I thought I had seen it all until a Business Week article last week entitled “What a long strange business plan it’s been”.  As it turns out, the Grateful Dead was quite a commercial enterprise. The band was highly profitable, had a Board of Directors, and a successful merchandising division whose lawyers protected its intellectual property.  Was Jerry Garcia a better businessman than the average Joe?

The real lesson here is the level of engagement that the band had with “deadheads,” the iconic fans that would travel the country to take acid and watch 5 hour concerts. “The Dead” had a phone bank announcing new shows and preferred seating for their best fans, a bizarre form of psychedelic CRM. This makes me wonder, if The Grateful Dead, who probably didn’t know what city they were in half the time could run a business with this level of sophistication, shouldn’t all businesses be capable of this level of structure?

We should at least aspire to have fans half as loyal. It appears that the deadheads would do just about anything to consume the product (I am talking about the music) time and time again. What can you do in your business to create raving fans? There are stories of how no two shows were ever the same which would suggest that the band relished the element of surprise. Fans never knew what would come next, and that was a big part of their fascination.

Business should find ways to do the unexpected for customers, like send a Thanksgiving card or an In-N-Out truck to their location. It wouldn’t surprise me if Jerry Garcia did the unexpected and showed up on stage some day.

I am often asked if organizations should include Facebook postings and other social media in their marketing plan. For those of you interested in a precise answer, here it goes: it depends.

Newspaper revenue has fallen off a cliff (down 40% by 2003) while magazines have not fared much better (down 20%). Television ad revenue is down 15%, this year alone.  Meanwhile, online media is growing at a 7% clip suggesting that as a whole, total spending on marketing is undergoing a precipitous drop.

According to Kiplinger, targeted campaigns will reap 75% of all marketing spending by 2013. Marketers, armed with the ability to regurgitate millions of data points such as age, gender, location, income and household size will find ways to market online to very specific audiences.

In these cases, social media will provide an inexpensive method for targeting specific customers.  In the interim, most of us are just spewing on social networking sites with little return. There is certainly room for consumables to be marketed through social media. A recent study published in the Harvard Business Review showed a significant lift in the popularity of certain products and services when Facebook  and Twitter are used to mold the consumers’ opinions, including the use of online coupons and the like.

Yet for now, it is hard to imagine a professional services firm (for example) using such sites for anything more than impressing their younger colleagues. LinkedIn is by far the most useful site for professional networking, yet few people take the time to mine their database beyond their existing relationships (which seems redundant and far from the point).

My conclusion is that if your primary audience is B2B, the focus of internet marketing should be search engine optimization, blogs, and LinkedIn. I have many of my B2B contacts on Facebook, but it is a slippery slope (some have even verbalized their preference not to have any business interactions on Facebook). It can be hard to mix business with pleasure, and Facebook certainly presents the opportunity for the horse to get out of the yard.

Combinations of internet marketing activities can be very powerful, such as linking Facebook, Twitter and LinkedIn posts to your blog. Some have gone as far as outsourcing to marketing professionals that do nothing more than ghost for a business on the internet.

I may be old school in this regard, but I think for most of us that money would be better spent trying to orchestrate meetings with people our own age who will be more impressed with what we have to say in person than how clever my Tweet is this week.

In a remarkable irony, the seat of Ted Kennedy (who spent his life fighting for health care reform) was lost to a Republican who has now shifted the balance of power in Congress. With the threat of filibusters looming, Republicans have new found leverage. Will Obama’s sudden drop in popularity translate into a more modest economic agenda?

I always say that within our firm, our role is not to provide all the answers; it is to ask the right questions. As the new realities of the new year emerge, one must wonder if some widely held assumptions about pending legislation (that affect businesses) must be modified to reflect the political climate. Clearly, health care and other legislation will be watered down. What are the ramifications of a Congressional stalemate?

• What will the new health care bill look like? Will employers be burdened with extraordinary administration such as employer coverage requirements? Will Congress levy a tax on preferred health care plans?

• Will the administration, desperate to maintain a majority during the mid-term elections and facing the reality of 10% unemployment, introduce a new stimulus package?

• With labor’s agenda stalled, will the law that would have replaced secret union ballots with card checks stall?

• How will bank regulators respond when financial institutions, still mired in commercial real estate debt, begin to default?

• Will TARP money be spent on infrastructure? Will the Afghan war drive military spending, or will deficit woes bring about an early conclusion to the war?

• What will be done about the Federal debt? At $107,000 per tax payer (did you know you had another mortgage?), not including the looming deficits to Medicare and Social Security, the Federal credit card balance continues to swell.

• Will marginal tax rates (due to increase to 39% in 2011) be reset?

In the face of such uncertainty, strategists must continuously review their forecasts. If you own a small business, you must seek out external (government, industry, competitor, etc.) predictive indicators and monitor the pulse of the economy and your sector before it is too late to react. Businesses are also well advised to revisit their budgets regularly and make rapid decisions based on demand and socio-economic trends.

For years, various employment surveys have yielded the same results. They tell us that employees value encouragement and trust over money, yada, yada, yada. Such surveys are inherently flawed, because we know that responses to such surveys often differ to the way people actually respond to various stimuli.

A study published in the Harvard Business Review reveals a vital lever in the execution of strategy. It appears that what employees truly value most is “progress”. In other words, workers want to feel a sense of accomplishment about their activities and that they are contributing to something that is creating value in some way.

This point may seem subtle but it has tremendous ramifications for the strategist. It reinforces a paradigm we have long since advocated; the more people who are involved in the formation of strategy, the better the execution will be.  It means that:

* As organizations develop strategies, they should retrieve data from a wide breadth of internal and external stakeholders.

* To tap innovation, companies should plunge deeper into the organization and seek out information from front line employees on what pain is being felt by customers and how the customer experience can be enriched.

* Key strategies must be communicated to all employees so that they have a better sense of how their daily activities align with the greater good.

* Measurement and accountability for execution must be shared throughout the enterprise.

* Decision making is vital to the pulse of an organization, and executives are well advised to push the envelope (and perhaps make a few bad decisions) as opposed to making slow decisions via paralysis by analysis.

The study, conducted by Harvard professors Teresa Amabile and Steven Kramer, was based on a more rigorous scientific method than merely asking for employees to provide their opinions. Instead of measuring their satisfaction on a given day, they measured their attitudes, behaviors and motivations in a diary format and synced them against achievement of specific milestones. When obstacles were overcome or key objectives were met, employee satisfaction and engagement spiked dramatically.

Amabile and Kramer concluded that management has control of the levers of both employee engagement and execution of strategy, and that they are one and the same.

Amidst the scandal and meltdown in the financial sector, many have been waiting for a taxing regulatory response.  One was not forthcoming until last month, as the House approved the most significant expansion of Federal regulations since the Great Depression.  In an effort to avoid a repeat of the liquidity crisis, the bill includes leverage limits and the ability for regulators to break up large banks.

But the more ominous government action will take place in 2010, as the Obama administration is positioning for significant tax increases which will dramatically impact small businesses.  The Treasury’s recommendations to enhance “revenue” include:

* Tax cuts for families and individual in the form of more aggressive MWP (Making Work Pay) credits,  Earned Income Tax Credits (EITC) and Child Tax Credits.

* Reinstatement of the 39.6 tax rate, 36% for couples over $250,000 in income, and elimination of deductions for certain taxpayers in this tax bracket.

* Imposition of  a 20% rate on dividends and capital gains (at incomes above $250k)

* Changes in 401K rules that will encourage retirement savings for lower wage earners

* Elimination of Capital Gains taxation on investments in small business stock (primarily in manufacturing).

* Making the Research and Experimentation (R&E) credit permanent.

*Expansion of the Net Operating Loss Carryback.

The most dramatic of these changes is the 13% tax increase in the marginal tax rate for the wealthy.  In a remarkable irony, the 35% rate (due to sunset in 2010) was part of the Jobs and Growth Tax Relief Reconciliation Act of 2003. Now that some in Congress believe that jobs and growth are seemingly not as important, the proposed rate will escalate to 36.6% for high income earners should the legislation pass.

The news is not all bad for the manufacturing sector as new tax laws may include the elimination of capital gains taxes for non-service businesses. To qualify, stock must be issued in 2009 or later and be held for 5 years. Tax savvy manufacturing entrepreneurs should seek counsel from their tax professional (that would not be us) and watch as these tax rules unfold in the months to come.

It seems that corporate acquisitions have come full circle.  In the 80’s, behemoth conglomerates fell out of favor as many of them were seen as too fat and inefficient.  Over the last decade, specialization and commitment to “core competencies” have been the mantra of CEO’s and management consultants.

Yet a recent trend has emerged as companies are going vertical, and seeking out business combinations that enhance positioning within the value chain. Our firm has recently worked with several companies employing this strategy, at a time when PepsiCo is buying back bottlers they spun off in the 90’s, and Oracle is purchasing Sun to which Larry Ellison spewed, “We’re really brilliant, or we’re idiots.”

Two converging trends seem to be the impetus to a return of vertical integration.

• Complex computer and distribution systems make integration critical to the success of an organization.
• The movement towards thrift and efficiency amplify a basic rule of distribution-the last mile of distribution is the most expensive (the implication being that it is more important than ever to control the distribution channel).

Many U.S. companies who have outsourced manufacturing and service overseas are starting to see the  upside of owning their suppliers.  Recent activity begs the question, when do such acquisitions make sense?

Much research around M&A’s over the last few years has yielded data that suggests that return on investment in these deals is realized through incremental revenue, not through cost cutting and efficiency. With the staggering costs of completing such deals, shaving a point or two of margin does not provide a very enticing payoff.

Thus companies seeking alliances and mergers should be focused on acquiring companies that complement their business in a natural and synergistic way.  For example, buying a supplier of quality parts provides the opportunity of integrating systems which may optimize inventory, improve cycle time and enhance the customer experience. If such synergies translate into more revenue, vertical integration can contribute to both the top and bottom line.

As a champion of value creation, I wanted to vomit on Black Friday.  As abhorrent as the massive discounting was, it did serve as a reminder that customer expectations are always a moving target.  For retailers, the bar has been lowered to staying open all night and giving product away at cost.

 For those of us who seek value by providing better service, we must push the envelope with equal fervor. The service you provide is not defined by you or your competitors, but by Lexus, FedEx and Nordstrom. Customers have come to expect extraordinary service on their terms: quickly and efficiently.   Every interaction with a customer offers what one SAS executive refers to as a “moment of truth”. In a single transaction, an organization can have dozens of such moments with a customer.

 Every company should do a “touch point audit” at least a couple of times a year and assess every potential customer “touch”.  To complete such an audit, create a checklist of touch points such as web, email, phone system, reception, customer service,  invoices, packing slips, etc. that represent the opportunity to disappoint or delight your customers. We have all been to voice mail hell, had a customer service call mismanaged or used information on a website that was no longer valid.

 It is useful to have a 3^rd party conduct such audits. Another approach is to conduct customer interviews, peer to peer.  I once had a client send their CFO to meet with a client’s CFO only to find out that invoices were poorly labeled and confusing.  By making some minor adjustments to the design of the invoice, my client improved receivable cycle time with the client by 5 days.  The CFO may not seem like an important person in the value chain, but casting your net wide within clients is an important selling strategy, especially when every nickel is being scrutinized.  The point here is that today’s marketer must take the time to evaluate every conceivable moment of truth and design systems and processes that optimize (my favorite word) the customer experience.

 One source of innovation and strategic advantage is to take emerging technologies from other industries and apply them to your business.  In the 90’s, Dell was amongst the first companies to offer email confirmation and real time tracking of shipments.  As the technology spread, customers came to expect such a level of service for online shipments of everything from flowers to wine.  If you are not moving forward with richer customer experiences, service improvements and automation, you are likely falling behind.

With the fervor over health care reform, many have been consumed with the debate over the “public option” and how we will pay for it.  With all the banter about who should be covered, there has been little discussion about how medical science and technology will converge to change the rules of engagement for the medical community.

There are fundamental flaws in the way our system is constructed:

A)     The people who most need medical insurance (like the uneducated and poor) cannot afford it

B)      The system is highly reactive, based on treating the sick instead of preventing disease.

C)      Without market forces at work, people are less apt to take responsibility for their own health.

The Federal government has already allocated $19 Billion in funding for the creation of electronic medical records (which could cost $30 Billion by some estimates). Electronic record keeping when combined with new nano-technologies will allow medical science, doctors and insurers to predict specific ailments based on a multitude of factors. Your health care provider could mine data to know how many steps you took at the gym in a given day, your  prescription history, and preference for Jamba Juice into an algorithm that could better predict your likelihood of heart disease or cancer . The potential for abuse is alarming. Yet, the emergence of such capabilities mark the true innovations that could result from reform, and the real opportunity to lower costs and improve the effectiveness of health care for American families.

If we really want health care reform to meet its potential, we will need to see past our fears about privacy and embrace predictive modeling.  Those of us who make good choices about our health should gravitate towards solutions that will allocate costs based on risk factors.  I should not be granted the privilege of superior care at a reasonable cost because of socio-economic status, but because I choose not to smoke or regularly frequent Burger King.

Much like the recent melt down in the financial sector, when risk is not distributed thoughtfully within an industry, the total costs escalate.  If the Federal government  (i.e. the tax payer) is going to foot the tab for national health care, we can only expect that we find a better method for distributing the risks and the costs.

I hear it from everybody, from the accountants to the architects, the world is simply much more competitive than it used to be. 

No industry has faced more brutal price competition than construction. In an environment where differentiation is hard to come by, The Concrete Network stands alone.

Concretenetwork.com is positioned on the Internet as the go to site for information on, well…concrete. The site provides everything from training on how to mix concrete to a database on how to find contractors.  They even have sponsors for their website. If an organization has the initiative and entrepreneurial spirit to be subject matter experts in an industry as basic as concrete, imagine what is possible for the attorneys, insurance agents, and manufacturers. It just takes some imagination.

I have spent the last year writing a book, blogging, writing articles and creating video testimonials to make my point.  If you don’t value your services, no one else will.  Creating a differentiated offer takes time, money, energy and resources, but mostly it takes will….the will to compete, the will to charge the hill and take on the competition. The easy thing to do is to whine that competitors are undercutting your prices and sabotaging the market. Of course, they do that because they are bit players in your production, but you have the ability to take them down.

Regardless of your offering, if you want to maintain price continuity and profit, one must find a way to add value whether it be through education, additional services, technology, support, etc.   You may need to experiment to find the right formula, but in the end, customers expect to pay more to vendors who offer more services and pay less to the lackeys who offer less.

Do you have the will to compete with the business that is replacing you?