Blogging is No Marketing Silver Bullet

In an article on how some small businesses see blogging as "a low-cost, high return marketing tool," the New York Times has an interesting two paragraphs:

David Harlow, a lawyer and health care consultant in Boston, said he started his blog, HealthBlawg, as a way of marketing himself after he left a large law firm and opened his own practice. Besides, he said, blogging was easy to get started and the technology was straightforward.

Now, after about two years of blogging, Mr. Harlow said he was pleased with the results. He gets about 200 to 300 visits a day, he said. He has also become a source for publications looking for commentary on regulatory issues in the health care field and has even gained a few clients because of the blog. In addition, he has formed relationships with other legal bloggers (who call themselves blawgers) and consultants around the country.

Any business looking for the "magic" of blogging should consider this: two years, a few hundred visits a day, a few clients. Notice the appearance of the word "few." This isn't a quick fix. The owner of an organic chocolate snack company mentioned starting a blog, but not any quantifiable payoff. An ice cream manufacturer experimented for a number of years with different blogs and ended up with one about personal finance, which it saw as a way to attract people and then let them see ads for the actual products.

I'm not suggesting that blogs make no sense. They can, and there may be a number of reasons to have them. Heck, I run five, and I see various benefits. But if you want something that will fill your place of business with no other effort, this simply isn't the answer.

Holiday Sales Hangover

It's official: the 2007 holiday shopping season were disappointing. But looking at some figures from a Financial Times article, let's consider the nature of disappointment. MasterCard Advisors said that retail spending climbed only 3.6 percent from Thanksgiving to Christmas, and "when the International Council of Shopping Centres warned that same-store sales or sales at stores open a year during the November-December period were below projections of a 2.5 per cent gain."

Clearly investors and businesspeople are only happy when there is a significant rise in sales year over year. But satisfaction is a relative term, and depends completely on expectations. Having rosy expectations when credit is mangled, when people are stuck with ballooning housing prices, and when fuel is up enormously over last year is simply deranged thinking. How could anyone expect the average person to be willing to go even more into debt to line the pockets of a relative few? You can't expect people to inhale and never to exhale, and so you cannot expect them to always shell out more this year than last, particularly when you want that number to exceed inflation. When asking themselves, "What could we have done better?" I think a wise answer might be, "Stop telling ourselves stories to feel better, and face reality so we can consider viable options, not fairy tales."

Less Profitable Time for Large Banks?

The Wall Street Journal is running an article suggesting that "the next few years will be a return to a simpler and possibly less-profitable time" for the big banks. But I wonder whether that is true when you take everything into account.

The basic thrust is that the banks will be holding on to more of the loans they make, rather than turning them into collateralized securities, and that they will do less of the off-balance-sheet lending that they were doing to corporations to put a check on capital costs. And then the article suggests:

The upshot: Bank investors expecting a big rebound in earnings growth after the debacle of 2007 will likely be disappointed. The slowdown is likely to be especially pronounced at some of the biggest banks, such as Citigroup Inc. Bank of America Corp. and J.P. Morgan Chase & Co.

Supposedly this is going to be a "negative" effect on investors. Frankly, I thought that the fallout from all the supposedly insanely profitable activity was negative enough, and that you'd have to be insane to want more of it. Banks writing down tens of billions of dollars in value and needing to find large cash influxes from countries to stem the capital loss in paying off the bad bets? Now that's negative. When everything is tallied, how much of the profit growth still exists? Even that which wasn't written off may have turned, instead, to loss of investor and customer faith, which means a dramatic reduction of good will, reflected in hits on stock price. As the article quoted Gerard Cassidy, an RBC Capital Markets analyst:

The originate-and-sell business model "encouraged reckless lending" that triggered the current mortgage morass, Mr. Cassidy said. Keeping loans on banks' books will help avoid future meltdowns that could torpedo years of profits.

It was also interesting to read about yet another respectable business scam: off-balance-sheet conduits of banks issuing "short-term commercial paper to purchase debt such as corporate receivables, mortgages and auto loans, capturing the difference in rates between the two." Many of the people running these institutions really do seem far too clever for their own good - and for the good of the investors, otherwise known as the people who own the businesses.

Marsh & McLennan To Replace CEO

Insurance broker Marsh & McLennan has decided to boot its CEO, Michael Cherkasky, according to the Wall Street Journal:

Chairman Stephen Hardis said the insurance broker's 2007 results have "fallen far short of our expectations. The board has taken this performance into account, and listened to concerns raised by some of the company's largest shareholders in recent quarters, in making this change."

But, in a stunningly insane move, the board is keeping Cherkasky on until a successor is found. Am I purely stupid, or is this one of the more foolish things a board could have done? When an employee is being fired, rarely does the company keep the employee on, at least in a functional role, until the replacement is in. The action creates enormous resentment in the employee (who may be tempted to cause havoc), it's disheartening to the rest of the company, and potential replacements have to be thinking not just twice, but three times whether it makes sense to join a company that would do something so screwy. When the position is that of the CEO, this rises to a potential fiasco.

According to the same short report I received by email, Cherkasky first came on in 2004 when then-NY state attorney general Elliot Spitzer sued the company:

alleging the company steered unsuspecting clients to insurers with whom it had lucrative payoff agreements, and that the firm solicited rigged bids for insurance contracts.

Was the board irritated that the new CEO couldn't get the same results as conniving could? Or did it figure that major credit upheavals weren't interesting enough, and so it would keep as an interim CEO the person it thought should be sent packing for poor performance?

UPS Goes to the Right, Ever to the Right

The line about going ever to the right comes from a song in the musical 1776. UPS is just bringing a new and more literal meaning to it. According to this story in the New York Times, the company, as much as possible, is trying to eliminate the left hand turn from its trucks' routes. The problem that left hand turns pose is, more often than not, requiring trucks to idle while waiting for an opening. A right hand turn is generally a lot faster (so long as you're in the US and not the UK). So the complex software systems that establish the loading order in the trucks and set the routes are now trying to minimize that waiting, and the assorted wage and fuel expenses. For most companies, this would probably be a waste of time that would do nothing but let management think that it was doing something useful. But UPS is hardly the average company, and is probably as efficient on the road as any:

Last year, according to Heather Robinson, a U.P.S. spokeswoman, the software helped the company shave 28.5 million miles off its delivery routes, which has resulted in savings of roughly three million gallons of gas and has reduced CO2 emissions by 31,000 metric tons.

It might be bluster, but I have a feeling that they are serious, and probably saving money.

Adolescent Investing

You've undoubtedly seen the news stories today about the loss in stocks in the face of the quarter percent interest rate drop by the Fed. The standard rationale being offered is that Wall Street expected a half point drop. That is equivalent to saying that a screaming teenager's tantrum about not getting to do something his or her friends are doing. It's not - the problem is a lack of maturity and realism on the part of the one doing the screaming.

It's clear that Wall Street invests based on emotion, and not strictly on logic. People like Alan Greenspan have pretty much said so, and if you look at the way stocks react, you can see direct evidence and not even wait for the experts to weigh in. So, investors wanted a double cone and instead got a single scoop, and so decided that they'd go home and pout.

In other words, there's no reason to get that upset or worried about the market, because it's as useful as getting twisted up over a teenager on a rant. What the grown-up parent or investor does is take all this in stride and do what is necessary anyway.

Microsoft Selling Against Microsoft

I've mentioned a number of times before how the lack of sales velocity for Vista could hurt Microsoft, whose business is held up by the twin pillars of Windows and Office. According to a link on Slashdot.org, Microsoft has tried advising IT managers how to make a case for upgrading from XP to Vista.

Given the claims that Microsoft made when XP first came out (disclosure - I happily use XP), about the robust security, selling on the strength of improved security - no, really, we mean it this time - is probably not the most convincing argument that the company could make. If it didn't deliver with XP, when it claimed that it did, why would anyone believe that it would this time? Wouldn't there be another argument for a future version that the previous versions were inadequate and there was no good way to patch them to get up to snuff? And the argument of having to upgrade "to match the capabilities of their competitors" is the same tired hog wash that the software industry (including analysts) have been peddling for years. Software doesn't make the product or the company. At best it's a tool. At worst, an expensive excuse. According to this PC World article, Microsoft is also claiming that Vista is cheaper than XP when run on mobile PCs (read as laptops) by some $606 less a year:

Peculiarly, the study actually was based on XP usage and extrapolations based on Vista capabilities because there was not a substantial base of Vista clients in use yet when the study was done early in 2007. Now, the installed base of Vista is 60 million PCs, Microsoft said.

I wonder if Microsoft actually included the upgrade costs - including new hardware - as so many of the early users had already paid for the upgrades under a site license agreement, and so would not have shelled out additional money. Whatever the case, it's not a good sign when company has to use fear, uncertainty, and doubt - the great software FUD - against its own products because so few people want the new one.

General Mills Undertakes Stunningly Bad PR

National Public Radio ran a story about a group of people in Potsdam, NY that has held an annual bake-off for the last ten years as a fund raiser for a local food pantry. Apparently the use of the term "bake-off" got the corporate Dough Boy irritated:

This year, food manufacturing giant General Mills contacted organizers and told them it owns the word, and only the company can use it.

How incredibly stupid does corporate management have to be? Had they contacted the people and said something to the effect of, "It's our trademark and we have to defend it to keep it at all, but we applaud your efforts and, if you can credit the trademark to us, we'd be happy to let you use it?" But, no, the iron fist came down and so did a story on NPR. Want to guess how long it will take for this to hit all other media? Want to guess the PR value of being seen as opposing food pantries and charitable work? How many boycotts on local levels will start? Could a competitor ever afford to cause this much trouble and get a competitive advantage? This is such a stupid blunder that it brings into question whether management has such tin ears that they cannot be trusted to do what is in the real best interest of the company and the shareholders.

I actually just posted this on my blog about the writing business, but I realized that it was an interesting question of economic dynamics of e-books and the Kindle, so thought I'd post it here as well without using a link back.

Tim O'Reilly is a smart book publisher, and he took a look at some of the numbers that e-book enthusiasts tossed around with the advent of Amazon's Kindle. His argument is that even if prices do tumble for e-books, it will likely be only temporary. It's worth the read.I'll add an additional angle. Let's assume that he's wrong and prices do drop and stay at $5 a title. What publisher and author combination can make money that way? Reading hasn't reduced in volume because the prices are too high - books just aren't that expensive.

If you have a current business model under which most titles don't even make back the pitiful advances that authors get, and where the cost of the actual paper is only about $1.50 a copy, then dropping the price by 60 to 80 percent is going to mean that publishers won't be able to afford to print anything that isn't going to be wildly successful.Current backlists may stay around (if the publishers have acquired the necessary rights), but forget the variety of titles coming out now. You'll be down to a handful of authors who can generate the necessary sales.

Some individual authors might be able to self publish, but if they're getting 35 percent of $5, that's $1.75. Take out costs of design and production, and maybe they're at $1 a book if they're lucky, which is the inadequate stream of money they made from publishers - too low to support self-publishing. So $5a copy, if really gutting the paper model, would actually leave book publishing virtually dead. Then supply and demand will kick back in, because there are those massive infrastructures to feed, and prices will head back up anyway.

US Versus European Managers

The Financial Times has a story today about a report from executive search firm Heidrick & Struggles:

Chief executives of large US companies have far less international experience than their UK counterparts, a sign of corporate America’s struggle to balance the lure of globalisation with the needs of its large domestic market, new research will reveal on Tuesday.

According to the study, only a third of US CEOs at Fortune 100 companies have lived or worked abroad for at least a year, compared to 67 percent of chief executives at the FTSE 100.

I find it interesting that with such an emphasis on globalization, so few US firms have international experience in their CEOs. Some in the US, including Intel's chairman, Craig Barrett, say that visiting markets can be enough. Excuse me, but that seems like arguing that someone experienced in a service business can understand a manufacturing corporation by visiting some factories. Granted, companies often find it useful to recruit people with backgrounds in industries different from that of the company, but it then takes a pretty long time to get up to speed, and that is with having all the information and in-house experts at hand.

There have been so many glaring errors that US companies have displayed when doing business overseas that you'd have to wonder why anyone would think that visits would be enough. That doesn't let you understand the dynamics of other cultures, business atmospheres, or political systems. No, you won't gain experience in all the places that you'd ideally want as CEO, but at least you'd have had your nose rubbed in the typically problems that will occur when doing cross-cultural business, and you'd hopefully have learned some of the principles that help you navigate the waters.

In the past I've interviewed Steen Kante, the former US head of IKEA during its heady growth years in the 1990s. "There were probably no land mines we could step on that we didn’t step on," he said. They made mistakes in a host of ways - not realizing that American cars, larger than European counterparts, didn't have to get a chair in a box, and that they didn't want to deal with the assembly. European beds were smaller and wouldn’t fit into existing American frames, so consumers here assumed that IKEA wanted to force the sales of new mattresses and box springs. "You’ve got to understand how the consumer thinks and adjust to them," Kanter said. "It took IKEA years. But when we finally got it, we got it." That was with someone living in the US.

Yet, if you asked American executives whether European counterparts could come in and start effectively operating in the US, I suspect they'd laugh. You have to know the market, the culture, the economic structure, the government ... all the same things you need to know when operating overseas. To be fair, the article, and study, I guess, suggests that Americans are concerned that they will be overlooked if out of sight for a significant period of time. The American market is also so large that it does take significant attention. But over time, I wonder if companies will come to see the need for overseas experience - and will that put US managerial jobs in jeopardy of "outsourcing," after a fashion.

Something that did surprise me was that American companies did far better than European counterparts in succession planning, with 86 percent of the Fortune 100 CEOs being promoted from within. There wasn't a number available for the percentage at the FTSE 100.

Another Nail in the Network Coffin

The New York Times today is reporting about NBC planning to buy blocks of programming from outside producers. Although apparently unrelated to the writers' strike, it's just another facet of the changing business climate and how networks, long grown fat on easy money, often creatively channeled away from people who supposedly had slices of profit. But they are so cautious about revenue that they parody themselves, doing one show after another that are practically indistinguishable. They need the producers - and the writers will end up becoming their own producers, creating their own shows. Networks will be totally dependent on those who actually create programming, which reduces them to a distribution business model. This is bad news, indeed, when the Internet will increasingly make that approach obsolete. when will they first wake up? When people no longer so anxiously take meetings or do lunch?