SLOW Movement

NY Times: The Yin and the Yang of Corporate

 

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January 26, 2012

The Yin and the Yang of Corporate Innovation

By STEVE LOHR

IN the hunt for innovation, that elusive path to economic growth and corporate prosperity, try a little jazz as an inspirational metaphor.

That’s the message that John Kao, an innovation adviser to corporations and governments — who is also a jazz pianist — was to deliver in a performance and talk on Saturday at the World Economic Forum in Davos, Switzerland. Jazz, Mr. Kao says, demonstrates some of the tensions in innovation, between training and discipline on one side and improvised creativity on the other.

In business, as in jazz, the interaction of those two sides, the yin and the yang of innovation, fuels new ideas and products. The mixture varies by company.

Mr. Kao points to the very different models of innovation represented by Google and Apple, two powerhouses of Silicon Valley, the world’s epicenter of corporate creativity.

The Google model relies on rapid experimentation and data. The company constantly refines its search, advertising marketplace, e-mail and other services, depending on how people use its online offerings. It takes a bottom-up approach: customers are participants, essentially becoming partners in product design.

The Apple model is more edited, intuitive and top-down. When asked what market research went into the company’s elegant product designs, Steve Jobs had a standard answer: none. “It’s not the consumers’ job to know what they want,” he would add.

The Google-Apple comparison, Mr. Kao says, highlights the “archetypical tension in the creative process.”

Google speaks to the power of data-driven decision-making, and of online experimentation and networked communication. The same Internet-era tools enable crowd-sourced collaboration as well as the rapid testing of product ideas — the essence of the lean start-up method so popular in Silicon Valley and elsewhere.

“These are business and management innovations lubricated by technology,” says Thomas R. Eisenmann, a professor at the Harvard Business School.

The benefits, experts say, are most apparent in markets like Internet software, online commerce and mobile applications for smartphones and tablets. “The cost of creation, distribution and failure is low, so it takes relatively little time, money and effort to float trial balloons,” says Randy Komisar, a partner in Kleiner Perkins Caufield & Byers, the venture capital firm, and a lecturer on entrepreneurship at Stanford.

That style of innovation is being applied well beyond Google’s products and Internet start-ups. The National Science Foundation, for example, is embracing the formula to try to increase commercialization of the university research it finances. Last fall, the foundation announced the first of a series of grants for what it calls the N.S.F. Innovation Corps. The 21 three-member teams received a crash course at Stanford in lean start-up techniques, and have been given $50,000 each and six months to test whether their inventions are marketable.

The lean formula, with its emphasis on constantly testing ideas and products with customers, amounts to applying “the scientific method to market-opportunity identification,” says Errol B. Arkilic, program director at the foundation.

Yet while networked communications and marketplace experiments add useful information, breakthrough ideas still come from individuals, not committees. “There is nothing democratic about innovation,” says Paul Saffo, a veteran technology forecaster in Silicon Valley. “It is always an elite activity, whether by a recognized or unrecognized elite.”

Successful innovation, Mr. Saffo observes, requires “an odd blend of certainty and openness to new information.” In other words, it is a blend of top-down and bottom-up discovery.

OPEN innovation isn’t a new idea. It flourished, in its way, even in the late 19th and early 20th centuries, notes Tom Nicholas, a historian at the Harvard Business School. In fields like electricity, pharmaceuticals and communications, big corporations including General Electric and Dow Chemical routinely monitored the research beyond their walls, and bought or licensed promising work, especially the inventions of university scientists. The result, Mr. Nicholas says, was a thriving “ecosystem of private and corporate innovation.”

A century later, the corporate labs at G.E. are trying to quicken the pace of innovation — but this is long-cycle innovation, since G.E.’s power generators, jet engines and medical-imaging equipment last for decades. The company is opening a software center in Northern California to make its machines more intelligent with data-gathering sensors, wireless communications and predictive algorithms. The goal is to develop machines, such as jet engines or power turbines, that can alert their human minders when they need repairs, before equipment failures occur. Such smarter machines, the company says, are early arrivals in what it calls the Industrial Internet.

To tap outsider ideas, G.E.’s research arm has made investments with venture capital funds in clean-energy technology and health care, and it works with corporations, government labs and universities on hundreds of collaborative projects. “We’re much more externally focused and connected to the outside world than we were several years ago,” says Michael Idelchik, G.E.’s vice president of advanced technologies.

Apple’s smartphones, tablets and computers typically have life spans measured in a few years instead of decades, with new models introduced regularly. But like G.E., Apple is in the hardware business, where innovation cycles are beholden to the limits of materials science and manufacturing.

Apple’s physical world is far different from Google’s realm of Internet software, where writing a few lines of new code can change a product instantly. The careful melding of hardware with software in Apple’s popular products is a challenge in multidisciplinary systems design that must be orchestrated by a guiding hand — though it will no longer be the hand of Mr. Jobs, who died last October.

Yet Apple has also repeatedly displayed its openness to new ideas and influences, as exemplified by the visit that Mr. Jobs made to the Palo Alto research center of Xerox in 1979. He saw an experimental computer with a point-and-click mouse and graphical on-screen icons, which he adopted at Apple. It later became the standard for the personal computer industry.

In 2010, Apple bought Siri, a personal assistant application for smartphones. At the time, it was a small start-up in Silicon Valley that originated as a program funded by theDefense Advanced Research Projects Agency of the Pentagon. Last year, Siri became the talking question-answering application on iPhones.

Apple product designs may not be determined by traditional market research, focus groups or online experiments. But its top leaders, recruited by Mr. Jobs, are tireless seekers in an information-gathering network on subjects ranging from microchip technology to popular culture. “It’s a lot of data crunched in a nonlinear way in the right brain,” says Erik Brynjolfsson, director of the M.I.T. Center for Digital Business.

Apple and Google pursue very different paths to innovation, but the gap between their two models may be closing a bit. In the months after Larry Page, the Google co-founder, took over as chief executive last April, the company eliminated a diverse collection of more than two dozen projects, a nudge toward top-down leadership. And Timothy D. Cook, Apple’s C.E.O., will almost surely be a more bottom-up leader than Mr. Jobs.

“What we’re likely to see,” Mr. Kao says, “is Google and Apple each borrowing from the playbook of the other.”

NY Times: Using Google's Data to Reach Consumers

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December 22, 2011

Using Google’s Data to Reach Consumers

By ANDREW ADAM NEWMAN

THE viruses that Google researchers usually focus on are those that strike computers, but in recent years, they have studied those that infect people, too.

Google correlated billions of flu-related Web searches from 2003 to 2008 with actual Centers for Disease Control and Prevention data over the same period. Then, because Web searchers’ Internet addresses indicated location, Google devised a formula to estimate regional flu activity based solely on searches, with a reporting lag of only about a day, outdoing C.D.C. flu reports, which typically are published a week or two after outbreaks.

In 2009, researchers from Google and the C.D.C. wrote an article summarizing their findings in the journal Nature, and stated that the new predictive model — now called Google Flu Trends and accessible in an interactive format online — could be a boon to public health. “Up-to-date influenza estimates may enable public health officials and health professionals to better respond to seasonal epidemics,” they wrote.

What the researchers probably did not predict was that the Google flu data would end up being the cornerstone of an advertising campaign.

For the Vicks Behind Ear Thermometer, a new product that determines temperature when placed in the soft area behind the ear, marketers wanted to reach mothers, the primary purchasers of thermometers.

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A mobile campaign by Blue Chip Marketing Worldwide, which is based in Chicago, places the ads for the thermometer within popular apps like Pandora that collect basic details about users, including their sex and whether they are parents, and can pinpoint specific demographics to receive ads.

But not all mothers will see the ad on their smartphones. Rather, the ads will be sent only to devices that, according to Google, are in regions experiencing a high incidence of flu. Also, the ads will only be delivered to mothers within two miles of retailers that carry the thermometer, including Walmart, Target and Babies “R” Us.

“Flu levels in your area are high,” says the banner ad within an app. “Be prepared with Vicks revolutionary Behind Ear Thermometer.”

Tapping the ad, which also notes the nearest store that sells the thermometer (“Buy at Rite Aid .3 miles away.”), brings users to a product page with items including an informational video and a list of nearby retailers. Tapping a retailer reveals directions there.

Also handling the campaign, which was introduced in a limited way early in December and will be at full throttle when flu season peaks in January and February, is Where, the location-based mobile advertising network that is a division of PayPal, a unit of eBay.

“It understands how this mom lives and shops, and she receives the message in the most relevant manner,” said Stanton Kawer, chief executive of Blue Chip, about the campaign. “It is so fantastically targeted that it’s really amazing.”

The new thermometer is made by Kaz, which through licensing agreements markets thermometers under the Vicks and Braun brands (both owned by Procter & Gamble), and which also makes Vicks humidifiers.

Sales for thermometers follow flu season, picking up in October, peaking in January and February, and tapering off in March and April, according to Lara Peterson, a vice president for marketing at Kaz, a subsidiary of Helen of Troy Limited.

Smartphones are used by 53 percent of Americans ages 18 to 24 and 64 percent of those 25 to 34, according to Nielsen. Google reports that 79 percent of owners use them for shopping purposes like comparing prices and locating a retailer.

Organizations including the American Academy of Pediatrics now recommend against mercury thermometers (citing the danger of both mercury and glass). Sales of digital thermometers are up, growing about 17 percent from 2005 to 2010, according to a report from Mintel, a market research firm.

The American Academy of Pediatrics still recommends taking temperature rectally for newborns under 3 months, and not taking it orally until children are at least 4 years old. The newest generation of digital thermometers measure parts of the body including the underarm, forehead and inside the ear.

The new Vicks thermometer, with a suggested retail price of $40 to $50, is the first in the category made specifically to measure behind the ear, according to Ms. Peterson, of Kaz.

“It measures fever in a very noninvasive way,” said Ms. Peterson, adding that the location’s proximity to the carotid artery, which carries blood to the brain, ensures accurate readings.

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Because feverish children can be particularly fidgety, the ease of use strikes a chord with parents. Kaz recently commissioned a study where the device was used to take the temperature of napping babies at a day care center, and 95 percent slept through it.

In addition to print and online advertising, also by Blue Chip, commercials for the thermometer will be shown in more than 2,600 pediatricians’ offices for two months beginning Jan. 15, through a deal with KidCare TV, which provides informational programming to waiting rooms.

As for the mobile campaign aimed at mothers in high-flu areas, Brian Morrissey, editor in chief of Digiday, an online publication that covers digital marketing and media, said being tracked by advertisers had a “creepy factor” for some consumers.

Many Facebook users, for example, balked when in 2007 it introduced Beacon, a program that shared their online purchases with their social network. “Creepiness comes in when consumers are surprised,” Mr. Morrissey said.

But he predicted consumers would actually like the thermometer campaign.

“It seems like they’ll pull it off, because they’re using the data in a smart way, for advertising that’s more relevant and useful,” Mr. Morrissey said.

FT: Charity begins at the office

Source:  http://www.ft.com/cms/s/0/0f3efb28-25b3-11e1-856e-00144feabdc0.html#ixzz1gcRptTwO

December 14, 2011 11:14 pm

Charity begins at the office

By Andrew Jack

Life savers: Network Rail partnered with Samaritans, which provided publicity campaigns to help reduce suicides

The chief executive of Standard Chartered has many pressing financial issues on his mind but when Peter Sands hosts a conference call with the bank’s senior executives on Thursday, one unusual item will be high on his agenda: its campaign to tackle preventable blindness.

Such sustained, top-level commitment to a charitable cause has helped the bank’s success in raising more than $37m in eight years to fund 2.7m cataract operations worldwide in conjunction with staff and partners, including a donation-matching programme for the Financial Times seasonal appeal this year for Sightsavers.

But StanChart’s Seeing is Believing campaign, which began as an employee suggestion for marking the bank’s 150th anniversary in 2003, has triggered a far broader programme that embraces volunteering and technical assistance. It has also brought substantial benefits to the bank itself and even led to changes in working practices. “It captured the imagination and commitment of staff, and plays to our culture in cementing a very diverse business,” says Richard Meddings, StanChart chief financial officer, who chairs the effort and points to its role in motivating employees and attracting recruits.

Such projects reflect a broader international trend towards more sophisticated partnerships between businesses and charities that go far beyond traditional chequewriting, a process that risks providing only short-term benefits while diverting an organisation’s limited resources.

“We’ve gone from the chairman’s wife identifying a worthy cause to cause-related marketing, with companies extending their brand by engaging with charities,” says Ben Kernighan, deputy head of the UK’s National Council for Voluntary Organisations, an umbrella body for the non-profit sector. “Companies recognise the huge range of skills they have to respond to the community”.

Mr Meddings says StanChart’s partnerships with local blindness charities around the world has led the bank to introduce “speaking” ATMs with Braille keys and to recruit from schools for the blind, especially in call-centres, where impaired vision need not be an impediment. In Uganda it has hired a former employee of a partner charity as an executive.

David Fass, Macquarie CEO for Europe, the Middle East and Africa, says the bank has partnerships worldwide, including the Cripplegate Foundation to tackle poverty in Islington, north London. “It not only provides valuable skilled resour­ces for the organisation, it provides development for staff. They come back more motivated, more creative . . . It broadens their horizons, working with a variety of stakeholders, [and] collaborating and engaging with senior colleagues.”

Building stronger partnerships

● Make a partnership a high priority: consistent top management support works better than diktats.
● Match: contribute alongside employees’ donations, and make it easier and more tax-efficient through payroll giving. 
● Partner for the long-term:one-off seasonal donations can be quickly forgotten and unsustainable.
● Be sensitive: employee polling to select charities may neglect less popular or well marketed causes.
● Identify shared values:common aims and objectives between a company and a charity help establish better partnerships. 
● Provide time and expertise:volunteering and technical assistance can add more than money for both parties.
● Service contracts: charities’ skills and expertise can form the basis for successful commercial contracts.

These deeper partnerships reflect recognition of professionalism among charities, coupled with an urgency to seek financial support during the economic downturn and a shift in the way services are delivered by public and private sector entities alike.

Klara Kozlov, senior corporate adviser at the Charities Aid Foundation, says one shift involves busines­ses hiring charities to deliver services directly. “The charity/business divide is disappearing,” she explains. “There is a move away from the ‘funder’ model of companies give and charities receive, to a relationship of mutual benefit.”

Three years ago insurer Legal & General formed a unit to create links with non-profit groups. “A lot of partnerships are great for a charity of the year, but the company never learns from them,” says Graham Precey, head of corporate social responsibility. “There is a lot of intellectual property in the third sector that would really help our business. We pay charities, which allows us to deliver better services and them to develop a new income stream and build capacity to work with other corporates.”

Identifying Macmillan Cancer Support as one of the most important beneficiaries of L&G’s employee donation programme led to it paying the charity to train 90 of its “critical illness team” in how to deal with calls from customers with cancer.

L&G has negotiated a similar arrangement with Age UK, a charity advising the elderly, recognising that “we’ve got a generation gap, with our 25-year-old employees talking to customers who are mainly aged over 55”.

It also works with housing charity Shelter and funds all three groups for activities beyond its commercial contracts, such as joint advocacy work where they have common interests.

Such innovative approaches can help win funding for groups that work on less popular causes and those with fewer resources to market themselves for employee ballots. One such charity is the Samaritans. “We struggle to get corporate funding because we are not cuddly or sexy,” says Rachel Kirby-Rider, its fundraising director. So she brokered a “commercial partnership” with Network Rail. The UK rail operator has paid the charity £5m over five years to run a programme that aims to reduce the number of suicides on British railways. These human tragedies also distress employees, disrupt passengers and lead to fines for service delays. “The basis is commercial but there are wider benefits,” says Mike Carr, Network Rail’s national safety improvement manager.

The Samaritans has trained station personnel to identify and talk to people they suspect may be contemplating suicide; counselled train drivers following deaths; and run a publicity campaign targeting men aged 30-55, those judged most at risk.

Jan Levy, head of Three Hands, a consultancy advising businesses on community engagement, praises such projects but cautions that effective partnerships require shared values, which risk being forgotten if “companies treat charities like cleaners”.

Sir Stephen Bubb, head of the Association of Chief Executives of Voluntary Organisations, says: “[The charity] can’t just be a subcontractor. You have to be involved in the way the contract is put together, and have ways to raise and deal with issues. But the marriage could be a really winning combination.”

Ms Kirby-Rider concedes that a direct donation of £5m from Network Rail would probably have been spent on other projects for the Samaritans such as new systems to allow callers to phone the counselling service for free. But she remains very satisfied with the project. “This is a commercial partnership that saves lives and enabled us to do things we would not have been able to do,” she says. “Network Rail staff are really excited about it, so you can achieve charitable and organisational objectives.”

Copyright The Financial Times Limited 2011.

NY Times: The Power of Taking the Big Chance

October 8, 2011

The Power of Taking the Big Chance

By STEVE LOHR

STEVE JOBS, technologist and tastemaker of modern digital culture, described himself as a captain of product design, inspiring his teams of workers, as he once said, to go “beyond what anyone thought possible” and to do “some great work, really great work that will go down in history.”

And he did, time and again. Mr. Jobs did not make the technology himself; he led the teams that did, prodding, cajoling and inspiring. His track record as a business team leader is unique — as Apple’s Macintosh, iPod, iPhone and iPad testify. In two stints at Apple, he made computers into coveted consumer goods and transformed not only product categories, like music players and cellphones, but also entire industries, like music and mobile communications.

Mr. Jobs even failed well. NeXT, a computer company he founded during his years in exile from Apple, was never a commercial success. But it was a technology pioneer. The World Wide Web was created on a NeXT computer, and NeXT software is the core of Apple’s operating systems today.

Part of Mr. Jobs’s legacy will be the lessons learned by those who worked closely with him over the years. Here are just a few:

DO WHATEVER IT TAKES TO DELIGHT CUSTOMERS Six weeks before the introduction of the iPhone in 2007, Mr. Jobs ordered a crucial design change. Until then, the planning for supplies, manufacturing and engineering had been based on the assumption that the smartphone’s face would be plastic, recalls Tony Fadell, a former Apple executive who led iPod and iPhone development from 2001 to 2009. Plastic is less fragile than glass, and easier to make.

But the plastic touch screen had a drawback. It was prone to developing scratches. Those scratches, Mr. Jobs insisted, would irritate users and be seen as a design flaw. “All the logical facts told us to go with plastic, and Steve’s instinct went the other way,” Mr. Fadell says. “It was Steve’s call — his gut.”

The glass choice was a challenge that seemed “nearly impossible” at the time, he says — a last-minute scramble to get supplies of specialized glass and tweak the design of the phone’s casing to reduce the chances the glass would crack when an iPhone was dropped. But with extra investment and a frenetic work regimen, the switch proved doable, despite the tight deadline.

The episode, Mr. Fadell says, points to a principle he took away from his years working with Mr. Jobs. “You do not cut corners and you make sure the customer gets an experience that is an absolute delight,” observes Mr. Fadell, who heads a Silicon Valley start-up company whose product has not yet been disclosed and will not compete with Apple.

GOOD IDEAS TAKE TIME After he was ousted from Apple, Mr. Jobs founded NeXT in 1985. It produced a powerful desktop computer, a stylish black cube, and its initial market was going to be in education. The idea was that the machine would be more than hardware and software; it would also offer content, “a universe of wisdom,” recalls Michael Hawley, a computer scientist who worked closely with Mr. Jobs at NeXT and lived part time in Mr. Jobs’s house, as Mr. Hawley shuttled between California and his post at the M.I.T. Media Lab.

NeXT computers, in Mr. Jobs’s vision, would marry technology and the liberal arts by including digital books, music and art. Mr. Jobs began pursuing the rights to works that could be converted to digital form. He persuaded a few publishers that because they would save the expense of paper, printing and distribution, NeXT should pay a royalty that was a fraction of the cost of a printed book. Mr. Jobs, Mr. Hawley recalled, struck a deal with the Oxford University Press for the complete works of Shakespeare for a royalty of $1 a digital copy.

NeXT’s foray into education fizzled; its machines were too expensive for that market. But Mr. Jobs’s concept and business model for digital media were “the instinct that was translated to Apple with the iTunes store, 99-cents-a-song pricing and all the media offerings that have followed,” Mr. Hawley says.

“When Steve believed in an idea, he was both passionate and patient, scratching away over the years until he got it right,” says Mr. Hawley, a scientist, concert pianist and host of the EG Conference, an annual gathering for technologists, educators and people in media and entertainment.

DON’T DWELL ON MISTAKES Steve Capps, a computer scientist, describes creating the Macintosh, which shipped in 1984, as a constant process of making decisions — part experiment and part product development, with steps ahead mixed with many setbacks. “Steve kind of knew what he wanted, but he didn’t precisely,” says Mr. Capps, who designed software for Macintosh.

Mr. Jobs, Mr. Capps remembers, was the arbiter on countless hardware, software and design choices. “His combination of incisiveness and decisiveness, I think, really explained his success,” Mr. Capps says.

Mr. Jobs was also decisive in recognizing mistakes, even when they were his own. For example, he favored one model of a disk drive — for reading computer programs stored on small, removable so-called floppy disks — while other members of the team championed another design. They kept their disk project going surreptitiously. When they showed him the result, he embraced it. “He turned on a dime,” Mr. Capps says. “Don’t dwell on your mistakes. It’s a great lesson.”

PASSION COUNTS FOR A LOT The relentless intensity and total commitment that Mr. Jobs brought to his work, former colleagues and friends agree, had a simple explanation: he genuinely enjoyed what he did and found it worthwhile.

Andy Hertzfeld, a member of original Macintosh team who is now an engineer at Google, says: “The most important thing that I learned from Steve is to always follow your heart. He believed that the only way to do truly great work is to adore what you are doing.”

Mr. Jobs made a lot of money over the years, for himself and for Apple shareholders. But money never seemed to be his principal motivation. One day in the late 1990s, Mr. Jobs and I were walking near his home in Palo Alto. Internet stocks were getting bubbly at the time, and Mr. Jobs spoke of the proliferation of start-ups, with so many young entrepreneurs focused on an “exit strategy,” selling their companies for a quick and hefty profit.

“It’s such a small ambition and sad really,” Mr. Jobs said. “They should want to build something, something that lasts.”

FT: How to avoid choosing the wrong partner

Source: http://www.ft.com/cms/s/0/b867b068-eed2-11e0-959a-00144feab49a.html#ixzz1aGUT7uK4

 

October 4, 2011 11:36 pm

How to avoid choosing the wrong partner

By Luke Johnson

I have read and written about the desirable attributes to look for in a business partner: but I have never seen a list setting out the characteristics to avoid. So I thought I would itemise the most dangerous flaws I have observed among top executives.

● Endless excuses: certain bosses are incapable of admitting any failings – their entire management style is about finding others to blame for setbacks. Since they never own up to guilt, they never improve – and no one wants to work with them. If things go well, they steal the credit.

● Conflict avoiders: running a business is not a relaxing affair. Frequently it involves differences – with suppliers, employees, customers, landlords, regulators and others. Wimps who retreat from any form of disagreement, who are incapable of being assertive, are no use.

● Too many divorces: everyone can make such an error once, but to repeat it several times shows poor judgment and lack of willpower. I know more entrepreneurs brought emotionally and financially low by repeated divorce than through their companies going bust.

● Serial litigants: never work with individuals who sue all the time, be it staff, vendors or partners. You are bound to suffer a legal claim from them sooner or later: better not to start such an arrangement in the first place.

● Chronic overoptimists: quite a few entrepreneurs fall into this category. There is a delicate balance to be struck between positive thinking and overcaution – which can inhibit action. But steer clear of the fantasists whose ambitions wildly exceed their abilities and resources.

● No sense of humour: things go wrong in life and at work. If you cannot laugh at the bungles, the journey is simply too painful.

● Alcoholics and drug addicts: partnering with unreformed substance abusers is a nightmare. They will lie and perhaps steal – their first loyalty will always be to booze and drugs.

● Wrong priorities: you want a financial partner to be highly focused on success. If their hobbies, home, family and friends are overwhelmingly more important to them, walk away. You need someone who will make real sacrifices to achieve your joint commercial goals

● No hinterland: the opposite extreme – workaholic bosses who possess no life whatsoever outside the office. Such monochrome types are dull and lack balance.

● Philanderers: owners who sexually exploit their staff are toxic – and surprisingly common. Their private lives are chaotic, and their extracurricular activities often generate discrimination claims.

● Verbal diarrhoea: great managers should listen and thereby learn, not simply deliver monologues. Communication must be an exchange of information, or it is ineffective.

● Persistent critics: their endless carping demotivates all their subordinates, which means they never build a solid team. Such moaners do not understand that the carrot is a much more effective tool than the stick.

● Non-delegators: detail maniacs who cannot surrender control of anything. As a consequence they are incapable of building a substantial enterprise, because they trust no one and doubt everyone’s competence – save their own, of course.

● Financial illiteracy: do not appoint an innumerate CEO. If they do not understand financial statements, they cannot be in charge of a business. They do not need to be a qualified accountant, but they must be able to interpret the accounts.

● Bullies: most who rise to the top are forceful personalities, but megalomaniac dictators who torment their staff tend to destroy morale and undermine productivity. They are anathema in the modern workplace.

● Neurotic worriers: overanxiety makes people indecisive and erodes confidence. Skilful leaders cannot afford such weaknesses: they are the ones who are meant to know the direction of travel, and who promote the cause.

● Profligacy: extravagance is not an asset in these straitened times. You want a cost-conscious, abstemious colleague who leads by example.

Of course, no one is perfect, and many of us suffer from some of these faults. But big scores on more than a few categories should set alarm bells ringing.

Don’t say you haven’t been warned.

Copyright The Financial Times Limited 2011.

 

The Unreal Times: BCG hires McKinsey to advice it on how to become number 1

 

This is hilarious! :D

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The Unreal Times

India's favourite satire, spoof, parody and human portal

Source: http://www.theunrealtimes.com/2011/08/12/bcg-hires-mckinsey-to-advise-it-on-how-to-become-number-1/

BCG hires McKinsey to advice it on how to become number 1

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McK will use the BCG matrix to slot BCG consultants as dogs and cows

Strategy consulting major Boston Consulting Group (BCG) announced today that it has hired the services of the world’s number 1 strategy consulting firm McKinsey to advice BCG on how to replace McKinsey as the number 1 strategy consulting firm.

“We are sick of being second best. After a rigorous year long internal analysis session that involved 35 BCG consultants (editor – this translates to roughly over 2.9 lakh manhours assuming each consultant put in 18 hours a day,7 days a week), 45 proprietary BCG frameworks, and over 900 Powerpoint slides, we came to the firm conclusion that the best strategy would be to hire McKinsey to advice us on becoming #1,” said Vijayendra ‘Baba’ Haryal, Global Head, BCG.

McKinsey has readily agreed to serve its new client as professionally as possible. “In normal times, we’d have asked them go climb a tree. But with another looming recession, we can’t afford to be choosy. Hopefully we should be able to retain BCG as an anchor client for at least 5 years,” said Achal Nath, Senior Partner, McKinsey.

Achal pooh-poohed the idea of a potential conflict of interest. “As long as they are paying us, we are happy to advice them. One of the firm’s core values is to place the client’s interest above everything else, so there is no question of  a conflict of interest” said Achal. The Senior Partner however did concede that in theory BCG can replace McKinsey as the number 1 firm at the end of the engagement. “Yeah, in theory they should. But the cool thing about consulting is that we are not required to put our money where our mouths are, so I am not gonna lose sleep over it,” he shrugged.

The McKinsey team deployed for this prestigious assignment has been persuaded by BCG to use the famous BCG Growth-Share Matrix for some of the analysis. “Yeah, we have our own tools but these guys seem quite sentimental about this stuff and insisted that we use it. So in the first phase of the engagement, we are gonna slot BCG consultants into dogs, cows, question marks, and stars so that the dogs can be kicked out and the stars can be promoted. We will then see what to do with the question marks,” said team lead and rising McKinsey star, Raghib Ahmed.

Pundits think BCG’s move is a master-stroke. “If McK indeed helps them become #1, great! If not, BCG can then tell prospective clients that Mck’s advice does not always produce results,” said Li Chin, a Hong Kong based business journalist. “Hmm… that’s an interesting line of thought. To be honest, we just want to get hold of some nice Mck slides, but that will help too,” said ‘Baba’ Haryal, Global Head, BCG to The UnReal Times.

NY Times: First, Make Money. Also, Do Good.

 

August 13, 2011

First, Make Money. Also, Do Good.

By STEVE LOHR

CORPORATE social responsibility efforts have always struck me as the modern equivalent of John D. Rockefeller handing out dimes to the common folk. They may be well-intentioned, but they often seem like small gestures at the margins of what companies are really trying to do: make money.

As well they should, an argument most famously made by the Nobel laureate Milton Friedman decades ago. He called social responsibility programs “hypocritical window-dressing” in an article he wrote for The New York Times Magazine in 1970, titled “The Social Responsibility of Business Is to Increase Its Profits.”

But Michael E. Porter, a Harvard Business School professor, may have an answer to the Friedman principle. Mr. Porter is best-known for his original ideas about corporate strategy and the economic competition among nations and regions. Recently, however, he has been promoting a concept he calls “shared value.”

Earlier this year, Mr. Porter and Mark R. Kramer, a consultant and a senior fellow in the corporate social responsibility program at the Kennedy School of Government at Harvard, laid out their case in a lengthy article in the Harvard Business Review, “Creating Shared Value: How to Reinvent Capitalism — and Unleash a Wave of Innovation and Growth.” Since then, Mr. Porter and Mr. Kramer have been championing the shared-value thesis in conferences, meetings with corporate leaders, and even a conversation with White House advisers.

Shared value is an elaboration of the notion of corporate self-interest — greed, if you will. The idea that companies can do well by doing good is certainly not new. It is an appealing proposition that over the years has been called “triple bottom line” (people, planet, profit), “impact investing” and “sustainability” — all describing corporate initiatives that address social concerns including environmental pollution, natural-resource depletion, public health and the needs of the poor.

The shared-value concept builds on those ideas, but it emphasizes profit-making not just as a possibility but as a priority. Shared value, Mr. Porter says, points toward “a more sophisticated form of capitalism,” in which “the ability to address societal issues is integral to profit maximization instead of treated as outside the profit model.”

Social problems are looming market opportunities, according to Mr. Porter and Mr. Kramer. They note that while government programs and philanthropy have a place — beyond dimes, Mr. Rockefeller created a path-breaking foundation — so, increasingly, does capitalism.

The shared-value concept is not a moral stance, they add, and companies will still behave in their self-interest in ways that draw criticism, like aggressive tax avoidance and lobbying for less regulation. “This is not about companies being good or bad,” Mr. Kramer says. “It’s about galvanizing companies to exploit the market in addressing social problems.”

The pair point to promising signs that more and more companies are pursuing market strategies that fit the shared-value model.

Several years ago, executives at General Electric began looking across its portfolio of industrial and consumer businesses, eyeing ways to apply new technology to reduce energy consumption. They were prompted by corporate customers voicing concerns about rising electrical and fuel costs, and by governments pushing for curbs on carbon emissions.

The result was G.E.’s “ecomagination” program, a business plan as well as a marketing campaign. In recent years, the company has invested heavily in technology to lower its products’ energy consumption, and the use of water and other resources in manufacturing.

To count in the program, a product must deliver a significant energy savings or environmental benefit over previous designs. G.E. hired an outside environmental consulting firm, GreenOrder, to help in measuring performance. To date, more than 100 G.E. products have qualified, from jet engines to water filtration equipment to light bulbs. In 2010, such products generated sales of $18 billion, up from $10 billion in 2005, when the program began.

“We did it from a business standpoint from Day 1,” says Jeffrey R. Immelt, G.E.’s chief executive. “It was never about corporate social responsibility.”

Technology has opened the door to markets that have shared-value characteristics. For decades, I.B.M. sold its computers, software and services to city governments around the world, though mainly for back-office chores like managing payrolls. But the Internet, the Web, electronic sensors and steady advances in computing have helped transform I.B.M.’s role, as it now helps cities track and analyze all kinds of data to improve services.

“We’ve moved from the back office to the core mission of cities — managing traffic, monitoring public health, optimizing water use and crime-fighting,” says Jon C. Iwata, a senior vice president.

I.B.M. is now working with about 2,000 cities worldwide as part of its “Smarter Cities” business, which began three years ago. One advanced project is in the sprawling city of Rio de Janeiro, where I.B.M. is designing a computerized command center. It is intended to pull data from dozens of city agencies, as well as weather stations and webcams. One assignment is to closely track heavy rainfall and to predict its impact — where flooding might occur, how traffic should be rerouted, and what neighborhoods may need to be evacuated. The goal is to predict and prepare for the kind of mudslides and floods that killed hundreds of people in April 2010 and left 15,000 homeless.

THE evolution of low-cost Internet and mobile phone technology has also let Intuit pursue opportunities with shared-value attributes. The company offers free online income-tax preparation software and filing services for lower-income households (now earning $31,000 or less). Since 1999, nearly 13 million people have taken advantage of the service.

The cost is relatively inexpensive for Intuit, as the service exploits the efficiency of online distribution; the charge for paying customers is $20 to $50. And the program blurs the line between charity and marketing, because millions of people who are sampling the company’s product, may well become paying customers as their incomes rise.

In India, Intuit has begun offering a free information service for farmers that can be accessed on any cellphone. Part-time workers check crop prices at local markets and send the information to Intuit. The company then relays the latest, local price quotations in text messages to subscribing farmers. As a result, the farmers can make smarter decisions about when and where to sell their produce.

The service in India began last year, and 300,000 farmers now use it. In follow-up surveys, farmers report that their earnings are up 25 percent, says Scott Cook, the founder of Intuit and chairman of the executive committee. The company, he adds, is testing ways to make money off the service, perhaps with text ads for simple tractors and fertilizers.

Mr. Cook points to other new business forays that are part of the same strategy. One is an Intuit health debit card for American small businesses that want to pay for some of their employees’ medical care but cannot afford conventional health insurance.

“We look for places we can use our strengths as a company to help solve big problems,” he says. “You can call that shared value if you like. But I look at it as the business we’re in.”

Coca Cola "Heist" Superbowl Commercial

Apt illustration of team work. Enjoy!

===

FT: Case study - Trung Nguyen coffee

Case study: Trung Nguyên coffee

By Morgen Witzel

Published: April 27 2011 23:08 | Last updated: April 27 2011 23:08

Mr Vu positioned his brand as part of a Vietnamese tradition

The story. Coffee cultivation in Vietnam began under French colonial rule in the 19th century and soon became a staple industry. By the mid-1990s, the country had become one of the three biggest coffee producers in the world.

Much of it, however, was low quality and sold at cut prices overseas. Vietnamese-American entrepreneur Dang Le Nguyen Vu believed high-quality Vietnamese gourmet coffees could be produced and sold profitably. So, in the mid-1990s, he launched Trung Nguyên, a coffee manufacturer and café chain.

EDITOR’S CHOICE

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Case study: Axa’s rebranding - Mar-09

The challenge. Vietnam is an emerging market. In 1995, per capita income was only $250 (the 2010 figure was $1,200). This was one reason why Mr Vu chose to develop a luxury brand that would appeal to both domestic and export markets.

To do so, he would have to persuade the home market that his expensive product offered value, and convince overseas customers that Vietnam could produce gourmet coffee.

The home market. As the owner of a coffee-processing business, Mr Vu could improve the quality but there was no efficient distribution network. The answer was to set up a chain of coffee shops, modelled in part on Starbucks, that would also sell coffee beans for home consumption.

The branding of Trung Nguyên was carefully planned. To counter competition from big multinationals, whether coffee shops or brands such as Nescafé, Mr Vu positioned it as part of a Vietnamese tradition. A Trung Nguyên museum tells the history of coffee-making in the country.

One of Trung Nguyên’s best-known products is kopi luwak or “weasel coffee”, made from coffee berries that have passed through the digestive tract of a civet cat. Marketing this expensive delicacy, which is harvested only in south-east Asia, helps identify Trung Nguyên with Vietnam’s coffee culture.

Combining heritage and modernity is at the heart of the brand, whether in the packaging or the styling of the coffee shops. Straplines such as “Bringing creativity into coffee” suggest innovation.

By pricing the coffee high, Mr Vu appealed to the aspirations of Vietnamese people. An emerging middle class took to the brand and the coffee shops became important social centres. The first Trung Nguyên coffee shop opened in Ho Chi Minh City in 1998, and by 2010 there were more than 1,000 across Vietnam.

Trung Nguyên has also diversified into decaffeinated and instant coffee and tea production.

The overseas market. Export was part of the strategy from the start. Trung Nguyên now markets its coffee in more than 40 countries, including the US and the UK.

Most of the brand’s appeal is to niche markets, to consumers interested in exotic coffees and, especially in the US, to visitors to Vietnam who have seen the brand there. Most of the coffee is sold online through franchisees. Sales volumes are very small compared with those in Vietnam.

Attempts to replicate the domestic coffee shop branding strategy and set up Trung Nguyên outlets overseas have met with mixed success. There are now two stores in Singapore and a few elsewhere in the world. But, generally, in spite of its success in Vietnam, the Trung Nguyên brand is not well-known elsewhere.

Current challenges. Trung Nguyên must expand its export market if the company is to continue to grow. Although rising prosperity in Vietnam means there are opportunities for domestic growth, Trung Nguyên is under pressure from competitors.

Key lessons. Creating a luxury brand in an emerging market might seem contradictory. But the Trung Nguyên case shows how it can be done. By appealing to national culture and values, and creating an aspirational brand with which rising middle classes could identify, it transformed the coffee market in Vietnam.

However, Trung Nguyên has also learnt that extending the brand overseas will take longer, and require more finessing.

The author is honorary senior fellow at the University of Exeter Business School

Copyright The Financial Times Limited 2011.

WSJ: The Really Smart Phone

WHAT THEY KNOW
APRIL 23, 2011

The Really Smart Phone

Researchers are harvesting a wealth of intimate detail from our cellphone data, uncovering the hidden patterns of our social lives, travels, risk of disease—even our political views.

By ROBERT LEE HOTZ

Photo-illustration by Adam Magyar

'Phones can know,' says an MIT researcher. 'People can get this god's-eye view of human behavior.'

Apple and Google may be intensifying privacy concerns by tracking where and when people use their mobile phones—but the true future of consumer surveillance is taking shape inside the cellphones at a weather-stained apartment complex in Cambridge, Mass.

For almost two years, Alex Pentland at the Massachusetts Institute of Technology has tracked 60 families living in campus quarters via sensors and software on their smartphones—recording their movements, relationships, moods, health, calling habits and spending. In this wealth of intimate detail, he is finding patterns of human behavior that could reveal how millions of people interact at home, work and play.

Through these and other cellphone research projects, scientists are able to pinpoint "influencers," the people most likely to make others change their minds. The data can predict with uncanny accuracy where people are likely to be at any given time in the future. Cellphone companies are already using these techniques to predict—based on a customer's social circle of friends—which people are most likely to defect to other carriers.

A wave of ambitious social-network experiments is underway in the U.S. and Europe to track our movements, probe our relationships and, ultimately, affect the individual choices we all make. WSJ's Robert Lee Hotz reports.

The data can reveal subtle symptoms of mental illness, foretell movements in the Dow Jones Industrial Average, and chart the spread of political ideas as they move through a community much like a contagious virus, research shows. In Belgium, researchers say, cellphone data exposed a cultural split that is driving a historic political crisis there.

And back at MIT, scientists who tracked student cellphones during the latest presidential election were able to deduce that two people were talking about politics, even though the researchers didn't know the content of the conversation. By analyzing changes in movement and communication patterns, researchers could also detect flu symptoms before the students themselves realized they were getting sick.

"Phones can know," said Dr. Pentland, director of MIT's Human Dynamics Laboratory, who helped pioneer the research. "People can get this god's-eye view of human behavior."

So far, these studies only scratch the surface of human complexity. Researchers are already exploring ways that the information gleaned from mobile phones can improve public health, urban planning and marketing. At the same time, researchers believe their findings hint at basic rules of human interaction, and that poses new challenges to notions of privacy.

"We have always thought of individuals as being unpredictable," said Johan Bollen, an expert in complex networks at Indiana University. "These regularities [in behavior] allow systems to learn much more about us as individuals than we would care for."

Today, almost three-quarters of the world's people carry a wireless phone. That activity generates immense commercial databases that reveal the ways we arrange ourselves into networks of power, money, love and trust. The patterns allow researchers to see past our individual differences to forms of behavior that shape us in common.

As a tool for field research, the cellphone is unique. Unlike a conventional land-line telephone, a mobile phone usually is used by only one person, and it stays with that person everywhere, throughout the day. Phone companies routinely track a handset's location (in part to connect it to the nearest cellphone tower) along with the timing and duration of phone calls and the user's billing address.

Typically, the handset logs calling data, messaging activity, search requests and online activities. Many smartphones also come equipped with sensors to record movements, sense its proximity to other people with phones, detect light levels, and take pictures or video. It usually also has a compass, a gyroscope and an accelerometer to sense rotation and direction.

What They Know

A Wall Street Journal investigation into the world of digital privacy.

• The Web's New Gold Mine: Your Secrets
• Sites Feed Personal Details To New Tracking Industry
• On Web's Cutting Edge, Anonymity in Name Only

Advances in statistics, psychology and the science of social networks are giving researchers the tools to find patterns of human dynamics too subtle to detect by other means. At Northeastern University in Boston, network physicists discovered just how predictable people could be by studying the travel routines of 100,000 European mobile-phone users.

After analyzing more than 16 million records of call date, time and position, the researchers determined that, taken together, people's movements appeared to follow a mathematical pattern. The scientists said that, with enough information about past movements, they could forecast someone's future whereabouts with 93.6% accuracy.

The pattern held true whether people stayed close to home or traveled widely, and wasn't affected by the phone user's age or gender.

"For us, people look like little particles that move in space and that occasionally communicate with each other," said Northeastern physicist Albert-Laszlo Barabasi, who led the experiment. "We have turned society into a laboratory where behavior can be objectively followed."

Only recently have academics had the opportunity to study commercial cellphone data. Until recently, most cellphone providers saw little value in mining their own data for social relationships, researchers say. That's now changing, although privacy laws restrict how the companies can share their records.

Several cellphone companies in Europe and Africa lately have donated large blocks of calling records for research use, with people's names and personal details stripped out.

"For the scientific purpose, we don't care who the people are," said medical sociologist Nicholas Christakis at Harvard University, who is using phone data to study how diseases, behavior and ideas spread through social networks, and how companies can use these webs of relationships to influence drug marketing and health-care decisions.

His work focuses on "social contagion"—the idea that our relationships with people around us, which are readily mapped through cellphone usage, shape our behavior in sometimes unexpected ways. By his calculation, for instance, obesity is contagious. So is loneliness.

Even though the cellphone databases are described as anonymous, they can contain revealing personal details when paired with other data. A recent lawsuit in Germany offered a rare glimpse of routine phone tracking. Malte Spitz, a Green party politician, sued Deutsche Telekom to see his own records as part of an effort by Mr. Spitz to highlight privacy issues.

In a six-month period, the phone company had recorded Mr. Spitz's location more than 35,000 times, according to data Mr. Spitz released in March. By combining the phone data with public records, the news site Zeit Online reconstructed his daily travels for months.

Read More

• Our Social Networks, Ourselves
• Google Defends Way It Gets Phone Data
• Avoiding Mobile Trackers

In recent days, Apple Inc. triggered privacy alarms with the news that its iPhones automatically keep a database of the phone's location stretching back for months. On Friday, The Wall Street Journal reported that both Apple and Google Inc. (maker of the Android phone operating system) go further than that and in fact collect location information from their smartphones. A test of one Android phone showed that it recorded location data every few seconds and transmitted it back to Google several times an hour.

Google and Apple have said the data transmitted by their phones is anonymous and users can turn off location sharing.

"We can quantify human movement on a scale that wasn't possible before," said Nathan Eagle, a research fellow at the Santa Fe Institute in New Mexico who works with 220 mobile-phone companies in 80 countries. "I don't think anyone has a handle on all the ramifications." His largest single research data set encompasses 500 million people in Latin America, Africa and Europe.

Among other things, Mr. Eagle has used the data to determine how slums can be a catalyst for a city's economic vitality. In short, slums provide more opportunities for entrepreneurial activity than previously thought. Slums "are economic springboards," he said.

Cellphone providers are openly exploring other possibilities. By mining their calling records for social relationships among customers, several European telephone companies discovered that people were five times more likely to switch carriers if a friend had already switched, said Mr. Eagle, who works with the firms. The companies now selectively target people for special advertising based on friendships with people who dropped the service.

At AT&T, a research team led by Ramon Caceres recently amassed millions of anonymous call records from hundreds of thousands of mobile-phone subscribers in New York and Los Angeles to compare commuting habits in the two metropolitan areas.

Dr. Caceres, a lead scientist at AT&T Labs in Florham Park, N.J., wanted to gauge the potential for energy conservation and urban planning. "If we can prove the worth of this work, you can think of doing it for all the world's billions of phones," he said.

Thousands of smartphone applications, or "apps," already take advantage of a user's location data to forecast traffic congestion, rate restaurants, share experiences and pictures, or localize radio channels. Atlanta-based AirSage Inc. routinely tracks the movements of millions of cellphones to generate live traffic reports in 127 U.S. cities, processing billions of anonymous data points about location every day.

View Full Image

M. Scott Brauer for The Wall Street Journal

Alex Pentland, director of MIT's Human Dynamics Laboratory, above. Using location data, he said, 'I can say a lot about the music you like...your financial risks.'

What Phones Know

• One study found that the U.K.'s happiest time is 8 p.m. Saturday; its unhappiest day is Tuesday.
• European phone companies discovered their customers were five times more likely to switch carriers if friends had switched, allowing the companies to target their ads.
• Another study was able to determine that two people were talking about politics—without the researchers hearing the call

As more people access the Internet through their phones, the digital universe of personal detail funneled through these handsets is expanding rapidly, and so are ways researchers can use the information to gauge behavior. Dr. Bollen and his colleagues, for example, found that the millions of Twitter messages sent via mobile phones and computers every day captured swings in national mood that presaged changes in the Dow Jones index up to six days in advance with 87.6% accuracy.

The researchers analyzed the emotional content of words used in 9.7 million of the terse 140-character text messages posted by 2.7 million tweeters between March and December 2008. As Twitter goes, so goes the stock market, the scientists found.

"It is not just about observing what is happening; it is about shaping what is happening," said Dr. Bollen. "The patterns are allowing us to learn how to better manipulate trends, opinions and mass psychology."

Some scientists are taking advantage of the smartphone's expanding capabilities to design Android and iPhone apps, which they give away, to gather personal data. In this way, environmental economist George MacKerron at the London School of Economics recruited 40,000 volunteers through an iPhone app he designed, called Mappiness, to measure emotions in the U.K.

At random moments every day, his iPhone app prompts the users to report their moods, activities, and surroundings. The phone also automatically relays the GPS coordinates of the user's location and rates nearby noise levels by using the unit's microphone. It asks permission to photograph the locale.

By early April, volunteers had filed over two million mood reports and 200,000 photographs.

Publicly, Mr. MacKerron uses their data to chart the hour-by-hour happiness level of London and other U.K. cities on his website. By his measure, the U.K.'s happiest time is 8 p.m. Saturday; its unhappiest day is Tuesday.

Perhaps less surprisingly, people are happiest when they are making love and most miserable when sick in bed. The most despondent place in the U.K. is an hour or so west of London, in a town called Slough.

On a more scholarly level, Mr. MacKerron is collecting the information to study the relationship between moods, communities and the places people spend time. To that end, Mr. MacKerron expects to link the information to weather reports, online mapping systems and demographics databases.

Several marketing companies have contacted him to learn whether his cellphone software could help them find out how people feel when they are, for instance, near advertising billboards or listening to commercial radio, he said.

Mr. MacKerron said he's tempted—but has promised his users that their personal information will be used only for scholarly research. "There is a phenomenal amount of data we can collect with very little effort," he said.

Some university researchers have begun trolling anonymous billing records encompassing entire countries. When mathematician Vincent Blondel studied the location and billing data from one billion cellphone calls in Belgium, he found himself documenting a divide that has threatened his country's ability to govern itself.

Split by linguistic differences between a Flemish-speaking north and a French-speaking south, voters in Belgium set a world record this year, by being unable to agree on a formal government since holding elections last June. Belgium's political deadlock broke a record previously held by Iraq.

The calling patterns from 600 towns revealed that the two groups almost never talked to each other, even when they were neighbors.

This social impasse, as reflected in relationships documented by calling records, "had an impact on the political life and the discussions about forming a government," said Dr. Blondel at the Catholic University of Louvain near Brussels, who led the research effort.

The MIT smartphone experiment is designed to delve as deeply as possible into daily life. For his work, Dr. Pentland gave volunteers free Android smartphones equipped with software that automatically logged their activities and their proximity to other people. The participants also filed reports on their health, weight, eating habits, opinions, purchases and other personal information, so the researchers could match the phone data to relationships and behavior.

The current work builds on his earlier experiments, beginning in 2004, conducted in an MIT dormitory that explored how relationships influence behavior, health, eating habits and political views. Dr. Pentland and his colleagues used smartphones equipped with research software and sensors to track face-to-face encounters among 78 college students in a dorm during the final three months of the 2008 presidential election.

Every six minutes, each student's phone scanned for any other phone within 10 feet, as a way to identify face-to-face meetings. Among other things, each phone also reported its location and compiled an anonymous log of calls and text messages every 20 minutes. All told, the researchers compiled 320,000 hours of data about the students' behavior and relationships, buttressed by detailed surveys.

"Just by watching where you spend time, I can say a lot about the music you like, the car you drive, your financial risk, your risk for diabetes. If you add financial data, you get an even greater insight," said Dr. Pentland. "We are trying to understand the molecules of behavior in this really complete way."

Almost a third of the students changed their political opinions during the three months. Their changing political ideas were related to face-to-face contact with project participants of differing views, rather than to friends or traditional campaign advertising, the analysis showed.

"We can measure their daily exposure to political opinions," said project scientist Anmol Madan at MIT's Media Lab. "Maybe one day, you would be able to download a phone app to measure how much Republican or Democratic exposure you are getting and, depending on what side you're on, give you a warning."

As a reward when the experiment was done, the students were allowed to keep the smartphones used to monitor them.

Write to Robert Lee Hotz at sciencejournal@wsj.com

WSJ: Tapping Into Social-Media Smarts

APRIL 25, 2011

Tapping Into Social-Media Smarts

Employees share information in their personal lives. Companies can use those skills to improve workplace collaboration.

By TERRI L. GRIFFITH

To recognize the huge potential social networking offers for companies looking to improve knowledge sharing and collaboration among their employees, consider these two facts:

• About half of company knowledge-management initiatives stagnate or fail.

• There are about 131 million U.S. Facebook users between the ages of 18 and 64, and more than 500 million world-wide.

Leadership in IT

See the complete Leadership: Information Technology Journal report.

That's more than half a billion people using the same kinds of tools so many companies have struggled to put to productive use. In their private lives, users of Facebook, Twitter and other social media are completely at ease forming communities of shared interests and keeping everyone up-to-date with messages, pictures and documents. Now they are ready to put those same tools to work at the office—to help everyone see who knows what, who needs what information, and how to coordinate their work.

In other words, employees already have the skills for more collaboration. It's up to companies to take advantage of them. Here's how to do just that:

Have employees identify areas that would benefit from greater collaboration.

View Full Image

Margaret Riegel

Be explicit. Raise the subject with a question like, "If we had something like Facebook [or Wikipedia, YouTube, LinkedIn, etc.], what part of your work would be better?"

It's likely that many of your employees are already thinking about how they might apply these same tools to improve how they get their jobs done. In fact, they may already have started without you.

In some companies, teams have created Facebook groups around their projects to help them get to know their teammates and have a single place to store project documents. Other savvy teams have studied Facebook, and then asked their IT staff to create a similar online space for collaborative work.

In both cases, employees are taking action based on recognizing unmet needs for online collaboration and knowledge-management tools.

Don't say no to social networking because of concerns about public sites.

Many companies have valid concerns about security breaches, privacy issues, bandwidth hogging and loss of productivity when employees use social-networking sites like Facebook at the office. But social networking for a business doesn't have to involve public sites. There are many products that allow businesses to set up private systems with internal database, search and chat functionality. Socialtext Inc., Altus vSearch from Altus Inc., Yammer Inc., and Chatter from Salesforce.com Inc. are a few.

These tools support social networking but let the company stay in control and maintain security. Altus vSearch, for example, lets companies capture videos of formal presentations and their associated slides—or informal how-tos and any other video content—and make the material searchable. As on YouTube, viewers can choose to follow particular people or topics. The video files can also integrate personal-profile information about the employees involved. The result is a database of work-related video for training, informal learning, reuse of presentations, and a more-developed, work-focused social network. Material can be made available to employees only, to invited outsiders, or to the public.

Set clear guidelines for both external and internal social networking and collaboration.

Make it clear to employees that they are personally responsible for the information they post and that real names should be used. Instruct employees as to what information is confidential or proprietary to the company, and how they can get the most out of sharing without putting company secrets at risk. In choosing or creating a system, ask your IT department about their biggest concerns around social networking and how these concerns can be dealt with while still supporting collaboration.

Start with goals everyone can understand.

Communicate to everyone at the company what you want to achieve, such as better team collaboration or brainstorming for new product or service ideas. Send a clear message that social networking at work should be about work. And make sure everyone at the company is part of the network. Don't build barriers that might exclude people just because of their position in the organization. New ideas can come from unexpected places.

Make policies and procedures supportive.

Employees will need to make social networking part of their work routines—interacting and answering questions from one another. They'll also need incentives to collaborate. Raises and promotions based solely on individual performance won't encourage workers to share new ideas or possible solutions.

It's also important for employees to be able to track the results when they share an idea, suggest a solution or support a team working on the other side of the world.

Prepare for expectations of greater democracy.

Social networkers are accustomed to seeing what their friends are doing, expressing their opinions in polls and being welcomed into conversations. Not all companies wish to be as transparent and open to dialogue as the public social-networking environment is. But there will be pressure for greater transparency in the workplace as social networking is introduced.

"If social media can democratize a country, you had better believe it can democratize your company," Vijay Gurbaxani, a professor of information systems and computer science, said in a speech to chief information officers in February in New Delhi. Mr. Gurbaxani teaches at the Paul Merage School of Business, University of California, Irvine.

You can sidestep tensions by being ready with clear and thoughtful responses as to where employees can expect transparency and open dialogue and where they cannot.

Be open to change.

Facebook, YouTube and Twitter are some of the first collaboration models your workers encountered, but they won't be the last. Some of your employees may now be experimenting with mobile video and location-aware applications. Always be willing to learn from employees about new technologies.

Dr. Griffith is a professor of management at the Leavey School of Business at Santa Clara University in Santa Clara, Calif. She can be reached at reports@wsj.com.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

WSJ: Uniqlo Pop-up Store Targets Sweaty Tokyo Commuters

Impressed with Uniqlo on their sales approach!

 

April 22, 2011, 11:59 AM JST

Uniqlo Pop-up Store Targets Sweaty Tokyo Commuters

Pop-up stores aren’t new. Nor are casual-wear chain retailer Uniqlo’s ‘Silky Dry’ and ‘Sarafine’ innerwear summer lines, designed to help wearers stay cool.

Uniqlo

Uniqlo’s pop-up store at the Ikebukuro subway station in Tokyo.

But the March 11 disasters knocked out a significant chunk of power utility Tepco’s electricity production capacity. And the possibility that a shortage of energy this summer in Japan will leave air conditioners idle as citizens drip with perspiration more intensely than the past is a very real and new scenario.

The likelihood has Uniqlo, the flagship chain of Fast Retailing Co., mashing the two well-worn concepts to test the likely pick-up in Tokyo commuter demand for the tech-savvy clothes: A pop-up store selling exclusively silky dry and sarafine innerwear products.

Uniqlo, ubiquitous in Japan, Thursday opened a temporary shop in the hubbub of Tokyo’s Ikebukuro station, one of the capital’s busier intersections. The merchandise is strictly apparel made using the cool summer-wear lines – a counterpart to Uniqlo’s popular winter hit, “Heat Tech” innerwear that’s designed to retain body heat.

The store, which looks roughly like a raft that docked in the middle of the station, will carry the basic innerwear lineup: crew necks, v-necks, camisoles and boxer briefs, among others, typically retailing for 990 yen, or about $12. The store will be open until June 26.

Launched in March last year, the Silky Dry line is for men, while the Sarafine garb is for women. The retailer touts the material of the men’s line as being like “a second skin” that’s barely perceptible. Sarafine’s fabric is made of “breathable fibers” woven together with nylon specially produced by fibers company Toray Industries Inc. The stretch fabric of both, the company says, absorbs and removes sweat and keeps body odor at bay.

Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved

Bloomberg Businessweek: The Games Companies Play

CEO Guide to Business Gamification April 4, 2011, 11:24PM EST text size: TT

The Games Companies Play

Siemens, Hilton, and Target are using games to train workers and improve how they design and market products

By Rachael King

 

Siemens (SI) is pinning high hopes on Pete. A cheery fellow, Pete wears a yellow hard hat with his name emblazoned across the front. He's polite and eager to lend a hand. He's also animated: Pete the Plant Manager stars in a new online video game from Siemens called Plantville that simulates what it's like to run a manufacturing facility. The aim is to take three dilapidated factories and make them more efficiently meet customer orders by hiring employees, redesigning layout, and buying and installing new Siemens equipment.

Germany's Siemens, which makes power plants, scanners, and trains, created the game to fuel equipment sales and foster greater employee knowledge of its products. "Employees are sometimes siloed in their business units and don't see the breadth and depth of our portfolio," says Tom Varney, head of marketing communications at Siemens Industry. The company joins a growing roster of enterprises as diverse as Hilton Worldwide's Embassy Suites hotel chain and German software maker SAP (SAP), which are using technologies that make games interesting in order to interact more effectively with customers and employees.

The trend, known as gamification, lets businesses weave elements of games into applications that otherwise have little to do with playing. The market for gamification will grow to $1.6 billion in 2015, from $100 million in 2011, according to Wanda Meloni, founder of M2 Research, a consulting firm that researches the gaming industry.

Companies such as Cold Stone Creamery and United Parcel Service (UPS) have for years used games for such tasks as training workers. Gamification is now letting managers push aspects of gaming into marketing, product design, and everyday work experience. It's also helping companies compensate for shortfalls in traditional forms of advertising and marketing, says Gabe Zichermann, chief executive officer of Gamification, a company that runs workshops for businesses that want to implement a gamification strategy. "What we have is a crisis of engagement," he says.

Nissan's "eco mode" dashboard service

Nissan Motor (NSANY) brought gamification to its new electric vehicle, the Nissan Leaf. The automaker uses the technology to help drivers conserve fuel. When the car is driven in so-called eco mode, its accelerator contains a counter push-back control mechanism that is activated when it detects excess pressure. The feature informs drivers that they're using more power than required. An online portal connected to the car's dashboard also lets drivers know how well they're conserving energy, compared with other drivers in the region. The most efficient drivers are given virtual bronze, silver, gold, and platinum medals.

Similarly, cashiers at Target (TGT) receive a score each time they check out a customer. The score is based on the the transaction's speed, with the checkout system also calculating the cashier's success rate over multiple transactions.

Companies need to guard against adding a superficial gaming gloss to applications—for instance, by creating meaningless leader boards that have little lasting impact on employee behavior, says Aaron Dignan, author of Game Frame, a book published in March that explores game mechanics in the workplace. "My hope is that it grows beyond that into a real discipline that's more rigorous than it is today," Dignan says. Managers also need to be alert to such possible unintended consequences as hacking or employees putting too much emphasis on the wrong aspects of play. "People could pay too much attention to things that don't matter or too little attention to things that do matter if the game is designed poorly," he says.

U.S. Companies Helped on Plantville

Siemens spent a year designing Plantville, working with such companies as Eugene (Ore.)-based game-design company Pipeworks Software, advertising and design firm Shaw Co. in St. Louis, and Fusion Performance Marketing in Plano, Tex. The game can be downloaded at Plantville.com and Siemens is using advertising, social media, and employee communications to get the word out. While the game hasn't been out long enough for Siemens to have amassed results, Varney says early feedback from employees has been positive.

Hilton's Embassy Suites is using game techniques in a customer loyalty campaign. Created with a marketing company called Maritz, the campaign targeted 50,000 of Embassy Suites' most loyal guests, then solicited their participation with 10 different approaches, including direct mail, e-mail, and asking customers to play a game. The game option proved most effective, says Christian Kuhn, director of brand marketing for Embassy Suites. The 5,000 people targeted by the game were most likely to open e-mails and later spent the most money, Kuhn says. That group accounted for about $200,000 of the additional $1 million in revenue generated by the campaign, he said.

Games may be more effective in marketing because they offer the gratification people experience when surprised and rewarded. An unexpected reward releases dopamine in the brain, giving beneficiaries a pleasurable feeling, says Barry Kirk, a vice-president at Maritz. "We don't think you can gamify something without understanding the human brain and neuroscience," Barry says.

Game designers are good at creating psychological hacks into how the human brain works to determine what motivates people, says author Dignan. That's why gamification can be a good fit for companies seeking to better engage workers. "It's about managing motivation and energy level and commitment," he says.

SAP's Games for Corporate Directors

Software maker SAP is turning to gamification to help corporate board members prepare for meetings. Directors typically must slog through thick binders full of documents or dashboards that feature key performance metrics. SAP is developing an application for Apple's iPad that boasts game elements such as progress bars and leader boards to get directors "more engaged in consuming various pieces of data," says Reuven Gorsht, senior director of strategy and global pre-sales at SAP. "We're dealing with very high-ranking executives that sit on six or seven boards and may have a full-time job running a company," he says. "Their time is precious and their attention span is fairly low." he says. The app should be ready in three to four months, he says. SAP is also looking at other ways to use game mechanics to make its software easier to use and more engaging for employees.

Traci Sitzmann, an assistant professor of management at the University of Colorado's business school, says games can make employees better at their jobs. She spent more than a year examining 65 studies and data from 6,476 trainees in a study due to be published in the journal Personnel Psychology. Those using video games had a 14 percent higher skill-based knowledge level, an 11 percent higher factual-knowledge level, and a 9 percent higher retention rate than trainees in comparison groups, Sitzmann says.

Siemens is looking to games, not only for retaining current employees but attracting future ones as well. "With Plantville, we think there's a big educational play with colleges and high schools," says Siemens' Varney. He says he hopes the game can help make manufacturing more attractive to young people. "We have about 3,000 jobs posted in the U.S. at Siemens, many in technology or manufacturing," he says. "We're hoping to inspire a new generation of plant managers."

King is a writer for Bloomberg Businessweek in San Francisco.

WSJ: How to Get a Real Education

THE SATURDAY ESSAY
APRIL 9, 2011

How to Get a Real Education

Forget art history and calculus. Most students need to learn how to run a business, says Scott Adams. 

By SCOTT ADAMS

I understand why the top students in America study physics, chemistry, calculus and classic literature. The kids in this brainy group are the future professors, scientists, thinkers and engineers who will propel civilization forward. But why do we make B students sit through these same classes? That's like trying to train your cat to do your taxes—a waste of time and money. Wouldn't it make more sense to teach B students something useful, like entrepreneurship?

Scott Adams

I speak from experience because I majored in entrepreneurship at Hartwick College in Oneonta, N.Y. Technically, my major was economics. But the unsung advantage of attending a small college is that you can mold your experience any way you want.

There was a small business on our campus called The Coffee House. It served beer and snacks, and featured live entertainment. It was managed by students, and it was a money-losing mess, subsidized by the college. I thought I could make a difference, so I applied for an opening as the so-called Minister of Finance. I landed the job, thanks to my impressive interviewing skills, my can-do attitude and the fact that everyone else in the solar system had more interesting plans.

The drinking age in those days was 18, and the entire compensation package for the managers of The Coffee House was free beer. That goes a long way toward explaining why the accounting system consisted of seven students trying to remember where all the money went. I thought we could do better. So I proposed to my accounting professor that for three course credits I would build and operate a proper accounting system for the business. And so I did. It was a great experience. Meanwhile, some of my peers were taking courses in art history so they'd be prepared to remember what art looked like just in case anyone asked.

One day the managers of The Coffee House had a meeting to discuss two topics. First, our Minister of Employment was recommending that we fire a bartender, who happened to be one of my best friends. Second, we needed to choose a leader for our group. On the first question, there was a general consensus that my friend lacked both the will and the potential to master the bartending arts. I reluctantly voted with the majority to fire him.

But when it came to discussing who should be our new leader, I pointed out that my friend—the soon-to-be-fired bartender—was tall, good-looking and so gifted at b.s. that he'd be the perfect leader. By the end of the meeting I had persuaded the group to fire the worst bartender that any of us had ever seen…and ask him if he would consider being our leader. My friend nailed the interview and became our Commissioner. He went on to do a terrific job. That was the year I learned everything I know about management.

Read More

• Turning the Classroom Upside Down

At about the same time, this same friend, along with my roommate and me, hatched a plan to become the student managers of our dormitory and to get paid to do it. The idea involved replacing all of the professional staff, including the resident assistant, security guard and even the cleaning crew, with students who would be paid to do the work. We imagined forming a dorm government to manage elections for various jobs, set out penalties for misbehavior and generally take care of business. And we imagined that the three of us, being the visionaries for this scheme, would run the show.

We pitched our entrepreneurial idea to the dean and his staff. To our surprise, the dean said that if we could get a majority of next year's dorm residents to agree to our scheme, the college would back it.

It was a high hurdle, but a loophole made it easier to clear. We only needed a majority of students who said they planned to live in the dorm next year. And we had plenty of friends who were happy to plan just about anything so long as they could later change their minds. That's the year I learned that if there's a loophole, someone's going to drive a truck through it, and the people in the truck will get paid better than the people under it.

The dean required that our first order of business in the fall would be creating a dorm constitution and getting it ratified. That sounded like a nightmare to organize. To save time, I wrote the constitution over the summer and didn't mention it when classes resumed. We held a constitutional convention to collect everyone's input, and I listened to two hours of diverse opinions. At the end of the meeting I volunteered to take on the daunting task of crafting a document that reflected all of the varied and sometimes conflicting opinions that had been aired. I waited a week, made copies of the document that I had written over the summer, presented it to the dorm as their own ideas and watched it get approved in a landslide vote. That was the year I learned everything I know about getting buy-in.

“Why do we make B students sit through the same classes as their brainy peers? That's like trying to train your cat to do your taxes—a waste of time and money. Wouldn't it make sense to teach them something useful instead?”

For the next two years my friends and I each had a private room at no cost, a base salary and the experience of managing the dorm. On some nights I also got paid to do overnight security, while also getting paid to clean the laundry room. At the end of my security shift I would go to The Coffee House and balance the books.

My college days were full of entrepreneurial stories of this sort. When my friends and I couldn't get the gym to give us space for our informal games of indoor soccer, we considered our options. The gym's rule was that only organized groups could reserve time. A few days later we took another run at it, but this time we were an organized soccer club, and I was the president. My executive duties included filling out a form to register the club and remembering to bring the ball.

By the time I graduated, I had mastered the strange art of transforming nothing into something. Every good thing that has happened to me as an adult can be traced back to that training. Several years later, I finished my MBA at Berkeley's Haas School of Business. That was the fine-tuning I needed to see the world through an entrepreneur's eyes.

If you're having a hard time imagining what an education in entrepreneurship should include, allow me to prime the pump with some lessons I've learned along the way.

Combine Skills. The first thing you should learn in a course on entrepreneurship is how to make yourself valuable. It's unlikely that any average student can develop a world-class skill in one particular area. But it's easy to learn how to do several different things fairly well. I succeeded as a cartoonist with negligible art talent, some basic writing skills, an ordinary sense of humor and a bit of experience in the business world. The "Dilbert" comic is a combination of all four skills. The world has plenty of better artists, smarter writers, funnier humorists and more experienced business people. The rare part is that each of those modest skills is collected in one person. That's how value is created.

Fail Forward. If you're taking risks, and you probably should, you can find yourself failing 90% of the time. The trick is to get paid while you're doing the failing and to use the experience to gain skills that will be useful later. I failed at my first career in banking. I failed at my second career with the phone company. But you'd be surprised at how many of the skills I learned in those careers can be applied to almost any field, including cartooning. Students should be taught that failure is a process, not an obstacle.

Find the Action. In my senior year of college I asked my adviser how I should pursue my goal of being a banker. He told me to figure out where the most innovation in banking was happening and to move there. And so I did. Banking didn't work out for me, but the advice still holds: Move to where the action is. Distance is your enemy.

Scott Adams

Attract Luck. You can't manage luck directly, but you can manage your career in a way that makes it easier for luck to find you. To succeed, first you must do something. And if that doesn't work, which can be 90% of the time, do something else. Luck finds the doers. Readers of the Journal will find this point obvious. It's not obvious to a teenager.

Conquer Fear. I took classes in public speaking in college and a few more during my corporate days. That training was marginally useful for learning how to mask nervousness in public. Then I took the Dale Carnegie course. It was life-changing. The Dale Carnegie method ignores speaking technique entirely and trains you instead to enjoy the experience of speaking to a crowd. Once you become relaxed in front of people, technique comes automatically. Over the years, I've given speeches to hundreds of audiences and enjoyed every minute on stage. But this isn't a plug for Dale Carnegie. The point is that people can be trained to replace fear and shyness with enthusiasm. Every entrepreneur can use that skill.

Write Simply. I took a two-day class in business writing that taught me how to write direct sentences and to avoid extra words. Simplicity makes ideas powerful. Want examples? Read anything by Steve Jobs or Warren Buffett.

Learn Persuasion. Students of entrepreneurship should learn the art of persuasion in all its forms, including psychology, sales, marketing, negotiating, statistics and even design. Usually those skills are sprinkled across several disciplines. For entrepreneurs, it makes sense to teach them as a package.

That's my starter list for the sort of classes that would serve B students well. The list is not meant to be complete. Obviously an entrepreneur would benefit from classes in finance, management and more.

Remember, children are our future, and the majority of them are B students. If that doesn't scare you, it probably should.

—Mr. Adams is the creator of "Dilbert."

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

NY Times: Once a Great Flop, Now Sold for Billions

 

 

---

April 5, 2011

Once a Great Flop, Now Sold for Billions

By ANDREW MARTIN

In announcing the sale of Pringles on Tuesday, Procter & Gamble concluded what had been a tumultuous, sometimes zany, 50-year experiment in engineered food.

The $2.35 billion deal with Diamond Foods is also a milestone for Procter as it sheds its last food brand after having already sold Jif peanut butter, Folger’s coffee and Crisco shortening.

The company’s expertise in edible oils was used widely by the potato chip industry in the 1950s and 1960s, and shaped the invention of Pringles, the thinly sliced saddle-shaped crisp. Company officials still aren’t sure how the chips got their name, but one theory holds that two Procter advertising employees lived on Pringle Drive in Cincinnati and the name paired well with potato.

The creator of the famous Pringles can was so proud of his invention that he asked that his ashes be buried in one.

Yet Pringles, which is basically dehydrated potato flakes that are rolled and then fried, was not universally loved.

It was such a dud in its early years that some called for Procter to dump the brand. The brand did not take off until the company tweaked the flavor in 1980 and introduced the “Fever for the Flavor of Pringles” advertising campaign.

By the late 1990s, Pringles had become a $1 billion a year brand. On the television series “Ally McBeal,” Ally got into a grocery store skirmish with a woman over a can of Pringles.

“When I was there 30 years ago, it was dead,” said Charles Jarvie, vice president of Procter’s food division in the late 1970s. “It’s a great example where they just didn’t give up.”

Nonetheless, the sale of Pringles was not unexpected, as Procter has refocused its attention on the core businesses of beauty, grooming and household care. “Pringles is an iconic, billion-dollar snack brand with significant global manufacturing and supply chain infrastructure,” said Michael J. Mendes, chief executive of Diamond Foods, in a statement. The $2.35 billion transaction includes $1.5 billion of Diamond stock, which goes to P.& G. shareholders who elect to participate in the deal, and the assumption of $850 million of Pringles debt by the merged company.

The sale will barely make a dent in Procter, with $80 billion in annual sales.

“It really didn’t fit what they are looking to do,” said Jason Gere, an analyst at RBC Capital Markets who tracks the company. “For a long time, this was one of those products that felt more appropriate in someone else’s portfolio.”

Pringles has kept up with some of its rivals in the flavor department, offering salt-and-vinegar, cheddar and pizza versions. While Pringles’ sales had been growing of late, Mr. Gere said that they had not been nearly as robust as many of P.& G.’s other megabrands.

Mr. Jarvie said the company had hoped to replicate the great science breakthroughs it had with laundry detergents, toothpaste and disposable diapers. But, he said, “food is as much an art as it is a science. Procter never got that.”

In the 1950s, roughly 25 percent of the company’s sales were in food, particularly in shortening and other cooking oils.

“We provided most of the oils to the potato chip industry,’ said Greg McCoy, a corporate archivist. “We were already frying up potato chips to test the oils.”

But it lacked a distribution network to ship perishable bags of chips to grocery stores, so it directed its researchers to come up with a longer-lasting chip that could be distributed with P.& G.’s existing distribution network.

“They knew from the get-go that they wanted it to be uniform in size, texture and taste,” Mr. McCoy said. Procter wanted to create a perfect chip to address consumer complaints about broken and stale chips and air in the bags.

The task was assigned to a chemist named Fredric Baur, who from 1956 to 1958 created Pringles’ saddle shape out of fried dough and also its can. But Mr. Baur could not figure out how to make the chips taste good, and he eventually was pulled off the Pringles job to work on another brand. In the mid-1960s, another Procter researcher, Alexander Liepa, dusted off Mr. Baur’s work and set a out to improve on the Pringles taste, which he succeeded in doing.

Another theory for the Pringles’ name comes from Mr. Liepa’s patent, which credits research done in the 1940s by Mark Pringle, Mr. McCoy said.

The chips were test marketed in Evansville, Ind., in 1968 and were an “overnight sensation,” Mr. McCoy said. But when the chips went national in 1971, the taste issue resurfaced. Officially, Pringles are called crisps rather than chips, the result of a long-ago fracas between competitors and regulators over what could be called a potato chip.

In the 1993 book “Soap Opera: the Inside Story of Procter & Gamble,” the author Alecia Swasy writes that Pringles were considered one of the great flops in company history, “the P.& G. Edsel.” Mr. McCoy maintains, however, that Pringles gained traction after a makeover in 1980s, which included a thicker chip and a new focus on the taste, rather than the can.

Mr. Baur never lost his affection for the Pringles’ can, which he invented. When he died in 2008, his children honored his request to bury his ashes in a Pringles can. In an interview with Time, Mr. Baur’s son, Larry, said he and his siblings stopped at a Walgreen’s to pick up a can of Pringles on the way to the funeral home.

“My siblings and I briefly debated what flavor to use,” Mr. Baur said, in the Time interview. “But I said, ‘Look we need to use the original.’ ”

WSJ: Why Are Fitting Rooms So Awful?

FASHION
APRIL 6, 2011

Why Are Fitting Rooms So Awful?

Stores Try To Beautify Spaces, 'Seduce' Shoppers to Buy More With Better Lighting, Mirrors, Design

By ELIZABETH HOLMES and RAY A. SMITH

You spot a gorgeous dress on a hanger and, hopes high, make your way to the fitting room.

The Dream Dressing Room

Stores are making over these spaces with a variety of features.

View Interactive

It's downhill from there. The door doesn't fully shut, the lighting makes you look ill and the frock looks frumpy in a mirror fit for a fun house.

The retail dressing room can be a total sales killer.

Now stores are making a big push to transform the dingy fitting room into a more flattering space. It's part of an ongoing struggle by retailers to coax consumers to spend more. Having saturated the market with stores over the last decade, they can't expand to increase sales. Instead, companies are trying to squeeze more profits out of their current fleet.

Retailers are taking steps to battle a sales killer: the dressing room. As Elizabeth Holmes explains, by fixing up the rooms, stores can increase the odds customers will buy clothing.

Customers who try on clothes in fitting rooms have a conversion rate—meaning they ultimately buy something they tried on—of 67%, according to retail consultant Envision Retail Ltd., of Surrey, England, based on observations of more than 8,000 shoppers. Customers who don't use the fitting rooms have only a 10% conversion rate. Shoppers who use the fitting rooms spend a third of their in-store time there.

Aesthetically, the dressing-room makeovers are an attempt to go from bland and barren to comfortable and inviting, as if the shopper is trying on clothing in her own home. Chandeliers are cropping up in luxurious anterooms, where racks of camisoles hang waiting to smooth the unexpected bulge. Inside the fitting rooms, wallpaper and back-lit mirrors aim to flatter, not frighten.

Before

To revamp its fitting rooms, Ann Taylor changed a bland space, above, into a lounging area for shoppers with clothing, accessories and seating, below.

After

Stores are focusing their design efforts on dressing rooms in the women's clothing sections. Men tend to buy without trying on in the store, says Paco Underhill, founding president of Envirosell, a retail behavioral research and consultancy firm, who has timed men's visits in stores.

The new design at Ann Taylor, a division of Ann Inc., is intended to replicate a shopper's walk-in closet, says Samantha Dorfman, senior vice president of store development, design and facilities. A huge chandelier and larger-than-life marketing poster fill the entrance to "seduce" customers back to the space, Ms. Dorfman says. It's an about-face from the barren, beige entrance to the fitting rooms in the current layout.

Old Navy, the bargain-priced division from Gap Inc., moved fitting rooms to the center of its new store design. The relocation came after customers referred to the old tucked-away location as the "dungeon," says Tom Wyatt, Old Navy's president. To further cater to its target customer—a time-starved, young mother—the chain added what it calls "quick change" areas. The half-circle spaces are enclosed by a curtain.

Noticing that many women like to go into a fitting room together, Anthropologie, a division of Urban Outfitters Inc., makes sure each room can accommodate more than one person. "They consider it a little bit of a party," says Co-President Wendy B. McDevitt.

This Bloomingdale's concept store has created a dressing 'pod' made of fabric that can be hoisted to the ceiling to make room for events. Bloomingdale's plans to use these in other stores as well.

For women shopping with children or a boyfriend or husband, department store chain Macy's Inc. has been gradually updating its stores to add communal waiting spots with flat-screen TVs tuned to either sports or cartoons and upholstered seating. The theory: Parking a husband, boyfriend or kids in that spot helps a shopper feel "less rushed and stressed," a Macy's spokeswoman said in an email.

Clothing stores typically allot about 20% of the square footage towards fitting rooms and storage and 80% towards displaying the merchandise, says Robin Kramer, head of Kramer Design Group, a retail branding and design firm which works with clients from Talbots to Alexander Wang. She has lobbied stores to dedicate more space to their fitting rooms. "It's the moment where you put the brand on your body and decide if that's what you want," Ms. Kramer says.

Anthropologie wants shoppers to feel 'relaxed and out of the fray,' says Co-President Wendy B. McDevitt.

Some retailers are filling the fitting room area with merchandise. At Ann Taylor, racks and drawers in the lounge area display undergarments such as shapewear and camisoles. Its sister division, Loft, also includes a bar of belts and jewelry. Sales associates manning the fitting room are able to sell more items to a customer without leaving the space.

Lighting is a critical component. "Any woman who goes into a fitting room that has really bad lighting, you look at yourself, you look at your skin and you're completely distracted," says Anthropologie's Ms. McDevitt. "Then you lose the real reason why you were in there."

The new Ann Taylor rooms have six sources of lighting and three types of bulbs, compared to one source and type of lighting in the old design. The mixture of ceramic metal halide, compact fluorescent and low-voltage bulbs is more flattering, Ms. Dorfman says.

Bloomingdale's has installed rear-lit three-way mirrors, which allow customers to see themselves from a variety of angles. There is also a ceiling-mounted light three feet back from the mirror to eliminate shadows on the shopper's face, says Jack Hruska, executive vice president of creative services at Bloomingdale's.

Old Navy added quick-change areas.

Personal touches at Old Navy include labels placed over a trio of bright yellow hooks, helping shoppers organize their haul. "I love it!" and "Not for me," the signs read. Anthropologie writes shoppers' first names on the fitting room door, making it easier for sales staff to refer to them by name. That one-on-one time with a customer helps the store to engage shoppers on an intimate level, Ms. McDevitt says.

Because fitting rooms are highly trafficked areas, stores must make the design durable as well aesthetically pleasing. At Ann Taylor, the gray tones of the custom-designed floral wallpaper mask scuffs. The leather benches were chosen for the material's resistance to stains, like lipstick.

To help shoppers get the attention of salespeople, some fitting rooms at Bloomingdale's, such as those in the intimates departments, have phones. Customers are automatically connected to a sales associate to obtain another size, or ask questions regarding fit. Bloomingdale's says the phones are used frequently.

Victoria's Secret, a lingerie chain from Limited Brands Inc., is testing buttons in a small number of its fitting rooms which, when pushed, alert a sales associate via headset. The system also keeps track of how many people use the fitting rooms, how long they stay and how many times they ask for help, says Marge Laney, president of Houston-based manufacturer Alert Technologies, which installed the Victoria's Secret system.

Write to Elizabeth Holmes at elizabeth.holmes@wsj.com and Ray A. Smith at ray.smith@wsj.com

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

Fast Company: How Carrots Became the New Junk Food

Article location:http://www.fastcompany.com/magazine/154/the-new-junk-food.html

April 1, 2011

Tags: Leadership, Innovation, Ethonomics, carrots

How Carrots Became the New Junk Food

By Douglas McGray

LATE LAST SPRING, Omid Farhang, vice president and creative director at the advertising agency Crispin Porter + Bogusky, started hearing a word around the office: "carrots." He didn't think much of it at first. Crispin specializes in lavish, zeitgeisty campaigns for brands such as Burger King and Old Navy. New clients are often assigned code names, to keep them a secret as long as possible. Carrots probably meant a new campaign for Nike or Frito-Lay. Then Farhang heard the brief. "I was like, Wait, carrots is carrots?" he says, laughing.

Bolthouse Farms sells nearly a billion pounds of carrots a year -- the carrots Farhang kept hearing about -- under a number of different brand names and supermarket labels. Only Grimmway Farms, a few minutes down the road in Bakersfield, California, sells more, just barely. Together, the two companies control more than 80% of the carrot market in the United States. As produce growers go, they are huge businesses -- in Bolthouse's case, between $600 million and $800 million a year in revenue, including premium beverages (carrot juice, of course, as well as açai, fruit smoothies, and vanilla chai) and salad dressings.

The company has been around for nearly a century now, but it boomed in the 1990s, with a breakthrough product. A local grower named Mike Yurosek had become frustrated with all the waste in the carrot business. Supermarkets expected carrots to be a particular size, shape, and color. Anything else had to be sold for juice or processing or animal feed, or just thrown away. Yurosek wondered what would happen if he peeled the skin off the gnarly carrots, cut them into pieces, and sold them in bags. He made up a few test batches to show his buyers. One batch, cut into 1-inch bites and peeled round, he called "bunny balls." Another batch, peeled and cut 2 inches long, looked like little baby carrots.

Bunny balls never made it. But baby carrots were a hit. They transformed the whole industry. Soon, the big growers in Bakersfield were planting fields with baby carrots in mind, sowing three times more seeds per acre, so the carrots, packed densely together, would grow long and skinny, for the maximum number of 2-inch cuts. Yields and profits climbed. The really big deal, the thing nobody expected, was that baby carrots seemed to make Americans eat more carrots. In the decade after they were introduced, carrot consumption in the United States doubled.

Then a couple of years ago, after a decade of steady growth, Bolthouse's carrot sales went flat. Sales of baby carrots, the company's cash carrot, actually fell, sharply, and stayed down. Nobody knew why. This was a big problem.

FOR JEFF DUNN, Coca-Cola was the family business. Dunn's father spent most of his career at the company negotiating huge sponsorship deals around events like the Super Bowl and the Olympics. Just a few years out of college, Dunn followed him. Dunn eventually took over his father's job and became one of the company's top executives, overseeing all of Coca-Cola's businesses in North and South America. Like his father, Dunn considered himself a marketing guy, which made sense for a top executive at a soft-drink company. "We were selling sugar water and fairy dust," Dunn says. "And don't forget the fairy dust."

Three years ago, he became CEO of Bolthouse. His office is across the street from an agricultural machine yard filled with tractors, seeding trucks, and 65,000-pound harvesters. It has been something of a change. Then again, there are similarities. "Carrots are basically a duopoly," he says. "It's Coke and Pepsi." And when he looked at his flagging sales, he wondered if some fairy dust might help.

Dunn put together a series of focus groups and surveys and discovered something interesting. People said they were eating as many carrots as they always had. But the numbers clearly showed they were buying fewer. What people meant, it turned out, was they were as likely as ever to keep carrots in the fridge. When the recession hit, though, they became more likely to buy regular carrots, instead of baby carrots, to save money. But people used to eating baby carrots weren't taking the time to wash and cut the regular ones. And unlike baby carrots, which dry out pretty quickly once a bag is opened, regular carrots keep a long time. So people were buying regular carrots and then not eating them, and not buying more until the carrots they had were finally gone or spoiled.

Bolthouse had never marketed its baby carrots. It just sent truckloads to supermarkets, where they got piled up in the produce aisle. Dunn assembled a small team and studied advertising campaigns for other agricultural commodities, such as almonds, avocados, eggs, and milk. They were shocked at what they found. "Every campaign paid back," Dunn says. "Every single one. Between 2 and 10 times."

So they drafted a brief to circulate to ad agencies. "Carrots have an appealing personality. Fun, fun-loving, friendly. High-energy. Visually appealing," they explained. "Baby carrots are the best form factor of carrots." Dunn was clear: He didn't want a health campaign, one that talked about beta carotene or cutting calories. He wanted something more emotional, maybe something funny, something that appealed to impulse rather than responsibility -- the kind of thing a soft-drink or snack-food company might do.

Dunn's team talked to more than 20 agencies. One firm pitched a commercial with a vegetable army, baby carrots in the lead, storming a beach defended by junk food. Another proposed pairing two unlikely celebrities together, or maybe rival politicians, with the punch line "Look who's having a baby!" Dunn kept a memento from the proposal he liked best, a large model of a carrot ripping through a jelly doughnut, red jelly oozing from the exit wound. Nothing, though, seemed quite right. Even the outrageous ideas tended to come back to avoiding junk food and eating healthier.

Then something unusual happened. One of the agencies recommended a rival firm, Crispin Porter + Bogusky. They thought the sensibility Dunn was fishing for sounded like Crispin's work. Dunn figured there was no way Bolthouse had the profile or the resources to hire a firm like Crispin. But he called them anyway. "You guys are kind of late to the game," he said, "but do you want to take a crack at this?"

A MONTH LATER, Dunn flew to Boulder, Colorado. Crispin had decorated its modern, glass conference room like a barn, with bales of hay stacked all around and a wooden bolthouse farms sign over the door. Farhang, the creative director, wasn't sure about the barn. It's possible these guys may find this offensive, he thought. They aren't a bunch of bumpkins.

The presentation began with some ethnography. Crispin had done its own behavioral research, lurking in kitchens around the Boulder area. Staffers had watched suburban moms unpack their groceries and studied where kids looked for snacks when they got home from school. Kids seldom went to the refrigerator; instead, they went straight for the cupboards or the pantry. If they did go to the fridge, baby carrots were at least visible, out on a shelf. Full-size carrots, though, always went in the vegetable drawer. "The drawer of death," one kid called it. Adults weren't particularly fond of the vegetable drawer either. They tended to associate it with all the vegetables they buy and forget, and then discover weeks later, limp and leaking. A strategy began to emerge. Let regular carrots be the vegetable.

"Everyone else pitched baby carrots as an antidote to junk food," Dunn says. "Where Crispin came out was almost the exact opposite. We want to be junk food."

Farhang and his colleagues unveiled storyboards with concepts for a series of winking, self-aware junk-food ads. One ad featured a baby-carrot-branded spray tan, endorsed by Snooki, the star of MTV's Jersey Shore. ("Doritos could potentially do something like that, with the cheese-dusted color of their product," Farhang explains.) In another, a sultry model, surrounded by billowing black silk, runs a carrot slowly across her lips as a voice-over purrs about indulgence -- think Dove chocolates. The best one seemed inspired by a Mountain Dew commercial. A skater dude rides a jet-powered shopping cart through a desert pass, dodging baby-carrot gunfire. Things blow up. There's a pterodactyl. "Extreme pterodactyl!" the voice-over yells.

"To have a great advertising idea, you have to get at the truth of the product," Farhang explains. "The truth about baby carrots is they possess many of the defining characteristics of our favorite junk food. They're neon orange, they're crunchy, they're dippable, they're kind of addictive."

Bolthouse didn't have much to gain from a house-branded campaign since it sells under many labels, and a generic campaign like "Got Milk?" might convince its rival, Grimmway, to share the cost, so Crispin made baby carrots the star. "It's not about making baby carrots cool," Crispin CEO Andrew Keller stresses. "It's about getting baby carrots into a different category."

Crispin imagined individual snack packs made of opaque, crinkly plastic, like a potato-chip bag, with bold, junk-food-style graphics (the new packaging would cost about 25% more than traditional veggie bags, but Dunn could justify it as a marketing expense). "People are now grabbing a bag of these, you know, eating them in the car," Dunn's marketing chief, Bryan Reese, says. They'd look right at home by a convenience-store checkout. Farhang and his colleagues showed ideas for a baby-carrot vending machine, too, and a chilled carrot jar, like a cookie jar, that might stay out on the counter. Bolthouse's traditional packaging worked only for the produce aisle and the kitchen fridge, and it asked more of people. "You know, unzip the 2-pound bag of baby carrots ..." Reese says, in a weary voice. "Grab a few baby carrots ... rezip it ..." We might remember this as an unfortunate cultural milestone, the moment when eating baby carrots became too much work, but Bolthouse wanted people eating more vegetables, and it was looking for whatever would sell.

Just to be safe, Crispin presented a few ideas that brought up healthfulness. But Dunn didn't seem to care. Farhang thought that was smart. "What a silly use of advertising dollars to tell people that vegetables are healthy," he says.

A few weeks later, Farhang was in the California desert, with a film crew. "There's a guy in a shopping cart with a rocket strapped to it, and there's pyrotechnics lining the base of a cliff, and there's a really hot model standing next to a machine gun," he recalls, and laughs. "It's hard not to be nervous. We've got this client that has a genuine desire to change its business, to change the way that people look at carrots forever." And it was planning to spend a huge sum of money for a produce company, in the neighborhood of $25 million. "This isn't Coca-Cola," he says. "We have one shot to get this right."

AT COCA-COLA, Dunn was obsessed with per capita consumption. "Per capita was my mantra," he says. But as he neared the end of his time there, he began to feel conflicted. It was still his job to sell more Coke. But people were drinking a lot of Coke. He talked to his father about it. "If you've got a per capita of three, four, five" -- 500 Cokes a year -- "that's fine. But there are places in the United States where you have per capitas of 1,000. I can't get my head around somebody drinking 1,000 Cokes a year," Dunn says. "This was before obesity had become as prevalent. But it was pretty clear that's where the world was going. And certainly sugar soft drinks had a direct role in that."

Dunn talks as if he carries some karmic debt, still. (He never doubted Coke enough to quit; he actually angled for CEO, only to be forced out when a rival got the job instead.) But his experience comes with a unique perspective. "If all we do is tell people fruits and vegetables need to be part of their diet or they're not going to be healthy -- the rational approach -- we have zero chance," he says. "The last 10 years has proven it. There's been so much written and so much government stuff. And per capita consumption isn't up. I believe there's a different approach.

"People will say, 'You open the bag, it's just baby carrots.' Well, it's just Lay's potato chips, it's just Doritos, there's nothing special about them," he says. "They're just cool and part of your life. If Doritos can sell cheeseburger-flavored Doritos, we can sell baby carrots."

Crispin's campaign, "Eat 'Em Like Junk Food," debuted last September in two test markets: Syracuse, New York, and Cincinnati. (There are plans to expand the campaign to other markets by this fall.) Three television spots aired, as well as a web series, Munchies, starring two slacker grocery clerks. @babycarrots began tweeting salvos at snack-food rivals: "Yo, @skittles. Taste our rainbow. Of orange." "Elves making cookies with their grubby little elf hands ... that can't be sanitary." Display ads, printed up for supermarkets, presented baby carrots as "the original orange doodle," and billboards suggested never fear carrots and beer. Maybe most provocatively, Bolthouse installed baby-carrot vending machines, wrapped in eat 'em like junk food graphics, at a pair of high schools.

By November, sales in Bolthouse's test markets were up 10% to 12% over the year before, compared to minimal improvement or slight decline in a control group. The vending machines were selling 80 to 90 snack packs per week; a number of schools have approached the company about installing their own machines, and Bolthouse is investigating what it would take to scale vending into a real business. In April, it will test its first movie tie-in, with snack packs promoting a new animated comedy, Hop.

"The biggest thing that hasn't worked yet is I haven't gotten my buddy down the street to do it with us," Dunn says. He and Grimmway's CEO have been talking regularly, but just talking, nothing more. (Grimmway's chief, Jeff Meger, declined to comment for this article.)

Meanwhile, nearby, in a room that looks like a cross between a sterile lab and a cluttered kitchen, a white-coated staff has been experimenting with a future phase of the campaign: flavors. Dunn won't say which ones baby carrots might come in, or how Bolthouse will do it -- both coatings and infusions have upsides and downsides -- only that anything it does will be healthy and natural.

So probably not cheeseburger. Cool Ranch, though, might want to watch its back.

A version of this article appears in the April 2011 issue of Fast Company.

---

FT: Finnish lesson on principles for Goldman

Finnish lesson on principles for Goldman

By Lucy Kellaway

Published: January 16 2011 19:04 | Last updated: January 16 2011 19:04

Lloyd Blankfein is in need of advice on the principles of business. Fortunately, I have just the man to give it to him: Hannu Penttilä, a Finnish shopkeeper who runs a chain of department stores.

His company, Stockmann, and the mighty Goldman Sachs are rather similar. Both have both been around for 150 years. Both are good at what they do. Yet when it comes to explaining how they conduct themselves, the US bank makes the most horrible hash of it, while the Finnish retailer gets it just right.

EDITOR’S CHOICE

Lucy Kellaway: My awards for management guff - Jan-09

Lucy Kellaway: Time-wasting at the office - Dec-19

Lucy Kellaway: Tale of two memos - Dec-12

Lucy Kellaway: Too many ambassadors - Dec-05

Lucy Kellaway: Better to save face - Nov-28

Lucy Kellaway: Breaking the glass ceiling at home - Nov-19

Last week Goldman produced a 63-page document on how it proposes to clean up its act, which began with The Goldman Sachs Business Principles. These are 14 in number, which is far too many for anyone to remember, even for Goldman people who, as the bank says, are the very best. Each principle is rather long, and after having read and reread them I am left feeling exasperated, confused and as if I’ve been lightly clubbed around the head.

Still, at least the first principle is pithy and memorable. “Our clients always come first,” it says. There is only one problem with this: it isn’t true. Not only is it not true in specific cases (like when Goldman sold “shitty deals” to clients and bragged about them), it isn’t true generally. Any bank really interested in its clients would shut down most of its M&A department on the grounds that buying other companies almost always works out badly.

The second principle is a long screed about Goldman’s “unswerving adherence” to being legal and ethical, with the result that the bank’s speciality – generating profit – gets shunted into third place. “Our goal is to provide superior returns to our shareholders,” the principle starts, making it sound almost altruistic. There is no mention of anything as vulgar as money; the word “superior” is pleasingly ungreedy. “Profitability is critical to achieving superior returns,” it explains, passing off a tautology as if it were an insight.

Now let’s see how the retailer does it. The first of its six short principles goes like this: “We are in business to make money; all our operations should support this goal.”

After this, its customers get a look in: “We earn money only by offering benefits which the customer perceives as real and better than those of our competitors.”

This is the right way round, and I particularly like the honesty of the word “perceives”. Value, like beauty, is in the eye of the beholder.

Stockmann has four more principles: efficiency, commitment, respect for its staff and social responsibility. On the last it simply says: “Our way of operating is ethical and just.”

By contrast, Goldman makes of a meal of being ethical. Having already declared its devotion to ethics in Principle 2, Principle 14 says: “Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives.”

Saying it twice doesn’t strengthen the message, it weakens it. And the bit about ethics in personal lives is alarmingly vague. Does it mean any banker who cheats on his wife can expect a visit from Mr Blankfein?

Even more worrying is Principle 5: “We stress creativity and imagination in everything we do.” One sincerely hopes that people in the compliance department don’t take this edict too seriously.

The remaining principles are predominantly boasts. “We have an uncompromising determination to achieve excellence in everything we undertake,” Principle 4 says, a claim that is belied by the document itself.

The principles aren’t even internally consistent. Quite apart from the central conflict between making money and serving clients, Goldman blithely ignores the clash between its boast about how quickly it promotes good people and Principle 8: “We stress teamwork in everything we do.”

Having pored over these two documents I’m left wondering what is the point of drawing up a list of principles. Stockmann answers this clearly: it is to provide a framework within which decisions can be made.

The purpose of Goldman’s document is rather different. Its principles would be no help in decision making: they are a mixture of untruths, platitudes and boasts which make the right noises but leave little impression. But then maybe that was the point of the exercise. To bore detractors into submission, leaving the bank free to conduct its business according to the time-honoured principles it has always followed.

Copyright The Financial Times Limited 2011.

ST: The time is ripe for adopting lemon law

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Jan 17, 2011

The time is ripe for adopting lemon law

Proposed law regarding defective goods could raise retail standards

By Jessica Lim

 

JUST a week after paying $2,150 for a wooden bed frame, Madam Radia Matom was dismayed to find long cracks appearing on it. She made more than 10 calls to the retailer at Harbourfront Centre, but got no satisfaction.

A year-long battle ensued, with five mediation sessions at the Consumers Association of Singapore (Case) and two trips to the Small Claims Tribunal.

Finally, the 50-year-old housewife was offered a partial refund of $1,000. She considered rejecting the offer and suing the retailer in court for a full refund, but was uncertain if she would succeed.

If a proposed law is passed here, success is certain for cases such as hers. But reactions to the proposed law have been mixed.

A taskforce headed by the Ministry of Trade and Industry and Case is revising the Consumer Protection (Fair Trading) Act and Hire Purchase Act, which together empower consumers to seek civil remedies for a wide range of unfair practices, from aggressive sales tactics to false claims.

Late last month, it proposed changes that will allow the courts to compel a retailer to repair, exchange or offer refunds for a good that is found to be defective within six months of purchase. Views are being sought on the changes till Jan 31.

Already, some small retailers are dreading the proposed 'lemon' law, named after the colloquial reference to a defective product as a 'lemon'. Consumers, on the other hand, are happy.

In fact, both retailers' despair and consumers' elation are unfounded. The law will not make things onerous for retailers. But neither will it provide a great deal of protection for consumers in its proposed form. But it is still a welcome step forward on the journey towards greater consumer protection.

Why do I say this?

First, it is timely. The consumer watchdog received 1,785 complaints about defective goods in the first 11 months of last year, compared with 1,877 in 2009 and 2,224 in 2008. In all three years, complaints about mobile phones, furniture and electronic products were most common.

Second, retailers' concerns are, frankly, unwarranted. Several shopkeepers told The Straits Times that they fear consumers taking advantage of lemon laws by returning goods that are used or damaged through wear and tear.

Petty customers, they feel, would demand refunds on a whim. It would make it easy for people to buy something - such as a prom dress or a Christmas tree - use it for a few weeks, and then demand compensation. Others may return a product simply because they have grown to dislike its colour or design, they argue.

Such fears exaggerate the impact of the proposed law, which after all kicks in only when a dispute makes it to court.

On the shop floor, retailers are not forced to give in to requests for repairs, refunds or exchanges. But if a consumer proceeds to sue in court, and wins, the retailer can be ordered to replace, exchange or give a refund for the product.

Right now, with no proper lemon law, the outcome of a case depends on the judge's discretion. The retailer can also deny responsibility and blame the distributor, the importer or the manufacturer for the defect.

Consumers will thus have more recourse with defective goods. But the law as proposed will have a narrow ambit - deliberately so.

This is a key feature of the law that merits attention: The cases affected are likely to be confined to big-ticket lemons purchased by consumers who will go the distance to seek redress.

With a limited law in place, the question may arise as to whether this law is worth putting in place at all.

The answer is clearly 'yes'.

As the experience of other countries suggests, a simple lemon law can be the start for more thorough legislation later covering different products.

This is the case in the United States, where specific lemon laws - first created there in 1982 - exist for vehicles, computers and even pets.

In California, for instance, retailers who deal in sick dogs can be fined up to US$10,000 (S$13,000) or put out of business for a period of time.

Singapore's proposed law follows the British version, which is a blanket law covering many products, said Case chief executive Seah Seng Choon. He explained that complaints are received for a wide range of products. The law could be amended in future to target specific industries if needed.

A lemon law will also enhance Singapore's image as a shoppers' haven. Singapore Tourism Board figures show that tourists spent $3.15 billion from January to September last year on shopping, up 30 per cent from 2009's $2.42 billion.

Most important of all, the law will have the salutary effect of spurring the entire industry to improve service standards in the long run.

The use of lemon laws in the US and Britain has encouraged retailers to come up with their own policies on refunds and exchanges, and to publicise them.

This way, they avoid the risk of lengthy lawsuits or damage to their reputations from irate customers. In fact, the wish to avoid risky transactions also encourages retailers to go for reputable product sources.

The law could thus spark a sea change in the retail scene here. Few retailers here, apart from the big boys like Courts and Robinsons, now have a refund policy.

Others may offer exchanges, but on a purely case-by-case basis, leaving consumers vulnerable while the retailer decides at whim.

In short, the lemon law, though limited, has the potential to change the retail scene far beyond the courtroom.

limjess@sph.com.sg

Fortune: Can P&G make money in places where people earn $2 a day?

 

Can P&G make money in places where people earn $2 a day?

As Western companies duke it out for a piece of the developing-market pie, Procter & Gamble is going deeper  -- courting not just the newly rich but also the very poor. The company's vaunted R&D operation is turning up surprises.

By Jennifer Reingold, senior editor

Wei Xiao Yan, a 29-year-old farmer in China, washes her hair in the doorway of her kitchen. P&G researchers spent a day with her at home.

We are a long, long way from Cincinnati. Getting here required a 15-hour flight to Beijing, followed by a nearly three-hour flight to Lanzhou, an industrial city on the Yellow River in China's midsection, and, finally, a bumpy, two-hour drive deep into treeless hills the color of dried clay. Our destination, in a pinprick of a town called Shahe, is a small cinder-block house framed by Szechuan pepper trees, its primary decoration a poster of Chairman Mao. Eight of us -- a reporter, a photographer, two local "fixers," a translator, and three executives from Procter & Gamble -- have come here so that we can watch a 29-year-old corn and potato farmer named Wei Xiao Yan wash her hair.

And she washes it with gusto, especially considering that she is doing it in front of a crowd while standing in the doorway of her kitchen, using a small metal basin with no more than three cups of water. Water scarcity is the rule here; the family stores rainwater in a well and must pay a private company for anything more. After trying to work up some lather with a tiny bit of Rejoice -- P&G's cheapest local offering, which costs about 10 renminbi ($1.50) a bottle -- Wei Xiao Yan does a cursory rinse, then forces the family comb through her tangles. "The shampoo puts nutrients in my hair," she says, noting that it is her first bottle of real shampoo after a lifetime of using laundry soap flakes, which made her hair oily. I make the error of asking her if it might not be more practical to cut her nearly waist-length hair. She looks at me with disdain. "As a woman, you should have long hair," she snaps. "And my husband likes it."

Cindy Graulty, principal R&D scientist for P&G, and Melisa Liu, principal R&D researcher, give each other knowing looks. My blunder led to the kind of insight that P&G is seeking as it tries to learn how best to make products for the underserved -- what the company calls the "$2 a day" consumer, based on average income. Wei Xiao Yan's tart response explodes the assumption by some marketers that what poor consumers look for is the most practical, cheapest solution. Wei may live on 900 renminbi a year ($135) and have so little water that her washing machine -- a wedding gift -- is rusting in the courtyard. But that does not mean she won't make the effort to look pretty for her husband. "It's a myth to say poor people only want function," says Graulty, who has headed P&G's $2-a-day initiative since October 2009. "They care about beauty. Just like us."

Obvious, right? Yet despite the growing belief that the billions of poor -- what the late management thinker C.K. Prahalad termed the "bottom of the pyramid" -- can actually make up a viable economic market, most attempts to harness it have failed. Procter & Gamble (PG),  a $79 billion (in sales) company better known for its middle- and upper-middle-class brands than for its low-end offerings, thinks there's another way to reach those consumers. So it has quietly launched a skunkworks, populated mostly by technical folks rather than market researchers, to approach the $2-a-day consumer from a new perspective. Rather than try to invent products first or rely on market research alone, the group spends days or weeks in the field, visiting homes in Brazil, China, India, and elsewhere. It's the same approach the company uses in developed markets but requires much more effort, without the obvious potential payoff from consumers with disposable income. "Our innovation strategy is not just diluting the top-tier product for the lower-end consumer," says Robert McDonald, P&G's CEO and chairman. "You have to discretely innovate for every one of those consumers on that economic curve, and if you don't do that, you'll fail."

P&G researcher Melisa Liu (left) is shown around a farm near Lanzhou by Gu Wen Juan. Liu is part of the company's "$2 a day" project, which focuses on consumers with that amount of income.

Some wonder why P&G bothers. The holy grail for companies in developing markets has always been the emerging middle class, and P&G is no exception. "Knowing how [Wei] shampoos is great," says Bill Schmitz, a managing director at Deutsche Bank Securities who covers P&G. "But she probably won't be a profitable consumer for a decade." Indeed, the company, present in 180 countries, remains committed to "mass prestige" -- delivering high-quality brands such as Olay, Crest, Tide, and Pampers to the middle and upper classes at a premium price. Even as P&G has focused more on developing markets, with sales there rising to 34% from 20% in 2000, its target customer is still the Shanghai bank manager we also visited. She lives in a new high-rise, dines out, and favors P&G's SK-II skin-care products, which retail for up to $374.

It is this woman, not Wei, who is the focus of the old saying "If every one of the 2.5 billion Chinese and Indians just bought one [Coke or package of Pampers or bar of Dove soap or insert product here] a [day, week, month], we would [double, triple, quadruple] our sales." Yet P&G, realizing that its future success lies in the developing world, has concluded that it must compete at the lower end of the spectrum as aggressively as it does at the higher one. For too long, says P&G director Scott Cook, founder of Intuit, the company ceded ground. "There was debate at the board level," he says. "It pushed them to stop being only premium and not to give competitors a safe harbor."

For P&G the stakes are high, in part because of some harsh new realities. Start with the fact that the global recession put a dent in P&G's up-the-curve strategy. Then there is the simple paradox of growth: For a giant company to grow at the levels it has in the past -- and satisfy its investors, as its stock is about where it was five years ago -- P&G must expand aggressively, even if it means moving away from its core strength. P&G says developing markets are growing at 6% to 8% annually, compared with 1% to 2% in the developed world. The market for the poor remains largely untapped.

"We're late to those markets," says McDonald, who spent much of his career overseas, including in Japan and the Philippines. "As a result, we've got to do things smarter." He's not exaggerating. In Brazil, which many think is poised to exhibit China-type growth, Colgate-Palmolive (CL) has a 71% market share in toothpaste; P&G wasn't even in the category until 18 months ago. Unilever (UL), with its Anglo-Dutch colonial heritage, already gets more than 50% of its sales from developing markets. "P&G is still very U.S.-centric," says Paul Polman, Unilever's CEO (and until 2006 a P&G exec). "What Bob is doing is not wrong, but it will take some time. Emerging markets are in the DNA of our company."

Consumer disparities: A sampling of markets shows big differences in spending on P&G products.

Throwing down the gauntlet, McDonald has set a hugely ambitious goal of 800 million new customers by 2015 and says he is shifting the company's emphasis from the West to Asia and Africa. Even in China, a notable success story for P&G since it entered a joint venture with Hutchison Whampoa in 1988, per capita spending on P&G products is just $3 a year, vs. nearly $100 in the U.S.? McDonald wants to raise the average expenditure globally from $11.50 in the next few years. "The move of the center of gravity is critical," he says.

To communicate that approach, he has changed the strategy of the company to "Touching and improving more lives, in more parts of the world, more completely." What he calls "purpose-inspired growth" is meant to help his employees believe that they are not merely pushers of deodorant and dryer sheets, but instead helping improve people's daily existence. "It's more than a noble idea," McDonald proclaimed at the company's Dec. 16 analyst meeting. "It's a game-changing growth strategy and a powerful source of competitive advantage." Certainly when aimed at the $2-a-day customer, the idea of improving lives allows people like Graulty to feel that her project has meaning. "It's almost like you don't even have to pay us to do this," she says. "Don't tell our managers that."

Going local on R&D

Beautiful Chinese women wearing red cheongsams are striking drums that seem to be made of water. A dragon with smoldering eyes undulates on the stage as P&G CEO McDonald and CTO Bruce Brown nod to various local dignitaries, including China's vice minister of commerce. You've seen this movie before; it's yet another ribbon cutting for a Western company expanding in China -- this time for P&G's Beijing Innovation Center (BJIC), a sparkling $70 million home for the company's regional R&D efforts. Already the company has invested more than $1 billion in China, and McDonald says it will spend another $1 billion in the next five years.

Yet leaving all the hoopla aside, the center is particularly important when it comes to P&G's shifting priorities. Though the company has 25 R&D centers all over the world, BJIC is an attempt to research, source, and develop products for China and the rest of Asia without having to rely on the company's headquarters in Cincinnati.

One of the most important reasons for that is the masses of high-caliber talent coming out of Chinese universities. The hope is that all that brainpower will lead to innovations that will also work in the developed world. P&G is, amazingly, one of the top three choices among Chinese university graduates looking for jobs. And the place is pulsing with the energy of young people who want to make it big; as a raucous karaoke party shows, they seem to have both right- and left-brain abilities. The campus feels a bit like being at a Silicon Valley startup -- except that it's a unit of a 173-year-old company.

For most of its history P&G, which puts a whopping $2 billion annually into R&D, succeeded by inventing technically superior products at home, then pushing them out to the market in a command-and-control fashion. Only over the past decade, as former CEO A.G. Lafley pried open the company to ideas from the outside, did things change. The Swiffer and the Mr. Clean Magic Eraser -- both hits for P&G -- came about through partnerships with outside product developers.

James Kaw, Director of P&G BJIC; Maurizio Marchesini, Manager of P&G Asia R&D; Bruce Brown,P&G's CTO; and CEO McDonald (from left) at the opening of the company's Beijing Innovation Center in August

BJIC is the only tech center in the developing world that operates across all the company's global business units, or GBUs, as P&Gers, acronym lovers all, tag it. Similar to the company's baby playrooms and fake supermarkets in Ohio, here a simulated hutong (a typical Chinese home) lets researchers observe consumers as they brush their teeth or change a diaper, then make immediate changes to prototypes. "Now we can do end-to-end product innovation," says Brown.

Even before the new center opened last August, several new products came out of China. They included Tide Naturals, a skin-sensitive detergent for women who wash clothing by hand, and Crest Pro Health toothpaste, a premium brand whose main researcher, Wang Xiaoli, cracked a 50-year chemistry problem by finding a way for stannous fluoride -- a stronger form of fluoride -- to stabilize in water. Wang, who won a companywide innovation award, says she came to P&G because "I didn't want what I learned to be published in 100 years."

The key, says McDonald, is making sure that technical development and testing are done locally. That's something P&G's Gillette unit learned the hard way before P&G bought it in 2005, when it developed a razor specifically for Indian men. Since many of them shave only a couple of times a week, often using a basin, they have longer facial hair than most Western men. Rather than testing in India, Boston-based Gillette decided to try out the razor on Indian men who were studying at MIT. They loved it, so the company went ahead with a launch in India. It flopped -- because the MIT students, unlike much of the Indian market, had access to running water. Lesson learned, P&G retrenched, tested locally, and last October launched Gillette Guard, a razor that is easier to rinse.

New uses for old ideas

The most valuable consumer insights for P&G's $2-a-day explorers are transnational ones. That's why Liu, a young Chinese woman who has worked in the research division of P&G for six years, has spent much of the past one trekking through the jungles of Brazil, the slums of India, and farming villages in rural China. She is bringing what she learns back to Beijing -- and hoping that the knowledge will lead to wins elsewhere. Back at Wei's home, she pulls out a plastic bag full of products -- some new prototypes, some off the shelf -- for her to sample. Wei relies on a washcloth and a scrap of soap to clean her body, and she never undresses completely -- not because of water concerns, but because of privacy issues. There is no bathroom, her father-in-law lives in the home, and she feels she has no place to go.

Out of the bag comes an unmarked bottle with a body cleanser formulated to clean without much water. It's kind of like Purell -- except that it generates foam, which can be easily wiped away, instead of lather. The technology comes from an existing hair-color product, which means that it's a potential win-win for P&G, a new use for an old idea. "We just have so much stuff," says Graulty. "Our job is finding the right match." Liu pulls out a bottle of Febreze -- an air freshener for relatively affluent customers -- and shows Wei its use as a spray to improve the smell of clothing that can't be washed often.

She likes it, but not as much as the leave-in conditioner they try next; the look on her face when she touches her hair is one of deep desire. I can't help but wonder whether this experience is touching and improving her life, or tantalizing her by introducing her to something she can't have. The item Wei likes most, though, is one that P&G doesn't even make: an off-the-shelf camping shower, basically a large plastic bag that hangs on a line or a tree and lets you shower with sun-heated water. For her it is a breakthrough product -- she can wash in private.

Does that mean, I ask, that P&G should go into the camping-shower business? No, says Graulty; certainly the company might try partnering with a producer to sell, say, cleanser with one, but the real insight is privacy. Graulty's project has uncovered other misconceptions about poor consumers, including the notion that they always want the simplest product (they don't), and that they are not as aspirational as the more well-to-do (they are). They need more skin-care products because they spend so much more time outside. And though P&G never contemplated selling hair dye to poor customers, Graulty has learned that in those parts of the world, dye is very much in demand. "It's a paradigm shift," she says. "We say, 'Why would they buy that? It's not like food, clothing, and shelter.' But to get a good job, to be presentable, they have to have beauty." The R&D folks are now working on a colorant that uses little water -- and is priced appropriately for a $2-a-day customer.

To be sure, it will be a while before any of this research helps P&G make real headway. In the meantime, the company is relying on classic tactics like price cuts and advertising to gain share. "Promotions win quarters," McDonald told the analysts. "Innovation takes decades." His message may be working. After a few years of skepticism, P&G is gaining fans like Goldman Sachs's Andrew Sawyer, who upgraded the stock in December largely on the company's emerging-market strategy.

Though no product has been launched yet from the $2-a-day project, Brown says several are in the works, including a hair-care product beginning formal testing in India. Last fall the group of about 100 met for the first-ever $2-a-day confab. (Ironically, the meeting took place not in Africa or Asia, but in Cincinnati -- "The logistics were better," Brown says, apologetically.) One move McDonald has not made so far is to form a formal business unit. That's the type of thing the company might have done immediately in the past -- but management now believes would be better handled locally, across silos. "If there were a $2-a-day division," director Cook says, "everyone else would wash their hands of it."

Now, if everyone else would simply begin to wash his hands with P&G products, the company might get somewhere.

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