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August 25, 2005
Auditors benefit from industry shift & WATCH OUT Big Four
Several articles have recently pointed to an interesting development in the world of auditing. Swamped with the demands of Sarbanes-Oxley implementation and with the increased complexity of even ordinary audits, the Big Four are less willing to handle smaller or private accounts. One industry insider reported that the number of hours for a typical audit have increased by 30%, and its getting harder to find qualified auditors to do the work. The Big Four are turning many formerly loyal accounts away, and giving the impression in general that they are less interested in such work than they used to be.
So who benefits from such a major industry-wide shift?
Turns out to be the former 'second tier' players -- companies such as BDO Seidman, who have picked up clients such as the $2 Billion revenue chemicals giant, Hercules. Another name that comes up a lot is Grant Thornton, the fifth largest accounting firm.
According to an article in Business Week (August 22, 2005, p. 39) 238 companies with revenue of $100 million plus switched their auditors in 2004, up from 115 in 2003. The Big Four have all suffered significant net losses while the second-tier players have gained.
Another interesting aspect of this story is a second - order effect. Used to be that a compelling argument for using a Big Four firm was that your analysts would dump on you if you didn't. Today, the picture has changed, and smaller firms are seen as reputable enough to instill investor confidence. According to Business Week, citing Deutsche Bank analyst David Begleiter, "it's positive, actually. IT's savign a lot of money.". What nobody is talking about is that this shift in analyst perceptions will dramatically change the traditional barriers to entry in accounting. The Big Four had better watch out - the barriers that allowed them to worry mostly about each other in a competitive setting have just begun to topple.
Second order benefits, anyone?
Posted by Rita at 12:15 PM | Comments (0) | TrackBack
Blow Beauty Resegments a market
So there I was reading our own Columbia Business School's Entrepreneurship Update (see http://www.gsb.columbia.edu/entrepreneurship) which is usually filled with the normal niceties of Center life. Imagine, to my surprise being jolted by a feature article about one of our alums who is exploring a fascinating re-segmentation of the beauty business. Julie Klingenberg (Columbia MBA, class of 1999) and a couple of friends have opened Blow Styling Salon in Manhattan's Meatpacking district in February of 2005.
The salon has really changed what we would call the 'attribute map' for the beauty business. It's taken out haircuts and color services, but added fantastic blow dries (they claim to offer "blow outs that will blow you away") and nail, waxing and makeup services. The concept is to focus on an underserved part of a woman's beauty care regime, the 'daily' aspect. So instead of only having that great "just done" feeling when you visit the hairdresser for the whole thing (cut, color, etc. etc.) for $35 you can indulge every day. Klingenberg developed some of her entrepreneurial talent with the support of Columbia's Lang fund, an endowed fund which provides capital to Columbia's most promising entrepreneurs. So hat's off to Murray Low, the Center director, and his great team of entrepreneurial supporters. To learn more about Blow Styling Salon, visit http://www.blowstylingsalon.com
Posted by Rita at 11:31 AM | Comments (0) | TrackBack
Frustration / Irritation = Inspiration
It's fascinating to see how much entrepreneurial verve is released by things that frustrate or irritate us (or worse). In the most recent Fast Company (Sept 2005) there are great examples. Find it nearly impossible to get your personal computer to behave? Geek Squad and Geeks on Call to the rescue. Or - can't see or open your medicine containers? Target's ClearRx Prescription System vastly improves the usability of a tablet package.
In the same issue, you can read about things that are frustrating or irritating, but which nobody has yet been creative enough to make money by fixing.
For instance, in a piece called "The Lost Picture Show," writers document multiple ways in which Multiplex movie theaters fail to deliver a great experience -- puny screens, crying babies, other customers talking, sticky floors and difficulty seeing the screen over the heads of other patrons are all massively irritating (especially with ticket prices rising ever-upward). Fast company offers some suggestions: enforce no-talking (or crying!) rules, clean the place up and possibly segment different theaters for different usage patterns - maybe even offering waiter service in premium seats. Whatever the industry works out, it's a sure bet that it will upend those players who haven't fixed what we call the 'tolerables' and 'dissatisfiers' in the moviegoing experience.
So, what other forms of irritation or frustration bug you - maybe there's a great opportunity lurking there somewhere.
Posted by Rita at 11:23 AM | Comments (0) | TrackBack
Oreo and new 'enragers' - An opportunity?
Just read (and commented on) a most interesting post over at the Fast Company web site. Seems the folks at Oreo are doing a lot of soul-searching about the addictive, unhealthy and all around negative aspects of their product, the iconic Oreo Cookie! What a great example of features that once were tolerated but have now moved to become dissatisfiers or even enragers. So, what should they do?
My thought was that they should of course fix the major sources of damage (primarily transfats) that Oreos can do. But to save the brand, Kraft will have to do better than that, which means either re-segmenting their mass market to focus Oreo advertising on customers who simply aren't tuned in to the problems, or even better, shifting the terms of the debate. They could, for instance, make eating Oreos occasionally a statement of a luxurious, self-confident treat. We all know that once that package comes home, it's the unique person who is going to eat just one, anyway...
Posted by Rita at 11:12 AM | Comments (0) | TrackBack
Dysfunctional Competition at WorldCom
A fascinating article in Fortune (August 8 2005, p. 32) details the mass destruction of the telecommunications industry perpetrated by the fraud at WorldCom (now MCI). During its heyday it's (illegally) efficient cost structure drove competitors crazy - to the point that competitors such as AT&T fired tens of thousands of people and eventually went into a deadly competitive tailspin.
Not only that, but today's MCI, post-bankruptcy and with a nice clean balance sheet seems poised to do even more damage to its competitors, most of whom are bearing the burden of significant debt. Capitalism depends on everyone playing by the same rules. The MCI story is a disturbing lesson of the helplessness of those rules in an age of intangible assets and underpowered enforcement.
Posted by Rita at 10:57 AM | Comments (0) | TrackBack
August 23, 2005
HP & Ease of Use
Speaking of easy to use computers, it's worth remembering that Compaq was a major innovator along this dimension when it first introduced it's "Presario" line in the late 1990's. I know - we bought 3 of them. They were marvels of user-friendliness. The box opened to a (now standard) 1-2-3 for dummies setup guide on one page. The cables were all color-coded, so all you had to know was that the purple cable went into the purple socket on your computer. And the CD-ROM 'setup' procedure actually worked to walk you through the whole process in a relatively straightforward way. Fast-forward to today, and all these innovations are standard. So where is the next big move in ease of use for PC's?
I've got to think that the ideas of segmenting along customer sophistication or age have a lot of merit. What I would pay for a computer that my mother-in-law could use and find engaging! We bought one for her 2 years ago, and it's been a lesson in frustration. Not only is the software and functions hard to figure out, the machine is physically extraordinarily difficult. Even seemingly simple things like 'right clicking' are hard when you can't move a mouse. Following screen instructions is hard when you can't see the screen! Different problem with today's young things - in my house, the patience for sorting out problems is rather limited, and I spend far too much time being the help desk of first resort.
So here's a challenge for the PC community -- why can't you build a PC that requires no more effort than a TV remote control to operate and would be fun for a change! I'll pay a lot more than commodity prices for that.
Posted by Rita at 12:35 PM | Comments (0) | TrackBack
Alienware vs. HP differentiator
So how do you differentiate a boring, humble PC? I was asking myself this, along with the "Business Evolutionist" who has a very interesting post with the title "Is Longer Better?" He's talking about warranties, of course, not ... well, you know.
Anyway, here I was promising the teens (I have two) that new computers were in the offing for the upcoming schools year. Dell? Nah, boring, and according to my daughter, too ugly for her bedroom. HP? Didn't even make the list, although both teens are hot for an HP printer to go with the new computer.
So what persuaded me to spend at least 1/3 more on the cool "Alienware" computers we eventually ordered? For my son, the appeal to gaming that Alienware has successfully promoted throughout what I can only imagine is a teenage boy underground. For my daughter, it's the color and styling. Can you believe it? Lessons learned: even in a commodity category, there are always going to be attributes that make a huge difference for some customer segments. Oh, and the son's computer is a really acid lime green, the daughter's a soothing silvery white.
Steve Jobs learned taught us years ago that people would prefer to pick the colors they like rather than the colors computer designers use. Nokia figured out that replaceable covers for their phones made all the difference against competition, which gave them an edge for years over the boring old machine-made competition. Why do manufacturers keep forgetting that sometimes seemingly small differences can have a huge impact?
I'll keep you posted on how things go when the cool new stuff arrives! Here's hoping.
Posted by Rita at 12:22 PM | Comments (1) | TrackBack
August 15, 2005
Academic obviousness
I recently returned from the Academy of Management Meetings in Hawaii (now there's a sight for you - 7,000 academics running wild on Waikiki beach...). I continue to be struck by the way in which academics are not researching questions that managers are worried about, and by the way in which the answers do not appeal to managers in practice. Or worse, by the way in which academic research discovers the obvious. Here's one from a paper I've just reviewed - seems that competition increasingly has to do with innovation, not just efficiency. Wow. Let me write that one down.
So what should academics be researching? All comments taken very seriously!
Posted by Rita at 07:03 AM | Comments (0) | TrackBack
August 11, 2005
Ilkone muslim-centric phones
Business 2.0 (August 2005 edition) describes a fascinating innovation: mobile phones specifically targeted at the needs of Muslim users. The Ilkone i800 contains features such as the full text of the Koran in both Arabic and English, a feature that detects the direction of Mecca from more than 5,000 spots and Arabic-lettered keys for text messaging. According to the journal, the $350 phone has sold about 100,000 units since its June 2004 launch with intentions to grow dramatically once penetration to nations with significant Islamic populations such as India and Pakistan.
Next year, the plans are to release two new phones with features such as cameras and checklists for those on pilgrimages to Mecca.
Posted by Rita at 02:36 PM | Comments (0) | TrackBack
Delivery Trucks go hybrid
A huge 'tolerable' in the package-delivery truck business is the outcome of their stop-and-start operations. Fumes, energy inefficiency and attendant environmental damage all have traditionally been tolerated because there was no viable alternative. Federal Express has seen the opportunity to eliminate these tolerables by implementing hybrid technology. The technology uses an emission-free electric battery instead of gasoline or diesel fuel. What's interesting here is that electric batteries in traditional trucking are not at this stage useful because they don't allow the vehicle to accelerate quickly.
In package delivery, however, what's needed instead is relatively slow-speed operations. Moreover, the hybrids allow the energy created in applying the brakes to even more electric power that can be used in the next cycle. According to an article in Fortune (July 25, 2005) a typical FedEx truck makes 100 stops a day and travels 1,500 miles per month. The trucks using the new system are reported to gain 42% to 56% better mileage, and to dramatically reduce exhaust emissions, a big deal in urban environments. The opportunity is huge -- Fortune reports that between 120,000 and 140,000 trucks are produced every year in North America alone, let alone the rest of the world where emissions are an even bigger issue than in the States.
Posted by Rita at 01:03 PM | Comments (0) | TrackBack
Fixing budget gaming
A most interesting article in the Harvard Management Update (Lauren Keller Johnson - Stamp Out Budget Shenanigans, Harvard Management Update August 2005) outlines some good practices to help address common games people play at budget time. Citing Richard Steele, a partner in Marakon Associates, they recommend four practices that can help make the budgeting process more realistic and strategic. I thought these were quite interesting, and essential in an era in which it is really hard for more senior people to know what is going on at an operating level.
First practice: Create decision support units that can offer an alternative to proposed budgets. This means that someone other than the manager whose personal good fortune is linked to achieving the budget is looking at the numbers as well.
Second practice: Use the very common 360 degree feedback process to include peer questions about the managers' behavior at budget time. By asking peers what they think, the questions can reveal behavioral tendencies to under-promise, demand too much or be unrealistic.
Third practice: Include customers in budget reviews. This means asking questions such as how many customers have you lost this year? How many need to be acquired to replace them? How many to grow? This will get the debate beyond the numbers to the strategic issues.
Fourth practice: Establish consistent checklists and standards for budget-planning meetings - including questions about execution, strategy and investments.
Food for thought as we enter into the second half of the year.
Posted by Rita at 12:27 PM | Comments (0) | TrackBack
August 08, 2005
Don't call us 2.0 - dumb ad category
So along the 'don't call us' theme, here is an example of a waste of money. The ad appears in the August 2005 issue of Inc, on what would be page 39. "Don't Call Us." it boldly begins, followed by the phrases "when a technology performs flawlessly and is simple to use, it soon becomes something you don't need to think about, won't need to think about. Fortunately for your business, XOptionsFlex is exactly that kind of "no need to call" technology".
What they don't tell you is what technology they are selling! I gather after scrutinizing the ad that it is some kind of telephone service provider. But what a name - XOptions Flex???
Don't lose the irony in this one - this company, along with others, is trying to simultaneously sell you a telephone service (I think) while the main thrust of their ad is about not making calls.
Oh well, maybe times have changed but when I went to business school Marketing 101 taught us that you need to tell customers what you are selling before they'll be prepared to buy.
Posted by Rita at 08:24 PM | Comments (0) | TrackBack
Don't call us 1.0
Is it a coincidence that in a recent edition of INC magazine that within a few pages the phrase "don't call us" came up over and over?
Posted by Rita at 08:23 PM | Comments (0) | TrackBack
Microsoft 1, Apple 0 in Mouse competition
The Wall Street Journal's 'personal technology' column (August 4, 2005) compares Apple's new "Mighty Mouse" with Microsoft's new entry, the Wireless Optical Mouse 5000. Much to the evident surprise of the reviewer (Walter S. Mossberg), the Apple product came out wanting in terms of usability. While the Microsoft product allows easy access to both left and right clicking and web page scrolling, the Apple product makes these characteristics subservient to a slick design. Moreover, Apple has been beaten to the punch by a key feature of the Microsoft mouse, namely that it can temporarily magnify any portion of the screen that the viewer is working with.
In an age in which more of us (unfortunately) are finding teensy tiny little type to be increasingly hard to work with, a simple little innovation like that has the potential to be real 'exciter' feature. Imagine not having to reach for your glasses every time you want to check email or search the web!
As Mossberg says, 'stop the presses: Microsoft has beaten Apple on hardware design, at least in this one case'. He can be reached at mossberg@wsj.com.
Posted by Rita at 06:03 PM | Comments (0) | TrackBack
Stealing Copper - Second Order
In many countries in Africa, copper is extraordinarily valuable as the raw material input for trinkets and tourist souvenirs. Where do you get a ready supply of copper, if you are desperately poor? Easy – just steal it from the telecommunications lines that criss-cross the land. A big problem for land-line based telephone operators has become a boon for mobile phone companies, even at a price that is 10 times the price of land-line based service. Now that citizens have mobile phones, a secondary market in phone-based services is beginning to emerge. Who would have thought that a great opportunity can come from such desperation?
Posted by Rita at 05:44 PM | Comments (0) | TrackBack
