $102k .

Unfortunately, as WSJ suggests, "Either the young Illinois senator is ignorant of capital gains data, or he just doesn't care..." Here's to hoping he refines this policy before the presidential election takes place.

"Brands listen more than they talk"

Ran across a white paper that Visa's new CMO Antonio Lucio created while he was head of PepsiCo's insights and innovation group, view it here:
http://nevereatalone.typepad.com/blog/files/antoniolucio_thusspaketheconsumer.pdf

In the paper Antonio discusses the role of brand and insights within marketing, and he makes some good points that I'd like to repeat below. For me, the central themes ring true --- the importance of appreciating emotion, insight, and complexity.

Marketers must learn to manage complexity...
...on behalf of their customers, by becoming trusted filtering resources:

Consumers are looking for "...brands and services that can edit and interpret the overwhelming amount of information into a format which can be digested and absolved according to consumers' points of view and/or biases..."

...and within their own organizations, by balancing facts with "emotional motivations":

We need to avoid "analysis-paralysis" and spend more time with the consumer face-to-face. "In this new world, we need to commit to transcend the obvious numbers and words, understand consumers' total brand experience, and dig much deeper into emotional territory."

"Lighthouse Brands" need to be developed - "brands that not only deeply understand consumers' lives but have a true differentiated and non-apologetic point of view on life."

The four key elements to a "lighthouse brand", the result of something he calls "seduction marketing" are:

• "aspirational ego-centrism" - life as consumers would like it to be
• about building emotion vs. reason
• a thorough understanding of the consumer's total brand experience
• intrusive and seductive exhibitionism

The marketing function needs to be brand-centric vs. activity-centric

"...brands have become more complex concepts to understand and to manage....that provide consumers safe grounding and the reassurance of known experiences. The challenge for the Marketer is therefore exponential, as successful mega brands need to be tightly orchestrated to maintain their core essence while building new benefits that will end up reinforcing at the same time as expanding and rejuvenating the Brand."

Consumer insight is the key

"Insight has to firmly guide and audit all decisions on brand and customers.... If we are changing structures and streamlining processes, the one thing that needs to be elevated above all is the voice of the customer."

Book Review: Richard Florida's Who's Your City

I completed Who's Your City a couple of weeks ago, and wanted to summarize key points from it here. For those of you who are not familiar with Richard, he's the professor and author that originated the idea of the "creative class". He has discussed the role of the "creative economy" --- one which values creativity and new ideas --- and his new book focuses on the role of place. This is a great book, and I wanted to extend my thanks to the publisher for providing an advance copy for this review.

Richard's thoughts center on three key ideas:
1) "...place is actually more important to the global economy than ever before."
2) "Places are now more diverse and specialized -- from their economic makeup and job market to the quality of life they provide and the kinds of people that live in them."
3) "We live in a highly mobile society, giving most of us more say over where we live" -- take advantage of that mobility.


The Importance of Place
Richard's contention is that "...in today's creative economy, the real source of economic growth comes from the clustering and concentration of talented and productive people". In contrast to another great book, Thomas Friedman's The World is Flat, Florida indicates that now --- more than ever --- where you live is as important as what you do. Although globalization has levelled the playing field for workers in some respects, an individual's location is critical to their well-being, the quality of their lives, and their ability to capture synergies and economies of scale from those within their industry. Richard:

"The reality is that globalization has two sides. The first and more obvious one isthe geographic spread of routine economic functions such as simple manufacturing or service work....the second, less obvious side....is the tendency for higher-level economic activities such as innovation, design, finance, and media to cluster in a relatively small number of locations."

This is what Michael Porter calls the "location paradox" --- "Location still matters. The more things are mobile, the more decisive location becomes." Finally, as Florida illustrates in the first part of the book, "The key to our new global reality lies in understanding that the world is flat and spiky at the same time."


The Continued Specialization of Place
Here, Florida works from findings of others to illustrate the cities continue to "cluster" into specialities. Schumpeter and Solow, illustrate the importance of "creative destruction" (i.e. innovation and entrepreneurship) to economic growth and wealth, and discovered the startling fact that ... about 4/5ths of the US economy's growth per worker was attributed to technological progress."

Jacobs and Lucas illutrate the importance of cities to this process, and identified the importance of "talent clustering", which lead to a "multiplier effect" that is the "primary determinant of economic growth." Ultimately, they noted that "...a doubling of population resulted in more than two times the creative and economic output." --- synergy. "According to UN predictions, by 2030, more than 2/3rds of the world's population (4.4B people) will be urbanites."

In the end:

"What matters most today isn't where most people settle, but where the greatest number of the most skilled people locate. Because the returns from colocation among the ablest is so high, and because high-end incomes are rising so fast, it make sense for these workers to continue to bid up the price of real estate..."

Using this Knowledge to Your Advantage
The final part of the book helps the reader identify characteristics that are important to them and the cities that they may ultimately choose to reside in. This can serve as an excellent resource for those that want to understand regional dynamics, and the "personality" of their respective city.

Although this probably serves as the most directly useful core of the book, Richard has a wonderful website developed as a supplement, and so I will direct you there for additional information: http://creativeclass.com/whos_your_city/


In summary, this is a great book that does a great job of helping to illustrate the global changes that are taking place, and provide them in a context that allows the reader to make some informed decisions about where and why they make decisions on where they live. Given the critical importance of place to well-being and economic security, a visit to the website would be an enlightening first step.

Are you happy?

While searching for my next role, I've had a lot of time to reflect, and recently came across a great website that has been useful to me: http://www.authentichappiness.org/.

What is truly important to you? Does the way you use your time align with your larger priorities? For those that indicate they are truly happy, there is a high correlation between the two.

Although my score indicates a fairly high degree of happiness, I'm always up for more. Here are some general recommendations (backed by a considerable amount of recent research), that have led many to a happier, more fulfilling life:

1. Count your blessings daily.
2. Practice acts of kindness.
3. Savor life's joys.
4. Thank a mentor.
5. Learn to forgive.
6. Invest time and energy in friends and family.
7. Take care of your body.
8. Develop strategies for coping with stress and hardship.

Another approach, based on the book The Paradox of Choice is essentially to learn when it is ok to "settle". There are essentially "maximizers" and "satisficers", and maximizers are those that always look for the very best option. The problem is that those people spend so much time evaluating options, that although they often make better decisions, they ultimately feel worse. The recommendation - "...only be a maximizer when it truly matters" to do so...

Here's to hoping this will brighten your day!

So you want to be a CMO...

Ever wonder what broad credentials separate senior marketers from their C-level contemporaries? As part of a conversation this week, I was guided to some white papers by Bradford McClain of Russell Reynolds, which provide some really good insight - http://www.russellreynolds.com/pdf/thought/RR0042%20Succussful_CMO_WhitePaper_8.pdf.

He references the following broad competencies:

• Strong business and financial acumen and ability to link marketing directly to corporate strategy
• Successful brand management and equity building
• Ability to develop strategy from analysis of insights
• Success driving results and delivering ROI
• Comprehensive program development skill across all relevant channels
• Ability to forge strategic alliances
• New product development skills
• Marketing and communications skills

Aside from some great content that can form the basis for a critical look at one's skills, Brad really captures the essence of the role in some other great ways. "The CMO must represent the voice of end users and be their advocate, inserting and often forcing their perspective on every relevant business issue the company faces."

The white paper also discusses critical success factors and organizational needs for the role, while acknowledging the turnover that occurs along with reasons. It is refreshing to run across someone who can articulate the role so effectively, and is also involved in identifying this talent for organizations.

If the CMO role is a career goal, these white papers are a worthwhile read. Special thanks to Jeff McCay for steering me this way!

From Ad Age's CMO Roundtable...

Wanted to present some interesting ideas from a webcast posted today via Ad Age: http://adage.com/print?article_id=125823

Although the use of TV was part of the focus of the CMO discussion, I thought there were a number of useful insights that should be repeated here, primarily on the use of media in today's advertising environment. But first, on the role of TV today, these CMOs believe that:

• TV has always, and will continue, to play an important role in building immediacy and awareness --- and now that there are more media options, the growth rates in "cost per thousand" for TV are starting to slow
• TV is still the only media that can provide truly massive scale and a forum where people can come together and actively experience the same content together (e.g. Super Bowl)
• TV is still the consumption channel of choice for a wide variety of users

But, to segue, as Bob Stohrer (CMO, Virgin Mobile) states "There is a balance between immediacy and awareness that TV still delivers that a communication plan should be architected around." Some other factors that should be considered relative to media spend/strategy:

• CONTENT is still KING - greater specialization in content and media will continue
• People want to interact with your product/brand in different ways --- teens consume media (YouTube, etc.) differently than Baby Boomers (some still read the newspaper)
• Now that there are so many media options it is easier to establish relationships with smaller audiences using more specific methods for fewer $s

From a marketing standpoint, it is a very exciting time. The variety of tools available has never been larger --- the challenge now is to focus on the right ones for your audience. The good news is that, if you pay attention, they will let you know what they want.

Customer Advocacy and Your Business...

Ever since Frederick Reichheld's book The Loyalty Effect was published, marketers have been talking about the role of customer loyalty as a revenue and profit driver. Now that nearly 12 years have past, the critical question remains --- how is loyalty established?

Many sources now consider customer advocacy to be a critical driver of loyalty, and ultimately an organization's financial success. Forrester defines customer advocacy as "the perception on the part of customers that a firm does what's best for them, not just what's best for its own bottom line." Within the financial services space, Forrester notes a strong correlation between customer advocacy and an organizations:

• Simplicity
• Transparency
• Benevolence
• Trustworthiness

Do these qualities ring true as you think about your "advocacy" to various companies? How successful does your organization foster this type of advocacy? Is the relationship that an organization develops with its customers reciprocal?

In the final analysis, I believe the question really does go back to one of value and trust. In situations where I sense that a relationship is "just about the money" it certainly alters my perception of the strength of that relationship. Can we ultimately expect anything else from our customers?

Take your Lump Sum Pension now!

Ok, so I'm still mulling through that Forbes issue from the last post, and it's lucky that is the case because as I consider my separation from ABN AMRO/LaSalle - it could help me save a decent amount of $$$$, and you too, for that matter.

The issue ---- pension valuation. The rules are changing in a way that will minimize the value of your pension over time. If you are one of the lucky few within the US to still have a pension, you'll want to take a closer look at this article: http://www.forbes.com/personalfinance/forbes/2008/0225/048.html

The skinny: Congress is allowing companies to lower the estimated earnings calculation that is made as pension benefits are calculated. As these estimates are lowered, the resulting amount that your company owes you decreases. If you have an opportunity to act before this legislation take effect - you should take it.

Retirement and your 2007 tax strategy

Great article in Forbes on tax advantaged ways to save: http://www.forbes.com/forbes/2008/0225/040.html?partner=email

Very good summary that will help you:
- understand your retirement savings options quickly
- determine how to prioritize those options

Of note - discussion about best location for various assets, based on the type of income they will generate. Highest growth assets belong in a Roth, while taxable bonds and REITs belong in a pretax 401k or IRA (since the income that generate is taxed at ordinary rates, you want to defer it as long as possible).

"Innovation is not a Strategy"

Forgive the posting delay --- too much going on. I wanted to start back by highlighting an article from Al Ries today (in Advertising Age: http://adage.com/print?article_id=125470 ) on innovation.

His take is that --- "A business enterprise has only one basic function: build a brand that can dominate a category" (a la Jack Welch's be #1, #2, or get out...). Innovation can help get you there, but as a method, not the goal.

Some really good thoughts on this:

• "Most brands don't need innovation, they need focus. They need to figure out what they stand for (or what they could stand for) and then what they need to sacrifice to get there."
• "Innovations outside of a brand's core position can undermine the brand."

How do you feel about innovation? I recognize its importance as a business concept, but still think that success is still a function of how well that innovation meets a user need - which is usually tied to a fundamental insight .

It's not innovation, in and of itself, that is important. It's a particular product's ability (through "innovation") to adequately meet a critical need that ultimately determines its success.

So riddle on that one. Thanks Al!

IBM's Approach to Emerging Markets...

As an IBM shareholder, I have gained a lot of respect for Sam Palmisano, who is reaching his sixth anniversary as CEO. As part of a recent "Boss Talk" in WSJ (http://online.wsj.com/article/SB120294821421766713-email.html), he talked about IBM's global approach, and I wanted to highlight a couple of his comments here.

They outline an approach that is cohesive, makes a lot of sense, and illustrates the long-term outlook that companies need to take when they enter a new market. Aside from that, these are the kind of fundamental insights that make a man like Warren Buffett very wealthy --- aside from the corporate strategy, these comments can help you, as an individual investor, develop a framework for investment decisions in emerging markets....

Now, to Sam.

IDENTIFYING THE NEED:
Today, "developing countries" account for 21% of IBM sales --- they currently target 50 countries that "are small today but will be big in the future". Palmisano states that the key to identification of growth markets is --- GDP growth and (more importantly) the "evolution of the consumer class".

IBM's realization is that as citizens around the globe become consumers, they shift into needs and wants that mimic our own here in the states. But beyond that, these new consumers skip the PC --- "the cellphone becomes actually the PC for entertainment, for microloans, for all those other things." What does this mean for IBM? INFRASTRUCTURE - a critical need as economies evolve...

THINKING LONG-TERM:
IBM knows the part of an emerging market's lifecycle that is attractive to them and they now move to a long-term, win-win executional approach. This is not something they do lightly, nor do they let short-term economics dictate their investment decisions.

Sam outlines the following approaches:
- "Enter early" - go when THEY are looking for partners, don't wait until the market actually justifies involvement - then it's too late
- Help the countries develop the talent --- IBM has critical talent needs, as does the country. By helping each country address the talent gap, both groups win - and learn to work and trust one another along the way.
- Development of "learning accounts" - to assist displaced workers within IBM develop their own valuable skill sets

So today, as a true multi-national company, IBM makes synergistic decisions within the markets that they target. In addition to that, they provide insight on the macro-economic factors that help them make those decisions. Pretty cool.




These comments are valuable as you build a framework for looking at emerging markets --- from an individual investor standpoint, and as a company considering doing business there...

Moving media buys back to the agency...

So I'm not getting my usual reading fixes, and posting yet another piece from WSJ, this one on Publicis and their new joint venture Optimedia Inside.

Interview with Publicis USA CEO, Susan Gianinno:
http://online.wsj.com/article/SB120287513864964733-email.html

According to Susan, the goal of the JV is to reunite media buying with the creative and planning functions that take place within agencies --- disciplines that separated over time as media purchases became more and more specialized.

The interviewer does a good job of addressing a critical issue --- the disconnect that has developed as agencies developed according to discipline, and then collectively began working independently on aspects of large client accounts as members within a larger holding company. After a while, marketers can begin to feel like they are double paying for services, as they pay for planning within digital, media, and consumer areas all at the same time. As a result, unified branding becomes more difficult as agency specialists focus on different consumer insights. But as Susan states, the problem is more complicated than that, and client organizations are often even more siloed --- something that I can attest to.

In my humble opinion, the reality is that substantive change is difficult for "the establishment", and that can mean the "old guard" marketing (or agency) types that have benefited from older organizational structures, and simply don't have an incentive to evolve. Hence, it's not an "agency" problem or a "marketer" problem, it's a complacency issue that plagues both.

Since a large number of marketing groups are not recognized as strategically important functions within their organizations, status quo thinking is allowed to continue. It's only by taking a long, hard look at connecting with customers, and then unifying those insights in a meaningful way --- on both the agency and client side --- that truly ground-breaking work gets done. Here's to hoping that this effort is a move in the right direction.

Think like a private equity enterprise...

I ran across a book review I really liked for Lessons from Private Equity that Any Company Can Use: http://online.wsj.com/article/SB120286252780263837-email.html, which is a book written by a couple of current Bain consultants.

As the title implies, the book suggests six "lessons" that organizations can use to improve their performance. These are:

1. Define the full potential of your business through extensive due diligence.
2. Develop a detailed blueprint for how you are going to achieve that potential.
3. Accelerate performance by matching the right people to the right tasks and measuring the right things.
4. Hire the right people by offering the right incentives and recruiting a useful board
5. Make equity "sweat" by loading up on debt and squeezing every last cent from your working capital.
6. Inculcate a "results culture" throughout the firm so that everyone works with the mind-set of a private-equity investor.

Now, as the review points out, most people may say - "So what?" - that's always the intent. But those of you that have experience working in a variety of organizations can quickly attest to the fact that any and all of these rules are violated at any given time.

The simple fact is that if rules similar to these are applied, the rigor around execution improves, and these lessons therefore serve as a nice "gut check" as management evaluates the strategic direction of an effort and the way that they are undertaken.

The reviewer takes exception to the authors' simplicity, and uses #5 as an example. Although I agree with the reviewers assertion that debt can be both a problem and a burden, my sense is that he was taking the interpretation of the lessons more literally than they may have been intended.

The central point is that the more exceptional PE firms do a better job of focusing an organization's efforts on those things that truly matter - and they often do that by making sound economic and strategic decisions that can be more difficult for corporate incumbents to undertake - for both personal and political reasons. By aligning incentives effectively around those decisions, they extract value.

That's a message that, however simple, all of us can learn from. But in the end, my friends, "the devvil is in the details"...

Burger King and "Deprivation Research"

Friday's WSJ had an interesting article on Burger King's latest ad campaign - the one where they videotape customers as they tell them that the Whopper has been discontinued.

Link: http://http//online.wsj.com/article/SB120244090812952965.html.

"Deprivation research", is a field of market research which measures a consumers loyalty to a product by taking it away from them, and the "Where's my Whopper?" campaign uses findings from this research to drive their latest campaign. Although the article doesn't cite sales figures (these appear to be lacking everywhere these new viral campaigns are highlighted), it does indicated that the campaign videos have been viewed 3.3 million times on their site, and almost 400,000 times on YouTube.

Aside from that, I just think it was well done. If there's anyone that is going to be upset about losing a Whopper, it's someone who visits their restaurant and tries to order one. But does it really say anything about the product, per se? Are the folks upset because they love them, or because they can't order one? In addition, BK can "pick and choose" the responses they share.

I guess that's why I like it - it's ingenious. It's real, and it's easy to get successful, compelling video. Most people make a connection that it involves the quality of the product, and not that it simply surprises people when something they expect is not there. And, most importantly, for just a minute, it makes you think --- what would a world be like without Whoppers? Hmmm, maybe I should go grab one! :)

Leveraging Social Media for Brands

Came across an interesting article recently in 1to1 Magazine: "Monster Energy Assembles an Online Army" that reveals how one company's social media efforts have evolved (link: http://http//www.1to1media.com/View.aspx?DocID=30644).

Monster Energy originally established a presence at extreme sporting events that was meant to help them collect demographic data on their audience, and that effort led to a companion website.

Organizers quickly realized they needed to provide a reason for visitors to spend time there, and the site's focus moved to:
- helping fans learn about amateur athletes
- helping participating athletes attempt to get sponsored
- allowing participating athletes to distribute information about their performances (e.g. schedule, photos)

Although unclear about the length or budget surrounding this effort, Monster Energy has been able to attract 58,000 users, they have built a demographic database, and they garner visits that run 7 minutes on average.

Do those metrics translate to incremental revenue? Based on the information here, it's uncertain, but this effort certainly provides some insight into how companies are trying to make these efforts pay off, either through increased relevancy, and ultimately, higher sales.

The site also allows Monster to get a pulse of this community, and to evolve with the community as new talent emerges --- blurring the distinction between social media and sponsorship. Just one example of some of the interesting things taking place in Web 2.0...

I want to be like Oracle

George Anders, in today's WSJ, had an interesting take on Microsoft's bid for Yahoo. His point was that this acquisition needs to be stated simply like those that Oracle performs, where Larry Ellision states his intent to be #1 in every software category they compete in. This is akin to the old GE mantra where they want to be #1 or #2 in every business they are in.

The implication is that the technology industry is no different from any other industry as it matures. When you reach that stage, when market growth is harder to achieve, the larger opportunity is to lower costs and focus on gross margin.

Is online search there yet, or more importantly, should Microsoft continue to be reluctant to indicate they want to be THE dominant player? I think that the answer to both questions is no.

Either way, Microsoft should clearly articulate the strengths of this potential acquisition to the Street, and it goes way beyond streamlining some of the software engineering talent.

Yahoo, Microsoft and online ad spend

How do you feel about your online advertising options if Microsoft's takeover of Yahoo is successful? Although the jury is still out, the general view is that this marriage would be good --- and bad.

Good: A Yahoo/MSFT union would put pressure on Google, and reduce the overall cost for key word search (aka paid search), as the cost of certain key words goes down. By becoming a stronger overall search option, more advertisers would seek to buy terms from Yahoo, and overall prices would go down.

Bad: Online display ad prices could rise. Since there is not a dominant player for banner advertising, the Yahoo/MSFT combination would reduce existing options somewhat. The net effect is still unknown.

Some things to keep in mind as you think about this:
- According to eMarketer, keyword search will account for $11 billion in advertising spend this year.
- Breakouts for that spend today: Google 28%, Yahoo 15.4%, and MSN 6.5%
- Online display ad spend projected this year: $6 billion

Keeping up with changes in the online landscape is difficult, but you can rest assured that the move online will continue, and having another online solid provider might continue to accelerate that move.

BLOG POSTINGS TEMPORARILY SUSPENDED

As part of the Bank of America acquisition of my employer, new internal guidelines have been provided to all employees. Within those guidelines, authoring of weblogs without the express written consent of the company is expressly prohibited.

In order to comply with these guidelines, I am temporarily suspending my posts as I attempt to secure this permission. My hope is to return to this effort as soon as possible.

If you are new to the blog, please take a look at past postings.

With warm regards.
Wes

The Dawn of "Blended Search"

Now marketers have another reason to be concerned about the quality of their search engine marketing (SEM), it's "blended search" --- basically the ability of a search provider (e.g. Google) to provide a searcher with all kinds of media as a result of a key word search; not just text, but video, pictures, etc. A powerful capability for search, but one that poses problems for those of us trying to make sure that the right searches return our products and services to our target audiences. The following articles discusses some of the challenges:
http://www.btobonline.com/apps/pbcs.dll/article?AID=/20070910/FREE/70910029/1109/FREE.

The reaction:

• "Entire marketing strategies will likely shift to adapt to significant changes or improvements in search experiences since search engines are where so much B2B product, solution and service research is being initiated." - global SEO manager, HP
• "Tagging all content appropriately will need to become a requirement vs. an option." - search marketing strategist, Cisco

Essentially, companies now have to move beyond simply making their websites "search friendly". A lot more thinking will need to take place around how users access the product/service data they need, and how that information can be optimized to make it readily available.

The key here is that customers will soon have all the tools they need to access your brand in the way they want to interact with it --- if they would rather watch than read content, you'll need to be able to do that for them. Although it may feel like you're becoming more of a librarian than a marketer at times, take solace in the fact that you will be able to engage with customers in some very compelling ways; it's just going to continue to take more time and effort to get that done. No rest for the weary, but the opportunity to differentiate for those that make the effort will continue.

Securitizations - An investor benefit?

Two recent WSJ commentaries highlight the delicate trade-offs that loan securitizations provide to the capital markets --- On one hand they allow lenders to diversify risk and investors to select the appropriate amount of it, but on the other they can make risk more difficult to quantify and evidence suggests they may actually increase the cost of the debt to the borrowers. These two articles discuss these trade-offs in greater detail.

Can the financial markets make a comeback?
This first article I found to be an excellent primer on securitization, by an early key participant in the industry, Ethan Penner: http://online.wsj.com/article/SB118817063701609287.html.

In addition to briefly explaining the process, Penner makes a couple of important points about the securitization process, using quotes from the controversial former investment banker Michael Milken.

Benefit: "The democratization of capital" (Milken), namely securitization:

1. Allows borrowers better access to the credit markets
2. Allows "investors to better target where they want to be on the risk/return spectrum"

Costs:

1. Low regulatory oversight - (cited by author as both a benefit and a cost)
2. Conflicts of interest - appraiser vs. debt holder vs. ultimate debt owner
3. Lax underwriting
4. Poorer transparency - like some CDOs, more difficulty pricing the risk associated with a particular debt offering
5. Poor liquidity - As I learned the hard way trading the VIX earlier this year, per Milken "liquidity is an illusion" in the sense that trading can instantly dry up when everyone is on the same side of an investment bet

In the second article I'll reference here: The Cost of Complexity (see bottom of article): http://online.wsj.com/article/SB118903970710218805.html my friends at BreakingViews make the argument securitizations are a net cost for the ultimate borrowers. They point out that although mishaps like the S&L crisis are now less likely given the diversification of risk across multiple creditors, the net spread of mortgage rates over T-bills has actually widened for borrowers. I would argue that the comparison might not be so simple, but this is an interesting insight nonetheless.

Are you SEM literate?

If you don't have a solid understanding of work being done in the Search Engine Optimization (SEO) space, you are putting yourself at a disadvantage as a marketer. If you don't believe me, just try to locate your company or your product via search online. Is it easy to find? Are you showing up in the critical "top triangle"?

As the following article discusses, although SEO is still in its infancy, it is also a five year-old discipline, and it is a true "game changer". Can any of us really state that we don't go online to research critical products before purchase?

The article is Tough Questions for CMOs: http://www.dmnews.com/cms/dm-news/search-marketing/42353.html. Some good points that this article makes relative to typical corporate SEO efforts:
- You need to be playing in SEO from a strategic standpoint at some level, regardless of its current ROI to your organization. The skills garnered from experience and the defensive nature of the efforts provide value beyond the pure return.

- You need to make careful Search Engine Marketing (SEM) agency selections. In particular here, not all agencies are the same, and the evolution here takes place quickly. Do good due diligence.

- Search is only a small part of your budget because you don't pay a lot of attention to it. Somewhat "tongue and cheek", but those who are experimenting w/search today, are generally getting a great deal of value out of it, and that is leading to more incremental SEO spend over time. My organization can vouch for this.

- Know your "search share". You need to know how often you end up as part of the critical search results that show up at the top of primary key word searches. This is a "market share" game, and if you aren't acquiring this space, your competitor is. Use cost/benefit, but be aware of the defensive nature of this game too.

There's much more on this. Take a look at the article, but look past it once it's provoked some thought. After recently attending the Online Marketing Summit, I've gained a lot of perspective on this that we are apply in our business. My hope is to post some of the better presentations from that Summit (with permission), but I haven't been able to identify a way to do that via this blog yet. More to come.

Customer Co-Design

This article from the August issue of CFO talks about the role of customer input, and it's likely future: http://www.cfo.com/article.cfm/9539646?f=search.

This article helps to emphasize the critical point that the future of innovation and product success really hinge with your customers; and not just customer "insight", but actually getting customers engaged early so that they can react to your product before it launches.

Patricia Seybold is quoted that "at least 50% of a company's innovation should be coming from customer input and designs"... More importantly and historically, P&G's CEO (Alan Lafley) almost two years ago publicly communicated an innovation goal that stated over 50% of new products need to originate from outside the walls of P&G. (Their phenomenally successful automatic toothbrushes are one example of an outside idea they bought and scaled.)

The successes that result from strong customer collaboration are not lip service. The article cites some additional examples that I'll just list here, but there are numerous other examples in the business community today.

Examples:
- Volvo N. America C30 launch - Volvo offers a build-your-own tool on its website prior to launching the C30. It receives over 10,000 hits. Results help them determine the production demand for the product and they also change the features offered as a result.

- Threadless.com - You may have heard of this one. Some Chicago guys get together and launch a website of custom imaged t-shirts where visitors rate designs, and then they are produced based on those ratings. High revenues result - check it out at http://www.threadless.com/.

- Kraft - Achieves 100MM+ in sales as a result of the 100-calorie pack rollouts for various products. Packaging developed in response to concerns from their customers about their difficulties around portion control.

This is just the beginning folks. If you are involved in marketing, and specifically responsible for product management or development, customer interaction is even more critical than it has been in the past. Involve them in proof of concept and pre-launch. If you don't, your doing yourself --- and more importantly them --- a dis-service.

IHOP - A Finance and Marketing Story

Here's a great story that really helps illustrate the role that both finance and marketing play on corporate strategy --- and more importantly --- on profitability. First, some details on the deal (if you are new to it see my previous post: http://marketlevers.blogspot.com/index.html#5254144304795988766. The comments in this post stem from a recent discussion of IHOP's strategy and recent "leveraged repeat" outlined in this article from CFO magazine: http://www.cfo.com/article.cfm/9716592?f=alerts.

The Financial Rationale
IHOP was driven to examine its business in depth when its largest shareholder (Southeast Asset Management) filed a Form 13D with the SEC. This action prompted IHOP to perform its own internal review. Management realized that their balance sheet intensive model needed to be refined. The decision was made to perform a leveraged recap to restructure the business.

Reasons:
- Significant reduction in on-going Capital Expense / Cost of capital
- Move from asset-intensive business to intellectual property base
- Significant cash flow upside in move to more direct franchise royalty model
- Return more cash to shareholders
- Allows IHOP to focus on their core operations - pleasing their customers through menu, store and service innovation

Result 1: Core strategy changes
As a result of the review, the core strategy changed focus dramatically as a result of the financial re-engineering of the company. As the last reason indicates above, IHOP moved from a chain operator to an IP "growth engine"; a place where the focus is on executing core competencies, and moving away from operations (like real estate management) that take them away from the improvement of their own business. Marketing and service become clear areas of corporate focus and expertise.

Result 2: IHOP delivers better financial results
As a result of their recap experience, IHOP has been able to:
- Purchase a company 40% larger than themselves (Applebee's) so that they could extract the value from their aged model
- Increase their same store sales by over 2.5% (a significant rise for old, existing locations) as a result of innovations that have been implemented with renewed focus
- Increase in profit by 37% - as Cap Ex and other Liabilities decline...
- Increase in cash flow and stock price

Lesson: This case is a very good example of what this blog is meant to be all about - illustrating the synergies that can be created when solid, innovative financial practice is coupled with a true appreciation of sound marketing. As IHOP continues to integrate Applebee's (and moves its focus from non-core ops to true differentiation in menu, service, and marketing) it will be worthwhile to watch how their stock (IHP), and their customers, benefit.

Another reason to move to ETFs

If what you've already seen hasn't convinced you about the value of ETFs, here's yet another argument: http://online.wsj.com/article/SB118704344974996454.html.

The article is specific to index ETFs, and the message is simple, take a close look at annual expenses --- they should be low. When your investment tracks a specific index, the fund manager should be able to effectively reduce expenses. According to the article, this reduction is somewhat of an art. One fund specifically mentioned, Fidelity Spartan 500 Index Fund. Take a look and let me know what you think.

Spin-off Opportunities

In addition to some merger arbitrage opportunities I've been evaluating, I would also like to alert you to "spin-off" situations where value is often created. One authority on this subject is Joel Greenblatt and his first book is a great introduction to this topic. In addition to being an extremely successful hedge fund investor, he's also an adjunct professor at Columbia Business School, the home of "value investing".

Without going into too much detail here, spin-offs can be attractive investment opportunities because it usually takes the market a while to accurately value the two companies that result from a situation like this. I just ran across a good example below, which is a brief description of the Metavante spin-off being conducted in Q4 by Marshall & Isley bank (of Milwaukee).

Take a look: http://www.businessweek.com/magazine/content/07_34/c4047055.htm#ZZZRY42U45F.

Words from Kimberly Clark CMO

More wisdom from marketing leaders, via the Advertising Report. Anthony Palmer, Kimberly Clark's recently appointed CMO (a new role for this CPG company), is charged with aligning the organization's brands, integrating the Internet as a channel, and addressing the threat of private label goods. He shared some insights here (some of which I reference below): http://online.wsj.com/article/SB118713327561397831.html.

The role of the CMO is to "...inspire the organization to take calculated risks" and "...have a view about what your brand stands for".

On branding:

• "...a brand is a promise and the product is a delivery of that promise"
• "I believe brands are more salient today to consumers than they ever have been -- they
  are a simplifying mechanism in a world where there are many more options."
• "focus all of your spending on the pinhead of the brand idea and break down
  the barriers to participating in the brand."

I found his articulation of "the brand" very insightful. As a senior marketer you must have a consistent view of your brand, be able to articulate it, and then convey how your product/service is essentially a manifestation of that brand. If you can do this convincingly you can simplify the decision-making process for your customer.

Cisco: John Chambers

I'm going to start a leadership thread on this blog as well, based on recent thoughts presented on this topic via WSJ... Today's executive profile was with John Chambers of Cisco: http://online.wsj.com/article/SB118644715420689890.html.

Some quick tips from John on running a technology company, which I feel are applicable to most organizations today:
1) Focus on market transitions and try to catch them at the right time.
2) Enter new markets with a sustainable differentiation.
3) Listen and take direction from your customers.
4) Develop a strong leadership team.
5) Innovate, innovate, innovate.

In addition to these direct tips, John also alludes to some methods that Cisco uses that I feel have also been critical to their on-going success, namely:

On strategy - set direction and remain committed to long-term strategic decisions : "...if you watch the major movements we made, while at times it may have taken us a little longer than we wanted, we always accomplished them."

On focus - insure that your differentiation you select fits with corporate strategy

Throughout John's tenure, there has been a clear commitment to development and implementation of a long-term corporate strategy, and although the company has faltered at times relative to the Street's short-term financial view, the longer-term strategy that Cisco adopts has always ultimately been validated. That ability to define a specific direction, and then identify and commit to critical long-term decisions, have made Cisco a real winner.

More on market correlations...

So, does investing internationally or across financial instruments shield you from losses? While diversification across asset classes and/or international markets was once seen as an accepted way to reduce risk, now there is debate about whether this strategy will really protect investors: http://online.wsj.com/article/SB118635012472388580.html?mod=mkts_main_news_hs_h.

As I note, here http://marketlevers.blogspot.com/index.html#7777250631725150197 and here http://marketlevers.blogspot.com/index.html#2178961660242578272, investing globally has historically had diversification benefits relative to the the S&P, but as the ubiquitous disclaimer states "past performance is not a guarantee of future results".

ETF Investing: A Basic Framework

As I've mentioned in previous posts, ETFs (exchange traded funds) can be a compelling investment option for individual investors looking to minimize fees and diversify their portfolios in specific ways. Today's WSJ provides a great summary of how financial planners have embraced these new tools, including information on the "core holdings" that most select for their clients. It's a great starting point for those of you considering a move to ETFs.

Link: http://online.wsj.com/article/SB118591511495683793.html.

Quick pro/con points discussed on ETFs (from this article and others):
- Pro: As the article points out, as opposed to mutual funds, an investor always knows the underlying securities within an ETF. While this is true, as I've researched these individually (e.g. Vanguard REIT ETF), sometimes it takes more than a look at a prospectus to get this data.
- Pro/Con: ETFs are easy to get in and out of, i.e. you don't have to wait until a specific window to trade them, and there are no front or back-loaded fees. While this is a benefit in the sense that it minimizes trading costs, some point out that it can make investors more prone to trading "in and out" of these investment as they try to time the market --- not a good idea.
- Pro/Con: These investments can be "shorted", in other words, you can "sell" shares that you don't own and then buy them back at a lower price later if you think they will decline. Again, not a technique for every investor, but a powerful feature that mutual funds lack.

Although I won't get into the details of the core holdings (see the article) or extended portfolio, here's a quick run-down of those I liked. Based on research I've done as I've watched this space for the past five years, these are solid recommendations for a long-term investor:

Core (by ticker):
SPY
RSP (my favorite)
PGJ
EFA

Extended:
IWM
VNQ
VWO

Investment Advice - James B. Stewart

This is just a quick recommendation for James Stewart, a weekly columnist for both Smart Money and the Wall Street Journal. He's got a very good, common sense approach to investing that I've grown to admire and have alluded to or directly addressed here on occasion.

Here's an archive of his recent articles, including his take on the Wild Oats acquisition and when to buy and sell stocks: http://www.smartmoney.com/commonsense/index.cfm?story=archive&nav=wsjpj.

WSJ Review - The Marketing Mavens

Although I haven't yet read this book (picking it up today), this is the second positive review that I've read: http://online.wsj.com/article/SB118592406657783899.html.

Important Insights from the article and book:

1) "You must put the customer at the center of your business." - I've talked about this one before, it sounds so simple but is so rarely done. Customer advisory groups and trend-spotting efforts are a start.

2) Four of his "five imperatives" mentioned in the article:

• "Pick markets that matter." - Not unlike locating a good franchise or other business opportunity, the focus should be on where there is truly adequate market demand and growth that will justify investment in the effort.
• "Dissecting markets" or as Mr. Lawton appropriately puts it in the article "Pick the market segments where [your company] can deliver the best product." I would simply insert "value proposition" here. Keep in mind, we can't all work for Apple, and that even when the product may not be optimal, there are opportunities to excel if the product can provide value to its targeted segment in other compelling ways.
• "Secure a differential advantage over competitors" This is a core "competitive strategy" message - find/develop a differentiator that makes your product more compelling. This ultimately would be incorporated into the value proposition above.
• "Measure what matters" This tends to be a fundamental, fatal flaw in most marketing organizations. Tying marketing efforts directly to impact on revenue and profit is truly not as difficult as it seems at times, but it take forethought and executive commitment, and at times those two qualities are absent.

After reading the book, I'll see if there's additional content worth noting for you here.