India trip: How much does the Chicken MahaMac cost in July 2011?

McChicken MahaBurger-India Delhi Airport ,July 31,20110001 The Combo Chicken MahaMac with a small fries and drink  cost Rs. 185.00 ( I think it was on special and the full price  was closer to Rs. 225) which I had on my return from a great India trip  while experiencing  the India boom first hand. The BigMac Index is a great measure of purchasing power parity and since I had'nt had the Chicken MahaMac , short for "Mahararaja Mac"at MacDonald's India – I took the opportunity at the swanky Terminal 3 of Delhi Airport and the receipt is presented alongside. Here are a couple of  observations of the scenario at the food court where the MacDonald is situated:

  • As in most other food courts in the USA the MacDonald's was the most crowded. Competition includes  North Indian. South Indian and Chinese food stalls and yet MacDonald has it going great. The MahaMac is the answer to Big Mac and is made with chicken as Hindus in India  don't eat beef. There is no bacon item as Muslims don't eat pork.
  • They have a vegetable burger apart from the two chicken pattie MahaMac and I think there was a "paneer burger" as well.
  • The store was overstaffed and the young folks ( the average age in India is 25 years) were professional,courteous and obviously happy to be working  at MacDonald's. 
  • Kids see retail and call center work to be more prestigious, air-conditioned comfortable  and better paying than factory work. Never mind the computer controlled machinery that require high tech skills in today's factories. Pretty similar to kids in the US if you think about it.

A McChicken meal in the US costs between $6-7  and that works out to a purchasing power  parity of closer to Rs. 30 to a US $ than the Rs. 20  to a $ estimated here compared to the official exchange rate of Rs. 44 to a dollar. In other words despite rising real costs, no signs of demand slowing in booming  India.

Leaders must be open to input: deference defeats innovation in organizations

As Hoftede would tell you, certain countries have huge power distance. For example,  in all the orange shaded countries you don't argue  with the boss , the boss is always right and you show deference.

It was that in the US you could speak up to the boss but that has changed since the economy has slowed. No one wants to speak up lest it upset the company powers and you are axed the next time there is a personnel cut.

Ron Ashkenas recounts the incident of top officers of a company that remain silent when the CEO just glosses over slides of a strategy plan assumes that the managers had already seen those slides. No one speaks up and just goes on listening to the rest of the presentation. The whole meeting obviously now declines drastically in whatever value it was supposed to bring to the organization. And Ashkenas makes the point that if this happens on such a trivial matter like not having actually seen the slides what must be happening in bigger things.  On being unaware of the slides-perhaps each manager thought maybe the others had seen it and they did not want to appear foolish, or if the boss assumed that they knew maybe they missed something in the 80-100 emails a day and the best course was to follow the silence is golden while speech is silvery routine.

The biggest casualty for this kind of communication block is in innovation. People are just not able to develop the courage to voice the ideas for fear of being pulled down by colleagues and worse being shot down by the boss. And you can be sure that organizations that have this problem at the top – the situation is probably no better at the lower reaches of the organization chart. On the flip side, people are just not willing to argue the downside of ideas that bosses put forward.

And going by Hofstede's power distance theory and the enormous innovation that individual American employees are capable of , because they are highly individualistic, deference defeats innovation in US organizations.

So try to become much more accessible as a leader to your people and avoid both verbal and non-verbal cues that encourages others to "shut-up, "  both in offering new ideas and critiquing your ideas and thereby making them great. By doing so you will foster innovation.

So much data and so little insight

Given the enormous amount of domain knowledge that exists in both theory and practice , its sort of amazing that organizations are getting carried away with the sexiness of big data as Jim Goodnight of SAS mentions.  You would wonder why all this analysis still leads to the mortgage mess, and debt crisis across many parts of the world. Well that's because there is too much  mindless data analysis without an understanding of the core business issues. So why does this happen?

Statisticians and computer experts are  sort of forced to come up with models of consumer or business buying insight. These experts are  also compelled to model  supply chains. The disadvantage is that they  have (a) never done these jobs as line managers and/or  (b)  have no knowledge of what is really known about the topic from published research. Instead, these analysts keep plugging a bunch of predictive variables based on the gut feel of whichever operational manager is willing to talk to them.

Would you allow your doctor to treat you without being current  on the latest medical research?  I guess not but  surprisingly, the more alert B2B marketer or Supply Chain leader is  professionally updated on the latest thinking and research just as the better doctors are upto speed for medical research, in their specialty. It's just that line managers don't take the time and effort to tell the statisticians and computer folks all they know.

Take the buying center concept which  is that for complicated business purchases  there are a bunch of people who are involved in deciding the criteria for supplier selection and what features are  really important. Now if you ask your  top statistician to model your B2B customer buying behavior and the sales and marketing people do not respond to the statistician's requests   for domain briefing (good statisticians never claim domain knowledge), your model is going to be just wrong. This is despite the fact that  every B2B marketer understands and lives  the buying center concept (its an obvious no-brainer to them)  and makes the fatal assumption that others in the organization, like the statistician colleague- would know.

If you are a business leader please  do not force the statistician to come up with a model. Your line function leaders must spend time explaining and making sure that the statistician is well briefed on the domain.Better the briefing to the math model builders better your insights from your massive data.

Impatience: are US companies losing out in growth markets? American companies down 25% in Fortune 500

According to the Fortune 500 list American companies are down to rank 133 from 176 in 2005 representing an almost 25% decline in top spots. Most of the growth in top spots has come from growth markets like BRIC (Brazil,Russia,India,China). So the question is whether large US companies are doing enough to engage with growing markets? Probably US companies are less engaged when you consider being engaged for the long haul including the willingness to build on learning and knowledge gathered over time. It comes with our general impatience…just think of our driving behavior.

The next time you are on a highway and see a traffic build up – notice how many people get out at the next exit, just not willing to deal with the uncertainty and delay. This despite knowing that traffic snarls on highways never last very long unless there is a blizzard or natural emergency. And this behavior was there even when the GPS was not so common and folks had to rely on memory or trial and error to get to their destinations. People are simply unwilling to wait and therefore take the nearest exit ! While this trait of being "impatient"  makes America great it is a kind of disadvantage in emerging markets when you compare with the competition.

For example,  compare the tenacity of the Scandinavian companies in Asia  with US companies and you notice that they have been around for decades and decades even when nothing much was happening in these markets. They built contacts, figured out how things work, recruited and trained locals  and in doing so went on driving their costs down. Perhaps the very small size of their home  country markets left them no option but to stick around in emerging markets despite all obstacles.

In contrast, and in a lighter vein, every American's ancestor left their home country because things moved too slowly but its now time to re-engage as parts of the old world Europe seems to regress while BRIC countries zoom forward. Re-engaging commercially with growth markets, means more patience in those markets, reclaiming  US spots on the Fortune 500. ..with more jobs in the US.

Netflix pushes US distribution for streaming Internet video and DVD on way out

As discussed in an  earlier post  Netflix  offering only streaming video  in global markets seems to be spreading to the US market and has outraged Netflix subscribers. Netflix wants subscribers to spend  about $16/month if they want both DVD and streaming- a 60% increase in contrast to paying $7.99/month for either service. A definite nudge to get subscribers to go streaming.Higher payments to movie studios for streaming rights is also a motivation for Netflix but I guess its more about changing the distribution model from the physical DVD to all streaming Internet video.

Seems unfair to Netflix subscribers – so used to the familiar Netflix mailer containing the DVD. Among all those junk mails and bills the Netflix envelope does tend to cheer you up. You selected the movie, perhaps agonized over your choice and now its great to actually receive it while  getting  a welcome US mail package in the bargain. Subscribers are cut up about the timing of the price increase given the slow economy.

Netflix subscribers are heavy Internet users ( they rent  movies on-line after all) and the backlash had to be well …..digital.

But Netflix had to start this push to  "all streaming"  sometime in the US market. This is among the first publicized cases of a US company going global first and then local in the US. Given the large and vocal backlash from US customers we can accept some sweetening of the deal for the  DVD and streaming combo price. But if you are a US Netflix user it's time to get used to movies via streaming Internet video because that's the way it's headed. More on Netflix.

Web Analytics completely changes Marketing Research and Insights

If you think of the “brick” retail environment there are  a  bunch of methodologies to understand consumer behavior- these include observation, focus groups,surveys and the whole bunch of traditional market research tools.

Now consider  a similar customer who visits the on-line store of the retailer. You can notice exactly what the customer looked at , where she left a category and started browsing another and exactly where the customer left if she did not buy. Even if there was a purchase you can track a  great deal of things later like sending an online survey or just observing post-purchase behavior data. Some of these analytics platforms are free like Google Analytics.

Suppose you find that lots of customers leave after they see that garish red scarf you have  on offer for $19.99 you can replace the scarf photo or better still try alternate experiments. You can actually put in different colors of scarves (maybe blue works better)  or see if there is a difference if you change prices around.

Imagine trying to do the above at a real clothing store. It’s really hard to know that someone looks at the red scarf and seems to move on. If you are the owner you will observe but can hardly expect the floor employee to notice,report and act on the observation (i.e. try putting on the blue scarf). In fact, buyer behavior data is both hard and expensive to collect. Gaining insights and acting on them is even harder . Hey where did I put the label gun? might just make you forget about trying out a different color scarf on the retail floor.

Organizations have tons or rather terabytes of data but are not able to develop actionable insights as this McKinsey article suggests. And it is not math skills that are required because all the analytics software do the math for you. What is required is marketing and business knowledge and deep domain knowledge and a curiosity and passion for the category (you must care a little bit at least, about the question of what kind of scarves  people choose and why?).

The amazing thing is that never before has consumer behavior been easier,cheaper or quicker to observe,quantify and analyze for actionable insights.You are able to actually observe what people do and not what they say they do in response to 7 point  “like-dislike” scales.

Incidentally at the B2B level, going by the very cumbersome  Supplier portals at big company websites, supplier web behavior analytics have barely  started . Exciting times are ahead for market insights through web analytics.

Also see: From Strategy to Execution via Website: the Power of Web Analytics.

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News Corp: Democratization arrives as privacy is breached

The News Corp scandal just seems to grow and grow. Allegations of phone hacking in the UK led to the closure of the oldest British tabloid "News of the World." The  no ethics  approach of those involved might put the acquisition of the British  pay TV channel BSkyB by News Corp on hold . Rupert Murdoch is himself managing the fallout from London and the disclosures indicate a major shift in the democratization of news and resulting breach of privacy.

History and news till recently was only about Kings and Queens and there was very little about the common soldier. Celebrities including those from sport and film were also considered fair game by the paparazzi but generally the average citizen was left alone when confronting personal tragedy.  Democratization with rising education  is probably the reason that the News of the World was trying to illegally hack the phones of fallen British soldier families. The news organization  reckoned that the public are interested in such a story, never mind the despicable method of getting to that story. 

Just keep in mind that all this started much before social media really took off and  reduced the privacy bar in society.

Jobs report: getting used to uncertainty – time to look at new markets for your skills

The US jobs report at 9.2 % unemployment is shocking and hard for those who make up this number. And this does not include those who have given up searching. It's time to get used to uncertainty and look at new global job markets.

With this report world stock markets have dipped and everyone is complaining about uncertainty in Washington DC. But frankly there is really no immediate cure for US unemployment. And uncertainty will only accelerate as the world becomes more globalized and connected.If a job has disappeared it is because some old skills cannot be used as it's house has shifted: i.e.  if the factory has shifted , then obviously the skilled operator has no job.

Going forward the displaced worker has couple of choices but this blog post is seriously about exploring foreign markets to put your skills to work wherever your work has moved. Some potential opportunities could be in training folks in that skill in the new country. For example, I have met technicians who were designated as experts by the United Nations in one of their programs and helped set up printing presses from the UN worldwide for  commercial operations. Similarly if you decide to teach your trade in the US there may be no market but you can be sure that trade schools in whichever place (think Afghanistan for eg.) the activity is growing. In other words, if you are unable  to change your skill set and want to put it to use,  other global markets of the world need you and your skills.

Directors want to spend more time on strategy, risk and talent says McKinsey Global Study

The Board of Directors of surveyed companies by McKinsey want to spend more time  on Strategy,Risk and Talent than they are doing. According to the McKinsey study the  the time spent on these things have not gone up since the economic crisis. So where is the problem?

Most times the Board of Directors just go by the agenda set out by the CEO and keep peace by approving whatever is proposed. It is considered "unfriendly"  to challenge strategy assumptions of the management and it is almost sacrilege to challenge the talent assessments made by the top operational leaders.

However, given the lessons of the financial crisis the C-Suite need to consider Directors as well wishers and not people who need to be just impressed with the last quarter's results. Directors should be seen as people who can add real value to the organization – only if the top managers let them do so. Frequently though, Directors that offer contrary views to the majority or the management are marginalized and edged out of the Board.

The McKinsey study surprisingly finds that the problem of "not excellent" Board performance is more on family owned and privately owned companies. Extending this finding we can safely say that the situation is much worse on non-profit Boards where Directors are unpaid volunteers and somehow try to find time to volunteer.

In other words, things need to change at Boards across the spectrum from listed companies to family owned private ones and non-profits. A first step is for the CEO to allow and promote discussion on  contrary opinions on high level issues like strategy and risk and genuinely involve the appropriate committees for talent. A bit like Jack Welch and his approach of letting Board members play golf with different candidates to understand them and their motivations better.

Netflix to stream movies in all global markets, cut out postal services – grow movie industry

Netflix used the US Post to famously distribute movies in America after the founder Reed Hastings was charged late fees for late return of a rental movie to a movie rental store. Netflix involves a monthly subscription of under $10  and you can take as many movies you want, just use US Post and the postage is prepaid by Netflix and included in your monthly subscription. The DVD aggregation,sorting,mailing provides employment at the lower skill levels in the US and much needed business to US Post.

For all global markets Netflix is only going to go with streaming video via the Internet. No distribution by mail in 43 countries in Latin America and Caribbean and further global expansion is planned. In this video, Hastings explains how the Internet bandwidth is going to rise to 1 Gigabyte by 2021 in the US. Emerging markets are trying to leapfrog to high capacity Internet connections. On the home hardware side the price of large computer screens keep plummeting and TV's have started to  come with an Internet connection or you can buy a 2$ HDMI cable (seriously, at Amazon)  to connect your laptop to the TV.

All this means that anyone involved in the physical handling of DVD's would be negatively affected, at least in the short term. These include:

  • Workers who work on the DVD packing,sorting,mailing lines at Netflix
  • Makers of DVD players and DVD drives because if you watch movies streaming you would tend to not use or replace your DVD player
  • Postal services in all these countries and US post eventually
  • Movie theatres  and associated businesses like the Pop-corn stand will see fewer customers

However, with Netflix taking up the long-tail market for movies globally -this is great news for:

  • Movie makers worldwide, from Hollywood to Bollywood and Hong Kong. The low number of movie theater problem will no longer hold back niche movie makers.If you are a film maker and only ten thousand people want to watch your 90 minute documentary, Netflix gives you the market via streaming video. This is huge because no movie theater distributor will take you on. Physically tracking DVD copies that will have a total rental of only 10,000 is just too complicated and costly for the entire supply chain. But if the movie can be hosted on a server in California and watched streaming from Brazil – suddenly there is a market !
  • Movie producers will earn more revenue as piracy margins decline and pirates lose interest
  • Those who store and manage Netflix's digital content should see more work

Like the book market growth after Amazon , the movie market will grow with Netflix's decision to go digital streaming and that's a good thing. More on Netflix US market changes….

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