Consulting Industry – A Consise History of the Last Decade

Read a really consise and informative history of the consulting profession over the last decade in Consulting Magazine last week.  Below is a link to the e-zine article online: http://www.consultingmag-digital.com/consultingmag/20091112/?pg=20#pg20.  CM tells the story using a top 10 format.  Number 1 of course is the collapse of Arthur Andersen that was tied to Enron.

The “Freemium” Business Model

Great interview on Charlie Rose with Chris Anderson, editor of WIRED Magazine (one of my personal favorite mags). 

http://www.charlierose.com/view/interview/10489#frame_top

Chris, author of “The Long Tail”, discusses his new book “Free”, which explores new business models around giving away products for free… and having higher end products that are purchased at a “freemium”.  Giving away products for free is obviously not a new concept.  What is new is that more businesses are able to do it thanks to low or zero distribution costs over the internet.

By the way, the book and audiobook “Free” can be obtained for free at the following sites!!  I just downloaded the audiobook from Audible

Book (on Kindle)

http://www.techcrunch.com/2009/07/15/chris-andersons-free-is-available-for-free-on-the-kindle/

Audiobook (via Audible.com)

http://www.audible.com/adbl/site/enSearch/searchResults.jsp?BV_UseBVCookie=Yes&N=0&Ntx=mode%2Bmatchallpartial&D=Free&Dx=mode%2Bmatchallpartial&Ntk=S_Title&Ntt=Free&x=11&y=10

GE – Proxy for American Competitiveness in the 21st Century

Fantastic interview on Charlie Rose the other day with Jeff Immelt, CEO of GE:

http://www.charlierose.com/view/interview/10412

The conversation is focused, not so much on GE specifically, but on US competitiveness in general and how we will emerge from the current global recession.  This is the defining moment for America, and will determine whether we continue to lead the world, share leadership with several other nations, or worst case- simply follow.  My belief is that GE, with its diverse portfolio of critical, large-scale businesses, serves as the best single-company “proxy” for US competitivenessin the 21st centurty.  Energy/Sustainability – Health Care – Financial Services…these are the industries that will define the future.  And if I had to pick one industry where the US absolutely must lead the way - it is Energy/Sustainability!  What’s needed, as Immelt points out, is nothing short of a “man-on-the-moon” type vision with defined goals and objectives, to make it a reality.  But of course, political, social and business will must unite like never before to make this a reality.  And the Obama administration’s leadership ability will be stressed to the max.  It won’t be easy, but then again…what is the alternative. 

What’s most disturbing in this interview is Immelt’s declaration that currently, America does not lead the way in “any” of the clean energy or alternative technologies of the future (this includes wind, solar, nuclear, CCS, etc.).  But according to Immelt, it’s not too late for the US to regain the leadership edge.  A defined plan with milestones must be laid out by the Obama administration – involving CO2 cap/trade, vehicle efficiency standards, education and job-retraining – just to name a few.  He quotes the GE saying…”In order to do something… you need to do something”.  In other words, let’s pick some bold national goals, put a plan in place, swing for the fences, track out progress and adjust along the way… complacency is not an option!

Detroit : Home of the The Big “1″!

Great interview on Charlie Rose on the current and future state of the auto-industry in the US:

http://www.charlierose.com/view/interview/10346

One of the experts mentions that a possible future scenario (which is not entirely unlikely) is that the US will be left with only 1 domestic automaker in 10 years … Ford!  The other “US automakers” would end up being companies like Toyota, Honda and Hyundai, that will occupy a much larger footprint in the US.  Does this spell near end or a new beginning for the US auto industry…only time will tell.  But one thing is clear to me… the 60% stake taken by the US government in GM and the word “ROI” don’t belong in the same sentence.  That $50B (with a B) investment is long gone and will never be repaid to the US government (ie. the taxpayers).  Unless the fundamental economics of being a domestic automaker change, I also believe that we may have to get used to The Big “1″ for some time.

Bear Sterns

Had to share this one … it’s a great 30 minute conversation about Bear Stearns and the economic crisis with Kate Kelly and William Cohen. 

http://www.charlierose.com/view/interview/10338

Kelly recently authored, Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street” and William D. Cohan recently authored “House of Cards: A Tale of Hubris and Wretched Excess on Wall Street”.  I will definitely need to pick up one of these books sometime to better understand the economic turmoil that we are in right now. 

 A couple points raised by Cohan and Kelly are worth noting:

1 – Bears Sterns is the “Rosetta Stone” of the current economic crisis; if you understand the greed, excess and risk taking that ocurred at Bears… then you will better be able to understand the collapse of Lehman, AIG and others as well.

2 – I like the point Cohen makes about private vs. public investment banks, and how private firms are less likely to assume large risk and high leverage ratios.  I don’t know the actual stats on this, but it sounds plausible that a private firm would be more risk averse since the owners are playing with “their money” versus the “stockholder’s money”.

3 – What’s up with all the bridge playing of the former CEO of Bear Sterns???  Apparently this guys attended 3 national bridge tounaments per year and spent about 4+ hours a day during business hours playing bridge on his computer?  On top of that he was an avid golfer.  What the heck did this guy do to earn 10+ million a year; apparently not much. No wonder Bears Sterns was ultimately purchased by JP Morgan for 10 bucks a share! 

“Rise Up” During the Downturn

Read a great article in The Plain Dealer (Cleveland Area Paper) regarding how the downturn really spells “opportunity” for those companies that are courageous enough to look ahead to the future.  (“Rise up” btw is the Cavs slogan, so I felt it would be appropriate for the title of this post)

http://www.cleveland.com/business/index.ssf/2009/05/_emrah_turudu_beachwood_softwa.html#more

The article reminded me of a few things…

1 – Cost costing, capacity reduction, etc. are important during a downturn – but they are simply table-stakes.  They are necessary tactical steps that must be taken – but are not competitive differentiators.

2 – To truly stand above the crowd, business leaders must be courageous and have a long term vision.  They must see the downturn as an opportunity to lean out their processes, improve business productivity, improve focus, innovate across the business and gain market share during the upturn.

Now you may be thinking, point 2 above is well and good.  But how do you pay for this… especially when the business is having a hard enough time with cash flow and working capital.  Once solution is to tackle the low hanging fruit – such as labor-intensive, paper based processes where it is possible to quickly and inexpensively wring out cost savings.  These cost savings can then be plowed back into the business to fund additional improvement initiatives.  Rinse and repeat enough times and what’s left is a company that can emerge even stronger from the downturn!  The article provides examples of three companies in the Cleveland area that are doing just that.

NPD and “American Idol”

Read an interesting and somewhat off-beat article the other day in Visions Magazine (Visions is the bi-monthly mangazine published by PDMA – focused on product development) that I thought was worth sharing:

http://www.visions-digital.com/visions/200812/?pg=1&search=american%20idol&per_page=5&results_page=1&doc_id=-1

The article is an interesting juxtaposition between the well know NPD Stage-Gate process and the American Idol selection process.  The two processes are very similar; each starting with a wide funnel entry point and a narrow funnel exit point, with a “winner” (product versus singer) ultimately selected.  Furthermore, in both processes, the “judging” becomes more difficult and the bar is raised higher after each successive gate is passed. 

The article provides a clever methaphor for the NPD Stage-Gate process, and demonstrates how it can be applied to many areas of life where a “winner” must ultimately be selected, but where you want to have a wide funnel opening to encourage all ideas (or people!) to come forward.

In my mind, a large part of the success of American Idol can be attributed to the democratic process that is followed.  Anyone (as long as you meet the age restrictions) can try out for the show.  This of course leads to all sorts of freaks to try out… but occasionally it leads to the discovery of an artist that nobody would have guessed as a star based on their appearance, demeanor, etc.  I think more than anything, it is this “surprise” factor that keeps folks watching.

The Complexity Conundrum

About 1 year ago, two Deloitte colleagues and I entered a paper for Deloitte’s annual Call for Papers Contest.  The topic was on managing product line complexity.  Turns out that complexity is sometimes good and sometimes bad… like many things in life “it depends” on the situation.  Complexity can in certain cases wreak havoc in your companies supply chain, disproportionally drive up cost per product and sap margins.  On the other hand, for some business it can be the ultimately competitive weapon and garner large premiums by offering greater customization.  The paper we entered provides a framework for analyzing product line complexity.  Unlike SKU (stock keeping unit) rationalization, the framework can be applied to make-to-stock and make-to-order business, and across discrete, process and service industries.  Ultimately, the paper won 4th place (along with several other papers) and was published on deloitte.com: http://www.deloitte.com/dtt/article/0,1002,sid%253D2224%2526cid%253D220288,00.html). 

To our delight, the editor of AMA’s Marketing Management publication was also interested in the paper, and after many additional edits and additions, the paper was finally published in their JAN/FEB 2009 edition of Marketing Management: http://www.marketingpower.com/ResourceLibrary/Publications/MarketingManagement/2009/18/1/MMJanFeb09Meeker.pdf

I hope you enjoy the article and look forward to your comments!  Thanks

The History of Money

For the last few days, I’ve been wondering the about the history of money and the reason’s behind why we attribute value to money.  I started to mentally review all the different things I learned at some point in my adolescent school career… about the gold standard, the barter system, inflation, etc.  But my mind kept circling back to the question; “why do people attribute value to money, especially when the money itself does not have any inherent worth?”. 

Whenever a question like this bugs me, I always head to http://www.howstuffworks.com.  I love this site because it is a vast treasure trove of information that is written in plain English.  I found and read the following article (http://money.howstuffworks.com/currency.htm), and discovered the answer to my question:

“The only reason a dollar, or a franc, or a Euro has any value is because we have a stable system in which people are known to accept these pieces of paper in return for something valuable. Or, as Nobel Prize-winning economist Milton Friedman puts it, “the pieces of green paper have value because everybody thinks they have value.”

As is usually the case when I check out a HSW article, I learned a few unexpected “Cliff Clavin” (http://www.youtube.com/watch?v=botdmsQilnU) tidbits of knowledge about money:

1 – The first coins were minted in Lydia, an ancient empire in the area of modern Turkey. The Lydian king Croesus started making small metal ingots stamped with an imperial emblem around 640 B.C. (HSW.com)

2 – Paper money was developed first by the Chinese, who used stag skins, bark, or parchment marked with the imperial seal as “bills of payment.” (HSW.com)

3 - The U.S. did not abandon the “gold standard” until 1971 (I always thought it was much earlier than that!).

4 – The largest US denomination ever printed was a $100,000 dollar bill with Woodrow Wilson’s mug on it: