February 2008 Archives

Bill Clinton Endorses Obama!

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Hat tip to Steel Pulse!

Positive online buzz for cars and trucks doesn't necessarily translate to volume sales, period.

Here's the story in AdAge: "What Web Buzz Does for Car Sales: Not Much"

Turns out that BrandIntel has been monitoring 450,000 comments over the past year. Comments made by "enthusiasts" in consumer discussion forums on auto-information sites such as Edmunds.com, newspaper and magazine sites, and blogs.

Let's look at the print/paper analogy. This is the equivalent counting the number of press-clippings in the trade mags. As a measure of PR efficacy of getting stories published, it worked great. As an indicator of sales, it didn't.

What matters in print and online is the credibility of the messenger and the size of the audience. A story in Rupert Murdoch's WSJ or the NY Times may have a dramatic impact compared to the same story in your local rag.

Online, credibility and audience-size still matter, but so does findability. How easy is the story to find? Does it come up high in Google and to a lesser extent Yahoo? If there is buzz, is the buzz on a hub or a backwater site? Is it getting attention or play through links from other noteworthy sites?

How does one measure that? There is a way - ecosystem relevance - which measures the position and rank of a site within its industry/category ecosystem.

A viable, sustainable economic model is crucial for the future of the planet. Tell 'em, C.K.!

Marketing in a Downturn

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Seth Godin writes about "marketing in a recession" :

The challenge for marketers is to figure out how to change the story they are living so that their customers can change the story they tell themselves. What you make, where you make it, who makes it, how it's priced and sold and ... it all adds up to a perception. If you change these elements the story will change too.

His point is that Starbucks becomes the indulgence of someone who has just traded down to a small rental apartment. Gone are the days of $4.00 coffee just for the heck of it.

I think Starbucks is busy changing their story. They're trying to be a new, upscale McDonald's - rapidly working to add in a "drive-in have a happy meal" component to their business model. The trouble is in the demographics. Bill Tancer at TIME tells us that "the Big Mac customer base has remained relatively stable, while Starbucks' coffee-drinkers have diversified. It used to be that Starbucks attracted customers from a small, elite segment of the country; now, its visitors pervade many more segments across America."

From my own observations at the local Target, I see far more customer buying ICEEs rather than Starbucks coffees. This is the "threat of substitution" that is always around the corner, no matter how good your product is. Seems like the days of mass-luxury are over.

So where does retail find its consumer, er, citizen? Turns out they're not citizens at all - you've got to sell overseas. India and China are experiencing a huge boom in luxury, thanks to an explosion in middle class prosperity. The fortune is in the middle and the bottom of the pyramid.

And if you can't reach those consumers? I wrote about that in an earlier post about advertising in a recession.

I was talking to Bill Dunk this morning, and we got to the topic of trust as an issue in global business.

I told him I'd seen a video in which Jeff Immelt said something to the effect that in China the concept of win-win is an issue, whereas India is much better at partnerships.

Immediately, Bill dug up this article for me - an interview with Nani Beccalli-Falco, GE International's chief executive.

From the article:

This is a difficult challenge and it is one that Beccalli-Falco speaks of with surprising candour. He talks of the problems of striking deals in China, where, he says, the values of equity and fairness implied in the West's 'win/win' approach to business are replaced by a more naked self-interest. "In China, they have a tendency to think 'win for China, OK for you'," he says. "It makes forming partnerships difficult."

If you want to get a global perspective on business, you must subscribe (for free) to Bill Dunk's Global Province >>

And yes, I finally dug up the video:

Watch Immelt's interview with Rajat Gupta, and listen carefully as Immelt talks about India versus China - right at the very end of the video:

"China has a hard time with win-win. That's a problem over the long term.India's much better. There's a much better sense that India can be a real ally..."


China's got the Olympics this summer... wonder if they'll let anyone else win a medal...

We did this interview a year ago, but he's finally (and deservedly) hitting the best-seller lists - thanks to a strong internet-based campaign. The book >>

Why do you claim that "Trust" is the key leadership competency of the new global economy?
Covey: If you look at the nature of the world today, a foundational condition in Thomas Friedman's flat world is the presence of trust. Put simply, today's increasingly global marketplace puts a premium on true collaboration, teaming, relationships and partnering, and all these interdependencies require trust. In the book I point out that partnerships based on trust outperform partnerships based on contracts. Compliance does not foster innovation, trust does. You can't sustain long-term innovation, for example, in a climate of distrust.

In issue after issue, the data is clear: high trust organizations outperform low-trust organizations. Total return to shareholders in high trust organizations is almost three times higher than the return in low trust organizations.

So we assert that trust is clearly a key competency. A competency or skill that can be learned, taught, and improved and one that talent can be screened for.

Trust is the one thing that affects everything else you're doing. It's a performance multiplier which takes your trajectory upwards, for every activity you engage in, from strategy to execution.

How do you identify a high-trust or low-trust organizations?
Covey: Trust is a powerful accelerator to performance and when trust goes up, speed also goes up while cost comes down -- producing what we call a trust dividend. How do you know if you have a high trust culture? By observing the behavior of your people. In high trust, high performance companies, we observe the following behaviors:

• Information is shared openly
• Mistakes are tolerated and encouraged as a way of learning
• The culture is innovative and creative
• People are loyal to those who are absent
• People talk straight and confront real issues
• There is real communication and real collaboration
• People share credit abundantly and openly celebrate each others' success
• There are few "meetings after the meetings"
• Transparency is a practiced value
• People are candid and authentic
• There is a high degree of accountability
• There is palpable vitality and energy--people can feel the positive momentum

Another very visible indicator is the behavior of your customers and suppliers. What is your customer churn rate? Do you have a history of long-term customer and supplier relationships? What is your reputation or brand equity in your marketplace?

Conversely, when the trust is low, there's a trust tax which changes your trajectory downwards. In our work with organizations, we find that low-trust, low-performance organizations typically exhibit cultural behaviors like:

• Facts are manipulated or distorted
• Information and knowledge are withheld and hoarded
• People spin the truth to their advantage
• Getting the credit is very important
• New ideas are openly resisted and stifled
• Mistakes are covered up or covered over
• Most people are involved in a blame game, badmouthing others
• There is an abundance of "water cooler" talk
• There are numerous "meetings after the meetings"
• There are many "undiscussables"
• People tend to over-promise and under-deliver
• There are a lot of violated expectations for which people make many excuses
• People pretend bad things aren't happening or are in denial
• The energy level is low
• People often feel unproductive tension--sometimes even fear

These behaviors are all taxes on performance.

The work we do is to establish trust as your organizational operating system. That's a high-tech metaphor, but it's appropriate. We know how trust works, how to measure it, how to establish it, grow it, extend it, and sustain it - with all stakeholders.

Why is trust such a hidden variable to many otherwise competent managers?
Covey: Unfortunately, too many executives believe the myths about trust. Myths like how trust is soft and is merely a social virtue. The reality is that trust is hard-edged and is an economic driver.

For instance, strategy is important, but trust is the hidden variable. On paper you can have clarity around your objectives, but in a low-trust environment, your strategy won't be executed. We find the trust tax shows up in a variety of ways including fraud, bureaucracy, politics, turnover, and disengagement, where people quit mentally, but stay physically. The trust tax is real.

There are many myths about trust, and in my book I present them in a table your readers may find helpful:

Screen Shot 2015-04-23 at 9.13.12 AM.png

So trust is measurable? quantifiable?
Covey: Absolutely, trust is measurable. Smart organizations measure trust in three key ways: 1) actual trust "levels"; 2) the "components" or dimensions that comprise trust; and 3) the "effects", or impact, of trust.

We have found that one very simple way to measure trust levels is to ask one direct question and roll it up and down throughout the organization. For internal stakeholders ask: "Do you trust your boss?" to employees at all levels of an organization. For external stakeholders, like customers or suppliers, you might ask them: "Do you trust our sales representative or account manager?" These are simple, direct questions that tell us more about our culture than perhaps any other question we might ask.

Now, wouldn't it be great if "trust" showed up on the financial statements as either a 'tax' or a 'dividend'? Organizations would then use resources to eliminate the tax or create a larger dividend! Although a high trust or low trust culture doesn't literally show up on financial statements, it does show up in the following ways, which are measurable, observable and economically relevant - all of which make a strong "business case for trust":

Screen Shot 2015-04-23 at 9.13.20 AM.png

What are the competencies, the behaviors that build trust?
Covey: Trust too often has been pigeonholed as based on character and integrity alone. There's nothing wrong with that, and that is clearly the foundation, but it's insufficient.

Trust is a function of both character and competence. Of course you can't trust someone who lacks integrity, but hear this: if someone is honest but they can't perform, you're not going to trust them either. You won't trust them to get the job done.

That's one reason why trust has a soft image- because it has been severed from competence and results.

So how does one apply trust to branding?
Covey: When I look at a brand, a brand is nothing more or less than trust with the customer, trust with the marketplace. The principle behind a brand is reputation. The brand stands for a promise and the ability to deliver on that promise. And in that promise is a company's character and competence, its reputation.

From the character side you start with integrity--honesty, congruence, humility and courage. The courage to be open, to stand for something, to make and keep commitments. Then there's intent--is there a genuine concern for people, purposes and society as a whole or is profit your sole motive? What's the company's agenda? And how does it behave? Sometimes poor behavior is simply bad execution of good intent.

On the competence side, you start with your capabilities--talents, skills, the ability to deliver. Is your company staying relevant, are you continually improving, do you have the right technologies to stay ahead of your competition? Brands need to reinvent themselves from time to time to stay relevant. Finally, look at your results. Your company and your brands are constantly measured based on past performance, present performance and anticipated future performance.

These four dimensions--integrity, intent, capabilities and results--make up the credibility and reputation of your brand. When the trust is high, you get the trust dividend. Investors invest in brands people trust. Consumers buy more from companies they trust, they spend more with companies they trust, they recommend companies they trust, and they give companies they trust the benefit of the doubt when things go wrong. The list goes on and on. On the Internet, a trusted brand versus an untrusted brand--the differences could not be clearer, you only give your credit card number to those you trust. And look what happens when a brand gets diluted or polluted or compromised, we see how fast consumers, and investors, turn away. They quit buying.

These same principles apply equally to companies and individuals.

What about the social responsibility of business? Is this part of the trust equation?
Covey: Initially many companies may move into this arena for PR purposes. More out of fear of not being in the arena, than really participating with their souls. But there are huge benefits that flow from this - the difference it makes with your employees first, then your customers, your suppliers, your distributors, your investors.

The distrust we see all around is suspicion, a response to the corporate scandals and vicious downward cycles of cynicism. But when a company focuses on the principle of contribution for all stakeholders, that becomes good business. Executives need to understand the economic benefits of this trust dividend, especially when the behavior is real, not artificially or superficially created as PR to manipulate trust. We will see more and more companies moving in this direction because it makes economic sense, period.

Trust varies by geography, as you've pointed out in your book. How do companies build trust globally?
Covey: There's no question that trust issues are global issues. There's also a country tax. The Edelman Trust Barometer tells us, for example, that trust is often based on country of origin. US companies are being taxed in Europe, in Germany, France and England, for example. How can companies like UPS improve their trust rankings?

Trust can be rebuilt. So how do you build trust? By your behavior. We've identified 13 behaviors which build trust:

1. Talk Straight
2. Demonstrate Respect
3. Create Transparency
4. Right Wrongs
5. Show Loyalty
6. Deliver Results
7. Get Better
8. Confront Reality
9. Clarify Expectations
10. Practice Accountability
11. Listen First
12. Keep Commitments
13. Extend Trust

Companies need to have a strong promise, because the promise builds hope. Keeping the promise is what builds trust.

My father has an expression: "You can't talk yourself out of a problem you behaved yourself into." So it is with trust.

Sometimes it takes a little time, but you can accelerate the process by declaring your intent and signaling your behavior, so others can see it.

People and companies can learn these behaviors. It's not a simple process which happens overnight. But it is a systemic, cultural process which can happen one leader at a time, one division at a time, one company at a time, and you can see the behavior shifting toward authentic, real trust-building behaviors as opposed to the more common counterfeit behavior of spin and hidden agendas and the like which tend to dissipate and diminish trust.

Screen Shot 2015-04-23 at 9.13.36 AM.png
Is there a danger in being too trusting or even gullible? 
Covey: One thing about trust is that everyone's for it.

However, there are three big objections which come up. The first one is that trust is a social virtue, to which I say no, it's much more than that; it's a hard-edged economic driver. Secondly, and we hear this all the time: "we can't do anything about trust, it's either there or it's not there." This too is a fallacy. Trust is a competency. It's something you can get good at. It's a strength you personally, and your team and your company can master. Being good at it will elevate every other strength you have.

The third complaint goes along these lines: "We've been burned before. We can't trust everyone. Are you suggesting we trust everybody?" That's where I suggest you exercise what I call "SmartTrust." Most leaders have been burned before, so they become distrusting. Our society is that way. After Enron and WorldCom, we pass legislation like Sarbanes-Oxley to force compliance, raising the "tax" on all businesses. The question is, "is there a third alternative?" An alternative where you combine a high propensity to trust with good analysis and judgment, so we can really assess the circumstances, the risk, the credibility of the people involved, so we can extend trust, and build into that trust a stewardship or responsibility.

If you're not trusted, you tend to reciprocate with distrust. That's how the vicious cycle of mistrust starts and spirals downward.

There is a risk in trusting people, but the greater risk is not trusting people.

SmartTrust says you look at the opportunity, the risk and the credibility of the people involved. And you add to that verification and analysis. So you trust and verify. As opposed to verify, then trust!

Let's look at Berkshire Hathaway and Warren Buffet. I mention them in the book as an example of a high-trust company, about the acquisition they made based on a hand shake without due diligence.

But did you know that's how the entire company operates?

They have a 192,000 employees with 42 different wholly-owned companies. How many people do you think work at corporate headquarters? '


Why? Because they choose to operate in a "seamless web of deserved trust" as Charlie Munger calls it.

This is real. It's not blind trust, but smart trust.

Thanks so much.

Seth Godin helps you wake up... you can't be average anymore.

- Design...
- Don't be safe...
- Don't be boring...
- Skip the BMW ad...
- it's Otaku time!

The December 2007 HBR had an interesting article by Kevin Coyne called Breakthrough Thinking from Inside the Box. There's far more to this article than just the 21 questions, so I urge you to go grab it here!

The approach Coyne and friends describe supposedly works better than brainstorming or strict quantitative analysis >>

“De-average” buyers and users

Which customers use or purchase our product in the most unusual way?

Do any customers need vastly more or less sales and service attention than most?

For which customers are the support costs (order entry, tracking, customer-specific design) either unusually high or unusually low?

Could we still meet the needs of a significant subset of customers if we stripped 25% of the hard or soft costs out of our product?

Who spends at least 50% of what our product costs to adapt it to their specific needs?

Explore unexpected successes

Who uses our product in ways we never expected or intended?

Who uses our product in surprisingly large quantities?

Look beyond the boundaries of our business

Who else is dealing with the same generic problem as we are but for an entirely different reason? How have they addressed it?

What major breakthroughs in efficiency or effectiveness have we made in our business that could be applied in another industry?

What information about customers and product use is created as a by-product of our business that could be the key to radically improving the economics of another business?

Examine binding constraints

What is the biggest hassle of purchasing or using our product?

What are some examples of ad hoc modifications that customers have made to our product?

For which current customers is our product least suited?

For what particular usage occasions is our product least suited?

Which customers does the industry prefer not to serve, and why?

Which customers could be major users, if only we could remove one specific barrier we’ve never previously considered?

Imagine perfection

How would we do things differently if we had perfect information about our buyers, usage, distribution channels, and so on?

How would our product change if it were tailored for every customer?

Revisit the premises underlying our processes and products

Which technologies embedded in our product have changed the most since the product was last redesigned?

Which technologies underlying our production processes have changed the most since we last rebuilt our manufacturing and distribution systems?

Which customers’ needs are shifting most rapidly? What will they be in five years?

Finally, if you want to hire Kevin Coyne, he's available here >>

Microsoft and Yahoo need to listen to this carefully...

One of Ram Charan's recent attempts to change the world is entitled: Know-How: The 8 Skills That Separate People Who Perform from Those Who Don't.

It's not just another one of those "I-worked-with-Jack-Welch- and-Larry-Bossidy-so-step-aside fool" books, but rather serves to create a modern day Ben-Franklin list of virtues based on performance.

Let's have some fun comparing the two lists:


1. Positioning and Repositioning: find ideas for the organization that meets customers' demands and makes money.
2. Pinpoint External Change: identify patterns that place the organization on the offensive.
3. Leading the Social System: get the right people with the right behaviors and the right information to make better decisions and business results.
4. Judge People: assess people based on their actions, decisions and behavior and match them to the job's non-negotiables.
5. Mold a Team: The ability to coordinate competent, high-ego leaders.
6. Set Goals: balance goals that give equal weighting to what the business can become and what it can achieve.
7. Set Priorities: define a path and direct resources, actions, and energy to accomplish goals.
8. Deal with Forces beyond the Market: deal with pressures you cannot control but which affect your business.

Charan also identifies personal traits of leaders that help (or hurt) these "know-hows".

1. Ambition:
the drive to accomplish something but not win at all costs.
2. Tenacity: The drive to search, persist and follow through, but not too long.
3. Self-confidence: The drive to overcome the fear of failure and response, or the need to be liked and use power judiciously but not become arrogant and narcissistic.
4. Psychological Openness: The ability to be receptive to new and different ideas but not shut other people down.
5. Realism: The ability to see what can be accomplished and not gloss over problems or assume the worst.
6. Appetite for Learning: The ability to grown and improve know-hows and not repeat the same mistakes.

Well, what's not to like? This sort of checklist is usually what the HR people hand out in those 360 degree-assessments which are supposed to separate the good leaders from the bad leaders. The problem is - it's too easy for a bad manager to do well on these things, by using some old-fashioned fear and coercion on his subordinates.

Now let's take a look at Ben Franklin -


Personal Virtues
The seven personal virtues relate to your attitudes toward activities and their challenges. Good personal character traits will better your chances of success in achieving your goals.

1. Temperance: Eat not to dullness; drink not to elevation.
2. Order: Let all your things have their places; let each part of your business have its time.
3. Resolution: Resolve to perform what you ought; perform without fail what you resolve.
4. Frugality: Make no expense but to do good to others or yourself; i.e., waste nothing.
5. Moderation: Avoid extremes; forbear resenting injuries so much as you think they deserve.
6. Industry: Lose no time; be always employed in something useful; cut off all unnecessary actions.
7. Cleanliness: Tolerate no uncleanliness in body, clothes, or habitation.

Social Virtues
These six "social virtues" concern your attitudes toward people with whom you have dealings. Good social character traits result in other people wanting to do business with you or to just hang out with you.

8. Tranquility: Be not disturbed at trifles, or at accidents common or unavoidable.
9. Silence: Speak not but what may benefit others or yourself; avoid trifling conversation.
10. Sincerity: Use no hurtful deceit; think innocently and justly, and, if you speak, speak accordingly.
11. Justice: Wrong none by doing injuries, or omitting the benefits that are your duty.
12. Chastity: Rarely use venery but for health or offspring, never to dullness, weakness, or the injury of your own or another's peace or reputation.
13. Humility: Imitate Jesus and Socrates.

I think I like old Ben's virtues a bit more. Looks like Ram Charan's been reading up on Ben Franklin, though, doesn't it?

Let me venture to add two more virtues of our age: greed + laziness. Get as much as you can with as little effort as possible (right, Richard Koch?)

Which reminds me - what happened to Dr. Deming's 14 points?

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