Tag Archives: Market intelligence

Customers First, Investors Last: What were they thinking?

For years now, my colleagues and I here at BoardBench, have been saying that Wall Street has it backwards.  In the boardroom, directors have been fed, with a very large spoon, the mantra that they are beholden to the shareholder, that their purpose is to “maximize shareholder value.”  If you asked a large group of directors if this is true, you’d see a lot of bobbleheads in the room.  Many believe this is a legal requirement and in line with good business sense and good corporate governance.  Unfortunately, the concept of “shareholder primacy” is a relatively recent phenomenon.  It is also simplistic (shareholders’ wants are not homogeneous), has no legal basis anywhere (go ahead, try to prove me wrong), and, as many are now pointing out, usually damaging to companies, and the economy as a whole.

What we believe is real, and will eventually be proven again as real to the Street, is that customers, and employees are the two key drivers of corporate success.  When I say “again” I’m referring to Peter Drucker’s famous quote from decades ago: “the purpose of a business is to create and keep customers.”  So many seem to have forgotten this, or have never even heard of it.

But the basic premise is this: if you take care of your customers, and have great employees who are well supported and appreciated for being curious and excited about what they do such that they will ensure that customers love the products and services that the company offers, the company and shareholders will reap the rewards, too.  Of course other things come into play, like managing R&D investments (with the customer in mind), operations, and supporting a corporate culture that has strong values and morals.  The basic premise may be slightly oversimplified, but it applies, and should resonate with the board.

It appears that I’m finally not standing alone on this either.  In a recent interview, Jack Ma, the world’s newest CEO darling, made two bold public statements.  He basically shunned the current thinking of the Street by stating, on national TV, that “our customers come first, ouJack.jpgr employees second, and our shareholders third.”   He continued: “We aim to be larger than Wal-Mart by 2016, or sooner.”  If – no, when – Jack succeeds, and executes flawlessly on his statement, that customers and employees take a front seat over shareholders/investors, then he’s got an excellent chance of passing Wal-Mart as the world’s largest retailer.  Note, Wal-Mart just slapped some of its employees, who have the most direct relationship with their customers, by cutting their insurance benefits. This was probably done to cut costs, but it will probably also have a long-term impact on their customer relationships, too. But, I digress.

It seems that too many directors, CEOs, and business leaders, have become obsessed with what Wall Street, its analysts, and shareholders think.  Many have learned to play these groups exceptionally well, too. Countless analysts and shareholders have been taken in by companies’ projections, quarterly earnings estimates, and highly creative financial management and reporting.  Don’t get me wrong, the importance of the exchanges and the markets cannot be downplayed, but a balance is needed.  Focusing on Main Street is just as important, if not more so.

If you follow Main Street, you know about big box discount stores. Costco Wholesale Club, founded by Jim Sinegal and Jeffrey Brotman, believe in serving the customer first, and that if employees are treated properly, they will work with, and treat the customer well too.  Jim, the public face, is a “hands on guy” who is known for visiting each individual Costco store.  Jim is also outspoken about his views on Wall Street.  He’s been known to say that he puts his customers and employee needs above “pleasing shareholders.”  This philosophy must be working: Costco’s five year return is +116.73%.  If you bought the stock earlier, your return would be closer to 354%.

American Express is another company known for taking good care of its customer/members.  Personally I’ve been a fan of the company’s customer service representatives over the years, and tell them that every time I’ve called for help.  Don’t get me wrong, working at this company must be tough: when I was younger, AmEx employees were nicknamed The Dragons.  Perhaps because they were seehat2.jpgn as willing to fight for the company and their customers nearly to the end.  By the way, if you invested in American Express five years ago, your return on investment would be up 149.46%.

If you’ve worked with the general retail public, as I did during my college years, then you know just how tough this can be.  Sadly, not everyone who enters a store, calls a helpline, or dines in a restaurant is a kind and thoughtful customer.  Amazon deals with all sorts of customers from nearly every continent in the world, and I’m sure they have some interesting stories to share.  However, the company is noted for being one of the best customer service organizations in the world.  Amazon has more than one customer base, as many do: retail members, and consumers.  Jeff Bezos clearly divided the customer’s connection to Amazon into two categories: the experience and the service.  At this level, he notes that customer service is part of the full customer experience.  If it’s unpleasant, it’s a negative customer experience.  He supports the idea that a positive customer experience creates greater loyalty with Amazon.  If you’ve ever dealt with an Amazon Customer Service rep, you know that they work quickly to resolve your issue, they get the job done for you, and you are nearly always satisfied and left feeling good about your relationship with Amazon.  And, if you invested in Amazon five year ago, your return on investment is now up 236.64%.

While it’s much more pleasant to focus on the “good guys,” there are dark clouds.  Some companies are noted for their poor customer service.  Some survive because there are few alternatives: think of phone companies and cable providers, and some you can name on your own (take a look at their five-year ROIs).  However, when it comes to poor customer experience these days, I think sadly of that American icon Sears.  Whenever I bring them up these days, all I hear is: “Oh my gosh, I could tell you about the time when…”  Sears is a sad story101.jpg about the decline of a once great and loved retail giant.  Many years ago, the Sears catalog used to be called a “wish book.”  Families would anxiously wait for it to arrive in the mail.  It was nearly 5 inches thick. Moms, dads, sisters, and brothers would argue over whose turn it was to browse through and select from among the items they wanted for birthdays, holidays, special occasions and more.  Some people even bought their homes out of the Sears catalog.  But, it has lost its way, and it’s touch with its customers and has already begun its drop down that magical slide once pictured in its own catalog.  The entire company and its hopes for the future look pretty dismal: sell off of units and real estate, store closings, etc.  Sadly, if you invested in Sear’s five years ago, your return on investment would be -58.50% and it’s still falling today.

To sum up and put things into even sharper perspective, I recently spoke with the General Counsel of one of the largest, most recognized corporations in the world.  He told me, succinctly, that the biggest problem with their board is that not one director had any understanding of who their customers were and are or what they want.  I can also assume that they don’t understand their employees either.  So I will watch how this company slides in the next few years (Note: their record has been negative for some time), and report back with an update, unless, that is, they somehow figure it out and turn it around.

Do you need to focus on board improvement: composition, strategy, direction, execution, oversight?  Boards are our specialty. Give us a call.

Nancy May

Is this why we’re spending money on higher education for our children?

Q: What do you want to be when you grow up?
A: Employed!

How are you going to explain that this isn’t your grandfather’s economy?

If deciding what university or community college or trade school your child is going to attend is starting to keep you up nights, you’ve probably visited more than a few of their websites. You’ve looked at the pictures of smiling faces, viewed the videos and read the inspirational language intended to convince you to spend your money, and, possibly, your child’s future, with the people on whose behalf those websites were created.

By now you’ve noticed that (a) you’ll have to do some digging to find any mention of tuition, fees and expenses because it would be in poor taste to publicize them on the home page; and (b) every one of those institutions is looking for a donation.

There are some who consider it gauche to have the words “money” and “university” in the same sentence. They would argue that higher education isn’t about money: it’s about introducing young minds to new ideas and new ways of looking at the world and themselves. It builds networks that include students who sit next to one another in lecture halls but live half a world away. Then there’s the benefit that comes from learning to fend for oneself away from home. This is the point where laundry and groceries enter into the discussion.

Those people would be right—to a point. But when the last glittering speck of that pixie dust that university websites magically create settles gently to the floor and the cool breeze of reality wafts through the room, the fact of the matter will be that nothing about attending an institution of higher learning is free. Once a child reaches the end of the taxpayer-funded, kindergarten/primary school/high school conveyor belt, decisions have to be made about the need for post-secondary education altogether. (P.S.: Taxpayer dollars pay for that, too.)

Even if his or her degree were paid for in full before the first day of lectures, the newly minted undergraduate or postgraduate is going to have to earn a living, especially if he or she is among the 40 million students south of the border who have US$1.2 trillion in student loans to repay, or the Canadians who owe between C$25 billion and C$50 billion. That money is going to have to come from somewhere. What about the cost of living? Will there be a new home or car to finance? Will there be enough money to pay the rent or buy food?

Finding work to pay for those things is the elephant in the room. Regardless of how many organizations the new graduate may have joined or voyages of self-discovery he or she may have gone on, if the résumé intended to support his or her application for that first full-time job is rejected by applicant tracking software for lack of key words and phrases, we have a problem. If the problem can be traced to a poorly executed résumé, the oversights can be corrected. But if the academic qualifications are wrong and creativity falls short of compensating for it, the only cure may be to spend 4 more years earning an education that will sell, but only after an in-depth reassessment of personal goals and what the economy needs.

As a country, we can’t afford scenarios like that because a mind is a terrible thing to waste (©UNCF). If you read or listen to nothing else today, please click on and ponder Robots Vs. The Middle Class (Bloomberg Businessweek, May 25 – May 31, 2015) and listen to Terry O’Reilly’s The Internet of (Marketing) Things (Under the Influence, CBC Radio One, Saturday, May 30, 2015). You’ll want to pay particular attention to O’Reilly’s thoughts about the Apple Watch.

How different is today’s economy from your grandfather’s economy? Well, did you ever doubt for a moment that your first job would be full-time with benefits? Are you doing now what you were planning to do then? Are you employed full-time? Have you been unemployed as a result of downsizing or outsourcing? Knowing what you know now, what would you do differently?

Would your grandfather recognize a world in which China is the world’s manufacturer, where 50% of working Canadians of all ages are not employed full-time, and where the price of post-secondary education is higher now than at any other time in history? What about a Canada where manufacturing has been decimated while employers continue to complain that they’re hard-pressed to find certain kinds of workers yet most of them refuse to train? What would he say about a Canada where $500 billion is sitting idle while vote getting corporate tax breaks underwritten by your tax dollars and mine go unused?

The North American work force is resolving itself into two camps: the one that recognizes that this isn’t your grandfather’s economy and is adjusting its expectations accordingly, and the one that doesn’t. One refuses to take career and labour market information at face value until they’ve confirmed it independently with multiple sources with their own eyes, not once but several times. The other doesn’t. One studies industries, market trends, the impact of technology and the performance of employers because they recognize that large numbers of dollars are at stake, not only the ones they’ll spend acquiring the necessary education, but the also the ones they risk not earning by failing to do their personal due diligence. The other doesn’t.

The economy is the financial air we breathe. We ignore it at our peril. Since 2001, I’ve met face-to-face with 2130 working people who, five minutes before I walked into the room, lost a job they thought wasn’t at risk. Most of them believed that where the world is going didn’t apply to them. They were mistaken.

F. Neil Morris
President & Founder
Personal Due Diligence
+1 (905) 273 9880

Risk is free, risk-free costs

Enough said.

Unemployment is not working

Enough said.

What are we worth and how do we measure it?

If your first instinct was to answer in terms of bank balances, stock market portfolios, real estate, investments, retirement pensions and the like, you proved how right Professor Philip Roscoe was in his book I Spend, Therefore I Am: How Economics Has Changed the Way We Think and FeelIt says a lot about the world we’ve leaving to our children and what they need to understand about it.

 

From Maclean’s, March 17th, 2014
WHEN THE PRICE IS RIGHT by Brian Bethune
Economics is so mainstream, we can put a value on a kidney, and even the donor’s worth

In 2006, economist Nicholas Stern made a series of alarming predictions, in a report commissioned by the British government, of the potential results of a worsening climate. Among them were the extinction of up to 40 per cent of all species, 200 million climate refugees—many of them ominously gathered on Europe’s collective lawn—and “an average reduction in global per capita consumption of at least five per cent, now and forever.” Stern has been roundly berated in the media ever since, particularly over the refugee projection, but the actual debate in the media was waged over the five per cent, and whether he exaggerated the cost of acting in the future while underestimating the cost of acting in the present.

For Philip Roscoe, professor of management at St. Andrews University in Scotland and author of the evocatively titled I Spend, Therefore I Am: How Economics Has Changed the Way We Think and Feel, the response to Stern was a perfect example of his book’s target: the triumph of the economic model. Once Stern introduced his own calculator and slide rule into his projections the argument could only be engaged on those terms: There is no market price for species extinction or massive refugee influx, so there was, in effect, no argument to be had. After a half century of measuring everything in dollars and cents and proclaiming how financial incentives control all behaviour, Roscoe says, “We lack the language to understand or even talk about issues in any other way.” What’s more, economic speech brings into existence what it postulates: “human beings as self-interested, calculative and even dishonest entrepreneurs of the self.”

Literally. Roscoe sees the reach of the economic model of humanity in the way suffering dictated by economic policy—the effect of the austerity program in Greece, say—is seen as “the wrath of God—inevitable, and in its inscrutable way, just.” But also, eight years after Stern, in the appearance of theoretical and even actual markets in human body parts.

Economic thinking—especially about private property—and notions of personal autonomy are closely intertwined, notes Roscoe. Autonomy is perhaps Western civilization’s supreme value today, the flashpoint between its prevailing secularism and its traditional religious faith. That quarrel has played out for more than half a century in a host of sexual issues, and more recently, in the growing acceptance of our right to die when we choose. Arguments against it that boil down to a gut feeling of “because it’s wrong” no longer have any traction. “Paternalism is the greatest of crimes,” says Roscoe.

And if death is an individual choice, a market in organs—a legal one, that is, for a black market already exists—may be inevitable. Roscoe suspects so, even as he marshals powerful counter-arguments. To start, he notes, there’s no reason to believe a legal market would not mimic the illegal one, in which, as he quotes an anthropologist working for the anti-trafficking organization Organwatch, kidneys flow “from south to north, from east to west, from poorer to more affluent bodies, from black and brown bodies to white ones, from female to male.” In Iran, the only country on Earth where selling organs is legal, the poverty of the sellers makes follow-up care rare for most, leaving them weak, unable to work and even more impoverished. “So what?” is the market absolutist’s response. It merely stands to reason that sellers would be poor and buyers rich—who are we to strip away the individual’s choice? Especially when the demand is so high.

Yet it’s a fallacy to think an open market would bring a supply equal to demand, Roscoe says. Consider the blood market, where paying for blood seems to have transformed rather than expanded the supply chain. “Blood sales, where legal, have tended to slow blood donations. They don’t wipe out the latter, though, so they don’t shrink supply, but blood sales don’t increase supply by as much as you’d assume, either. The California plasma market now works well, with regular sellers, but when it started it had lower-quality suppliers and higher monitoring costs.”

And that is where Roscoe feels himself falling into the very abyss he sought to avoid. Did he just make an economic argument against the monetization of human bodies? Once you’ve arrived at opposing an organ market because it would increase transplant costs, you’ve joined a continuum that includes those trying to establish a baseline price for organs. One American economist has made calculations—arbitrary, in Roscoe’s opinion— for the $15,200 price tag he believes would match up supply and demand: $7,500 for “risk of reduced quality of life,” about $3,000 for a month’s lost earnings during recovery and $5,000 for risk of death. Note particularly the income cut-off, Roscoe says—the model assumes those earning more than $36,000 a year wouldn’t be interested. The debate, he predicts, will focus on that sort of question— “how much?”—and not on “should we?”

Kon-Tiki

In 1947, Thor Heyerdahl mounted an ocean going expedition in an attempt to demonstrate that people from South America could have made the trek to the Polynesian islands. He and his crew used the materials, Polynesian navigation techniques and knowledge available prior to Christopher Columbus’s voyages in 1492. In 101 days Heyerdahl and his 5-man crew sailed across the Pacific on a balsawood raft he christened Kon-Tiki. The 6,900 km (4,300 mile) trip ended successfully and safely when the crew made landfall after Kon-Tiki struck a reef in the Tuamotu Islands.

According to Wikipedia, most anthropologists now believe that South Americans did not travel to Polynesia. Whether they did or not doesn’t alter the fact that the navigation techniques Heyerdahl and his crew used to make the voyage worked. In his account of the expedition, he described how Polynesian navigators used the direction, size and speed of ocean waves as one means of determining their position when they were out of sight of land. To do this meant they had to know where those wave types originated, but only after they identified them.

Heyerdahl and his crew knew where they were going and why, and their targets didn’t move. Working people and pre-working people on this side of the world can’t say the same. They’re not as confident about their professional and occupational destinations as they used to be. Yesterday’s targets are moving or disappearing altogether. Those that still exist may demand much more of entry level candidates than they used to.

Ontario’s new status as a “have not” province is particularly troubling. Students are discovering that their degrees don’t carry the weight they used to, or are the wrong degrees for the times. The personal and professional expectations of parents and students are out of sync with today’s markets. To make matters worse, students paying their own way are taking on debt loads and the repayment anxiety that goes with them. Employers are now demanding that they work as unpaid interns or defined-length contractors without benefits in lieu of being engaged permanently. Had conventional sources of information risen to the occasion, these students wouldn’t be struggling the way they are.

It pays to bear in mind that mortgage lenders, car dealerships and landlords will be skittish about loaning money to borrowers and tenants whose paid employment horizon is measured in months instead of years. If you are contemplating such an offer, be sure to weigh all of the pro’s and con’s. Where possible, avoid employers who insist on stacking the deck in their favour at your expense. If they promise full-time employment at the end of your contract, make sure the promise is in writing. Despite inflation, promises are still a dime a dozen and talk is cheap.

Heyerdahl’s ocean waves are today’s disjointed, Internet-delivered facts. There are no cookie-cutter decisions when it comes to acquiring education as a prerequisite to entering the labour market. Re-entering or repositioning in today’s economy carries with it unprecedented levels of personal, professional and financial risk. This is a subject with which PDD is more than just a little familiar.

When all is said and done, the final say over what work you pursue and why is yours. PDD can help you assess the risk associated with that decision by bringing to bear information that’s current to within months so that you can plan accordingly. Psychological profiling is long on aptitude and potential fit, but silent on the subject of labour market conditions and prognoses for the future.

Polynesian navigators turned facts about where they were into information in real time. Today, information about education and career navigation has to be right because mistakes come at a price. Unlike vintage fine wine, market intelligence is best consumed young.

Advantage you

CSIS.

What’s running through your mind? Canadian Security Intelligence Service? Dark glasses? People in black suits and trench coats speaking to their wrists? Black Chevy Tahoes? Cloak and dagger? Covert ops?

That’s what was going through my mind when I was introduced to the CSIS agent turned security company consultant who was participating in a meeting I attended. If you saw him on the street and listened to him, you’d think he was an MBA. He was.

We talked about the quality of Canadians in the secret service, and about how [much more] on the ball [than the Brits and the Yanks] they really are. But the more we talked, the more the stereotype I had of people in that line of work changed. He described a boardroom meeting in Chicago where he revealed things he knew about his client’s company, financial and otherwise, that the company president didn’t know. The outsider left the president speechless.

Then we talked about the concept of classified information. CSIS doesn’t protect the bits and pieces of whatever that are readily available in the public domain—because they are in the public domain. What he and his colleagues went to great lengths to protect were the documents and properties that described the results of the deep analyses company employees do of those bits and pieces, the conclusions they draw, and what they plan to do about those conclusions. As he explained it, bits and pieces become an asset called information worth protecting when and only when the analysis of those bits and pieces and its significance is complete. Analyses, conclusions and plans are assets and they deserve to be protected.

If you’ve been following this blog since it first appeared, thank you. You’ll have noticed that everything written here is about information and strategy. In business, knowledge and information are not only about confidence; they confer a distinct advantage on the bearer. If your information is flawed or incomplete, you can’t build and execute a strategy that will work. PDD was conceived to help you collect, assemble and analyze the bits and pieces in ways that other people—your competitors—can’t and don’t.

Advantage you.

Students and people looking to resume an income or change a career are going through a very rough patch right now. The uncertainty we’re living with may be with us for longer than we think. But the world hasn’t stopped spinning and minds haven’t stopped thinking. “What’s new?” as a perfunctory form of greeting is going to take on a whole new meaning because new and different and better are what the world economy is about, and always has been. The 7 people who are PDD will guide you in acquiring the bits and pieces you need to analyze to arrive at conclusions about options others might not.

You’ll want to use your information to make decisions about education and training, choosing one university or community college over another, choosing one employer over another, choosing one occupation or profession over another. Since few things stay the same longer than it takes to change them, accumulating, assembling and making sense of bits and pieces can be the difference between being ahead of the curve, or merely somewhere on it. If you believe in staying ahead of the curve, PDD is here.

Advantage you.

Please note: PDD is in no way connected to CSIS or to any of its present or past employees.