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Getting Boeing 787 Dreamliner airborne should be US national priority

Getting the Boeing 787 Dreamliner airborne should be US national priority next week. Its eight days since the Dreamliner was grounded by the US-FAA (see timeline here).  Japan, India and European air safety regulators have similarly grounded the aircraft and there is no timetable to put it back up, as of yesterday. And Poland may even ask for compensation. Here is why getting the Boeing 787 Dreamliner airborne is so important:

• Safety is important: but regulators are risk averse. Flight Safety Regulators in every democratic country are risk averse by definition. Their worst nightmare is that of not taking action and then being blamed, if a plane actually catches fire due to the batteries . Understandably the "safety" is about bureaucratic careers  so much so that no Prime Minister would like to over-rule its own flight safety regulator, unless say President Obama personally called to assure safety. 
• Batteries overheat: This blog claims no expertise on lithium ion battery technology but these seem to be bigger versions of the laptop computer battery. And there have been numerous battery recalls on laptops and you would have noted that it only takes a few reports before mass recalls happen.
• Boeing is the largest US Exporter: Boeing is the largest US Exporter. And the Dreamliner on air is key to that role. Along with US exports come US jobs.
• Global aviation competition is intense: Aviation competition is intense globally and the French Airbus has got a foothold in the Japanese market and is also fairly prominent in other markets. Delays in resolving the battery problem will only weaken the Boeing  brand and its competitive position in global markets. 

Currently, Boeing seems to be naturally on the defensive and reports indicate all kinds of problems like tight funding in the development, fragmented supply chains etc. But this is not the time to get into diagnosing the history and faults of Boeing to come up with this great American innovation ( see earlier Dreamliner post from 2007 ).

Instead,it is absolutely critical to manage the safety problem of the batteries and not let imagination run wild that planes will catch fire in mid-air after reasonable fixes are in place. Luckily United Airlines CEO Jeff Simisek has called the Dreamliner "terrific" and some other Boeing customers have also stepped up with their vote of confidence.

Let's hope that we see the Dreamliner airborne again very soon. Contact StratoServe.

Papa John $250 million lawsuit for mobile text ads: how search advertising is different

Papa John is facing a $250 million lawsuit for sending half a million text messages to customers in early 2010 - search marketing would have eliminated this problem. But first, more about the Papa John matter.

Text message  recipients maintain that they got 16-17 text messages a day, including in the middle of  the night for pizza deals - just because they had ordered a pizza from Papa John. In traditional marketing, once you buy something, the marketer has a "relationship" with you and can approach you with deals. It's not clear if the mobile text agency that Papa John used asked permission and more details should emerge. Meanwhile the Papa John stock is down. Consider the following:

• With manual  "push marketing" like live  telephone calling, direct mailing, door knocking the physical difficulties of actually calling on someone is enormous. Imagine how difficult and expensive it would be to send 16-17 pieces of junk mail a day to an individual customer.
• With digital "push marketing" like robot telephone calling, email blasts or mobile phone text blasts there is really no difficulty or significant cost to sending 16-17 messages to a customer. If you own the software or are on an "unlimited" plan, it's tempting to bombard the customer. And customers' don't like it particularly if it is not a once in 4 years election but a product like pizza that you might eat more than once a week. Customers might get so annoyed with digital push marketing that they might just search on the web for "pizza."
• With Internet search marketing  there is no permission involved. When you search on Google for "pizza" anything you click on (organic search results or Google AdWords) you are virtually entering the store. Just as entering a brick store is your choice- so is the choice of clicking on search results. And just as an annoying salesperson might make you leave a brick store- so too with websites. The difference is that with web analytics you know exactly where the visitor decided to leave and you get the chance of improving things. 

In summary, push marketing in the digital age is fraught with risk. The risk of  putting off customers. In contrast, Internet search marketing is far less intrusive and far more respectful of the customer. Contact StratoServe. 

First time since the Great Blizzard of 1888, NYSE closes for two days for Hurricane Sandy

Hurricane Sandy has caused more destruction than imagined with thousands without power across the region, flooding of the New York subway, at least 40 deaths, 3 feet of snow in West Virginia and the NYSE closed for two days. The NYSE has been closed for two days due to weather for the first time since 1888 and the Great Blizzard of 1888.  And you did not have computers and the Internet in 1888 and also the motor car was yet to be commercialized and weather forecasting was a nascent science. 

As Arthur Levitt former Chairman of the SEC says, this will shake the image of the NYSE. No one is saying that safety of the traders or exchange employees is not important, but with a back-up plan the seat of world capitalism should not have to shut down for two days. Obviously the NYSE did not have confidence in a back-up "mirror" type of arrangement for electronic trading through the NYSE Acra all electronic platform.  As the video explains it was just that NYSE did not have the stomach to face technical problems running the exchange electronically during Hurricane Sandy. NYSE folks continue to be nervous after the Facebook IPO problems and the Knight Capital Group trading software problems. Perhaps it is timely to do whatever is necessary to have back-up arrangements so that an institution like NYSE is not shut down for two days from a predicted weather event. Contact StratoServe.

Hurricane Sandy: what can businesses really do?

Hurricane Sandy is arriving today at the East Coast of the US and is being hailed as a "Super Storm."  Hurricanes are a rarity in the East Coast and local and State Governments, private and public organizations are pulling out all the stops to keep people safe. Businesses have to wonder what they can do better, at least next time because it is turning out that Hurricane Irene last year was not an isolated event for the US East Coast. Here are some thoughts:

Transportation: In an unprecedented cautionary move, Connecticut has banned trucks on highways from 11 am and all non-emergency travel on highways from 1.00 pm. Better safe than sorry is the mantra of all officials across the region. The subway trains have been closed in New York and generally transportation has ground to a halt in the East Coast according to CNN. If you are in the transportation business there is nothing much you can do except share with customers you are delivering to that there will be delays. Going forward improving delivery "status" updates via digital  and social media means might at least keep everyone on the same page. Those businesses that deliver their product or travel to customers or work need to probably develop routines that can deal with several days of transport disruption. Delivery schedules could perhaps come under review as soon as this type of Caribbean hurricane is forecast which provides a week's lead time. If the processes are in place - customers can be contacted for moving up deliveries of supplies, before the storm.

Electricity: Electricity companies across the region are a beleaguered lot. Contractor crews are moving by road from Texas over 2000 miles (3200 km) away. Since everything is so dependent on electricity life comes to a complete halt as water gets into substations, trees fall on power lines and transformers burn out. Since food spoils in the refrigerator and there is no electricity for the microwave or stove, folks dash to the coffee shop who cannot offer coffee because most of their equipment is based on electricity. It's probably time for smaller restaurants to look at the cost benefit of getting generators or trying liquid petroleum gas as a standby heating source. Between internet service providers, utility companies, telephone and wireless providers there needs to be some way of providing a solution to smaller businesses to keep going as power is restored.

Property Insurance: Insurance companies and their customers need to probably explicitly deal with what is hopefully not going to repeat every year. There is a flood zone provision in most policies but insurance companies need to review their estimates of what are flood zone regions in such hurricane situations. Businesses probably should be more receptive and be willing to pay that extra premium when the insurance company clearly spells out the payment after its actuarial calculations.

Thus businesses can try and prepare better for transportation, electricity and insurance matters going forward. Meanwhile this blog wishes all its US East Coast readers safety during and after Hurricane Sandy. Contact StratoServe.

Supply Chain rationalization means fewer jobs in small businesses

At a recent conference an entrepreneur at the $25 million sales level mentioned that all the bigger organizations preferred to deal with $100 million level firms for purposes of supply chain rationalization. Quite understandable, but this does affect  employment in US small businesses. Let's see how:

• Supply (procurement) managers buy goods and services that must fit reliably and seamlessly to the process and supply chain of the buying organization. Reliability of the supplier is absolutely important and rises exponentially according to the items risk value position.
  
  • For big volume leverage items like raw materials or direct materials and services it's difficult for the buying organization to take a risk with a small business.
  • For strategic items and particularly high knowledge content services sometimes a big firm will hire a small business but again large suppliers have an advantage as they come across as less risky.
  • Bottleneck items do not have volume and do require large investments as in making pneumatic valves for food process industries. Here too small businesses are at a  disadvantage.
  • Non-critical items like stationery also favor large suppliers primarily due to the ability of the larger firms to offer on-line ordering and better servicing.
• The alliance mechanisms for smaller firms to achieve scale in B2B markets are just not well developed. The only option is to merge and become big and in the process rationalize the merged organization that inevitably leads to job losses.
• Small businesses inevitably collapse to operating nail spas, restaurants and liquor stores that are strictly B2C and offer only low wage US employment.

Given that a large part of alliance and B2B marketing thinking derives from the human marriage model, perhaps it is time to have some kind of easy ways of arranging small business alliances and entities. These alliances and entities should be able to give comfort to big organizational buyers so that small businesses get orders in the value add - high tech- high pay segments of the economy. Or else the US economy and its small businesses will only be creating low paying jobs in nail spas and restaurants. Contact StratoServe.

Kraljic Model: Reducing risk perceptions and the 2009 Hyundai Assurance Program

The 2009 Hyundai Assurance Program  is a great illustration of reducing risk perceptions even in B2C (Business to Consumer) situations. Keep in mind that the Kraljic model was originally developed to understand B2B (Business to Business) buying behavior. Kind of like relationship marketing that B2B marketers always practiced and B2C marketers have enthusiastically adopted - more as  technology allowed easy availability of CRM (Customer Relationship Management) and SFA (Sales Force Automation).

So let us understand the 2009 Hyundai Assurance Program that made Joel Ewanick famous. If you think about it the Hyundai campaign addressed the deep job loss risk  anxiety of 2009 without really giving much away. Here is how:

You must have a job to get the car: This is sort of subtly put - but very clear. The customer thus has the ability to pay - at the time of taking the car. Initial payments, for the marketer, are assured.

What if you leave your job? - the 3 month assurance: In 2009, Americans felt a huge sense of risk of losing their jobs and here is where Hyundai offered to waive upto 3 months of payments. If you think from the organization's risk taking ability- this is a real cool one. You give out the lease or installment sale knowing that the customer has a job and will be able to make the payments. Just in case the customer loses her/his job the 3 month promise puts a cap on the company's liability. This would be the worst situation- something that both CFO's and CEO's are eager to know.

What happens if you can't find a job in 3 months- just return the car. This again is a brilliant idea in recessionary times. People are feeling the risk but the company must nail down what the exact risk is that the company has to bear. If every buyer/lessee returned the car from the 4th month if every  customer lost their job- then you are probably looking at a far higher unemployment rate than the max 25% in the great depression.  Very unlikely - even if you go back to 2009.

By providing a risk assurance, Hyundai did pretty well with its assurance  program and unequivocally added CSR  to its company resume. Contact StratoServe.

What are the quantitative goals of innovation in your Product Innovation Charter (PIC)?

It is important to articulate your organization's goals of innovation in your Product Innovation Charter (PIC). Your goals can be both quantitative and qualitative and they need to clearly stated so that the innovation team has a way of evaluating their own progress. And you ( the CxO)  have a clear way of evaluating ideas that are presented. The common quantitative goals (qualitative goals in a later post)  for innovation are profits, sales dollars and market share and here are some thoughts on each:

• Profits from a new product or innovative service are a function of two numbers. Your costs and revenues from the new product. While revenues correspond to sales dollars it's really important to think about profits at the PIC (Product Innovation Charter). By doing so the innovation team will start looking at possibilities of reducing input costs and will demand ideas and inputs from the supply manager member on the innovation team. They might also be able to identify that a particular process in manufacturing has a high waste figure and speeding up an ongoing lean manufacturing initiative might reduce waste and thus cost.  Apart from encouraging the team to think of input costs from very early in the NPD process the company leadership has to address their risk tolerance ability as this McKinsey article discusses. The company leadership will have to spell out how much initial losses they might be willing to bear as the product is launched and takes time to build market share.
• Sales Dollars as a quantitative measure leaves out units sold and is interested only in the multiplied number of sales volume and prices. The higher the dollar sales targets are the more the tendency of the team to simply assume that its going to be  easy to sell  the innovation at high prices. It is therefore a good idea to also include some minimum quantities that might encourage the team to think of multiple global markets right from the outset.
• Market Share as a measure is popular. However as Jack Welch discovered in GE,  if you said that want to be no. 1 or 2 in the market managers tended to define the market segment very narrowly- to be no. 1 or 2. To understand this consider that you compete in the cola market then  its easy to be no. 1,2 or 3 if you define your market as " excluding  Coca Cola and Pepsi" ! In addition, since global markets have become far more accessible over the last decade, it is a good idea to deal with market share aspirations  in a global sense.

A big benefit of thinking and signing off on the above quantitative PIC goals by the C-Suite of officers is that they get involved  at the early almost zero-cost stage of the NPD process. In doing so, the top leadership with the most experience provide their thinking bandwidth and can greatly help innovation success. Contact StratoServe.

India Power Outage: why possible opportunities for the global electricity industry

India suffered two consecutive power grid failures that plunged 700 million people into darkness and that is one tenth of the 7 Billion humanity on the planet. It's important to understand why there are huge opportunities in India for the global electricity industry.....

US media repeated this blackout news and pointed that none of the BPO (Business Process Outsourcing) work was affected as these suppliers all need to have  back-up generator supply to overcome this endemic risk. Indians were embarrassed given their sixth largest economy status in the world and to the credit of the Indians there are no reports of looting as in the New York power outage of 1977.

Adding insult to injury was the need for New Delhi to buy power from tiny neighboring Bhutan (the Happiness Country) just to start up the stranded Metro and clearly the Indian public is now planning big changes at their next elections. For the country has moved from basic election issues like food,clothing and shelter  in the sixties and seventies ( in Hindi : Roti,Kapda,Makan) to the next level of  Electricity,Roads and Drinking Water (In Hindi: Bijli,Sadak,Pani). Elections are certainly being lost if politicians are not able to deliver these infrastructure items. Ever since the unshackling of the Indian economy in the early 1990's the public energy and entrepreneurism is very high as is the endless internal consumer demand for everything.   And without electricity you cannot run the computer and soon are unable to charge your all important  cell phone.

"Electricity" is at very top of the electoral demands of the Indian public and you can be sure that all political parties have got the message after this massive blackout. And this means huge opportunity for global players, both large and small, and time to step up their India market efforts. And here are some thoughts about possible opportunities:

• Power Generation: Whether coal,water,wind or nuclear it's not just about your technology but your ability to deal with the travails of land acquisition for the plant. An upfront realization of the challenges here can help.
• Generation Technology: More digital, more compact the better. And don't worry about relatively  low cost high skilled workers. 
• Distribution: Has huge opportunity, consider wireless technology for billing, meter reading given the huge cell phone penetration.
• Pricing politics: The pricing of power is highly politicized with large voting groups of farmers always asking for subsidies from politicians. Having specialized dedicated folks to deal with all the vociferous demands of a vibrant democracy is probably a good idea.

In you are a foreign company already in India and in the power sector, you business is about to zoom! Contact StratoServe.

Outsourcing transfers the perishability risk to the provider

As outsourcing becomes an important issue in the US Presidential elections- it's interesting to look at the perishability risk of services and how the provider or vendor takes over managing that risk. But first about perishability in services.

Services have been differentiated from goods in terms of service characteristics that include intangibility,perishability,inseparability and variability.  The idea of perishability seems to come from the food supply chain where unless you refrigerate and have a good reliable cold chain perishable foods like dairy,produce including meats literally perish. Thus, the example of trying to sell last minute, seats on an airplane or rooms in a hotel. Once the plane leaves the empty seats represent perishability and  lost revenue as does the empty hotel room. Keep in mind that all the operating costs of the airline or hotel stays constant, it's just that the revenue disappears. Thus, you have the last minute deals that try to get some revenue in.

Now let's think of service outsourcing and perishability. Consider a manufacturing organization that  outsources  its cafeteria. The cafeteria is managed by a contractor who is in the "running cafeteria" business and probably runs several of them and has figured out the processes, routines and solutions to common problems that come about for different clients. Meanwhile, the client company does not bother about the cafeteria and focuses its leadership and management attention to its core manufacturing business. The managerial focus and attention is a scarce kind of "perishable" commodity. Let's imagine the same business has an in-house catering department and you can be sure that all the catering employees will have all those HR needs as the folks on the shop floor. So HR will spend time as will the CEO and other CxO's and don't be surprised to find eventually a Vice President of Catering who will need time to discuss the menu for next week at review meetings while the CFO questions why all those extra bags of vegetables perished and need to be written off and how auditors would object ! Replace the catering function with any other non-core outsourced function like call center,software, and you can visualize how managements separate an activity because of the problems of managing the perishability of that service. If you don't own the call center your HR is not sleepless over training and employee attrition and instead is thinking about training the folks at the core of your business for innovation and growth.

In other words, the hassles of managing perishability in services makes outsourcing attractive.Outsourcing transfers the perishability risk to the provider. The providers have their own industry and very highly specialized skills in that industry. Thus a company that provides cafeteria services belongs to an industry which really knows how to provide the right food at the hospital, in the factory night shift or at the college cafeteria. And unless you decide to get back to catering when you are in manufacturing your company will not create more jobs. What happens when the provider is overseas will be the subject of a later post. Contact StratoServe.

Innovation needed: Healthcare Exchanges that make people want to buy

The Affordable Care Act  (also Healthcare Reform, Obamacare) was upheld  yesterday by the US Supreme Court and now the focus for the Insurance Industry, States, Federal Government and the Healthcare supply chain should be to make it all work. Easier said than done if you see the enormous material that exists on the FAQ pages of the CCIIO or Center for Consumer Information and Insurance Oversight. And this is when most folks had doubts about the Supreme Court allowing the law to stand. Chief Justice Roberts has provided a great  marketing clue in his brilliant summary of the majority opinion. Justice Roberts said that the Government does not have the right to force people to buy something by imposing a fine if they do not. However, the Government can impose a tax on those who do not buy. If people don't want to buy then they are slapped with  a  fine (now a tax) that neither insurance companies, healthcare providers or Federal and State Governments really want. What all organizations, healthcare B2B and B2G want is that everyone buys insurance. Here are some suggestions to make this happen:

• Think early stage Insurance market:  The insurance market (including life, property or health insurance) at early stages needs a lot of effort,explaining and US Insurance marketers went through this launch experience  at least two generations ago. Ask the sales folks in developing country insurance markets for ideas that work and explore how insurance pioneers sold insurance products initially in the US.
• Segment through big data: Data exists on all the 30 Million who are un-insured. Make it easy for them to get insurance. Remember at least 6 million (20%) of these uninsured do not have Internet access. This estimate given that Internet penetration in the US is about 80% and the less affluent is unlikely to have Internet access. Something different from an Internet portal for this segment needs to happen.
• Exciting Sales Promotions and Point of Sale: Reaching and communicating with the uninsured is a challenge and exciting sales promotions might help. Those using only emergency rooms can be provided with free insurance  sign-up so that some costs shift to the less expensive primary care stage.
• Insurance as Risk Cover for BOP :  Insurance covers risk and risk is felt least at the bottom of the pyramid (BOP), because there is so little to lose. To motivate the young healthy but poor to buy insurance will need some novel marketing ideas that are being used in multiple categories in the developing world. Small packages of offerings at very low cost works well and gets the market primed to buy more as they can afford it.
• Keeping  it simple for the consumer is essential despite the huge length of this law and its complications. Think iPhone!

All in all , exciting times for all folks involved in making the Healthcare Exchanges work. Contact StratoServe.