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Why some companies like McDonald do a better job at product recall than Bayer,J&J and BP

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A recent article in Fortune discusses how McDonald did a much better job of product recall than J&J and BP. The question is why are they able to do so? The product in question are 12 million Shrek glasses that were discovered to contain slightly higher level of cadmium that can have potential long term health risks. Legally the cadmium levels are not a problem but with huge potential to lower consumer trust in McDonald.

If you think about it – more the consumer facing the product is the more is the customer sensing and responding ability. Coupled with that is McDonald's realization that it is the largest buyer of toy products (ahead of any Toy operation like Toys R Us etc) for their children market.They have one of the greatest supply chains and franchising systems but are not mesmerized by their own strengths.

Contrast some other recalls:

Bayer dithered while recalling Baycol and as one ex-Bayer PR person mentioned the management refused to believe that all their meticulous drug development could actually have problems. The inability to seize the problem fast was because the company spent more energy in internal investigations and less on dealing directly and immediately with customer problems. Immediate recall might have saved the Bayer prescription business.
J&J also suffered from needless obsession with things inside the company rather than what customers were thinking and going through.
BP lost time finger pointing at alliance partners because they did'nt see the public effect of the oil spill having being at the most exposed to the rare gas station mishaps at the consumer end of their business.

All B2B ultimately has an individual customer at the end of the chain who pays a few dollars for a gallon of oil, a McMeal, a pharma product but who is a also member of the larger public. The more the product is removed from the customer either physically in the value chain ( the BP oil well) or is distant technologically (as in pharmaceuticals with years and millions spent on research ) the more managers feel protected and insulated. This insulation is like a bubble and not unlike the one Emperor Nero was in while Rome famously burnt.

Over reaction at the first hint of a consumer or public problem may seem like an overkill but that is what pure consumer companies like McDonald do. They figure out what to do with the glass supplier i.e. ARC International of Millville NJ for the McDonald Shrek glasses later.

“Switch” by Heath Brothers seems to be about hearts, minds and process

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"Switch" is the latest book on personal and organizational change by the Heath Brothers. There is a nice summary here. When the Heath brothers talk about the elephant,rider and plan they are really talking about the organization's right brain (emotions),left brain(logic) and path (process). But first about the Heath brothers.

I had read their great book "Made to Stick" about getting great ideas across and then related it to some Pharmaceutical industry executives in my New Product Development MBA class to very positive feedback. One of the Heath brothers, Chip Heath is a Stanford Organizational Behavior professor and a much cited scholar as well.Together they make a great team and do a wonderful job of communicating academic research in an "easy to understand" fashion. Their latest book "Switch" sparked my interest and I am thinking of what the real problem is in organizational change so fundamental to introducing innovations into the organization particularly from suppliers in the supply chain and new innovations to the customer across the distribution channel, the subject of this blog.

Business and organizational thinking has a lot of analytical elements ( just count the number of graphs, charts and well "numbers" in a business presentation !) and can sometimes have great emotional appeal, particularly if the speaker is a compelling one. The big gap seems to be in spelling out the path or process that will implement change and innovation.

Organizations develop routines and Karl Weick is my favorite author in understanding how organizations make sense,develop routines and get things done. Ask any BPO provider and they'll tell you that when they take up a BPO job the big challenge is to figure out the informal and formal routines of the client, create their own standard process to do the outsourced work and bring it back to the value chain of the client as seamlessly as possible.

The right brain (emotions or the "elephant") and the left brain ( numbers, analysis and "rider") are sort of ideas that stick ! The problem with routines,process or "path" is that these are less glamorous and seem boring.Also spelling out the path makes the manager feel "pinned down" which is really not necessary.The process does not have to be set in stone, but a road map is helpful. Look at your GPS carefully and you'll find that there is a disclaimer on the screen that the maps and GPS directions are for "guidance" and drivers should use judgment!

If GPS directions have disclaimers, I guess it is OK for organizations to develop road maps for managing change as they try to get the "elephant" and "rider" to work together.

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Google,Scholar and B2B “Mirror mirror on the wall”

According to Pew Research 57% people have Googled themselves. On the CNN website an informal poll puts the number at over 80%. This is the Snow white “mirror mirror on the wall” effect in the digital age ! I was surprised that young people actually monitor their online reputations more closely than older people. The Facebook generation is really concerned about how good they look online and can fret a great deal if not so kind things are said. Think of the recent privacy issues on Facebook,

Academics take the “mirror mirror on the wall” effect to an entirely new level. Type the scholar’s name on Google Scholar to check out the impact of the scholar in terms of citations. More the citations more the scholarly standing. And you cannot be a “one hit” wonder ie only one work is cited a lot and others are not. The H-Index is supposed to simplify things. I know of at least a few academics who have installed the composite Publish or Perish on their computers which pulls data to give a “credit” score kind of report. Amazing!

Reflecting this major change in individual behavior- in the B2B domain both buyers and sellers check each other out first on the Internet before(or if at all) going to an Industrial directory like Thomas Net or deeper verification like business credit reports and individual references. So it’s really worthwhile for both buyers and sellers to at least keep their official web pages straight even if they are not able to get around to getting everything perfect with SEO etc.

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Apple makes computing friendly, offers tangibe products and overtakes Microsoft

The market capitalization of Apple surpassed Microsoft today and Apple is now the "technology king". Apple has the "easy" feel of Google and tangible products like the iPhone and now iPad that consumers swoon for-worldwide. In the US the iPhone tie up is with AT&T and people live with the spotty AT&T wireless service that they pay extra for every month. The compensatory effect of the Apple experience overtakes the deficiencies of the wireless carrier and consumers seem to rationalize that it's OK – quite incredible when you look from the point of view of AT &T wireless who got into an exclusive alliance with Apple. The excitement and energy around the iPad launch also was incredible. It sold a record one million units in the US within one month.

Innovation that occurs in the back end and makes the consumer experience simple and great is the secret at Apple. You don't feel technologically challenged when you use an Apple product which makes technology adoption by the consumer a pleasurable experience even when one uses only a fraction of the features offered.

Now consider Microsoft and the everyday use product – Microsoft Word. If you receive a Word 2007 document and your machine has only Word 2003- you can't open the document. You have to sheepishly admit that you have an older system that can't handle Word 2007 and try and explain to the document sender how to save the document as a Word 2003 document. In a world of open source software I wonder why this issue was not resolved in the Office 2007 suite.

Anyway,consumers take notice and the stock market cheers. One bright spot as the DOW went below 10,000 today.

BP Oil Leak and Marketing Myopia – the upstream product recall

Theodore Levitt had pointed out in Marketing Myopia (1960) that the oil industry had been just lucky as new uses for oil was discovered outside the industry and demand continued to grow. Starting as a medicine, oil found new uses in kerosene lamps,oil home heating and finally automobiles. Marketing was primarily distribution and you really did'nt expect a mass product recall problem as in different pharmaceutical product recalls.

With a heightened awareness of environmental issues,the leak has escalated to a strange and new problem of the "upstream product recall." Unlike the Union Carbide Bhopal gas leak the oil leak is playing out in slow motion and frankly I was expecting a resolution soon after my last post on this topic. As of today one report suggests that BP has spent 700 Million $ and the bill is escalating.

Doug Suttles the BP Chief Operating Officer has the unenviable job of facing the huge public outrage and daily media scrutiny. Let's hope that the leak stops on Wednesday when the "Top Kill" method is tried out.

In the meanwhile, organizations should think about how to deal with upstream product problems that reflect so badly on their brand. These incidents are very rare but in a world of socially connected media the brand and corporate reputation fallout is just unimaginable. Long after the oil is cleaned up, the stain will stay forever online.

Overcoming the mid-career, mid-skill problem – Part-II

Following Part-I , its useful to understand work in context of the employees role in the chain:

input—>process—-> output

All work can be categorized in these three categories. Within these categories you can subdivide work finer. For eg. in the input side supply management can involve indirect purchases (eg. stationery) and direct purchases (raw materials). There are several outsourced purchasing agents who take care of indirect for entire industries. So if an individual is specialized in indirect it might be useful to consider moving to a specialized contractor who does only indirect materials.

The process part is fascinating as it includes all kinds of organizations like manufacturing, service and associated functions like HR,Finance and Accounting.For eg. entire swathes of the HR function from recruiting,training,payroll,benefits to outplacement are being done by low cost specialized contractors. So if you are in an organization where you do one of these, think actively of moving to the relevant contractor industry. Once you move though, you might find yourself involved in the sales function of the contractor. Here be flexible and enthusiastic because you bring deep contextual (say payroll) organizational knowledge to the table and you add more-value as an employee.

There are no quick fixes to this huge problem, and those affected might find this post just skimming issues. But thinking about re-inventing yourself is more urgent than ever.

What’s next for American mid-careers with globalization and the recession?-Part-I

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Between the time I started working on global outsourcing over six years ago and now – the world has changed drastically with the recession for American mid-careers. Some academics have started questioning if you even need a college degree for the kind of jobs you can hope to get in the US. It’s called Plan B.

Think about it, the vast majority of mid-skill jobs in manufacturing, software,accounting,non-contact customer service, non-contact market research can either be outsourced to technology or outsourced overseas. For example, this season many more folks used tax software than an accountant/tax preparer to save a few dollars on the tax preparation fee.

So you are really left with the high end jobs like nanotechnology,biotechnology, aircraft engineering and so on.These require long study in science and math starting at elementary school and not very popular among younger people, which a whole other topic.

The other end of jobs are low paying service jobs (slightly better paid than McDonald’s like retail,hospitality) which really don’t need a college degree.

US organizational acculturation during the industrial and early pre-Internet age for getting and holding on to these disappearing “mid-skill” corporate jobs was to conform,stay below the radar to stay employed for life . This is no longer working– as no matter how compliant and polite an employee you are – if you are mid-skill and mid career you could be history.

Thomas Friedman talked about the “Flat world” and Seth Godin talks about becoming a Linchpin. Here are some thoughts particularly for the mid-career and suddenly mid-skill employee:

Recognize that the change is here to stay. Open your mind-be more flexible.
Move up your skill chain- needs more training and become an expert in a niche
Or move down your skill chain- sacrifice pay and status
Move sideways on your skill chain – particularly if you are in the production function – try moving to sales or supply chain
Think global and take work in another country where your skill is valued but may only be matched by purchasing power parity.

In Part-II , I ‘ll explain these points in more detail.

B2B Sales -focus less on customer contact and more on solutions

A recent (2010) article in the McKinsey Quarterly suggests that the “push push” and “constant contact” approach in sales is avoidable in B2B sales particularly for high-tech products and services. 35% of the 1200 firms surveyed felt that they were contacted too much!

[ Note : This post from May 17, 2010 was updated with working links on January 24, 2021. The ideas still hold according to us]

My own experience in talking to folks in the IT and procurement field supports a similar anecdotal finding. Consider that some of these decision makers are even reluctant to share their contact details in public including conferences, so bothered they feel with repeated contacts from known suppliers.

Coupled with this in the McKinsey study (another 20%) respondents feel that the sales reps do not know enough about their products.Here it is not that the reps do not know their products but they spend inadequate effort in understanding and communicating the “solution” aspect of their offering. Business buyers are looking for solutions and just talking about your offering is not enough and a motivated,well informed salesperson comes across as not knowing enough.

So just because of automated emails and mobile apps don’t get carried away and overwhelm the customer.Instead, try to think of how your product and service is a “solution” to the customer problem and focus on “solution” aspects – you won’t need to be on the face of the customer all the time!

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Oil Leak- dealing with risk in alliances: BP,Halliburton,Transocean and now Cameron International

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No prizes for guessing that BP,Halliburton and Transocean have worked together as alliance partners repeatedly over time and now Cameron International as the blowout preventer valve supplier is being blamed .

And guess what- the leaking offshore oil well has the alliance in tatters, at least at the Senate hearing.

There is a whole bunch of work I am involved in the set up of new outsourcing alliances so that intellectual property is better managed, innovation is generated and other positive outcomes come about.In recessionary times avoiding negative outcomes seem even more important.When alliances are involved and things go wrong ( as in the leaking oil well) one must go back to understanding fundamentals like:

Repeated partnering involves work and co-ordination at all levels. People learn to work together,understand each others routines and generally are able to deliver as one team.
However, responsibilities of each alliance partner is governed by contracts and not by one boss-as in a case where all the work is done “in-house” with no contractors.
Better contract review, supplier performance review and less display of buyer power is critical during these processes.More the supplier feels empowered, the more they’ll want to speak up- in time.

The irony of the present oil-leak situation is that long term partners at the top-most levels are vehemently blaming each other on TV. Perhaps, businesses will learn to manage alliances better, going forward.

StratoServe

“Switch” by Heath Brothers seems to be about hearts, minds and process

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Google,Scholar and B2B “Mirror mirror on the wall”

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Apple makes computing friendly, offers tangibe products and overtakes Microsoft

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Overcoming the mid-career, mid-skill problem – Part-II

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What’s next for American mid-careers with globalization and the recession?-Part-I

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B2B Sales -focus less on customer contact and more on solutions

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Reducing cycle time from theory to practice- Yale 2010 Consumer Insights Conference

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