US Employment: Opportunity at the high knowledge end and the high touch end

Rana Faroohar of Time discusses the 5 myths of the economic recovery. And a variety of folks have been talking about some of these issues for a long time, notably Thomas Friedman in his The World is Flat that in part, inspired the start of this blog.  It's becoming clearer there are only two ends of the economy that can create jobs in the US:

  • The High Knowledge End: High knowledge (i.e. a graduate degree or Ph.D.) takes years of schooling particularly in science and technology and is a longer term solution and applies to students  at the high school stage today. 
    • Those older individuals who are already in these high knowledge fields need to    think hard about what value they bring to the “global” economic table given     that businesses   and hire   several scientists and  engineers in China or India at the cost of the single individual at a high cost location like the US. And as numerous reports suggest multinational companies are doing exactly that.

   Promoting entrepreneurship for the US high knowledge end is probably the policy answer for the  folks who already have these high knowledge skills.

  • The High Touch Service End : This is the delivery or distribution channel piece. Included  at the low wage end are all kinds of services like hair salons nail spas and restaurants.  Go to any Town Center in America and you’ll be surprised by the very high number of new hair and nail spa types of places. Obviously these businesses work, but neither employees nor owners are laughing to the bank.
    • There are  high touch high skill jobs are also knowledge end but don’t need a Ph.D. These include healthcare sector jobs like nursing, high end technical trade skills and very specific business analytic and support   skills.

The big change we have to start accepting is that the mid-range factory skills or service skills will continue to migrate overseas. The new skills and value add will need to be support the high knowledge skilled entrepreneurs that can help the high tech knowledge sector take off.

And  guess what – the support high touch “non-outsourceable” jobs  might be fairly well paid, can employ masses, and will require only relevant training that does not take years. Contact StratoServe.

US Innovation: A High-Tech small sector led growth is the answer ?

Where can US Innovation lead to jobs is a question on everyone's  minds.  A clue is from today's stock rally,  spurred in part by the Fusion-io IPO,  after six days of stock market losses. Fusion-io makes flash memory storage and its largest customer is Facebook who use their infrastructure to manage all those millions of Facebook accounts. Sure there are jobs at Fusion-io today but with a larger operation you can be sure that many of the routine remote IT work will be done from overseas. But the core know-how and high skilled jobs at the knowledge end of the flash memory business would remain in the US.

The old industrial factory of Henry Ford that gave employment to thousands of  Americans,in one location,for a lifetime has disappeared with globalization. Because no sooner that you, as a business, put more than a few hundred people under one production roof    (whether it is manufacturing production or service production like managing computer servers remotely) you start wondering if you can do this cheaper overseas. 

On the other hand ,smaller organizations that are able to integrate  value whether in advanced engineering,biotechnology,finance,insurance,health-care etc. should be able to lead  US growth.

So what is this value that can be integrated? This value could be services like patient trials in medicine to code in software or  products like components for aerospace and automobile. A global sourcing orientation must be in the business model itself.

The problem with this kind of innovation is that the first market success can take time and profits may be illusive to start with. However, the Fusion-io IPO suggests that investors are willing to  take the risk  when they see the downstream success of customers like Facebook for Fusion-io.

The idea of a born global firm for marketing products or services globally to start with is not new. What this blog is suggesting is on the sourcing side hi-tech firms should start with a global sourcing model. It is great for competing globally and  for US communities who do not have to face job losses. Because both the market and a lot of the low cost inputs are abroad and are built so into the business model.

Why Ford Motors strategy on emerging markets and small cars is great for 50% growth

Alan Mulally of Ford Motors sees 50%  growth from the emerging markets of China,India and Africa. They are increasing small car models from five to  fifteen in China and from three to eight in India.In an earlier post this blog had discussed about how Mulally reduced complexity at Ford and it seems that the current strategy makes sense. Here is why:

  • All through the post industrial revolution, technology transfer has occurred from developed countries to developing countries. Entire cars used to be exported  in the  early 20th century because  although everybody wanted cars the economies were taking time to develop and it was not viable to set up production,assembly or extensive distribution and service centers. With  dramatic economic growth there is both an appetite and affordability for cars today. Also is the technical  capability , in these countries to assemble,service and  provide more bulkier elements of the car including uphostery and most autobody parts. Africa is growing at double the rate of US, while China and India are growing at a four to five times  the US  rate.
  • The small car segment is huge in countries like India ,where a very large population so far able to afford only two wheelers, are   now  able to afford cars and have inspired  the Tata Nano. At segments that are above the Nano is where Ford Motors can play at this huge bottom of the pyramid of the global auto market. Cars need to move on roads and be parked, and smaller cars are helpful if you are thinking about 2.5 billion people in India and China and the roads and parking needed to accommodate  so many cars !   Contact StratoServe.
  • But the bigger compelling logic from US  point of view is that all these smaller cars would be engineered in the US and manufactured here at least for the value added components like engines. There will be huge opportunity to test these cars performing in difficult road conditions and thereby improve design.
  • The huge technical knowledge that will develop as a result will help grow the small car segments in the US and the developed markets.
  • Why should the  US market care about small cars? Because gas prices are not going down very much in the future as in Europe.
  • In addition, the US consumer is becoming more environmentally conscious and prefers greener cars and smaller is generally greener when it comes to cars.

All in all, the Ford strategy sounds great and the question will be the implementation of the strategy at the emerging market end. About StratoServe.

How Google Analytics improves search and changes Market Research Industry

The market research field before the Internet, used to be just about figuring out what customers preferred,bought , the media they watched. The traditional technique of gathering information was based on statistical sampling ( you had to ask a sample of people from your target market) and then tried to predict what the the rest of your market would do. All this changes with web analytics at least for your web customers.

Once you start  using  Google Analytics and other web visitor analytics programs, you start appreciating the huge customer insight possibilities from these programs. In the "brick" world let's say you have a retail clothing store in a mall with shelves of clothing. People seem to be always walking into the store and many folks are just there to check  out your stuff. Even when you ask them (the classic how can I help you) they seem to respond the classic – I am just looking…you are forced to look away and give them space.

Contrast this "brick store" situation to the website of the same store. Now Analytics tells you a great deal about the behavior of each visitor to your store. These include how the customer:

  • Found your store ( Internet search keywords ,advertising, direct to website)
  • What products the customer looked at and how/where the customer left the store or exited- whether or not they bought something

Just the two pieces of information above can help you make changes and see if they work. Let's say that several visitors look at a product and then leave it. Maybe just adding better pictures, clearer descriptions would help- try it !

Now to do the above research for a brick store is a huge deal. And no matter how well you sample and design your surveys and focus groups, you are really asking your respondents to recall what they did or are likely to do, not capturing what they actually do. Customer paid panel studies capture actual behavior but only what they buy not what products they pick from the shelf and put back! You would however, get pretty good results from well designed surveys,focus groups, customer panels  but there is this huge cost when you compare to Web analytics which is free for the most part.

Also as businesses change their web storefront and content to more closely match what their visitors are looking for – they help improve the ability of the search engines to find them by better matching search queries to the offer. The better search engine is the one that gets you what you are looking for and the store/content provider who delivers what the searcher is looking for tends to be higher on search engines. Gives a whole new opportunity for the market research industry and web marketers.

Medium is the message: from theatre to movie and Print/TV to the Internet

If you have acted in a play, or have watched stage acters rehearse, you know what I mean, by medium is the message. A play or theatre needs you (the actor) to throw your voice to the last row , just in case the audio does not work. You also need to exaggerate your expressions so that the folks in the middle rows of the auditorium can appreciate your expressions. While stage actors (including Broadway ones) would like to believe that the last row of the audience is able to see and appreciate their nuances of expression, that's wishful thinking.

On the other hand a Y-Gen Millennial young person finds songs and acting from the 1950's and 1960's really slow and exaggerated. Hey its just that the theatre crowd is getting used  to the film medium. In the movie world, there are numerous re-takes and a slight arch of the eyebrows can be "zoomed" in and music and special effects can be added for good measure. In the theatre world you get only one "take".

Today we see a similar shift from print and TV to the Internet. Simple question:

  • What is the average programming  duration on TV between advertising  spots ?
  • What is the average, popular YouTube/Internet video   clip duration?
    • Let's just  say that the Internet video clip is shorter than a TV between ads segment. And you need to see the Ad before you see the Internet video clip.

Just as the theatre to movie acting involved subtler expresssions , very different choreography in the movie world, we are at a threshold of shorter attention spans with the Internet today, compared to the printed word or TV. The huge upside is that your audience on the Internet is also far more focussed on your content compared to the TV or print audience. And that is a huge opportunity for business.

German E. Coli outbreak and regulating a global fresh food supply chain

The German E. Coli outbreak seems to be one of the first fresh food global supply chain problems that have come to the fore. Germany imports 40% of its cucumbers from Spain a total of 182,000 tonnes a year. Initially, German authorities blamed Spanish cucumber contamination for the deadly outbreak and now the Germans are saying that while Spanish cucumbers were  contaminated, they did not have the problematic  E. Coli strain.

As of today 18 people have died and 1600 are sickened and all had traveled to north Germany, 17 of the dead are Germans and one is a Swede. It turns out that Germany is the largest importer of fresh produce with a 6.6B$ import per year and US is the second largest importer importing about 6.5B $ of produce mostly from Mexico.  Regional free trade and movement of fresh produce facilitates commerce and brings new challenges to health and regulatory authorities.

It's sort of inexplicable how the Germans accused Spanish cucumber and banned that produce – ruining Spanish farmers while  sparking outrage in Spain.

The German response is the classic "pre-globalization" response to such type of problems. "Ban first and study later" is the mantra and  strategy for regulatory agencies in each country. Can't really blame the Governments who are trying to protect their citizens and consumers what with up to the second news from social media beyond the 24 hours news channels putting pressure on Governments to act.

If most of the produce is imported and that too from a multitude of countries as in Germany, things become tough to trace. There are hundreds of companies and contamination could have occurred at either the farm or at the retail packaging points.

Since we are talking fresh produce and farmers here who earn only during the season , the old response of simply banning produce is not an answer, given that Russia has now banned all EU produce. Global fresh food regulatory regimes would need to redefine co-operation and fresh food supply chains would need to build more easy tracking.

B2B Marketers think “value” while Supply Managers think “risk” – the Risk-Value Matrix and Kraljic Model

Risk Value Matrix-Kraljic Model-StratoServe

B2B marketers think about providing value and innovation to their customers. These include existing customers and also new customers. How can our product or service add more value to the buying company’s business? is the question B2B marketers constantly ask themselves, their teams and their own organizations. Innovation is somewhat spurred by this organizational motive to provide “value” to its customers.

On the other hand the Supply Manager of the buying organization considers value but is more concerned about “risk” to the value chain of the buying company. The supply manager is accountable for buying stuff that works and delivers as promised. It is this risk question that prompted the famous old quote when IBM was in computers: no one ever got fired for buying IBM.

The Risk-Value Matrix or the Kraljic model is a useful way of breaking down the categories of the Risk -Value matrix is a popular post in the CPSMBlog sponsored and maintained by StratoServe. The four categories are:

  1. Non-Critical Items are Low-Risk and Low-Value or the bottom left quadrant is one where there are many suppliers and items have low value and low strategic impact. Examples include stationery items like paper and pencil. For these items more sophisticated supply management organizations might have a P-Card issued to users. Sometimes when the volumes are very large then there might be an “approved supplier” list.
  2.  Leverage Items are Low Risk but High Value and include major raw materials. For a food company these include packaging purchases, raw material and ingredient purchases. There are several possible suppliers but the volumes are very large and has a huge impact on operating cost. Here quality is important as is the ability to really mesh with the processes,systems and user folks at the buyer organization. If a packaging machine malfunctions the packaging supplier should be able to send out a technician who is able to resolve the problem and who also is able to connect with the operators who operate the machine.
  3. Bottleneck Items are Low Value but High Risk. This might be a critical  valve in a chemical plant and a failure might cause great  production loss. The bottleneck valve might cost only a few hundred dollars and there would be a few suppliers. When such items are clearly identified, Supply Managers prefer to keep ready stock.  Since the item is of small value to the B2B Marketer, they tend to not give a great deal of attention to this type of item. It’s important for marketers to review items that are ordered in ones and twos and examine whether these are bottleneck items. If so, you can be sure that the buyer company wants to know you and maybe there is something else you can provide value with.
  4. Strategic Items are seen high value and high risk. These items can be consulting services that can involve a high value contribution and also considerable risk for the buyer. In the heyday of the IBM quote (no one ever got fired for buying IBM)- the computer was seen as a “strategic” purchase unlike today where computers are commoditized. Here the Supply Manager works with other members of the organization more closely and it is useful to reach out to the managers who would have an input in the decision making ( eg. the CIO for IT, the Quality Department for Lab Equipment etc.).

The four quadrants of the Risk-Value matrix helps both B2B marketers and Supply Managers to get a better understanding where each is coming from. 

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What has Oprah’s last show got to do with B2B/Supply Chain Relationships? : Validation

Oprah’s last show on CBS May 25,2011

I found myself watching the last show (CBS, May 25, 2011) of Oprah like millions of guys in America. Many of the businessmen (businesswomen thought that this was a no-brainier !) watching were undoubtedly impressed with the “Kleenex” sponsorship of the event. A virtual Niagara of tears ensued  and Kleenex was really put to use ! The Kleenex Product Manager had this completely figured out and congratulations to her/him.

Humor aside, one has to give it to Oprah: 25 years, over 4000 shows, millions of fans for a black woman who would have been at the maximum a “school teacher in a segregated school”(by her own words today)  has a huge message for business. Oprah said  that every one of her thousands of guests over 25 years had only one need. That was a need to be heard,understood and where possible appreciated or validated. This need irrespective of whether they were weak or strong, rich or poor.

Guess what? in B2B and Supply Chain Relationships the Oprah formula of validation is highly applicable. B2B and Distribution Channel scholars have been studying “power in distribution channels”  and examples include:

  • As a supply manager you make the weak (frequently small ) supplier wait in the lobby for ages despite an appointment.
  • As a B2B marketer you delay responding to distributors who don’t have good volumes.
  • As a supply manager you insist for 180 days payment for the weakest suppliers  and if you are on the B2B marketing side you insist on  advance payment for your weakest distributors.You take opposite positions for your strongest partners.
    • And when you are the stronger partner,  either in B2B or Supply Chain you really don’t care.

In general you display “power.”

But today Oprah made it clear that weak or strong- all that folks want is “validation” and that simply means that you meet the small supplier or distributor as agreed, even though you cannot give them the volumes or terms that they want. Just explaining why you are doing what you need to do “validates” them and keeps your B2B and supply chain relationships in top shape.

Oprah will have have her huge (validated)  following in the Fall on her own channel  and B2B marketing and supply chain folks need to think about how well they validate their business partners -be they strong or weak.

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Internet increases complexity for the supply chain

The Internet is great as it  allows search engines (Google,Yahoo,MSN etc.) and social media (Facebook,Twitter) to create algorithms that deliver personalised content to the Internet user. Based on this highly segmented audience  search engines and social media can now provide highly segmented and "customized" advertising targets. Advertising is cost efficient and highly effective because now you have an audience that cares for your product or service. But that can mean huge complexity for the supply chain.

This huge supply chain complexity problem pervades  every category from engineering to food,medicine and music. If there are 36 varieties of spaghetti sauce, you have to have 36 different types of labels, raw material and finished goods inventory and a huge deal of distribution logistics to keep track of each of the 36 varieties of spaghetti sauce. What happens if you can define and reach 36,000 or 36 million spaghetti users through the communication piece via Internet search or Social Media or paid advertising?  Well you need 36 million can labels for starters ……..you get the picture.

The basis of business thinking is "scalability."  You start with the farm production of tomatoes and then add 36 different options based on segmentation studies. Check out the TED talk by Malcolm Gladwell on spaghetti sauce.Things get real complicated if you can economically communicate with 36 million different consumers via the Internet and they have different preferences. The upstream complexity of delivering the sauce to delight the individual consumer is unimaginable.

The point is that the Internet is the disruptive innovation that can individually reach consumers at very low cost. All innovations of the past involved  the product first. The light bulb, the motor car came before the communication piece for the consumer via newspaper,TV. You first had the product or a set of competencies to produce something and then thought of reaching the market effectively.

Now you can communicate  with  the individual consumer easily and cheaply. If you have a digital product  (eBooks, Music) you can also distribute  via the Internet.  The problem is how do you deal with the complexity in this micro-segmented market when it comes to delivering.

Jack Welch GE’s 4 E and one P curve

Update and Caution: August 10, 2022: We are both elated and worried about the wild popularity of this post from 2011. Serious questions are being raised about Jack Welch’s style, as depicted in this post. See recent criticism by David Gelles in “The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America―and How to Undo His Legacy.” Some GE managers who worked during Welch’s time seem to agree though ex-Home Depot CEO Bob Nardelli is still a steadfast supporter of Jack Welch’s leadership style. Welch was widely considered “the manager of the century.” The Jack Welch century was the 20th Century. Do check out what seems to be working in leadership in 2022. Leadership Style 2022: Jack Welch or Satya Nadella?

This blog had discussed Jack Welch’s  4E’s and one P in an earlier post; given the interest among blog readers, here is some more clarification about the concept.

Jack Welch 4E’s and 1 P -StratoServe

To evaluate managers, GE started a system of differentiating managers on performance but was hard pressed to identify the characteristics that differentiated managers on the “Vitality” curve, which is essentially a “grading” curve or graph for managers. The word “vitality” is confusing because it refers more to being vital or essential to the organization rather than being “vital” in the “having high energy” sense. In fact, “Energy” is one of the 4 E’s but let’s go over the 4 E’s of GE leadership briefly:

  1. Energy: High personal energy of the manager is important. It reminds me of a boss who used to watch the speed at which you walked in the corridor! It sounds weird, but someone who is mostly lethargic in walking up and down does give off a “low energy” vibe.
  2. Energize  others: Do you brighten up a co-worker’s mood? Or do co-workers feel down after interacting with you?
  3. Edge: Can you make tough decisions that are Yes/No without fear of being disliked? Welch found that many managers have two or even three of the above “E’s” and did not seem to click to be put in the top 20% of the curve. “Execution” was this missing  4th E which is this blog’s favorite managerial and leadership ability.
  4. Execution: Can you deliver? Let us say that you are a supply chain manager who is responsible for engaging a few small high-tech innovative suppliers for a new component development for a new product project. You asked one of your buyers to send out emails from the supplier database, and perhaps none of the suppliers responded. When you show up for the new product top team meeting, you just say that suppliers are not responding. Well, you are not “executing.”  

The “execution” focused manager would have figured out why suppliers were not responding ( perhaps small suppliers worried about volumes down the road before investing), then would have put out a “development” financial advance proposal and discussed, offline, how much the new product team was willing to spend in supporting a new supplier. High “ability to execute” is the manager who walks in with the prototype of the component into the next meeting with no excuses.

Such managers do not promise anything easily. Once they do, top management or the board knows it can “consider it done”! 

5.Passion: is the “P” in the 4 E’s and one P. A manager passionate about her/his job goals normally has some of the first 3 E’s and must focus a great deal on executing. Passion is what holds the 4 E’s together for the top 20% performers.

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