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Purpose of a Corporation : What every American needs to know

 

One of the most exciting things for business over the 2019 summer was when the Business Roundtable put out a Statement on the "Purpose of the Corporation." Signed by 181 American CEO's all of whose brands are well known to consumers or businesses, the statement reflects the changing times. Download the  Roundtable Statement here and check out the 181 signatures from many CEO's of companies you are already familiar with.

American politicians have been telling us what we know to be true - the "American Dream" eludes most folks today due to rapid changes in globalization and technology. Thankfully, leaders of American businesses have taken notice and have decided to move their focus from the "next quarter" to "long term shareholder value" on the shareholder element and have included all stakeholders in the "Purpose of the Corporation". The times have truly changed in the last decade with all stakeholders having a voice on social media and the old dictum of "just focus on shareholder (short-term) value"  can no longer work.  See Eric Posner's article "Milton Friedman was wrong" in the Atlantic.

This blog assumes that the Round Table CEO's have positive intent and they really do want to switch from a next quarter approach to long term value for shareholders. So why have CEO's collectively become so pious? That question deserves an entire post but three quick thoughts. (1) As Warren Buffet has been saying investors should think long term and Americans are listening with increasing appetite for index funds. It makes sense for CEO's to align with the changing investor.(2) Politicians worldwide realize that only citizens in their country can vote and if unhappy then the election results can't be good. The politicians of all persuasions are pressurizing companies  to look out for their voters (3) There was no social media when Milton Friedman suggested that if companies focussed on dividends then individual investors would have the freedom to choose what charity they would like to support. Although more efficient if companies directly engaged in charity through Corporate Social Responsibility (CSR)  - Friedman thought that the individual investor would be disenfranchised in not being able to decide on which stakeholder causes she/he would like to support. Today all stakeholders can speak out easily and do so with speed and vehemence, unimaginable even ten years ago. The CEO's are forced to address stakeholder's problems - after the fact -with a lot of collateral damage to their reputations (eg. big brands caught up in the opiate crisis ). The times are changing too rapidly to stay only with short term shareholder value....

In any case,  assuming that the CEO's have positive intent here is how Americans in private life and in their roles as employees, consumers and as public  need to think about each element in the Corporate Purpose statement.

•  Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. This is really about the purpose of marketing. All employees must appreciate that your customer needs to be happy with our work. Irrespective of the work you do including production, finance, customer service or janitorial. As a free market American companies including all their stakeholders need to appreciate that the customer (who pays the bills !) can move to a competitor as soon as she perceives that she is getting a lower value than what she is paying for.

• Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect. Although primarily HR leads on this, employees need to take initiative in asking for training that will further their careers in a rapidly changing world. At the personal level it is  critical that all employees deal with whatever stakeholders they are involved with  (other colleagues, customers, suppliers, public) respectfully and with a spirit of diversity and inclusion.

• Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions. This one is huge from this blog's perspective and many prior posts. Be respectful to suppliers and don't be that supply chain manager who makes suppliers wait in the lobby after giving an appointment. Involve suppliers in innovation early - they have a great stake in your organization's success.

• Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses. As a community member - speak up - when you see a problem. Keep in mind that organizations are trying to do their mission and if they close the community loses even when you are not a direct employee or financial beneficiary of the local organization. Speaking up is easy on social media or email if you check the company's contact page. Creating and running a business or non-profit is hard - and sometimes managers just don't think of stuff. Many times  if you reach the correct person- you do not need to take to the streets in protest.

• Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders. As investors we all need to again "speak up". Attend shareholder meetings  and at the minimum participate in the voting for board  elections  and do not send the letter to junk!  Yes this major shift is not good news for short term investors. But they have  the incentive for questioning managements when short term results disappoint. This should prevent companies and CEO's from hiding behind this broader purpose statement.

We  appreciate both businesses and non-profits and their leaderships for trying to do things that make the  economy and life run. Rather than demonizing business all Americans can help by first understanding and then participating in the purpose of a corporation.

About StratoServe for Growth Strategy.

Big Data at work: Surgeon ratings by patient outcome data available online

Surgeons ratings by patient outcome data is now available online. ProPublica unveiled the Surgeon Scorecard recently for 8 elective procedures.

People check online ratings all the time and for major stuff like knee replacements you can bet that patients will  research online. We already have specialized ratings doctors,lawyers, restaurants (Yelp), airline routes (Routehappy), vacation trips (Trip Advisor),plumbers and electricians ( Angies List ), colleges(US News, Princeton Review), movies (Rotten Tomatoes, IMDB),  etc. . Then there is the omnibus Google review that can influence customer choice. All of these ratings reflect the customer's perception of the service experience.

So what makes surgeons'  ratings with patient outcome data special?  This is the start of a trend to measure and rate services by performance data and not perceptions alone.

This is a momentous shift as ratings are based on all customer data and not merely on opinions  of  those (only 0.5% customers post opinions on Amazon according to Quora) who post an opinion online. Here are some things all service businesses might want to consider as big data finds its way to online reviews:

1. Does your industry segment have the data and the motivation ? Medicare has patient data and the surgeon data and an interest in reducing costs. Surgery complications means more bills for medicare. The same should apply to insurance auto repair services where customer satisfaction and costs are important. There is likely to continue to be a data gap for direct to customer billing relationships like plumbers where data of how many faucets(taps) continue to leak after a plumbers' visit is unlikely to become available. 
2. Perceptions of the 0.5% will continue to matter online: Perceptions of the 0.5% customers who report an opinion online will continue to matter. These are folks who are vocal online and care enough to post a review online. Dissatisfaction resolution should therefore be a major focus for all businesses because if you address dissatisfaction you are doing "service recovery" and that helps unhappy customers happy and in case some of these are online reviewers - their story will help your business and you will probably get a good review in the bargain.
3. Be alert to the context of your services: Service providers miss the context of their services. Two examples
1. (a)  a great dentist misses the turn-off annoying behavior of their office staff, who constantly chase patients for a $1 payment short payment  that they failed to collect at the office.Patients defect only due to the accounts receivable folks.
2. (b)  If a customer faces parking problems for your  restaurant - it rubs off on your restaurant quality. Not addressing the parking problem is bad for business.
4. Follow-up is critical: Follow-up after service is critical because if something is wrong- people will tell you. Auto dealer services are good at doing this and non-response to surveys from customers is fine, because you can be sure your service was satisfactory at least. We are sure that with the Surgeon Scorecard, surgeons will become more active in managing post-operative care because any lapse will directly and publicly reflect on their ratings.

To summarize, we can expect big data to find its way into performance ratings sooner where transaction data is available (e.g. Medicare for surgeons). Meanwhile, managing perceptions of  customers will continue to matter.About StratoServe Digital Marketing Services.

About StratoServe Digital Marketing Services.

About StratoServe Digital Marketing Services.

Is your innovation R&D intensive or customer intensive?

R&D Intensive innovation: It was a bio-technology strategy executive who explained when asked why it is hard to produce "made in the garage" innovations in biotechnology. The problem is that in biotechnology and pharmaceutical research you need labs, teams and a lot of money and time to come up with a blockbuster cure. You cannot do it alone.

It costs time and money, early in the process,  as depicted in the graph alongside. R&D and particularly R&D in basic sciences might take years to come to engineering and convert to something practical. This is the reason that a lot of these types of fundamental work starts at universities.  The stringent academic review process delays things, but you can reasonably sure that when ideas are published in major academic journals- you can actually start developing something applied based on those ideas. This holds true for the social sciences as well as one sees in the work of Malcolm Gladwell, who is able to take some core ideas from the social sciences and convert them into an applied, usable format via popular books. The entrepreneurial skill here is to be able to take an abstract- frequently academic idea  and convert it into a usable, practical insight that can be commercialized if there are customers willing to pay for that usable idea or product.  This is the case of a solution looking for a problem.

Customer intensive innovation: Contrast R&D intensive type of innovations with the "Shark-Tank" kind of pitches that are primarily based out of existing technology i.e. there is no new molecule being developed. In this category the entrepreneur observes a problem, thinks that he or she might have a solution and sets about developing that solution. The solution is developed with available technologies of the day because timing is of the essence as the market problem may disappear or change, competitors may emerge etc. Here the entrepreneurial skill is to understand the customers problem in as much detail as possible and make early changes in the solution without spending too much at the back end of the new product development process. Thus it is important to do concept testing carefully and also do product use testing or alpha testing in software so that most problems in the solution to the customers problem is ironed out early in the process of innovation. Most of the cost happens later at the launch and market stage where huge expenses on advertising and sales force are called for as depicted in the graph with this post. Here the problem is in search of a solution.

And both types of innovation have started using digital methods throughout the process from recruiting patients for clinical trials to introducing the new product through special deals online. About StratoServe Digital Marketing Services.

Mona Lisa mystery eyes might be due to high cholesterol: tagging images for SEO

The Mona Lisa painting by Leonardo Da Vinci is open to so many interpretations that it is a  perfect example of the picture tagging challenge for SEO (Search Engine Optimization). Search Engines do not know if Mona Lisa is really smiling, or just letting you know that she "knows"..... 

Research for this post on tagging pictures for SEO brought us to the Wikipedia page for Mona Lisa. It appears that many doctors believe that Mona Lisa might have had high cholesterol that probably caused fatty deposits under her eyes, that helped with that perennial enigmatic smile. 

Popular press articles like the Telegraph UK,  ascribe the Mona Lisa-cholesterol theory to Vito Franco of the University of Palermo in 2010. When we did some search on Google Scholar we found that the earliest cited reference to Mona Lisa's possible cholesterol condition is in a 2004 article
"Xanthelasma and lipoma in Leonardo da Vinci's Mona Lisa," by Dequeker, Muls and Leenders. It turns out that medical scholars refer to this stream of research as "Xanthelasma."

We wanted to illustrate the tagging of a Mona Lisa picture in the context of the cholesterol-xanthelasma, so here goes with a public domain picture of Mona Lisa:

• If we wanted to do only one thing with the image, it would be to name it in the file name as we would like folks to find it and its associated  content.Since the purpose of this blog post is to alert hi-tech/high knowledge businesses about image tagging for SEO, and we think that the cholesterol explanation is interesting, we are calling the image "Mona Lisa cholesterol-xanthelasma- image tagging SEO-StratoServe," This is the name you see if you tried to download the image and save it.

When it comes uploading the image to this post, there are some options that Wordpress or your  content system will give you. These could include ALT-TEXT, Keywords, Description and you should simply fill up the fields provided. Just keep in mind that you have a message to give your reader with the image and its associated text that answers the web searchers question.

It may well be that folks interested in Mona Lisa's cholesterol condition have absolutely no interest in SEO, but they would not be disappointed if they searched "Mona Lisa Cholesterol" and came to this page. Similarly there may be folks searching for "Image SEO for high tech products" and only have a mild interest in Mona Lisa, and we hope that they will not be disappointed with this post, either !

Also see the LinkedIn post: Do you call your resume file "CV" ? The cardinal photo SEO sin.

About StratoServe Digital Marketing Services.

Why the ALS "#icebucketchallenge' is a social media and fundraising success

The ALS  Association has reportedly received $1.35 million in donations between July 29 and August 11 compared to $ 22,000 during the same period last year with the ice bucket challenge. This is quite remarkable, but first some background.

ALS is a neuro degenerative disease that causes progressive paralysis of the patient as family, friends and medicine watch helplessly. Pete Frates, a Boston College baseball player, only 29 years old was diagnosed with the disease in 2012 and challenged his friends to take the ice bucket challenge. You took the ice bucket challenge within 24 hours of being challenged by a friend and posted on social media(#icebucketchallenge). If you did not take the challenge  you needed to donate to the ALS Association to raise awareness for ALS. Whether or not you took a friend's  social  media challenge to raise  ALS awareness, you were very likely to donate to the ALS Association.

The #icebucketchallenge has suddenly gained huge visibility with Martha Stewart and NBC host Matt Lauer doing it on TV. Ethel Kennedy 86, took the challenge and has  asked President Obama to take up the ice bucket challenge as well.

Apart from the fundraising at the ALS Association, you can be sure that the NIH, medical schools, biotech and pharma companies will all be freeze- jolted into more action to cure this dreadful, but relatively rare disease.

Non-Profit development folks must wonder about how they could gain more traction for their worthy causes. For every non-profit has a worthy cause and  rarely a "total" solution to the problem that needs funds and importantly: awareness. Here are some thoughts as to why the "#icebucketchallenge" is working.

•  Brief discomfort- specific friends:  Although it is summer, actually it is at least briefly uncomfortable to douse yourself with ice water. You are not asking your friends for too much on Facebook and you are asking only selected friends.
• Donations are easy: The online donation page at the ALS Association starts donations at $35 and the downloadable form starts at $ 25 if you want to mail your check.
• The baseball connection: In 1939 Lou Gehrig abruptly retired from baseball due to the disease. In the US the disease is also known as Lou Gehrig's disease. Many folks are probably noticing that Pete Frates, who is ailing with the disease, is also a baseball player.

There are no better spokespeople for the cause of non-profits than the beneficiaries you help.

Contact StratoServe.

Digital Expectations: being Government,non-profit or a small business is no excuse

The problems with the Obamacare website forced the President himself to address the issues yesterday  of... a website? Just a few years ago- organizations including Government, non-profit and small businesses used to wonder if they should have a website. In teaching and learning, students would complain loudly about the problems of online learning platforms and senior faculty would talk about the "feel of real chalk" when explaining advanced calculus on a traditional blackboard instead of a virtual Blackboard. All this incredible change in the last 5-7 years.

The problems with the Obamacare website is centerstage today and this blog empathizes with Health Secretary Kathleen Sebelius in the video above, the entire IT team including the contractors involved because everyone missed the biggest change of all :

Digital Expectations

Digital expectations is the real "flat world" where a person with an Internet connection in Sub-Saharan Africa has the same access as a Boston Brahmin contemplating the New England fall colors. Denizens of both these diametrically opposite places know that a) Twitter works and they both use Twitter and b) Facebook works beautifully and c) Google is always there for what you do not know .. and it works.They have high digital expectations!

The Bostonian, with more disposable income, uses Amazon.com more frequently than Amazon.com  customers in sub- Saharan Africa but both understand the "quality" of the digital experience. 

The problems with the Obamacare website is a wake-up call to all manner of software developers including:

Enterprise software : The famous ERP program SAP has been called Slow and Painful. Because of its excellent quality folks have endured , but digital expectations are rising.

Non-Profit Websites: Non profit websites always got kinder treatment from the public including beneficiaries,donors and volunteers, but here too digital expectations are on the rise.

Small Business Websites: Small businesses would console themselves that after all they were "small" but being small is no longer an excuse for a poor web visitor experience.

Naturally the lesson from the Obamacare website performance is a great message for Governments worldwide whether local,state or national that merely declaring an e-governance initiative or an e-service is not enough. The public,worldwide, expects at least a near  "Facebook" type experience (and by the way Facebook is free). Writing clean software code and simple programs that are repeatedly beta tested early in new  software development  is something the public assumes. Similarly, even if your software is an "internal" one for your customer like ERP systems, you cannot continue to provide a clunky experience because a competitor will come up with an easy working friendly cloud solution and displace you. If you have existing clients inside organizations, its a good idea to innovate faster because just listen, your users are already comparing your software to the dismal healthcare.gov initial launch experience. Contact StratoServe.

Pharmaceutical companies outsource innovation to Biotech firms

Pharmaceutical companies have great strengths in the marketing of medicines but tend to outsource the uncertain business of early stage innovation to small Biotech firms. For creativity and radical innovation is difficult to do in very large organizations. There are just too many processes, and many of them are not very clear in the first place. On the other hand, a small Biotech has comparatively few staffers that are highly qualified and very highly motivated. The motivation comes from the possibility of inventing a blockbuster drug and the windfall that could arise upon FDA approval. 

However, here are some numbers to think about to get a sense of the odds of innovation success from page 3 of this brochure from innovation.org a Pharmaceutical research and industry organization: It takes between 9-15 years to come up with one approved drug starting with five to ten thousand (yes 10,000) compounds. It is not uncommon to find Pharmaceutical scientists who have spent 20 years in the lab working on some stage of the process, and having not seen a single product make it to the market!

At the marketing end of the pharmaceutical business one keeps hearing of blockbuster drugs or those drugs that sell over $1 Billion  a year. But it turns out that there are only 125 of these drugs and these too face the "patent cliff" when patents expire and cheaper generics take over much of the market. For example, the blockbuster cholesterol drug  Lipitor from Pfizer saw a sales decline of 42% in the first month of coming off from patent.

Another piece of older research by Grabowski and Vernon (1990) reports that of  those prescription drugs that made it to the market 4 out of 5 or 80% made less than $250 million dollar after reckoning the R&D costs for the drug. In other words, those 125 blockbusters do have a very long tail of low selling drugs that all went through the travails of the drug innovation process.

Thus, it does makes sense for big Pharmaceutical companies to outsource early stage development to biotech companies and have multiple alliances to ensure that there is a very thick pipeline of products under development. By doing so, the Pharmaceutical company can focus resources and processes around later parts of innovation like clinical trials and marketing. These activities can be made into an efficient routine that delivers results far more easily with a large organization than the uncertain endeavors of creatively coming up with initial ideas that small biotech firms can do well. Contact StratoServe.

Apple vs Samsung: the link between innovation,intellectual property and US jobs

Innovation is hard, it needs fanatical dedication and focused innovators like Steve Jobs to come up with blockbuster product ideas like the iPad and iPhone. And although there was one Steve Jobs, he inspired thousands if not millions to try their own stuff.

Capturing value from your innovation efforts depends on protection of intellectual property and the recent award of $1.05 Billion to Apple was decisive and quick action by jurors in San Jose,California. Velvin Hogan the Jury Foreman probably knew how hard it is to come up with intellectual property because Hogan has a patent of his own.

American innovation works because courts move quickly and jurors understand the importance of giving credit for innovation to the innovator by recognizing intellectual property. When firms innovate, prices do go up as Samsung says in the video alongside from CNET. However,you do get products like Lipitor , the cholesterol blockbuster drug from Pfizer, now out of patent and available much cheaper. American innovation leads to American jobs.

In most emerging markets intellectual property law is weak. As is the enforcement and it does not appear likely that things will improve soon enough for accelerating American innovation for global markets and more American jobs. Contact StratoServe.

Outsourceability : an example from the US doctor's office

Since the recession-outsourcing and outsourceability- a taboo topic is now being discussed much more openly in America. Most people agree that if your job can be outsourced to a cheaper location or to technology - it will be outsourced. Thus young people, mid and late career folks are all thinking again about outsourcing and its impact on their professions. So here is an example from the doctor's office for  the patient facing folks. We exclude back office tasks like medical transcription now outsourced to technology etc.Here is how an annual  visit to the ophthalmologist works out:

• The appointment is taken over the phone and the receptionist also seems to be a nurse  or at least someone experienced enough to categorize and schedule the patient. This task is pretty contextual, does require at least an associate degree and an understanding of the medical procedures  that occur in that office. Is key to getting the patient into the practice and thus corresponds to a front-line sales /service role. There is probably a small segment of tech savvy patients who can fix their appointment online and bye pass the receptionist/nurse. These tech adopters will rise as will the clarity of insurance payments so the job at the reception  desk will get increasingly outsourced to technology.
• The patient arrives and a series of optometrists who are both skilled and qualified go through a bunch of measurements. Your eye and the machine both are present and someone needs to manage the test and the patient. Both skill and physical presence of the optometrist/technician is essential. Naturally the pay and skills of the optometerist/technician is higher than that of the receptionist/nurse and this is a job that is difficult to entirely outsource to technology or overseas.
• The MD and specialist finally sees the patient for a few minutes along with all the piles of data that have been gathered. Technically it is possible to outsource routine un-complicated patients records and review to a cheaper qualified ophthalmologist . All the data gathered in the previous steps can and will be available digitally eventually and appropriate doctors at different locations (and costs) might be able to review test results and decide about the need for the actual consultation with the specialist.  In other words, even at the highest levels of medical skills outsourcing is possible and is being done for expensive skills like radiology.

Does this mean that only jobs that require a physical presence and contact (as the optometerist/technician) are the only jobs that are not outsourceable? Yes and these physical presence jobs include at the lower pay end food preparation and serving. At the high pay  end , it includes the surgeon who performs urgent surgery.  I say urgent because non-urgent surgery can be moved overseas at low cost to health insurers.

Just as a  doctor's office can have different outsourceability levels for the patient facing folks so goes for every other professional work context. Contact StratoServe.

Globalization & Technology is why 28% US workers may remain in low paying jobs in 2020

According to the Economic Policy Institute 28% US workers will remain in low paying jobs in 2020 which is the same as in 2010. Globalization & technology is the reason as some previous blog posts have indicated and this post gets into some more details. But first let's  understand the different levels of skills and pay that is involved in a service ecoonomy.

• Low-skill physical presence jobs: These are the jobs that make up the 28% The jobs include retail salespeople,  store clerks,cashiers and food service workers. But set to grow are occupations such as farming, personal care, building and grounds maintenance andhealthcare unskillled support. And these occupations pay less than the hourly poverty wage, which is why it is so hard to attract local apple pickers in Washington State, for example. These jobs don't really need a college degree and yeat there are large numbers of employees in retail for example, who have college degrees just because they can't find better paid jobs.
• Mid-Skill-Middle Class jobs: These started disappearing from the early 2000's with the onslaught of technology and globalization. Manufacturing moved overseas and many services moved to technology (eg. tax software) or when it was routine it was outsourced overseas. And this was before the recession.
• High Skill-Physical Presence Jobs: As the CNN report points out, there are simply not enough jobs in this category. For example an advanced plastic prototype making plant, or involved in biotechnology can employ only an order of dozens of  employees. A very much lesser number than the old steel plants. Even in this category high skill high pay work can be outsourced to low-cost locations. A famous example is of radiologists reading x-rays from Bangalore India. And even in radiology, routine stuff is being handled by technology. 

Low-skill and low pay is likely to stay but overqualified college educated folks in low-skill, low-pay jobs need to be able to find better opportunities. Contact StratoServe.