There is so much written about the need for more innovation in America and that innovation needs to be the engine that will drive recovery and growth. True innovation is always needed but history can illustrate that it is not the lack of innovation that holds us back but the adoption of innovation.

The New York Times ran an article on May 25, 2010 entitled “The New Touch-Face of Vending Machines” about all the flashy new vending machines around the world and what they’re capable of selling. It made me think back to a project in the late 1980s which was all about exploiting the innovation available through vending machines. This in turn got me thinking about a project for IBM also in the late 80s to commercialize touch screen technology. I remember going to IBM’s Boca Raton labs and using a tablet computer. Maybe it was not as advanced or fancy as the iPad but considering the fact that was 20 years ago, not that far off.

About the same time we were doing an assignment for MasterCard, “The Future of Credit Cards”. It was at a time when decisions had to be made regarding the use digital technology to verify and transmit charges. Remember back when a store had to run your credit card over a machine and make an imprint that they would then send in to the bank for processing. Moving to magnetic stripe technology would allow for major cost savings and efficiency improvements but we thought why not leapfrog all of that and go to another available technology — biometrics. Why carry plastic when your fingerprint is both unique and with you all the time. Or if plastic was such an important bridge why not embedded chips? MasterCard’s PayPass and Visa’s payWave are still fighting for adoption even though they contain a decades-old technology and offer significant benefits to both the consumer and merchant. And by the way, have been commercially available for years in other countries.

In the mid80s we were commissioned by Kodak to map out the Future of Photography. One of the findings was that by the mid90s, silver halide film would be a relic and digital photography would have 90% share of pictures taken. Our recommendation was simple, own “Kodak Moments” not how images are captured. Kodak also asked their Advertising Agency to independently do the same project. They came to the same conclusion although they thought the transformation would happen faster. We were both right about the transition but wrong about how quickly it would happen by almost a decade.

Recently we were subjected to an agonizing debate about health care costs and availability. These are two very different issues and unfortunately in the debate the cost component seems to have been lost. Again decades-old technology, proven technology and innovation if adopted by hospitals and doctors would significantly decrease the cost of medical care never mind improve the quality of that care – the use of digitized records. Records that could be carried on a chip embedded in your insurance card. The military has been “testing” such a system for decades.

It is clear that we have more next generation technology than we know what to do with. And technology is not the answer to every problem but it is a start. So what is the problem? The facts point directly to risk avoidance. There is fear on the part of business to commercialization innovations (risk) and of consumers to be willing to adopt new and better ways to meet their needs and wants. Based on my research, it is far more that businesses are afraid of potentially disturbing what they believe to be a predictable revenue stream. This is real until someone not reliant to that revenue stream decides to enter “their” market.

There are role models out there that taking the risks will pay off. The poster child is Apple. Not one of their innovations, iPods to iPhones to iPads, utilizes new technology. What they have been willing to do is reinvent that technology in a far easier to use form with superior design and functionality. While that might be considered a form of innovation it shows a focus on what is required to gain adoption. In the simplest terms not new but better. When they do, it breaks down the consumers adoption aversion and a win win success story is born.

Another example is the recent success by Ford. While there are many moving parts to why Ford has succeeded (or at least hasn’t gotten in as much trouble as the other car companies) one key component is their making it easier for consumers to adopt the use of technology through their joint venture with Microsoft through Sync. The application of existing (old) technology as a point of difference and suggesting to consumers a higher tech car will be a better investment (more fun to drive.)

How do we change the dynamic so adoption is seen as a benefit? Maybe a place to start is to determine who within an organization “owns” getting the idea adopted. Simple answer would be the person responsible of marketing. Many “experts” having written volumes that for a company to succeed the “brand owner” (or chief marketing person) has to be the CEO or at least someone totally empowered by the CEO. Would any one dispute that Steve Jobs is the brand owner of all things Apple? And yes, Apple has a person who heads worldwide marketing.

You only need to look through the executive teams for the answer. Most small entrepreneurial or start up companies don’t even have someone with a marketing skill set – knowledge and tools to drive adoption. Having worked with many getting a dollar to confirm the basic premise of the business (ability to generate trial) is near impossible. Millions get spent on building the idea but nothing to be sure that people will actually buy it. A long time mentor has a cliché which says it all – beware of falling in love in a dark bar. This problem is not unique to small companies. Managers do not focused on adoption, they fall in love with an idea in a dark bar.

As the folks at Nike would say, “Just Do It!”

Over the years I have found that learning from failure was far more instructive because in success it is so hard to differentiate cause from effect. Having just completed one of the best business books I have ever read (and I must admit to being a business book junkie) I find there can be real learning from a well document success story as well. In all honesty the book I am referring to “The Audacity to Win” by David Plouffe is not really a business book. It is the story of getting Barack Obama elected. Before all my Republican readers and friends go crazy it is not political. As I said, it is a business story. The business of getting one man elected President of the United States.

Plouffe gives us a first person insider view of Barack Obama’s Presidential campaign, the strategies, process and the execution. It is a primer for every person interesting in increasing their probability of success. While possibly not the author’s intent, the book illustrates the importance of strategy as a guiding light. In a nutshell, he reminds us of the importance of strategy (and the confidence to stick to it), execution and the importance of remaining focused on the objective. The objective in this case was simple, get 270 electoral votes – not get Barack Obama elected. The fact that it worked makes a great story.

People who have worked with me have heard me ask over and over (to the point of frustration on their part) – what is the objective? If you get the objective wrong or don’t keep reminding yourself of what the objective was in the first place your probability of success goes down exponentially. One of my favorite quotes comes from Alice in Wonderland, if you don’t know where you are going every road leads there.

Another lesson from this book was the importance of developing and executing a new game strategy. Let others play by the established rules of engagement. First the Clinton campaign and then McCain did everything by the (old) book, and lost. Old game strategies may sustain a business for some time but someone else always seems to come along with a new game strategy and displace the incumbent. Apple is a classic example of a company who is always looking for and executing new game strategies. Google is another.

Below I have transcribed several pages from the epilogue of Plouffe’s book. I believe it speaks for itself.

“We were essentially a startup business. We had had nothing when we began — no lists, no equipment, no talent pool just waiting for the green light. Our candidate had had little experience on the national stage and almost no relationships or experiencing the states that would decide our fate. It was an enormous challenge to launch this effort, under intense scrutiny, while we were still trying to get the phones turned on and the computers up and running. But that formative period created our identity, in many of the principles and decisions we employed at the outset were instrumental in allowing us to win. I presume these ideas would have some value to any enterprise.

We entered the campaign, and exited it, in the right mindset, with a unique mixture of idealism and pragmatism. We believed that Obama offered great promise as both a candidate and a potential president, the kind of promise that most of us had assumed we would never witness, much less be part of. This optimism was married to a keen appreciation of just how narrow our pathway to success would be. The odds from the start said that we would not win. So idealism kept us going, but pragmatism kept us grounded. Both were necessary to our success.

We begin with the belief that we needed a clear message as well as a single strategy. The message would encapsulate the emotion and substance we were offering voters, and the strategy would outline our theory for how we would succeed. Both of these were established at the outset and inviolable. There was no guarantee our strategy would work, but we needed to commit to one path, not many, and base every decision on it. And on both message and strategy, we did not pay much attention to what those on the outside were saying, whether we were perceived at the moment is up or down. We had our own radar and metrics and did not change course or rethink our fundamentals when the chorus of critics demanded it.

Everything in the campaign flowed through the prism of strategy, which made decision-making relatively uneventful, a must for any organization. Taking the suspense out of why you say yes or no improves productivity, understanding, and morale, and makes it easier to reach sound decisions for the right reasons. This methodology allowed us to make decisions quickly. In the beginning we had no choice, but as we got established, we carried that approach forward. There was simply no time to dither and second-guess. We knew that we wouldn’t get all the calls right, and of course we didn’t. But when we were wrong, we avoided wallowing or extended recriminations.

Technology played a role in our success. Reaching an audience involves more than just figuring out who your audience is; it also means knowing how to find them. Part of the reason our campaign was so successful is that we were able to identify early that many of the people we wanted to reach were spending more of their time on the Internet. We realized that a smart, and large, Internet presence was the best way to provide people with the opportunity and the tools to get involved in the campaign — they were already immersed in the world of technology and would be more likely to encounter us there. We met people where they lived instead of forcing them to deviate from their habits or lifestyle to seek us out. Our early commitment to a digitally-based platform paid huge dividends.

From the outset, we tried to figure out how to communicate with the target voters with a fresh set of eyes. Establish tactics, like press interviews, TV ads, and mail pieces, would of course be important parts of our arsenal. But we put a huge premium on direct digital communication, as well as on the power of human beings talking to human beings, online, on the phone, and at the door.

The principle underlying this was fairly simple: we live in a busy and fractured world in which people are bombarded with pleas for their attention. Given this, you have to try extra hard to reach them. You need to be everywhere. And for people you reach multiple times through different mediums, you need to make sure that your message is consistent, so, for instance, they don’t see a TV ad on tax cuts, hear a radio ad on health care, and clicked on an Internet ad about energy all on the same day. Messaging needs to be aligned in every level: between offline and on –, principle and volunteer, phone and e-mail.

We tried to be our target voters’ network TV, cable, satellite, and on-demand; on their radios; all over the Internet; in their mailboxes; and on their land lines and their cell phones, if we could; at their doorsteps; and out of their communities. Balanced communications across all mediums is critical to any messaging effort today.

We measured our progress exclusively with our own yardstick. That takes discipline, but discipline without attention to the right metrics is meaningless. Whether it came to fund-raising, voter registration, or local press footprint, filling volunteer shifts, were ultimately reaching our voting goals, we had clear internal benchmarks that the campaign leadership used to measure our progress or lack thereof, and that all of our staff and volunteers could use to measure their own work. This is of chief importance — organizations tend to thrive when analysis of job performance is based on clear and incontrovertible standards. This way, any corrective action is based not on subjective measures but on clear, well-defined, objective ones.

Culture is about people. And the people of our campaign made this victory a reality. There is no more effective courier for a message that people who believe in it and have authentically embraced it. Our secret weapon, day in and day out, was our army of volunteers, real people who brought Obama’s message and ideas to their neighborhoods, coworkers, and fellow citizens, guided by our extraordinary staff. The bonds of trust between individuals who shared values, goals, or even just living space were far stronger than anything we might hope to have forged through more traditional tactics. In many ways, the delivery of our message and the execution of our electoral strategy were successfully carried out on the backs of these bonds.”

America is suffering from a severe case of cognitive dissonance over health care. At a minimum it helps to explain the emotion and misinformation people seem to be harboring in regards to the current “debate” on health care. Cognitive dissonance is one of those apparently simple concepts that is both hard to translate and to understand. I should know having learned about it the hard way. When I was finishing my MBA, cognitive dissonance was a question on my comprehensive exam. One which the grading committee felt I had come up short in explaining. Fortunately it was not the only question.

I gained first-hand knowledge about cognitive dissonance early in my career working at Johnson & Johnson. My assignment was to expand usage of Johnson’s First Aid Cream. One of our concepts was to eliminate the sting that children experience when mom put on first aid cream. In a nutshell, this concept failed miserably because of cognitive dissonance. If there is not some sting it does not work. Over the years I have seen example after example where cognitive dissonance causes failure to what would appear to be a viable concept.

Depending upon who you ask we have been debating and discussing health care reform for some 40 years. Actually we are worse off today and the problem is getting bigger every day. Yet everyone I talk with, every article that I read suggests a common agreement that health care reform is an imperative that cannot be ignored. Why the failure to make progress? Could the answer be as simple as cognitive dissonance?

The answer to this question is not a simple yes because it is important to first determine the cause of the dissonance. In my opinion, that cause is confusing interrelated but also distinctly different issues, the quality and cost of health care delivery and how healthcare is paid for. One can be totally for the reform of health care from a quality and cost of care basis and be totally against changing how it is paid for. It is a classic case of the devil you know is better than the devil you do not know – a case of cognitive dissonance.

If you are lucky enough to have insurance, even if the premiums are extremely high, then the current system works just fine. The fact that your premiums are high because of all the people who cannot afford to pay or do not have insurance is a hidden cost seems to be easily ignored or rationalized. The fact that many medical providers are charging your insurance company for procedures they may or may not be performing so as to get the fees they require to stay in business seems to be accepted. If you do not have insurance and you go to an emergency room for treatment why would you want to change anything, the systems is working for you. This situation only begins to explain the conundrum and the cause of the dissonance.

So is this country facing a quality of care problem, a cost of care problem or a payment of care problem? Unfortunately the answer is yes and this is where the cognitive dissonance is formed. Explaining this issue to the American public with all of its diversity is a challenge to say the least. While it would be irresponsible to just leave it to Congress to work out a solution, it is equally irresponsible to model an “everyone wins” solution which ends up being no solution at all. It is not clear to me whether it is the White House or congressional leadership that has failed in finding a way to communicate the problem they are trying to solve or even if there is agreement to exactly what the problem is. Possibly if they understood the cognitive dissonance that is generated by the complexity of the situation they could come up with a solution.

There is no question that the real estate market fiasco (loaning money to people who couldn’t pay it back) was a prime cause of the current Great Recession. The banks have become the villains in this mess and they surely deserve a lot of the blame but are they the only cause? Through recent experience and some follow up research, my conclusion is the real estate brokers and their agents deserve some of the blame and it is time for reinvention.

Warren Buffet has been quoted as saying, “It’s only when the tide goes out that you learn who’s been swimming naked.” When there are more buyers than sellers everyone can appear to be a superstar. When there are, for any reason, more sellers than buyers (the current situation in most markets) then being that superstar is critical.

It is not news that the agent represents, well, themselves. There are as many buyer beware as seller beware warnings. What has come as new learning to me is how broken the real estate buying/selling system is. Let’s start with a personal experience. Recently I tried to sell a property in Florida. After 9 months with less than a dozen showings and no offers we have taken the property off the market. As the MLS listing expired we were bombarded with (really pushy) phone calls and mail wanting to relist our home.

What got me thinking was why have we gotten ten times more calls to relist than we had showings? Where were these “superstars” when the property was on the market? I even received calls and or mail from two or three agents with the same broker who did not even know one another. While I know that the broker holds an overall license to sell real estate and the agents are really just independents who forfeit part of their commissions to be affiliated with the broker, shouldn’t they at least know one another?. When I asked the agents what they would do different to sell my property it was like a recording. Oh, we are the top advertisers. We work hard to be sure your property gets maximum Internet visibility. We place ads in all the home magazines.

Here are some things which were not said. Not one broker that called sold the value of their agency. Not one agent talked about working with other agents not just in their firm but in other firms. Not one agent had a plan to identify prime prospects for our property. When asked why we had pulled the listing, the first thing I said was the market did not seem to have buyers or at least our agent had not found the right ones. The response I got was, oh it is a really tough market and it will probably take 3 to 5 years to come back. So as I followed up with, so what would you do differently or better, the response was ads in home magazines and Internet presence.

This personal experience led me to do some Internet research on real estate companies and their “marketing”. It was shocking how insulated people in this industry are to consumer needs and service that they are supposed to be offering. They clearly have not gotten the, it is the consumer stupid, message. It is unclear what their idea of marketing is because ever site is a carbon copy of the next. They have not gotten the message that listings are not a competitive advantage. Generating listings does not in and of itself build the business and they do nothing to build brand value.

All of this led me to a conclusion that there is a real opportunity for some one to reinvent how real estate is bought and sold. When you think about it, while you can name a number of national real estate umbrellas, you have a much harder (impossible) time knowing what their stated positioning or desired competitive advantage is. What benefit will they deliver to the consumer? When an industry allows itself to become commoditized it screams opportunity.

If the current model is agents versus employees, what if it were the other way around? Many industries grew via the franchise model and learned that real growth, profitability and brand strength came only when they bought back the business from the franchisees. If the current model is transactional, what if it became a team approach where the selling team worked with the seller community and the buyer team was solely focused on “owning” the buyer community but they worked together?

There are many examples of companies and industries that have built profitable businesses by improving the buying experience and not accepting the status quo. Reinventing what turns the consumer off, adding value by developing a twist on the familiar. For example, CarMax built a business model that made buying a preowned car easier, more empowering and less risky. The first step was a stop at a computer terminal to enter your needs (how much you drive, uses, brand and type preferences) and then like a Google search all the vehicles that meet your needs and where they are located on the lot appear. How consumer friendly! No sales person standing over your shoulder unless you wanted one.

When we worked with in the boat business we found that segmenting and better understanding the consumer made targeting the selling effort far more efficient and profitable for the company and satisfying for the customer. In this case we developed a simple screening device to be sure that a sales person was showing the consumer boats and talking about features that met their specific needs whether it was price, how they would or could use the boat to financing. By not wasting time and focusing on the consumer the better shopping experience delivered more sales.

Segmentation, consumer engagement and relationship building with your consumer is not by any means new but all three appear to be relatively nonexistent to realtors. Maybe it is time for a reinvention Coldwell Banker, ReMax or Century 21?

My friend and associate Kevin Hoffberg just posted a wonderful article which I strongly recommend you read. The following is my response to Kevin’s post.

I too was happy that President Obama “took off the gloves” as it relates to the insurance “industry”. But did he? As this debate, if that is really what is going on, continues there are a number of things that I find troubling.

Let me offer up my own story. Being on Medicare I already live with the “public option”. It is confusing, expensive and did I say confusing. Among a number of issues, under the onerous threat of a huge penalty, I am forced to buy Part D drug coverage. I am very lucky and don’t take any prescription medicines so I currently have no need to buy this insurance. The premium just went up 36% – no choice. And don’t get me started on the “donut hole” gap in coverage. Then there is my supplemental insurance policy because Medicare doesn’t cover that much. Even with issues it seems to work. At least everyone over 65 has an insurance option.

When you consider what I pay the government for Medicare, AARP for supplemental and AdvantraRX for Part D my health insurance costs are not cheap, in fact they are close to what I paid for health insurance before Medicare. But it works.

So why this story? My complaint is with the Administration and the Democrat leadership and their lack of telling a clear story that sets the record straight. They have left the door wide open to everyone with a vested interest in the status quo. I was unaware of the antitrust exemption – and why would the insurance industry have (need) an exception?

If I understand what is being proposed, anyone on Medicare is already there. We would just be expanding the coverage to people who don’t have it and solving the “emergency room” problem. And I haven’t heard anyone suggest that they would give up their Medicare coverage which is far from perfect but it works.

By the way, while I am ranting, the fact that Pricewaterhouse Coopers would prostitute themselves for a fee is a disgrace and disservice to any and every other consultant. It is how our industry has gotten a bad name. As Kevin said, sometimes we need to “rescope, rescale, and rethink” not bend over say “thank you sir, do it again.” Advising a client on what is right and factually correct should be more important than the size of the fee.

In 1990, Nike opened it’s first Niketown. At the time it was considered a big deal because it was a retail outlet that wasn’t based on selling “stuff”. Its reason for being was to allow consumers to experience Nike products and bask in the glory of Michael Jordan’s heroics. Fast forward to this morning as I open the N.Y.Times. There on the front page above the fold, “Disney Retail Plan is a Theme Park in Its Stores“. What I found so surprising was that the Times thought this was newsworthy. Not that it isn’t a good idea, it is, but when does making the shopping experience fun become news?

If you read my articles you know I believe everything (with the exception of sex and dying) is a reinvention of something which preceded it. Another theme is convergence – the combining of two similar but different concepts to add value to one or both. So when you think about Disney’s retail plan it is part reinvention, part convergence but not news.

So why do you think the Times gave this top billing. Last I checked the Times does not own Disney (possibly soon but it will probably be the other way around.) Could it be that there has been so little innovation, especially in retail, that they found it worth such prominence? Or could it be that writers and editors are so young and do so little research that they don’t know what they are writing about really isn’t new.

Mike Vance who was Dean of Disney College way back when would say that innovation was making new what was old. I really applaud what Disney is doing and from my experience they will be pleasantly surprised by the result. Management deserves high marks for listening to Steve Jobs (a Director) to not be satisfied with incremental change. As Nike found with Niketown the expeience leads to sales. As Starbucks found with coffee a better experience lead to sales at a premium price. As they both found when they allowed the experience to become routine, sales declines followed.

So much is written about the benefits from innovation and continuous improvement but getting managements to walk the walk seems to be hard and getting harder. Getting younger members of organizations to take the time to study what has been can reap true results, even for newspaper writers and editors. There is nothing new in what Disney is doing other than they are doing it. They appear to have climbed from the bunker of this Great Recession and that is a wonderful “green shoot”.

One of the harsh realities of our current economic situation is the need to find a new base that works with the changing reality of our current and future world. For example, the auto industry has been forced quite painfully into this realization. The infrastructure the auto industry built was based upon having a 90 share of the US market and probably a 70% share of the world market. The financial industry is a similar example. Change generated a weight they could not bear.

As I read about the health care debate the similarities appear obvious. We have a health care system built upon a reality that no longer exists. We have a system that was built on local doctors (think local bankers) making house calls, taking care of anyone who was sick (loans to people they knew) and being paid by the family in whatever way the family could pay them. We have migrated to a system of conflicting corporate interests whose profit motives sure appear to be far greater than their stated reason for being — dispensing health care.

It is not hard to understand how we have gotten to where we are. The separation of haves from have-nots is not new in this country or any other for that matter. We only need to look around the world to see many variations on how to “best” dispense health-care with varying degrees of success.  Reed Abelson offered an interesting article in the June 14, 2009 New York Times Week in Review section titled Following the Money in the Health Care Debate.   His point is one’s perspective on health care is directly associated with their self-interest.

We are a nation who must find a solution to the rising health care costs and the diminishing level of care to people who need it. The focus has to be on what is the objective, not who makes what money. While possibly being overly simplistic, I believe the objective is simple. How do we deliver the best health care to the most people at an affordable price? We will succeed if all efforts are directed to this objective and not to  attempting to mollify the needs of all the vested interests.

I read a story this past week which I believe is illustrative even if it is a little off topic. For some time now it has been impossible to watch a TV show and not get blasted out of the room when a commercial comes on. When I asked my son, who is president of an ad agency, why this is happening his answer was the move to digital has made integration more difficult. He didn’t say impossible but more difficult. It appears members of Congress have noticed the same thing so they began hearings.

An industry association spokesperson (David Donovan, president of the Association for Maximum Service Television ) said, the “bill could actually slow TV stations’ voluntary efforts to control commercial volumes because any FCC proceeding would generate wide debate and uncertainty”. There is no uncertainty about being blasted out of your living room by a commercial. The industry knows it is a problem, now Congress knows it is a problem and I venture to say the industry is not going to like the solution Congress decides on. My guess is it will add cost, take longer to implement and potentially not solve the real problem. But once again the broadcast industry will have a government solution dictated to them because they refuse to solve what seems to be a simple problem.

So much of current debates appear to be centered on political philosophy versus the objective. Often I hear people say or read that all the Obama administration wants to do is socialize everything. Well there is an alternative and that is for industry to take some responsibility to solve the problem themselves. If health care associations truly would represent their constituents and work together on an alternative plan versus fighting what is being debated in Congress I believe they would like the result much better. If there is any group who has the most prejudiced perspective and lacks the appropriate skill sets to address the health care objective it is Congress.
But here is the dilemma. We have a crisis in health care as we do in many other industries and the industry has chosen, mostly because of their desire to maintain the status quo and current levels of profit, to ignore the problem. They have left Congress no alternative than to intervene. So what we are left with is a growing crisis being solved by people least capable of finding the best solution.

It does not matter whether it is the auto industry, the financial industry or the health care industry the relevant executives continue to sit around thinking that somehow no one will notice we are in crisis and that their profits will continue to flow. Well it is time to wake up. The paradigm has shifted and industry executives must learn to work together. If they do not find a way to work together to solve these problems then not only will the problems get worse, the governmental solution will be regrettably onerous, not only to them but to we the taxpayers.

The lesson here is for all industries to understand the benefits of being proactive. If health care industry groups, whether they be hospitals, doctors or insurance companies, sit around either being complacent or just reactive (to Congress) it is a guarantee they will not like the result. Like what we just experienced in the auto industry and the financial industry, the health care industry is in crisis. The cost and complexity of keeping our society well has gotten totally out of sync with the needs of the consumer. Some months ago a collection of health care executives went to the White House in a show of cooperation. What they did not do and must do is go to the White House and Congress with a viable solution that works for them and for the consumer they serve. It is a sure bet that if they do not they will not like what they get.

Danny Devito, playing a takeover executive in “Other People’s Money” is speaking to the workers/owners of a business he wants to buy so as to sell off the assets – “folks what you don’t understand is the company is already bankrupt, you just haven’t run out of money yet.” Truer words have never been spoken.

In the aftermath of General Motor’s bankruptcy filing there have been numerous articles about when did GM really go bankrupt and what could have been done. I will leave it to the pundits and the academics to speculate but for me the answer is simple and instructive.

In a previous post I mentioned having worked on Saturn before there was a physical car. For those who need a timeline we are talking about early 1980s. I am not sure when the Saturn concept was first hatched but a good bet the need to reinvent GM, the beginning of the end, was anticipated well over 20 years ago. It took General Motors over two decades to run out of money. One would think that would be enough time to reinvent themselves.

In fact, as mentioned in an earlier post, they tried. Saturn was the proof and poster child for what needed to be done but they made Saturn into GM instead of making GM into Saturn. They (GM management) have tried a number of times. For example, Ron Zarrella who was brought in at the end of 1994, reorganized their brands and brought in experienced marketing people who had proven their marketing and innovative skills at companies like P&G. One of his early initiatives was to establish a brand management system to bring focus and uniqueness to each brand. He lasted all of seven years (half some would say as a figurehead CMO) and most of the marketers were gone in under three. No one ever knew whether sales or marketing was responsible for building the brands and driving sales. The facts appear to be neither – it was the dealer networks.

The failure of GM should not be a surprise to anyone. Suggesting that it was a lack of strong focused management might be over simplistic but in my opinion that appears to be the case. It is said that when no one is in charge everyone is in charge. It has also been said that a strong CEO must be the brand owner. Not the CMO but empower the CMO because he or she must be the voice of the consumer. To say that marketing was a stepchild at GM would be an understatement.

The lessons that should be evident with the GM case is if your ultimate customer is a consumer then the consumer’s representative must be the brand (business) owner. Period. Marketing must be (the brand owner and strategist) and must be empowered by the CEO – no confusion as to who is in charge. The executional side of marketing (advertising, promotion, pricing, etc.) cannot be confused with the strategic side (brand ownership). The concept of a sustainable competitive advantage is bogus. There are only temporary advantages and if a brand does not allocate resources to continuous reinvention it will be replaced. It is just a matter of time.

I suppose it has always been this way but recently I have observed far more black or white behavior. Whether you are reading a newspaper article, a blog or listening to someone on TV one would believe there is only one side to every story. The concept of collecting all the facts and weighing different opinions appears to be getting lost. A case in point is the recent open letter of resignation from AIG executive Jake DeSantis.

The letters and comments that have followed his letter seem to miss the point – there are two sides to every situation. When I talk to business people, especially senior executives and people who work in finance and private equity, they voice true outrage at the reaction from Congress and others over executive pay and bonuses. Their outrage is the “everyone in business/finance is evil” assumption driving the discussion and legislation. Many of these folks have made millions making deals that saved companies, created jobs and paid taxes. They would be the first to admit that it is an imperfect world but their wealth has come from putting together far more good deals for the American people than bad deals.

The facts are that how we remunerate people is a totally different issue than how we deal with questionable performance or whether businesses should get government support. Mixing all three of these in one pot only makes the issue too irrational for any hope of making the right corrective action. Because the decision was made to bail out AIG or any of the banks does not have any relevance to how executives are compensated. This does not mean that executive compensation should be off the table but it should not be done in the context of a very different problem. Different problems require different solutions and both sides of each situation must be considered if we ever hope to make “the right” corrective decision.

We live in a country where the top 5% of earners pay somewhere around 30% of the taxes. We live in a country where living the American dream is being a success – yes, making money. We live in a country where we pay athletes or actors hundreds of millions of dollars to entertain us with their specific ability. Why have we begun a crusade that vilifies businesspeople that have the skill sets required to run our ever larger more complex businesses? Not every bank or every business is full of money grubbing, incompetent over paid managers. Why then is Congress and the media so focused on convincing the American public that this is so.

In a free democratic society we will always have the robber barons who take advantage. We always have the Bernie Madoff’s and other scoundrels will bend the rules and steal our money. We have laws that address these situations. What we have not had is the discipline and resources to enforce those laws. I have written before about the dreaded pendulum swinging back too far and doing more damage than good.

There is nothing that is perfect and what is right in one person’s perspective can be totally wrong to another. It is for this reason that we must continue to remind ourselves that there are always two sides to every situation.

The great part about case histories is they give you the opportunity to study what is going right or in many cases is not.  They allow you to consider the basic imperatives to growing a business which so often get ignored.  There is also much to be learned from what I like to call a case history in progress.  Most people who have studied the principles that lead to success all agree there are basic imperatives for success.  Lists can vary in the importance of individual imperatives and do get debated but the basic list tends to be similar.  Items that will show up on most all lists are things like focus, clear strategic intent, competitive advantage, flawless execution and mostly consumer understanding.

Recently I came across such a case history in progress in the form of Zappos.  I happen to follow Tony Hsieh on Twitter where he recently posted his presentation at the South by Southwest conference.  Tony is the CEO of the incredibly successful Zappos business.  In the spirit of full disclosure (and to give an unabashed endorsement) I began following Tony and Zappos because The Ad Store, where my son Brian is President, does their advertising.

Several incredibly important themes jumped out at me as I read Tony’s slides.  The first was his emphasis on the consumer, tonality (fun), all leading to the goal of superior customer service.  The second was the importance of company culture which led to the third which was one of the best illustrations of succeeding where others have failed – getting the first two right. Zappos appears to be making a ton of money with what is basically a commodity offering.  In fact, what they appear to have done is to have built a competitive advantage by aligning their execution in the consumer’s 90% versus their own.

How does this competitive advantage result in incredibly fast-growing business?   In my last post, Marketing Under Attack, I wrote that the art and science of growing sales is based on the principles of volumetric modeling: awareness, trial, repeat, rate of repeat.  If consumers are not aware of the product or service then they cannot try it.   Once they try it the product or service must be good enough for them to repeat (buy it again).  Rate of repeat is a function of usage rates, getting consumer to buy early and often.

Zappa’s consumer message and ability to reward the consumer at every step generates initial awareness and word-of-mouth (awareness), the desire to experience Zappos (trial), rewarding a great buying experience (repeat) and having in place simple and rewarding benefits to the consumer like unquestioned free return (rate of repeat) generates a business model that succeeds by its success.   The culture that Tony has generated guarantees to enhance the value derived from being so customer centric.

What I think makes this all work is the simplicity of how the company goes to market and their flawless execution.   What they go to market with is a commodity.  Their competitive advantage is all about the culture and to be totally focused on the consumer.   It is amazing how many words have been written on this simple premise and how few businesses have put it into practice.

Nicely done Tony.

Beware of the pendulum swinging back too fast and too far.It is a well-documented fact that finding a happy medium is rare.As a society, and equally true among the business community, it is nearly impossible to know when we are reacting too far and too fast in an attempt to rectify a wrong or solve a problem.The reaction to the current economic situation is no different, specifically as it relates to how marketing funds are being spent or cut.

The latest uproar over Northern Trust sponsoring last weekend’s golf tournament is a perfect example.Without knowing the facts it is hard to know whether a bank like Northern Trust was prudent or not in allocating a portion of its marketing funds to sponsoring a golf tournament.But like any business institution that hopes to grow it must continually market itself to its target audience, reward it loyal users and producers or it will eventually fail or at a minimum cease to grow which in today’s world is the same thing.

For any business to grow it must understand and allocate resources so as to fulfill the four imperatives for generating sales — generate awareness, trial, repeat and ensure a growing rate of repeat.At the risk of being pedantic, these four imperatives are the keys to volumetric modeling.If consumers are not aware of the product or service then they cannot try it.Once they try it the product or service must be good enough for them to repeat (buy it again).Rate of repeat is a function of usage rates which impacts some products or services more than others.For Crest toothpaste, getting people to brush their teeth more often will increase rate of repeat or for Apple to get people to go to iTunes store more often generates a greater rate of repeat and sales.This all takes marketing.

As we criticize the banks for holding these boondoggles we need to be careful that the pendulum does not swing too far and that “the cable commenters” and “opinionators” (Maureen Dowd) don’t generate a significant downturn in marketing investment.If businesses do not drive trial, awareness, repeat, and rate of repeat we will not grow.My father, who was in sales, was fond of saying that “nothing happens until you sell something”.While a company’s inability to access a line of credit will certainly have a negative impact on their ability to grow and to keep or hire new employees so will diminished marketing.

To suggest that incentive trips and rewarding important clients and their company representatives is a travesty flies in the face of understanding basic human nature. People respond to being treated special, think customer service. And don’t bore me with, oh they are taking taxpayer money.What! Marketing you can see is bad and that you don’t is OK? When we start “legislating” against what salaries people can make and incentives they can take part in we better beware of that pendulum swinging back.Most importantly we better get out of the way because when it hits us we are not going to like the feeling.Personally I think it is insanity to pay a baseball player $150 million but if a baseball franchise thinks that is a good investment that should be their decision.If they are wrong they will probably lose (New York Yankees.)If the bank thinks that sponsoring a PGA event with all of its ancillary festivities is a good investment of their marketing dollars than it should be their decision to do so.

It is not the marketing department that got the economy in this mess so we best beware of making it the fall guy in how the problem gets solved.  Keep your eye out for that pendulum coming back at you.

A good friend, the CEO of a Fortune 100 company, sent me a most disturbing e-mail.He was sharing that on top of all of the business issues that requires attention, he was forced to deal with totally unfounded and unsupported personal attacks. Detractors being negative because they can. As I read and reread his e-mail it was just another example of how negative our country and society have become. It is almost impossible when listening to commentators and talking heads on TV or even reading news articles to find anyone articulating a glass is half full perspective.

Without getting into the causes of our current national crisis it is refreshing that we have a President who is at least trying to be proactive and trying to find a solution. No one, including the President, can or should state with surety that what is being done is either enough or is guaranteed to work. What I find depressing is the fact that he has not even finished laying out a plan and the commentators, politicians and “news” people are already saying “it will NOT work.” How do they know it will not work when they do not know what it is?

Having spent a career inventing new products and reinventing businesses this negativity is troubling and disruptive. Where would our country be if this attitude of it will not work before we try it prevailed? Amazon almost failed a number of times and is now a successful company. The history of FedEx is legendary in the number of times it had to be resuscitated before it became a true success. Before the return of Steve Jobs, Apple was considered a has-been and a goner driven to almost extinction by status quo thinkers.

My mother, I am sure like yours, would say over and over again, if you cannot say something good do not say anything at all. That seems like very good advice right now. Another often used line, we have met the enemy and it is us, also seems appropriate. Sure things are bad for a lot of people but they are also good for even more people. Recently I was out to dinner with my sister and brother-in-law and as we looked around the restaurant he looked at me and said, “is this what a depression looks like?” Every table full and the bar was packed with people waiting for tables. Granted an appalling number of people are out of work, their homes are being foreclosed on and a larger number of people are getting farther and farther behind on their bills but there is also a lot of good happening.

If the entrepreneur or new products person gave up on every idea at the first sign of failure we would have no new businesses, products or services. We would have no reinvented businesses and we would have no economy. This country was built on never giving up but we are being encouraged by too many to give up. This chorus of it will not work, it is too expensive or is just not good enough is being beaten into everyone to the degree that could well become a self-fulfilling prophecy. Fortunately, there are some who do not believe it. This group must become the majority.

Ideo is one of the most successful design companies in this country. One of the key tenants of their system is the belief that great design and success is built upon an iterative process. Not so different from what Amazon, FedEx or Apple has done – always on a quests to reinvent themselves. The lesson we should be learning is that success is built upon a factually derived strategy, flawless execution which is constantly being measured and revised as needed. As Deming taught us – plan, do, check, act and then do it all over again.

Brian Williams has a segment on his evening news called Making a Difference. He seems to try to highlight something positive as he ends reporting the news. One has to wonder what people’s mindset and attitudes would be if we were not being bombarded 24/7 about how awful things are and that financial Armageddon is a month away. As my mother was also fond of saying, it takes far more muscles to frown than it does to smile.

When I first started writing these posts, my goal was to share experiences and lessons and not to rant. In this piece I am going to do a little of both because the recent Wells Fargo/Wachovia advertising campaign has my blood pressure up.

On one hand I suppose one could make the case that advertising in the current environment is helping the economy. Being a marketing person, I am all for keeping marketing, advertising and production people employed. I am totally committed to the value and importance of advertising. God knows the media needs every advertising dollar they can generate. But in this case Wells Fargo/Wachovia is spending my money and not very effectively.

Any and every advertising message must communicate a benefit to the consumer. It must be truthful and believable. To be running an almost full-page ad with the headline “One Team, Twice as Strong” is certainly not believable and based upon the amount of money both of these institutions are taking from the federal TARP funds, one could question how truthful it is. I have no idea how much they are spending (between print and TV) on their total media buy but based upon what I have seen it must be substantial. I for one do not see the benefit to consumers in the joining of these two institutions. If there were a benefit than they would have merged long before their collective managements had brought them to the point of total failure. Oh yes, and the benefit is what and for who?

Shouldn’t companies taking taxpayer dollars be using those dollars in a way that will help the economy? Shouldn’t they be loaning money to qualified people whether they are for homes or businesses? Shouldn’t there be some oversight that requires them to be more responsible managers? And if they are going to advertise for goodness sake find a benefit and don’t think you can pull the wool over consumers eyes.

One has to really wonder whether anyone has a clue about the right business model especially for banks. Gretchen Morgenson wrote an excellent piece in the New York Times on January 18th, SundayBusiness section, “The End of Banking As We Know It“. She starts with, “the concept of the financial supermarket – the all-things-to-all-people, intergalactic, behemoth banking institution – bit the dust last week.” She goes on to talk about Citigroup and then talked about Bank of America. While she made some excellent points I do not understand how the Bank of America strategy could be deemed appropriate while Citigroup is deemed a failure but that is for another piece.

This morning as I read the New York Times and a headline caught my attention, “For Homeland Security Nominee, Good Leadership Is in the Details”. The opening paragraph read as follows:

PHOENIX — Janet Napolitano, the Arizona governor and nominee to head the Department of Homeland Security, has been busy the past few weeks with a painstaking review of … the department’s budget.

“She will tell you understanding the budget is understanding the policy directives of any organization,” said Jan Lesher, her chief of staff who, like several aides, is preparing to join Ms. Napolitano in Washington if, as expected, she is confirmed after a Senate hearing on Thursday.

Brilliant, an absolutely brilliant statement. It reminded me of so many stories of frustration both when I worked for corporations directly and then consulted to them. Ms. Napolitano’s modus operandi is certainly not new but few embrace it.

It reminded me of a situation when I was working for Bristol-Myers in the early 1980s, now Bristol-Myers Squibb. An industry study found its way to the chairman illustrating that Bristol-Myers spend more on new consumer products than any of its peer companies and had the lowest success rate. Needless to say, senior management was not pleased. What did they do, formed a task force of course. Being responsible for new products at the Drackett Company (their household products arm) I found myself on the task force.

Like most diligent employees conscripted to a task force we had long meetings, lots of fact-finding and detailed analysis of budgets and behavior over a five-year period. When we met with management to share our conclusions none of the members of the task force really wanted to speak up. Being too young, too dumb and too ambitious, a terrible combination, I finally spoke up. Gentleman I said, “Bristol-Myers does not want new products or have the stomach for the inherent risks that come from introducing new products. We sure go through the motions but stop well short of getting to the marketplace.” Not exactly the conclusion senior management was looking for.

What we learned was that the people who worked in new products, the innovators, creators and change agents either wanted out of the new products department or the company. The finding was that no one, not one person, had ever been promoted out of new products. All promotions and the higher salary levels went to people who were lucky enough to be assigned to the largest divisional brands. It had nothing to do with how or whether they had grown their brand but everything to do with maintaining their brand, minimizing risk and maintaining the status quo. They were evaluated on whether they made their number. The number which by the way they set and was a sales number not a profit number. Oh, and this magic number that was never intended to be significantly higher than the prior year. Predictability is far more important than innovation. Why would anyone want to work in new products? Fortunately much of this thinking has changed but it has taken far too long.

The other thing we found was that new product P&L’s were compared to those of established brands. For example, Windex and Drano were longtime leading brands at the Drackett Company. The amount of marketing support because of their number one category position was significantly lower than any new brand needed to be. Yet these comparisons on marketing support, cost of goods, you name it where the benchmarks for new products and benchmarks no new product could meet. I am sure you can understand why there were no new products.

Jumping a decade or so to when I left corporate life to begin consulting this lesson of looking at the budget was reinforced. I cannot tell you how many times a client would say, “I would love to do this but I do not have the budget.” The translation, “I really do not want to do it, it just seems too risky and all my funds are committed to doing all the stuff that is not working anyway.” Denis Healey is credited with one of the great quotes “it is a good thing to follow the First Law of Holes: if you are in one, stop digging.”

The hardest thing for most corporate managers to do is to stop doing something. An exercise that we used to take clients through was to make lists of every activity on every line in the budget. These were both direct and indirect costs. For example what is the cost of hiring a person to do something that does not need to be done? For each item they were required to put a number between 1 and 10. 1 meant not at all important or critical and 10 meant absolutely critical to the business. From this exercise it always became clear that two thirds of the things in the budget, two thirds of their activities were not directly impacting the growth of the business.

With this learning in hand we could then take them through a stop, keep, start doing exercise. Let us take the things that we believe we need to start doing and eliminate those things that are not impacting the growth of the business going forward. It is absolutely amazing how much money turns up. It is actually amazing how many activities are being perpetuated because no one has the determination to just say stop doing that. It may have been a good idea at one point but its usefulness has long passed. Think about what you could stop doing and how much time and money that would turn up for new ideas, innovation and a more rewarding work experience.