At the risk of carrying on ad nauseam about iEverthing, iPad is sold out for weeks just about everywhere. I went into a packed Apple store this week looking for one and felt like I was in an electronic Disneyland except Mickey Mouse was a 20 something with bad hair. I also took note that the iPad displays had no prices, reinforcement for a value proposition based on a unique offering where price is almost irrelevant.

In the classic “I am a PC” commercials Apple throws mud at Microsoft and the PC platform, and perhaps the criticism is deserved.  Apple is clearly an amazing product innovator, but what has taken form is an integration of their products (such as MacBook, iPad, iPhone and especially the App Store) to a point where the Mac platform has become the strategic advantage.

We are no longer just enthusiasts, we are believers: believers that Mac’s future products and ability to integrate them will make our lives better.  We don’t only have iPhones based on what they do now, but because we know something clever will be on the App Store next week, or the week after that. We know we won’t need three different adapters, for whatever is iNext, we will use the ones we already own.  We know the machines will work harmoniously without pulling whatever hair we have left out.

Having a belief system that supports a platform can extend beyond iGadgets. If your investment advisor or insurance broker were on the wrong platform, you would lose faith in the advisor in the way that you may have with Microsoft (with security problems, coding issues and the release of the much maligned Vista). Cloud computing presents us with a new platform for storage, and DirecTV has a new DVR which will record programs on one central hub that you can watch on any TV in your home.

How can your platform change? What would be a game changer in terms of service delivery for your customers or clients?

While many businesses dependent on MS Office will run on PCs in the near distant future, it will be interesting to see if the Apple platform can steal away the office productivity market like it has all of the others. I was amused that when I ran spell check for this article in MS Word, iPhone was not recognized as a word.  I may be a convert very soon.

In my book Intended Consequences, I have not exactly been gentle with United Airlines, the air carrier that lied to me, lost my bags, canceled my flights, and abused me unlike any other (airline).  Yet, I am hopeful that the United-Continental merger holds promise.

As we endured the merger bubble of the 90’s and the giant sucking sound that followed, we learned that mergers based on “efficiencies” and “cost reductions” work for the investment bankers, but not too well for us stockholders.  In a post great recession world, all the costs have been stripped from the system.  Synergistic mergers are generally those that improve the value proposition and enhance revenue growth.

Continental flies to 136 cities not serviced by United. United is stronger flying to the Pacific Rim, while Continental has more routes to Europe. The merger offers more than the world’s largest airline, it provides consumers more choice. While both sides are talking about a modest cost savings, efficiency isn’t the impetus to the deal.

Of course the same principles hold true for smaller companies looking for business combinations that could provide some type of advantage. During the pains of the downturn, acquirers could be selective and cherry pick customer lists and inventory from troubled companies.  Now that business has somewhat stabilized (I would not call it normal by any means), more sensible deals may prevail. If you are a potential buyer or seller, look for mergers that will provide more value to the marketplace in terms of better service (such as through a vertical integration), enhanced delivery system or geographic coverage, but not those that will simply allow you to slash a few administrative positions.  Such bloodletting rarely provides an adequate return to stockholders nor does it improve the customer experience.

Big Idea 1-Your Car as a Device

In a shocking role reversal, Honda and Toyota are both caught in reverse, and GM and Ford are suddenly surging.  Ford made $2.7 billion last year, as its stock rose 700% without a government bailout.

Perhaps even more shocking is the prospect of real innovation at Ford.  Fast Company referred to the venerable auto maker as “America’s most surprising consumer-electronics company.”[i]

CEO Alan Mulally has a rabbit up his sleeve in the form of a new generation of automobiles. These cars will change our paradigm, from connecting our PDA’s and iPods to our cars, to the car becoming a device itself. Imagine a car being a killer app!

The new marriage of steel and plastic will allow people to actually pay attention to driving their car while getting more functionality than we could have imagined. Sync-My-Ride (cool brand name if I ever heard one) allows you to sync your car to a PC. In 2011, several models will have elaborate touch screens that will allow you to customize the dashboard on your car to your preferences. You can even download your Ford settings onto a thumb drive and load it on another Ford (for example,  a rental car).  Ford may be becoming relevant again.

Big Idea 2-Integrated Internet

Another news item that caught my attention recently was Facebook’s recent announcement that could upset how we use the Internet. 25 year old Mark Zuckerberg and friends are attempting to make the Internet smart; having it anticipate how you want to use it based on your Facebook preferences on things such as friends, sports, hobbies and music.

In concept Facebook tools would be outwardly facing, interacting with other websites so they become a cloud of integrated websites.  Imagine signing on to your fantasy baseball site (you know who you are) and having your favorite Kings of Leon song streaming on Pandora behind it – automatically.

As was the case when ATM’s, email and social networking exploded on the scene, there will be all kinds of security concerns and late adopters but the opportunity to create a fresh online experience is likely to take storm.  Facebook is disruptive once again.

Big Idea 3-Cashless Society

One of the scenarios we project in the book (Intended Consequences) is the trend towards a cashless society. Federal Reserve Banks rarely handle cash or checks anymore; bank commerce is almost entirely electronic.  On the internet, PayPal offers a 3^rd party clearinghouse where money is moved safely from one party to the next.

While we have the ability to transact electronically using a credit card almost everywhere, paying for things can still be slow and arduous. The mechanics of an online transaction are still a barrier;  setting up a new account can feel at times like a root canal, especially when vendors expect you to enter all kinds of extraneous information about your first born and personal income.

In contrast, on iTunes one’s ability to download media is practically instantaneous, and that is what other websites should aspire to.  As new online technologies allow for safer transactions, our ability to instantly download media and pay through a 3^rd party will be a game changer.

Ten years ago organic foods represented 1.2% of foods sold in grocery stores. Organics were hot and going mainstream as soccer moms stuffed lunch boxes with the purist carrots and over-priced apple juice.  A decade later only 3.4% of grocery sales are organic, merely a blip on the radar. 

It is often difficult to predict if the latest and greatest is a fad or legitimate trend. Is the iPad merely an extension of the iPhone or is it a game changer? Certainly tech savvy early adopters are already scooping up the new device, but will the masses adapt to a new way of viewing media?

Our mantra in our firm, in my book and in this blog is that marketers must consider converging factors, and no more is that more true than in evaluating fads.  Within a complex socio-economic environment, changing quickly with the advent of technology, there can be immediate swings in demand of a given product or service.

The key to converging factors and understanding trends is the acquisition of current and relevant information.  The ability to understand trends, and convert the opportunities presented into competitive advantage is both art and part science.  Science is required in the accumulation of hard data, whether it be from public sources such as government statistics or through private sources such as market research or trade associations.

The art is focus on customer wants and needs in order to preempt the market with products, services or features that may not be offered or are framed differently. Often innovation is not presented in the formation of a new product but through the delivery system by which it is presented. The iPad, like the iPod before it is not delivering new media but is providing an improved gadget for accessing music, books and the Internet.

Often, the best way to define a new delivery system is to reverse engineer problems that customers have, and try to find new ways to solve them. This requires a significant intimacy where the vendor can gain a deep understanding of how the customer functions.

In the fashion industry, designers and buyers must accurately predict styles as far as a year in advance, and move quickly to capitalize on emerging styles. Whether your source of information tends to be closer to science or art, the successful marketer has their ear to the ground and is paying attention to all the inputs that determine fad or fashion.

If you were amused by last week’s post regarding the management acumen of Jerry Garcia (no, that is not an ice cream flavor), this week’s post will really rock your world.  It seems that Jerry was not to be outdone by David Lee Roth, the eccentric front man for Van Halen.

As Dan and Chip Heath (of Made to Stick fame) tell in last month’s Fast Company, Roth chronicles a provision in the standard Van Halen performance contract that a bowl of M&M’s would be provided back stage, with “no brown ones” included. Upon arrival at a new venue, Roth would immediately search the M&M’s to insure the brown ones had been removed (the agreement called for a cancelation of the show should they be present).

 It seems that Roth was using brown M&M’s as a predicative indicator. “Guaranteed you’re going to arrive at a technical error” quips Roth (in his new book) meaning that he used the brown M&M’s as an indicator of whether the venue’s management had read the agreement and were attentive to detail. Given the complexity of Van Halen’s massive production, he viewed brown M&M’s as a symbolism for work quality and in regard to setup of the band’s equipment, he wasn’t taking any chances.

The only way to insure service or work quality is to monitor such indicators. In my experience, world class operators are always masters at measurement. Quality programs such as TQM (total quality management), Lean Manufacturing and Six Sigma are rooted in such predictive measures of quality. Whether you are making widgets, or running a service firm, quality comes down to managing finite details.

Having strong quality standards may not be much of a differentiator any more, but it is certainly the cost of admission in most businesses. Buyers just have too many choices, and they will not accept quality that is subpar.

Businesses are well advised to have quality metrics that are measured in real time and made very public. Service errors need to be corrected almost as quickly as they are made.

What is your brown M&M?

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.

You may have fantasized about visiting exotic places such as Portugal, Spain, or Greece, but you may not want to plant any money there anytime soon.  All it took was tiny Greece to signal a potential default on its debt to send the U.S. markets spiraling like something out of a Greek tragedy.  With its deficit ballooning to 13% of GNP, Greece is one of many European countries saddled with debt.  With lower reserve limits, European banks carry more risk at times when liquidity is low.  European banks represent merely a microcosm of a bigger problem; the outliers, the seemingly trivial and unpredictable events, can trigger a global panic.

Volatility is not a recent trend. Over the course of a decade, we have experienced Y2K, 9/11, Katrina, Enron/WorldCom, the Asian Financial crisis, mad cow, the tsunami, the bird flu (H1N1), and influenza strains that have not yet been named. Volatility has become the norm.

In this age of uncertainty, entrepreneurs must have a greater level of preparedness because there are more variables to prepare for. We must be prepared for the things that we control and even the things that we cannot.

Such volatility requires a different mindset, where infrastructure is more flexible.  Depending on the nature of one’s business, we need to have more flexible labor structures, less inventory, and the ability to be nimble.  Perhaps more importantly, we must be ready to change like a chameleon, on a moment’s notice.

In October of 2007, DuPont’s CEO, Chad Holliday, visited a customer in Japan who reported a sudden squeeze on cash flow. Upon his return to the U.S., Holliday heard that U.S. automakers (who order paint from DuPont only 48 hours before applying it to new vehicles) were dramatically curbing orders.

Holliday took swift action. The following morning, Holliday deployed the company’s crisis management plan and put 17 teams in charge of curbing production. Within 10 days, every manager in the company had met with their employees to “re-clarify expectations.”

If a company of DuPont’s size can change on a dime, so can mid-market companies.  The volatile market place requires that we prepare cautiously, move quickly, and act decisively.

As many view the holiday season as a glimmer of hope, I was struck by several news items this week:

 Apple vs. Google

The battle for Silicon Valley supremacy has heated up in the last few weeks as the two behemoths vied for two start-ups:  La La Media (bought by Apple) and Ad-Mob (purchased by Google in November).  As technology often drives M&A activity, these deals may be a spark for a wave of acquisitions, as investors who have been sitting on the sideline may re-enter the fray.  The release of operating systems from Microsoft have often been the trigger for waves of technology spending, and it will be interesting to see how the sector fares this year.

Retail Discounting

I was struck by an offer by a local golf course this week. It read “What Rain, Play all Day on Friday for $39”. It used to be that marketers offered discounts when demand was low. Now, everyone from carpet cleaners to retailers are trying to drive demand to offset over-capacity or excess inventory. Such a combination creates a double whammy, where high costs are only exacerbated by diluted margins. It appears as if our worst fears for the retail sector are coming to fruition.  A shocking 95% of Americans say they are holding off purchases to take advantage of last minute sales.

 The uber discounting in the retailer sector is truly horrific. Retailers used to make all their margin in the fourth quarter, but they are sabotaging any enterprise value by giving away the store.  If you feel compelled to start a price war in your business, do it at a time when you want to introduce new customers to your product or services, not when they are going to buy from you anyway.

Boeing Tests 787

 The aerospace sector has also been crushed by high oil prices, the recession and the delay of new products.  Yet this week Boeing’s 787 airliner will make its inaugural flight and begin a year of field testing. The 787 is Boeings’ response to the European Airbus A350, a generation of planes built using up to 50% composite materials.   

United Airlines ordered twenty five 787’s and twenty five A350’s, suggesting that airlines may be ramping up capacity, especially in more profitable long range routes.   With the exception of military suppliers, the American aerospace industry has been in a deep freeze and is eagerly awaiting a rebound.

It appears that some sectors of the economy are starting to improve while others remain stagnant.

Many of my older colleagues are feeling a bit out of sorts with Facebook, RSS feeds and the plethora of online media which have disturbed the sanctity of our desktops. Many feel compelled to join the party, regardless of their place within the world order. 

I wonder if all of this panic is really necessary.  For some, running Facebook ads seems trendy, but for others it is like selling Yankee pinstripes at Fenway Park. My point is that if you have an old world product, it is hard to convert to online marketing techniques overnight.

Peter Drucker said all management is marketing but I wonder if he is turning in his grave at the prospect of Twitter and its lack of a sustainable revenue model.  He couldn’t have expected marketing to change so dramatically, practically overnight.  Print advertising is dying a rapid death.  Yet some products and service have an experiential component that make Internet marketing difficult.  Companies are spending a lot of money on ad words and other SEO (search engine optimization) tools, sometimes void of any real strategy or measurement other than click through (which is a ridiculous measurement if I ever heard of one).

Companies are well advised to consider their Internet strategy within a broader effort that blends different approaches into an integrated marketing plan.  Marketers must take the time to acquire the skills, resources and technology to compete effectively in the online space. 

One advantage that online marketing offers us is the ability to measure specific outcomes of web traffic, and we should all be a bit more vigilant in measuring the effectiveness of our marketing so that we can better allocate resources to the approaches that work best.  See you all on Facebook.