Crazy Career Advice

I've noticed that younger people entering adulthood and jobs are getting advice often crossing the border of Baffling and moving straight into Inane. The other week I heard an interview with a young woman, maybe 24 or so, who wrote a book about how people should approach getting into the workforce. But from what she said in the interview, it was largely about "What do I get," and not what could I, the new potential employee, offer that might have value for someone else. Even when advice was sound it tended to be about reining in self-absorption, like not having loud phone conversations in the office because there are people on the other side of cube walls who can hear what you say. Has this really become the sine qua non of solid business advice? Noting about learning other parts of the business, developing a strong foundation of how things work, remembering the importance of what everyone does, and so on?

And then someone pointed this out: a Yahoo article by Penelope Trunk, author of The Brazen Careerist. Some of the points are sensible, but others? They seem a attempt to create "new rules" for the sake of being different and selling books and personal brand, not to really consider what the results might do to someone's fledgling career. Here are some examples of the worst:

• Invite your CEO to be a friend on Facebook.


• Keep your headphones on at work.


• Don't ask for time off, just take it.


• Call people on the weekend for work.

Do I hear the words inappropriate, narcissistic, and anti-social? There does seem to be some common sense out in the world, though: at the time I write this, the article had 6821 reader ratings giving it an average of about 1.5 stars out of five. Maybe there's hope for the coming generations, yet.

Executives Do Favors for Wall Street Analysts, Get Better Ratings

The Finanical Times had a story on Friday about a new study that proved mutual back scratching to be alive and well on Wall Street. Researchers from the University of Texas in Austin and the University of Michigan spoke with 1,800 analysts and hundreds of corporate executives. They then tied back admissions of favors given to nearly two-thirds of all analysts they interviewed.

The study found that by offering analysts favours, ranging from recommending them for a job to agreeing to speak to their clients, executives sharply reduced the chances of a downgrade in the aftermath of poor results or a controversial deal.

More specifically, an analyst who took two favors was 50 percent less likely to downgrade the company's rating after poor results. According to the CFA Institute, yes, this is unethical behavior.

The sad thing? I sent a copy of the story to some colleagues, one of whom used to work in investor relations and the other a former investment banking type. Their take was, "Ho-hum." They had found that corruption was systematic in their experience.

And what happens to the individual investor trying to make intelligent decisions? They have a good chance of effectively underwriting, with their own money, these backroom relationships because they may keep putting money in a poor investment based on biased advice.

US Looks to Scan All Cargo on Ships

I read yesterday in the Financial Times a story that must be scaring the beejeezus out of shippers:

All cargo going into the US on ships would have to undergo thorough screening at foreign ports under new legislation agreed by key congressional committees, in a move attacked yesterday by the shipping industry as a recipe for chaos.

Notice, this isn't scanning ships in US ports - it's scanning the cargo in foreign ports as it gets loaded on. And if Congress passes this legislation, just how do they expect to make it stick with the foreign governments running those ports? I suppose that they would have to if they wanted the products to leave the country, but has our government talked to any other about this? I highly doubt it. And that opening paragraph from the story doesn't mention that all air freight would also have to be scanned.

Someone from the National Retail Federation brought up what I thought was an excellent question: does the Department of Homeland Security have the wherewithal to go through the literally millions of images that would come flooding back? Think about it - they'd have to review the images in real time to stop a container from being loaded onto a ship or plane.

This sounds like another feel-good piece of legislation where people haven't considered what they're actually requesting. And it's another example of how people desperately want to think that they can have complete safety and security. Someone should point out to them that this has never existed and never will. No one can completely eliminate risk, and to think that you can is self-deceptive.

AT&T Shows Sometimes Success is Failure

In reading the New York Times article on Apple's whopping 73 percent jump in profits (guess a lot of people are willing to pay big to be cool), I noticed some interesting numbers. The profit jump, exceeding analyst expectations, was boosted by selling 270,000 iPhones. But the company's stock had recently taken a 6 percent hit when AT&T told its investors on Tuesday that it had activated 146,000 iPhones in the day and a half between when the phone came out and when the quarter ended.

That means 124,000 people couldn't get service turned on. That's 46 percent - almost one out of two - being ticked off that they couldn't get phone service when they were told they'd be able to have it. Wow! What a massive pile-up and an abysmal failure. This would be like having the last Harry Potter book come out but with only 4 million copies available instead of the 8 million that sold. It's one of the worst examples I've seen of operations falling that far behind marketing.

Good Credit? Bad Credit? How About Smoke and Mirrors

The news of Countrywide Financial seeing more borrowers with good credit falling behind on mortgage payments sent the markets into a scurry. But, really, what have they been expecting?
The New York Times in the first graph of their story noted "that the housing market might not begin recovering until 2009 because of a decline in house prices that goes beyond anything experienced in decades." Well, folks, we had the most insane run-up of housing prices for, what, a decade? When will people start looking at history and nature? Nothing lasts forever: not reputations, not nations, and certainly not economies.

Housing prices went up giving people all sorts of wealth - on paper. So what did the mortgage lenders and banks rush to do? Get them to take out equity. As I was reading in the Financial Times (sorry, no link), what really caused the problems for Countrywide were home equity loans where deliquency rates had more than doubled over the period of a year. What compounded that problem was a practice that many lenders have entered: a form of credit washing. Lenders took combinations of loans, mixing different credit risks, and got large lump sums by selling the loans off to legally insulated subsidiaries and then selling high-yielding securities. They essentially washed off any credit taint by saying that even if some loans defaulted, the rising housing prices would ensure the ability to maintain cash flow. In other words, they were juggling numbers and betting that a rising tide would float their rears out of trouble. But it all depended on those prices going up. That's over:

a conference call with analysts that lasted three hours, Countrywide’s chairman and chief executive, Angelo R. Mozilo, said home prices were falling "almost like never before, with the exception of the Great Depression."

This shouldn't have been hard to see. Hell, I saw this coming and so did various people I know, because none of us think that the good times last forever. Prices were at a point that people could no longer afford to get more and more - there's only so much of your income you can devote to something like housing. So people stay put, buying drops, and of course the prices drop. Then people can't move, because they're in hock up to their eyelashes and can't get the price to clear them of debt, meaning that selling the family manse would leave them cowering in the financial basement, so to speak.

Now the experts are saying that it will take until 2009 for home sales to recover. I don't believe them. This is a precarious log jam. More payments will be late, panicky lenders will recall loans (because that's what they do), more houses will be on the market, driving prices lower, with even more people stuck. Every time prices drop, more people find themselves in this trap as the barrier to being dangerously financially leveraged gets lower and lower.

So, we heard in 2006 that it would get better in 2007. Then we heard 2008 earlier this year. Now it's 2009. By the time the finance types admit that there's a significant problem, it will be the next great depression. How depressing.

Managers See Top Take-Home Pay in Surprising Places

Where do you think managers make the best money? The US? Germany? The UK? According to the Hay Group, a management consulting firm, if you take into account cost of living and taxes and look at the what the effective buying power is, Saudi Arabia and the United Arab Emirates top the list. There are seven European countries in the top 20 and the US at spot 24. According to the press release with the information:

“Companies are operating in an increasingly open and competitive global economy, and emerging markets are offering managers higher disposable incomes than established countries –which is making these locations an attractive prospect for management talent,” said Iain Fitzpatrick, Director Reward Information Services for Hay Group North America.

The company used its own proprietary data to make the comparisons. Here's the table of results:

Hay Group's Management Buying Power

Rank	Country	Disposable Income
1	Saudi Arabia	229,325
2	UAE	223,939
3	Hong Kong	203,947
4	Russia	157,348
5	Turkey	154,762
6	Mexico	152,283
7	Ukraine	149,118
8	Thailand	147,547
9	Singapore	142,655
10	Argentina	138,188
11	Poland	128,537
12	Spain	128,197
13	Switzerland	127,732
14	China	126,281
15	Greece	126,102
16	Malaysia	126,026
17	Brazil	123,766
18	Lithuania	122,941
19	Germany	122,427
20	Ireland	117,010
21	Portugal	116,678
22	Romania	115,280
23	Austria	112,906
24	United States	104,905
25	Netherlands	103,823
26	Australia	103,578
27	Japan	102,604
28	Italy	101,487
29	South Africa	100,257
30	New Zealand	100,136
31	France	98,117
32	South Korea	97,867
33	Latvia	97,409
34	Czech Republic	97,352
35	Egypt	97,001
36	India	92,750
37	Hungary	91,358
38	Belgium	89,632
39	Slovakia	86,632
40	United Kingdom	86,367
41	Denmark	82,697
42	Canada	81,613
43	Estonia	80,908
44	Norway	77,202
45	Sweden	75,581
46	Finland	74,038
47	Indonesia	71,839

It's a Case of Out with the New, In with the Old at Microsoft

An article in Computerworld (though it comes via PC World) says that Microsoft will see increased Windows XP sales in 2008 than in 2007, even though Vista is available:

During a conference call with analysts following the earnings results release Thursday afternoon, Chief Financial Officer Chris Liddell said the company has changed its fiscal year 2008 forecast from an 85/15 split in sales between Vista and XP to a 78/22 split. Windows XP sales will, in other words, be nearly 50 percent higher in the next 12 months than Microsoft had estimated earlier.

Alright, so it's not that Vista is going away, or even that it's selling less than XP. But this really is an astounding situation for the company. It's continuing to set aside revenue into the "unearned income" category for the year because of "undelivered elements." That translates into having to ship unannounced upgrades and enhancements to Vista. Another way of saying that, I think, is that Vista has too many problems and gaps, which shouldn't surprise if you've followed stories about the product, or even know someone who has shifted to it.

Microsoft is planning to stop selling XP to resellers and retailers after the end of next January. What does this all say about Vista specifically, and the software business in general? The industry is on a painful tredmill. They sell products, which probably don't really need to be replaced for years, and then keep adding new features that few people ask for and create new file formats to make older versions obsolete. This is why Microsoft and other companies are trying to push software as a service - not because it's good for customers, but because they're trying to get themselves out of the pricing jam they've been in for a good 20 years and get people locked into a leasing model. There you know customers will be regularly paying money.

Alas, Poor Journal! We Knew It, Rupert

The Dow Jones board had decreed, and now it's up to the Bancroft family to decide whether Rupert Murdock will get the company, including its crown jewel, the Wall Street Journal. Many in the publishing business are upset - I know a number of hardcore journalists, many of whom happily write about business, who are ready to end their subscriptions to the Journal. (I'm certainly planning to.) And a company director has already resigned over the deal.

Why? Because in the face of commerce, people like to think that there are some to whom doing business is more than just making money. No matter what you thought of the editorial policy, the Journal's business coverage has been exemplary: fair, insightful, and well-crafted. That is something that doesn't come from a strictly economic imperative. Any of the writers or editors at the paper could go off and make considerably more in business. But they haven't because reporting on the news with style had an appeal that a pay check alone couldn't satisfy.

Murdock promises that he won't interfere to turn coverage to support his own business interests - as he has arguably done with every single media property of his. He offers a controlling committee to keep the journalism independent - although, as some who have worked for him note, he's simply ignored what such groups have said in the past. And why not? It would be his paper.

Supposedly, many in the Bancroft family, which owns the controlling block of shares, are ambivalent. It's hard to turn down that much money. But there are the pangs that something is wrong.

They feel that because there is something wrong. A commoditized life, where everything is for sale, has no meaning other than the price you can command. That means you're at the whim of the market with no sense of permanence. That's no life, because the essence of what you do doesn't really matter. Murdock may well get what he wants - people with money and power often do. But the world of business and of the intellect will be lessened for it, and no amount of money will ever make that up.

Rocky Road for Portfolio

In the New York Post, Keith Kelly has an interesting piece about Portfolio, Condé Nast's business magazine that was so long in getting out and trumpeted so much. There is a lot of pressure on the editorial front - ad sales are down between the premier and second issues, but that apparently is normal.

Ah, but the hype, the hype. How could any magazine live up to the expectations that this one was setting? I'm sure it's great having Tom Wolfe work on a story, but I'm not sure that most business magazines actually get what business readers really want. Too many are focused on being vessels of information for investors. Nothing wrong with that, but where can you read about strategy and dealing with problems and management? There are very few, and they tend to come either from academic sources or from the trade press.

It's fine to talk about editorial direction, but for that to exist, I think you need to know audience direction, and I'm not convinced that most business journalists understand that.

The Power of Customer-Driven Media

A Chinese news anchor has garnered a lot of attention as the subject of a story. His blog entry helped pressure Starbucks into closing its store in the Forbidden City, according to the Los Angeles Times.

Sure, the guy was a media star in China, and so his blog got more attention than most. However, that's not the remarkable thing from a business view:

Seven months ago, Rui, an anchor for the state-run China Central Television, complained on his blog that the presence of a Starbucks had "undermined the Forbidden City's solemnity and trampled over Chinese culture."

It was as if he had opened the valve on an espresso machine. Reaction from Chinese readers poured forth, hissing and full of steam. Many people, it seemed, were offended by the presence of a shop selling half-caf mocha frapuccinos in the most hallowed spot in China, where 24 emperors had ruled in almost unimaginable grandeur for nearly 500 years. By the next day, Rui says, the item had been read by half a million people and generated "thousands, if not tens of thousands," of e-mail responses.

That's the point. When people get fed up enough with something, it doesn't take much of a crack to start the vocal explosion.

Think that couldn't happen here? Look at the number of scandals and outcries started by bloggers, one of the latest having been the Don Imus affair, though rumors are that he'll be returning to the air by September. It doesn't take a big presence for a blogger, or any other person who is passionate about a subject, to make a difference. It just takes reaching some of the right people at the right time. That's one reason why companies should focus less on having their own blogs - because, frankly, most people don't care what management says anyway - and more on reading the content of others'. When public opinion is out there for the world to hear, why wouldn't you want to know what it stated?

Customer Service and Self Interest

I just received an email from the Financial Times informing me that I needed to update my credit card details to maintain my subscription. Simple enough, I thought. Ah, maybe not. The directions in the email had me click on a link and told me to update the credit card details. Unfortunately, nothing on the page mentioned credit cards. So I figured that I might try updating the account information. Fair enough, it seemed right, although I had to remember the answer to one of the security questions rather than just providing my password. (I wondered how many legitimate people were screened out and if the company ran into any poseurs.) Then I looked and there was still nothing saying credit card, though there was a link for payment details. Ah-hah! Success. This time.

But I've seen this problem many times before. A company will email a customer, asking for updated information or instructing them to do one thing or another, and then the instructions turn out to be wrong. Strategy is important, but companies gain and lose customers on the details. Those customers are rarely interested in the strategic directions. They want things done when they need them done. If a company isn't going to spend the short amount of time ensuring that instructions actually correspond to reality, then it's going to find that some number of people walk away because of frustration. This is unnecessary and it's far more expensive than the small amount of time needed to do thing correctly. A good proof reading would cost all of maybe $50, and a single subscription in this case is worth over $200 annually. A little attention to details is profitable, indeed.

Synergy and Self-Delusion in the Book Industry

As I mentioned today in my literature blog, En Words, a teen lit title slated soon to hit the shelves has traded product placement - mentions of makeup products - for promotion by Procter & Gamble.

While I mentioned the background and my take on the desirability of the practice from a writing view, I think there are serious business problems with the approach. When you create products (and in this case, I think the term applies more thoroughly than book), the more you design with an eye to your own marketing and not to. In the needs of the user, the more you build something essentially injurious to the long-term health of your brand.

People will literally buy product placement up to a point. But eventually they catch the scent of the wool someone is trying to pull over their eyes. AOL did terribly with this concept. Many others have as well. It's not that exercises in synergy never seem to work - they might. In fact, they most often do when the cross-references are back to the original venture, like promotional tie-ins with movies. But when the reference is out from the original and not back, I'd wonder how much actual measurable results companies see. And if there is measurement, it's generally going to be over a tiny window of time, and with a small view. This is like making decisions to "make the numbers" for a given quarter without considering what the long term effect might be.

In the case of AOL, the result was unmitigated disaster. Remember that book sponsored by Bulgari? Only vaguely? Case in point. It's a desperate ploy that comes out when companies find that their customers no longer care about them. Why should they? The companies stopped caring about the customers a long time before. As the chief executive of the book's publisher, Perseus Books Group, wrote in a letter to the editor answering the editorial:

No money was paid to the authors for product placement, and the companies involved are disclosed on the book's copyright page. "Cathy's Book" is a novel to be read with mouse and cellphone in hand, and we see it as the antidote to the decline in teenage reading.

These are the words of someone who must be inwardly embarrassed. No money paid? The IRS seems to think that barter is taxable income. The companies involved are disclosed on the copyright page? Certainly one of the more thoroughly perused spots in a book, I'm sure. Whenever you find yourself having to carefully construct your words to explain why you sort of didn't do what you got caught at, you should consider politics, not business, to be your metier.

Mackey's the Real Wackoy

There's a terribly fascination for the business community when a CEO seems to melt before your very eyes. And Whole Foods John Mackey is doing just that. It turns out that for years he's been using a pseudonym to tout his own company and trash talk a competitor (that he now wants to acquire) on Yahoo Finance chat boards. Not only was he shooting from the hip, but he went after at least one journalist, Herb Greenberg.

Bloomberg has a good overview. By trying to take on the FTC and SEC while all this comes out, he's moved beyond putting feet into his mouth and is now filling it by the cubic yard. And not only is he doing things that the SEC might see as blatantly illegal, but he's trying to do them through chat rooms? Oh, puh-lease! As Greenberg aptly put it in another blog entry of his own:

To post on outside message boards, especially using an alias, not only shows poor judgment but strikes to the heart of a company's culture and makes you wonder what else might not be quite right.

How can you argue when said CEO is spending time writing such comments as "I like Mackey’s haircut. I think he looks cute!" and "13 years from now Whole Foods will be a $800+ stock before splits."

My question is where is the board in all this? Are we to assume that none of the directors knew of his inclinations or of his posts? It would be altogether too easy to see Mackey as the sole problem and not look at the environment that permitted and even supported such actions.

Early Results of Microsoft Buying Search Audience

An InformationWeek story notes that MSN and Microsoft Live slice of search volume jumped from 8.4% in May to 13.2% in June, according to Internet metrics company Compete, and that what has increase business is prizes for users:

"A good portion of the additional Live searches are coming from the Live Search Club, where you can apparently play games for points which you can redeem for fine Microsoft products," said Steve Willis, a Compete analyst, in a blog post Monday. "All of the games involve using Live's search engine - to get the points, you have to search with Live."

Much of the story looks at whether this is realistic, but even if it is, this actually isn't good news for Microsoft. This is a classic example of bribing customers - I actually mentioned it here in April. Glad to hear that volume may have increased, but the problem still remains that this is not sustainable customer development. The theory is that if you bribe people to do business with you, some amount will remain out of habit so that when the bribes (whether called rebates, subsidies, or by another name) eventually stop. That might be true, but does anyone check the profitability of these "catches?" Someone drawn nothing more than one company's freebie is subject to being distracted by another's, and so the likely lifetime value of said customer mercenary will be low. Compare that with the acquisition costs, and it could be that you're actually losing money with each increment.

Profile of Peter Stringham of HSBC

Here's a piece that appeared in Advertising Age last year.

Marketers are often asked to do the impossible. That’s what Canadian beer company Molson asked of Peter Stringham in the mid-1990s when he ran BBDO in Canada. The brewer was the largest in the country, but by only a few percentage points ahead of Labatt Breweries, which was coming up and fast with innovative product lines. Stringham’s client wanted to move away from Labatt with new products, but nothing seemed like it would do the job.

So Molson went to Stringham shortly after the New Year asking for help. What management wanted seemed impossible: research, design, and develop a new product with a complete marketing campaign and have everything in hands of consumers by May. Five months.

“We went back to them and said alright, we can do this, but there’s going to have to be a team of people from the agency and people from the brewery,” Stringham says, “and that team has to be given complete authority to develop the product, develop the marketing communications, everything.” It would be a group that, collectively, could approve all aspects of the task, from formulation of the new beer, packaging, marketing, and distribution. It would have complete responsibility – and complete authority.

Desperate times call for desperate measures, and Molson agreed. The group worked hard, challenging the basic perceptions of how beer companies promoted their products to their core audiences: young men. By the end of May, Molson had a new product called Red Dog. “The astonishing thing is that it actually did launch in late May,” Stringham says. “It was the most successful launch that Molson had ever had of a new beer and the most successful launch of a new beer that Miller [which was handing U.S. sales] ever had.”

What Stringham saw was that good ideas may come from the lone genius, but big ideas – those that can transform a product, a campaign, a department, company, or even an industry – more often than not come from a group that has a clear mandate of what it needs to achieve and authority to carry out its plan.

He continues depend on such groups in his current position as group general manager of marketing at global banking firm HSBC. “We only became a global brand by rebranding almost 80 different banks in almost as many countries in 2000 as HSBC,” he says. There was nothing new in the positioning of being a global collection of local feel and presence. “What was transformational was this whole idea of how you execute.” One of Stringham’s project groups (“I was the client, so I was able to create the team,” he jokes.) realized that people like dealing with a global company if they can still feel as though they’ll be treated as individuals.

“It’s particularly important in the banking world because people feel they’re being treated like a number,” he explains. “We don’t try to push the same products in France that we do in the UK.” And a clever and funny marketing campaign emphasized the trouble people can get into when they don’t recognize that life and culture can be very different around the world. From its beginning in 2001, the brand last year was rated by Interbrand the 29th most valuable one in the world.

Who in the group came up with the idea? Stringham doesn’t know, or even care. The method’s success speaks for itself – and for HSBC.

Short Blog Postings Don't Provide Big Business Value

Jakob Nielsen, a major expert on usability in web design, has an entry in which he argues that business web sites are generally better off with well-executed articles than with blog postings. His argument is that blog postings - particularly "numerous short comments on ongoing blogosphere discussions" - are insufficient when a company has long sales cycles and the need to build long-term relationships with customers.

Although there is an irony here in my commenting on his comment not to comment, I have to generally agree. Any corporation communication strategy must start with a business strategy. Slapping something up on the web isn't necessarily the wise thing to do. After all, just because you can serve whipped cream and cherries on pan-fried calf liver doesn't mean that you should. If you're just looking for traffic and don't need any sort of sustained connection with the audience, then, sure, have a blog. But when you do nothing but offer surface remarks on what others have written, you aren't providing much value.

Offering value in writing really means showing an audience that your experience can provide them with value. As your experience is the key, there is an understanding that they won't necessarily get the same thing elsewhere. If all you do is point to other sites, then you've become a portal or cheap news aggregtator. Psychologically you're saying that you are only in business because others let you. In that case, why bother with you? Why not go directly to the real sources?

Nielsen makes an even deeper point, I think, in noting that even experts are going to have a range of quality in their postings, and if they are doing the short stuff often enough, there will be times when the postings of others are better - even much better. Those occasions serve to deflate the reputation of the experts, who now look as though they can't do any better than the average person on the web. He then argues that with enough deep content, an expert can find an audience willing to pay for the information - basically reinforcing an idea I've been considering recently that the future of writing and publishing is in micropublishing good material at premium prices to dedicated audiences.

So most businesses, if they aren't satisfied being commodity entities (and some will be - and that's fine, if the business model makes sense for you), should consider how they provide content on their web sites. This also brings a question about some of the fundamental strategies of search engine marketing that I've seen. Many companies on the web try to create content that maximizes search engine potential, so that more and more people come across their site. That's fine so far as it goes, but then there's an unstated assumption that more people mean more business and more profit.

Anyone who has dealt with data-driven marketing and direct response marketing will know that isn't necessarily the case. Prospects often fall into groups, and not all groups are alike. Look at Sprint, which just dropped 1,000 customers they called customer service too often, which means the company (hopefully) did a profitability analysis to see that the former customers didn't bring in as much profit as others. Or consider a classic direct mail issue, in which two mailing lists with apparently identical characteristics respond entirely differently, and at different rates, to the same offer.

The SEO marketers assume that more is better, but it could be that the people searching most often are not necessarily the most ready to buy, or even to enter a relationship with a business. So posting material packed with specially chosen search terms might drive traffic, but the wise business sees if it drives sales. Understand the value your best customers need and find a way to provide it.

Getting Locked in to Verizon

According to an Associated Press story, many consumers and businesses are getting a surprise when they order Verizon's FiOS fiber telecommunications service - they lose the copper wires to their buildings without warning. That might not seem to be a big deal; after all, the fiber carries the same signals. But there are some consequences:

• US law only requires the big carriers to lease copper, not fiber. So you could find that there are no longer competitive alternatives available - and telecom deregulation was intended to increase competition, which lowered prices. So as people and companies adopt FiOS, we move back toward telecom monopoly.


• Use FiOS and you see service charges that can be significantly higher. The article compares DSL with fiber-based Internet access. The latter is undoubtedly faster, but also costs twice as much.


• Once you switch, you can't necessarily switch back. You're stuck, as is anyone in the future who occupies the same property.


• FiOS doesn't work when the power is out once the battery backup runs down, unlike traditional phone service, so there is a potentail security/safety aspect.

AT&T and Qwest have also been trying to replace copper with fiber, but not in the final hop to the consumer or business becasue of the cost of replacing it for each individual location. Someone from Verizon is claiming that the company will reconnect the copper if someone asks, but the company will try to convince the customer not to. And the "notification" that Verizon provides is questionable:

An example of what Rabe describes as adequate notice is the fine print on Verizon's FiOS policy, which is printed on its Web site. It says "current Verizon Online DSL customers who move to FiOS Internet service will have their Verizon Online DSL permanently disabled after their FiOS conversion."

Saying that you permanently disable a service is not the same as saying that you will permanently change a physical connection - particularly when you have a 30-day money back guarantee. And as far as rates go, when you've only got one choice, they probably only have one place to go - up.

So perhaps it's time for Congress to once again look at the telecommunications industry and ammend the Telecommunications Act of 1996 to ensure that competition continues and that the back door doesn't open to a new age of monopoly.

BIG Problem with iPhone and Battery Replacement

According to an Associated Press story, a consumer advocacy group has just noticed some unpleasant fine print on doing an iPhone deal: you can't replace the iPhone battery yourself, as it's soldered into the unit! If you do need it replaced, it's $79 plus $6.95 for shipping and takes three business days. Oh, and while it's out at the shop, you can get a loaner - for another $29.

What in the name of all that is holy were these people thinking? Let's tally it: You pay either $500 or $600 for the phone, you have to get a $60 per month AT&T service plan, and now you've got to pay for someone else to replace the battery? And to bury that information so it took some careful deep reading by some technology bloggers and a consumer advocacy group to learn of the scheme is simply trying to distract people long enough so they can get stuck.

Now let's look at some of the other idiosyncracies of this battery replacement process that I didn't see in the AP story:

• The total of $85.95 is subject to local tax, which, I'm guessing, means that if there's an Apple office or store in your state, you're paying.


• "Service may not be available if your iPhone has been damaged due to accident or abuse." I wonder what "abuse" can mean? Oh, so sorry, but there's a scratch on your iPhone and we think you may have abused it (you bad, bad person), so we can't replace the battery. Have you considered buying a new one? Does this seem a bit too Machiavellian? Absolutely - but then, I never would have thought that a glorified cell phone would have a battery soldered into the case. Oh, and if Apple decides, according to its service policy, that iPhones "that have serial numbers altered, defaced or removed or that are damaged due to accident, abuse, neglect, misuse (including faulty installation, repair, or maintenance by anyone other than Apple or an Apple Authorized Service Provider), unauthorized modification, extreme environment (including extreme temperature or humidity), extreme physical or electrical stress or interference, fluctuation or surges of electrical power, lightning, static electricity, fire, acts of God or other external causes," it can send them back and charge a $100 "Diagnostic Fee."


• The replacement process is going to wipe all the data off your phone! So if the battery dies before you get a chance to back everything up, you're out of luck.

Apple has shown signs of incredible arrogance in dealing with other companies, the press, and even with its users over the years, demanding draconian conditions, generally keeping prices artificially high by not licensing hardware or software, and in some cases (like the iPhone) offering fewer features than competing products for more money because, I'll admit it, they're great at marketing. But this is ridiculous. I have a question for Steve Jobs: how long does this servicing really take, and how much profit will Apple make from it? Isn't locking people into more expensive hardware from your company enough? Oh, I think he already answered that.

Study Suggests Key Ways for IT to Drive Competitive Advantage

Last month the results of a study done by the Hackett Group, a strategic advisory firm, suggested that IT really can be a strategic tool to companies and isn't just a commodity. Based on benchmark data from over 2,100 companies, those that led in IT operations spent more 7% more per end user than the average company. For the average Fortune 500, that would mean an additional $29 million a year.

However, the investment seems to pay off with lower average operational costs of $134 million a year, with IT playing a critical role in attaining the gains, so the total savings is significant. There are five key strategies that the best in class companies use:

• Streamline the number of ERP and other applications and standardize data so you don't spend too much time and money trying to get everything integrated.


• Do risk/reward analysis to find the areas where the greatest gains exist. Be ready to implement process reengineering at the same time if you don't want to simply pave over the cow path.


• Maximize value at the lowest achievable cost rather than simply cut costs across the board. If you just spend less, you might also end up sending less in the areas that can provide real return.


• Make data available in a coherent way to those who aren't computer experts. Let management have access to information that they can use to direct better performance.


• Outsource only to improve effectiveness, not to increase efficiency. In other words, outsource IT systems and functions to increase how well you do something, not how inexpensively you do it.

According to Hackett, these principles can keep executives from seeing IT as nothing but a cost that needs to be trimmed without regard for wht it can provide. If you're interested in more details of teh study and don't mind putting yoruself on a mailing list, use this link.

Do Tracks Make Up for Albums?

According to an AP story, music album sales - 229 million - in the first half of the year were down 15 percent over the same period last year, according to Nielsen SoundScan. Over the same months the industry sold 417.3 million digital music tracks, which was up 49 percent.

Yet the numbers are deceiving on the surface. Assuming that albums go for $12 each, that would be roughly $2.75 billion in sales. Since the number of albums is down about 15 percent, that would mean a loss from the previous year of 40 million albums, or about $480 million.

But even at 99 cents each, the digital tracks would total about $417.3 million in sales, and they had roughly doubled. So offsetting the $480 million album loss is just over $200 million in digital sales. Clearly what we're seeing is not a 1-to-1 replacement, and so the industry is making less money overall. So what's the real story? I really don't think it's pirating so much as consumers often find albums padded out and are only interested in a few cuts.

Digital tracks become an efficient way of getting just what you wanted. If music labels want to retail the same profit levels, they'll have to address issues of quality and customer demand. Otherwise, no one will have an incentive to go back to albums. Unless the labels start to understand what it is people want, rather than using a "me too" approach, following all the other labels around in a circle, they'll have to tighten their belts quite a bit.

Apple Not Universal-ly Liked

Back in April I mentioned how EMI was going to license non-protected music to Apple. Now, according to the New York Times, it looks as though Apple isn't on Universal's play list - and that the reverse could be true at a moment's notice. Apparently Universal Music Group isn't going to renew its annual contract to sell music through Apple's iTunes service. Instead, it has chosen an at-will arrangement which would let it pull its wares on short notice, should the companies not agree about something or other. Or, as the story says:

In particular, Mr. Jobs’s stance on song pricing and the iPod’s lack of compatibility with music services other than iTunes have become points of contention.

Sony has recently renewed a one-year agreement, but this shows some significant resistance to Apple's insistence on not letting the iPod work with any service other than iTunes as well as on pricing issues.

It seems that lots of music industry insiders are warning the labels against antagonizing Apple, as it has such a huge market share. But I'd point out that the danger ultimately faces Apple. Should Universal walk, that would still leave other large labels, but they'd all be paying attention. Without content, iTunes is unimportant from a business view. People will go where they can find the music, and that's up to the labels, not to stores, whether online or real-world. Then there was this other point:

Mr. Jobs, in February, noted that less than 3 percent of the music on the average iPod was bought from iTunes, leading music executives to speculate that the devices in many instances are used to store pirated songs. (Of course, users can also fill their players with songs copied from their own CD collections.)

If less than 3 percent comes from iTunes, and since iTunes has overwhelming market share, you have to wonder whether music executives are wondering whether Apple is necessary at all. There is this factor:

The iTunes service accounts for 76 percent of digital music sales, and the contract talks come as it is on the rise — Apple recently surpassed Amazon.com to become the third-biggest seller of music over all, behind Wal-Mart and Best Buy, according to data from the market research firm NPD.

But there's something incongruous here. If Apple is so big in selling music, why do iPods have relatively so little? And do these figures count CD sales from people who want more than a few cuts of a given release?

If the labels walk, though, I think it would be bad judgment on their part - not becuase they make that much on digital music, but because when it comes to marketing, Steve Jobs is way smarter than any of the music companies. He is the one who insisted on low flat pricing to get people to start buying. That was smart. Unfortunately, the music companies want to be able to charge more for popular tunes. I can see the rationale - get what you can when the properties are hot. But consumers are already ticked at all the ways music companies have gouged them over the years. Jobs wants to build long-term relationships. That's smart marketnig.

Where Jobs misses the boat, I think, is that he also refuses to license the digital rights management scheme to other companies, which harkens back to how Apple has always approached business: be the sole supplier. Yes, it's built a viable company, and yet, at the same time, Apple's market capitalization is far lower than any of the PC-centric hardware companies, let alone Microsoft and its Windows juggernaut. Jobs and company never learned the lesson that sometimes letting go is the only way to get more, even though that's what he ironically urges the record companies to do - sell unrestricted music. His argument is that spreading the use of the DRM code would make it more likely that someone could crack the system. Please. People have been able to break virtually any digital protection scheme they've wanted to. Not putting it on other machines won't offer significant protection - other than market protection.

Hmm. Maybe even Steve Jobs could do well to listen to Steve Jobs.

iPhone Seeing Share of Problems

Most of what you'll see in the press about the iPhone seems to be raves. But to get a better rounded picture, it's informative to see what customers are saying in Apple's support forum. Some of the complaints:

• No support for AOL, Yahoo, and MSN instant messaging clients.


• No voice dialing support.


• One of the more "locked-down" phones you can find, which means that you're more than usually tied to the service provider - AT&T in this case.


• The headphone jack needs a special adaptor for most headphone sets.


• No support for custom ring tones.


• No to-do list in the calendar function.


• If you aren't careful with what features you leave on, a battery charge can last under half a day.


• Volume is less than on many phones and can require particular "technique" of use to hear.

There is even one person complaining on Slashdot that the phone won't work with the 64-bit version of either Vista or Windows XP and that a post on the Apple support forum about the issue was removed. (Apparently the incompatability is not listed on the iPhone specs, according to Engadget.) And reportedly AT&T insiders were saying to the blog Ethan Says/Homorific that the iPhone frequently drops calls. (Not something you want to support if you're trying to deal with customer perceptions that dropped calls are a carrier problem.) And this is just scratching the surface of the commentary you can find on the web.

Apple has had a good reputation in industrial design and engineering, but ultimately you need a product that works and doesn't just look good. The Apple die-hard group as a percentage is a tiny part of technology consumers and releasing something that starts making people angry is one of the best ways to damage a product line. Negative word of mouth travels faster and farther than positive.