Get Your Teams Talking: Make Your Business Look Good. Avoid Fiascos Which Make The Whole Business Look Bad
Saks upgraded its system for Saks.com just 5 days before a major online one-day marketing promotion which promised generous gift cards on the basis of total order purchase amounts. What upgrade ever does go smoothly? This one did not. Then, on the day of the promotion, customers online watched as orders disappeared, sales product images disappeared, pages failed, and the site was taken down. The site came back up only to offer to download whole pages to shoppers’ personal pc’s and then to deny shoppers the promotion code at checkout. The next day, there was bad blood on the floor between IT and marketing.
Why did these two teams not cooperate? An upgrade is a nightmare in any circumstances. To time a system upgrade to less than a week before a major semi-annual promotion is suicide-or murder-for a company. It certainly must have generated homicidal fever between these two teams.
Cooper Industries Marketing Integration
The Leatherman Pocket Survival Tool™ had become a consumer favorite over ten years when Cooper Industries decided to replicate the success with its own version of the tool. Many companies had already imitated and had been sued when Cooper’s team went one better. Calling its imitation the “Cooperman” in-house but observing the finer points of trademark law and officially naming it “Toolzall”, the team was slow to produce a prototype in time for an upcoming trade show. When the ToolZall brand manager told the team to prepare a prototype for advertising, in a striking misfire of team integration, a Cooper team member actually modified a real Pocket Survival ToolTM to produce a prototype which the rest of the team then photographed for posters, packaging, press kits, catalogues and magazines.
Then Tim Leatherman saw the promotions for the ToolZall, and the ToolZall not only looked like his Leatherman, it was his Leatherman. Suit ensued to the tune of $50,000 in compensatory damages and $4.5 million in punitive damages. (Cooper Industries, Inc., Pet. v. Leatherman Tool Group Inc., Resp., Brief for the Petitioner, Wm. Bradford Reynolds, USSCt., No. 99-2035.) The team caught the name issue but not the real issue. It should make one think about how to fully integrate one’s team.
© Copyright 2007-2008. Sigrid Caroline Schroder. All Rights Reserved.
Atonal Marketing: Turn It Around;
Don’t Let Advertising Keep Shooting You in the Foot (Or Head).
It was my then 17 year old son who noticed it first: KFC’s new “unsub side” commercial. “So KFC’s the criminal or the investigator?” he asked. Fan of NCIS, to him “Unsub”= “Un”known “Sub”ject of an Investigation. KFC confirmed what his father’s secretary had always told him: there was something suspect about that chicken. And this is supposed to be KFC’s answer to the raucous Subway commercials. Atonal advertising is nothing new, but one wonders why the lowest common denominator of taste, intelligence and aesthetics is somehow thought to encourage one’s clientele. So often with a turnaround, the expert will come in with draconian measures to evaluate numbers, control cash, bully Sales and shake up vision but never to rationalize that creative interface with the customer, the marketing, and inject vigor, taste and smarts. Aesthetics have become so relative that the numbers guys never see them. They should: Insulting your customers’ intelligence has real costs.
Unsub KFC should marked for the annals of toxic marketing along with the notorious “Nova.” Notoriety is not fame. Notoriety is a negative. Negative associations sank the Chevrolet Nova in Latin America. You don’t need be entrained by the “CSI” TV genre, for “Unsub” to generate its own negative associations, negative associations unrelated to putative Subway inferiority: “Unsub”= unsubscribe, unsubstantiated, unknown subject. Prius commercials are inane; iPhone commercials are fatuous; the competing Subway commercials are a celebration of stupidity. And in a deep recession, this is how companies put their best foot forward? No wonder customers close their wallets.
Bad advertising can have inventive costs. Not only did Cooper Industries knock off the immortal Leatherman tool, when Cooper marketing created its initial marketing, the Cooper tool pictured WAS a Leatherman tool, doctored. How expensive was THAT case? Trademark infringement, copyright infringement, publicity infractions, privacy intrusions, torts, breaches: is anyone minding marketing? Have someone there to spot it and to solve it: It’s not clever; it’s not creative license; it’s dumb. Don’t let it go out the door and ruin your buzz or your year or your years–or close your doors.
© 2009. Sigrid Caroline Schroder. All Rights Reserved.
How Do You Integrate The New Senior Hire?
It is crucial for new hires, particularly at highest executive levels, to be coached or to be given structured support continuously over the first quarter and at lesser intervals over the first year of their hire as they go through the “seasons” in both financial and product cycles. This integrates them more fully with crucial compliance, business model, product and market needs, and requirements of and changes in talent or staffing. It is particularly important to provide functional, business and cultural integration support in technology or engineering fields and companies where the inclination is to constantly test the new hire and look for weaknesses. Anecdotally, many good hires do not succeed merely because of poor integration and insufficient cultural or social support.
Sufficient purpose driven social/internal networking events help new hires make friends and find collaborative colleagues. It gives new hires a chance to learn what they and others really do and with the fresh insights of the outsider they may become true innovators in product, process and/or procedure. They assimilate into the culture more fully. Sufficient purpose driven (as opposed to keg or mere informational) events help integrate everyone into the mission, culture and operations of a company. Cross-functional, cross-departmental meetings, or show and tell, can keep everyone better integrated into the model and smooth entry for new hires.
Mentoring has been shown to have uneven effectiveness, particularly when initiated by HR. HR does not always grasp the technicalities and skill sets of particular functions and people and so often mismatches mentor and mentee. A department head, administrator or even AA or PA may have a better sense for matching people. The new hire should have a performance review-safe way of admitting skill set or cultural blind spots, inadequacies, confusions or misfires early on so that support in the form of mentor or trainer may be supplied fast. Mentors should be chosen for generosity with information and not for mere skill set, willingness or rank; the mentor should be willing to train and take the right attitude toward training, understanding that it is a tutoring and not testing role. Don’t let the new hire grope in the dark!
© 2008 Sigrid Caroline Schroder. All Rights Reserved.
Rio Tinto Risk and Reward
There are certainly a lot of “ponder-ables”, if you will, in the Rio Tinto case.
Reading through the last decade’s history, don’t you think that the press has been unduly harsh and has ignored the real human tragedy for the whipsawed sector, including the companies’ people and the affected populations worldwide. The press has cast this as a disaster of embarrassing blunders and miscalculations when in fact the catastrophe is in real lives. A lot of livelihoods, hopes, economic progress, infrastructure improvements, and raw value have been lost. Perhaps Rio Tinto needs a geologist CEO and not a mining engineer. However, it seems rather harsh to punish Tom Albanese with firing, given the buffeting the mining industry has had over the past decade, but other major mining companies have already shed their CEO’s, and after the Alcan and Mozambique problems this result was probably inevitable.
Let’s look at what has just happened to RioTinto. Regarding the CEO, of course ‘the CEO serves at the pleasure of the board.’ Yet on Tom Albanese’s side, not only had China growth and development been widely predicted just a few years ago to rise forever, driving up commodity prices and supporting expensive infrastructure and technology, commodity prices have been battered twice since its Alcan deal, and coal prices have taken a battering since the Mozambique deal. It has also had several chairmen in the past few years, including one chairman-apparent who left weeks prior to assuming chairmanship because of disagreement within the board about the “Chinalco solution”.
Rio Tinto has been suffering from the Alcan deal for years now after buying at market peak. It is not as though Rio Tinto was the only mining company hit by the crash in aluminum and steel back in 2009; mines and smelters were shuttering or scaling back everywhere; commodities stabilized and climbed back only to be hit again. Meanwhile, insiders are cited in the press as blaming a former chairman for the Alcan acquisition and not Tom Albanese. It is not as though mining companies have not faced massive other challenges as well in recent years, facing aggressive rejection of mining and processing in the West and basic challenges of mining everywhere else. It is not as though in the past 4 years Global Warming and coal-related political fallout worldwide have hit Rio’s coal.
Was Mozambique a good deal at any time? Perhaps. The promise of the frontier coal deposit had been cited for many years in reports that predate Rio Tinto’s interest. It does have coveted metallurgical coal, as well as thermal coal. Mozambique’s vast undeveloped coal deposit was thought a resource for the next 100 years. And may well be. Real mining companies have to think in centuries.
This deposit is on trend with known developed resources in other countries and is thought to be possibly the largest in the world although undeveloped and thus still largely unknown. Meanwhile, before Rio Tinto’s involvement, the World Bank had been financing infrastructure in the area, and the UN and other entities were promoting development of the Mozambique deposit. Rio Tinto had a lot of company in betting on this deposit. Riversdale joint ventured with Tata before selling to Rio Tinto. Vale had begun mining coal nearby, the first to start actual production, and South Koreans have begun work elsewhere in Mozambique. Interestingly, in 2010, Wuhan Iron and Steel entered into an MoU with Riversdale to develop the Zambezi mine adjacent to Rio Tinto’s Benga.
By the time it did the deal, Rio Tinto had “all major approvals”; the Sena work was about to be approved. Rio Tinto knew how to barge the coal to port even if the rail being rehabilitated proved insufficient. The government had approved river transport down the Zambezi to port.
And then the government changed its mind about barges.
The problem with Rio Tinto’s deposit may be not the quality and quantity of all the coal but just the recoverable coal. Recoverability is a complex concept. Rio Tinto refers in its recent press releases to the quality and quantity of “recoverable” coal. This does not necessarily mean that the metallurgical coal is not there; it may mean that the coal that is technologically, economically, and socially recoverable is more thermal than metallurgical.
As the USGS itself noted recently about developed US deposits, coal mining is tricky: Even with outcrops, test cores, geophysical surveys, and good detailed mapping, it is hard to know what is in the ground; formations fault out, thin, deepen, and change in composition, mineralogy, stratigraphy, and structure, across the deposit, Structure of the beds can make it technologically or economically impossible to recover. Social issues make coal unrecoverable. And those are unknowns for developed deposits. The Mozambique deposit is at a raw stage of prospecting. The rocks are folded, faulted and intruded by igneous dykes. Sounds like pretty tough exploration country.
Even with 20/15 hindsight, it doesn’t seem fair to fault the Rio Tinto board, the mining industry has always been plagued with the curse of commodity prices supporting construction of infrastructure, and major deposits require infrastructure. It looks as though politics was the final blow to this project, and the Rio Tinto board should really not have to answer for either.
This is one of the largest undeveloped coal regions in the world, apparently thought at the time of acquisition to consist largely of metallurgical coal used for steel and iron production. Isn’t this how new natural resources frontiers get developed, with a lot of risk and a lot of infrastructure? At the time the acquisition was begun, coal prices and China steel markets were coming off the recession lows and continuing to climb: metallurgical coal was then less than $300/ton; by 2011, it was $400/ton. The Rio Tinto board needn’t have expected the price to be back down at $165/ton in months. While the project required a billion dollar investment in prospecting post-acquisition and new infrastructure, including a new coal preparation and handling plant and power, water, roads, and rehabilitation of the Sena Railway, Tata Steel and a consortium of Indian companies had each considered bids. Even now Tata has a minority position in Benga and an off take agreement. Given all that Rio Tinto was prepared to do to help Mozambique get its coal to market, Rio Tinto probably thought that it could avert the political risk, including nationalization, favoritism, and corrupt practices.
And now, Mozambique seems to be deliberately blocking Rio Tinto, refusing to allow Rio Tinto to use the Zambezi and or even build a new private railway. Anti-bribery and anti-money laundering laws have been stiffened in the West, unlike elsewhere in the world. That too may have had an impact. It will be interesting to see who comes in to exploit the deposit. China has recently been taking over resources across Africa, but perhaps Tata or the Indian consortium will re-emerge.
1. Tata Steel and Riversdale Jt Venture Announced
* Transport minister said in a report that his country will overcome a shipping bottleneck to export its vast coal deposits by finding ways for barges to navigate the Zambezi River. http://timelines.ws/countries/MOZAMBIQUE.HTML
1. Riversdale Mining Limited https://www.ausimm.com.au/content/docs/sthqld_180309.pdf
2. Mozambique Appears To Be Success Story. Mozambique Country Assistance Strategy 2009-2014 – USAID.gov
3. AFP: Mozambique approves Riversdale coal mine. http://www.google.com/hostednews/afp/article/ALeqM5iEPreHQ_addBM2g86NwUcdwqNDDA
4. December 2010 Rio Tinto in talks for $35 billion Riversdale bid. http://m.theglobeandmail.com/globe-investor/rio-tinto-in-talks-for-35-billion-riversdale-bid/article1319495/?service=mobile
5. 05 July 2011 Riversdale – a new supply of hard coking and thermal coal. Speaker: Andrew Woodley, Executive Director Riversdale Mozambique Limitada. Location: Mozambique Coal Conference – Maputo, Mozambique. http://www.riotinto.com/media/18435_presentations_20732.asp
6. Rio Tinto replies to SARW report on coal v communities in Mozambique | Open Society Initiative of Southern Africa (OSISA) http://www.osisa.org/economic-justice/mozambique/rio-tinto-tackle-issues-tete
7. Zambeze Coal Mine, Changara – Mining Technology http://www.mining-technology.com/projects/zambesecoalproject/
8. MOZAMBIQUE_COAL_REPORT http://www.miningiq.com/downloadSecureContent.cfm?ID=545
9. Chapter D. Coal Resource Availability, Recoverability, and Economic Evaluations in the United. States—A Summary. By James A. Luppens,1 Timothy J.. pubs.usgs.gov/pp/1625f/downloads/ChapterD.pdf
10. Mozambique goes Green. http://mz.one.un.org/eng
11. Investing in Mozambique-top ten sprinters over next decade. http://www.saoga.org.za/sites/default/files/EiA%20Mozambique%20overview_study%20tour_march2012.pdf
©2013. Sigrid Caroline Schroder. All Rights Reserved.
The Very Strange Case Of Tokyo Power At Fukushima
Earthquakes are always a shock. But they are not entirely unpredictable, not when build in a seismically active region with a long history of large and catastrophic quakes. There are a number of facts and factors actually indict Tokyo Electric Power management and Japanese government oversight for their roles in the Fukushima disaster. Since the tsunami in 2011, we have learned that Tepco deliberately decided not to implement a severe accident response plan, according to the Wall Street Journal, for fear of scaring people and triggering protests and closure of the reactor. Even worse:
1. Prior to construction, management knew but dismissed:
a. a historical record of a tsunami hitting Dai-Ichi in 1677, extensive seismicity in the region and across Japan, onshore and offshore; and particularly
b. the active major fault immediately offshore, the fault on which the 2011 quake did occur, was known;
c. ease of construction required excavation of the sea cliff on which the reactor stands, lowering its height by 82 feet in order.
2. At the time of construction, management artificially lowered the sea cliff by more than 80 feet so that equipment would not have to be hoisted up all the way up the cliff. WSJ, July 12, 2011, “Fateful Move Exposed Japan Plant”, Yuka Hayashi (Ibid)
a. The cliff was originally 115 feet and was cut down to 33 feet.
b. Had the cliff not been cut, the tsunami would never have hit the reactor.
c. The Tepco Daini nuclear plant less than 10 miles away and the Tohoku Electric Power Onagawa plant 60 miles away, selected in part for its elevation, were set 10 feet higher and were not hit by the tsunami.
3. There was a known history of devastating seismicity in the immediate area of Fukushima. According to the WSJ, the 1966 application for the construction permit actually lists seismic activity from 1273 A.D. on, including:
a. the tsunami which hit Dai-Ichi in 1677, destroying a thousand homes. WSJ, July 12, 2011, “Fateful Move Exposed Japan Plant”, Yuka Hayash.
4. Management could foresee disaster, given the long history of catastrophic seismic activity across the region and across Japan, seismicity which has caused much societal anxiety and loss and which Frank Lloyd Wright’s Imperial Hotel in Tokyo was thought remarkably engineered to have survived twice, (although damaged by the Tokyo earthquake of 1923).
5. Since construction: Tepco management, the government, and the industry had dismissed:
a. “warnings based on advances in seismology since the 1960’s and 1970’s….according to Katsuhiko Ishibashi, a seismologist…in the Research Center for Urban Safety and Security at Kobe University” ( Bloomberg News. October 20, 2011, “Tepco’s ‘deal with devil’ “, Peter Langan, editor.);
b. geological research, by Koji Minoura at Tohoku University, indicating that the Dai-Ichi region “had been hit by three giant tsunamis over 3,000 years;”(Ibid.)
c. the location of a number of Japanese reactors …”on or near active faults ” and “in an area called the ‘Devil’s Triangle by seismologists’ “. (WSJ, July 2, 2012, “Report on Nuclear Disaster Holds Key to Reactor Fate”, Mitsuru Obe.)
d. even Tepco’s own admissions, in 2002, that “it had falsified maintenance reports at nuclear plants for more than two decades;” ( Bloomberg News. October 20, 2011, “Tepco’s ‘deal with devil’ “, Peter Langan, editor.)
e. the admissions and investigations showing that the Japanese nuclear power industry had been found to have lied, cheated, and falsified safety reports.(Ibid)
6. Tepco management admitted, in October 2012, that it had deliberately decided not to implement a severe accident response plan, according to the Wall Street Journal: “it knowingly avoided implementing some safety measures for the nuclear plant out of fear of causing lawsuits, protests, or the need to close the plant.” WSJ, “Japan Utility Says Crisis Avoidable”, Oct 12, 2012, Phred Dvorak, Rebecca Smith.
©2013. Sigrid Caroline Schroder. All Rights Reserved.
What is Happening in Your Sector? Or Your Portfolio of products or subsidiaries? Your stock price plunging 20% in 2 weeks, as Amgen’s has done, will powerfully concentrate your mind and keep you up at night. Biotech, last fall’s “safe” bet, is this month’s dog and with this comes a new analysis of where Biotech is going and where it has been. Biotech cannot be discussed without discussing Pharma, and vice versa. Certainly there are a lot of things keeping Pharma CEO’s awake at night right now.
Blog analyst word now is that Obama likes neither, threatening to end Biotech’s competitive protections by allowing biologics to be genericized. The justification given for this is the pricing disparities between the US and China and other parts of the world and the production capabilities abroad. This is no good argument. Likewise, these CEO’s are losing sleep because even as on all sides Pharma and Biotech are now threatened by generics, compulsory licensing in the Third and Second Worlds and potential abrogation of patents in the First and Second Worlds have become an increasing threat since the year 2000. Obama is cool to their threat. If Pharma and Biotech needed proof of Obama’s froideur, they need only consider his snub in almost, but not quite, appointing a new Commissioner to head the FDA even as he criticized the FDA for not tracking down salmonella fast enough, even as he almost, but not quite, appointed a journalist, albeit a very technical, lettered one, as Surgeon General. Gupta thought better and removed himself, but little besides threats to take apart the FDA have yet materialized. All this occurs after a decade in which the FDA’s internal morale was devastated by the American Home Products (Wyeth) rotavirus vaccine catastrophe and years of being tossed as a football between political forces. The FDA deserves better, quicker definitive support and clarity. What the FDA does is excruciatingly technical, intellectually difficult, ethically trying, and painfully risky. The Commissioner selection has been long a trial by water; each time there’s a gap. the pipeline to approval slows and the FDA, Pharma and Biotech suffer and are blamed. The real victim is the US patients, and those of the world. Yes the CEO’s must be up late at night.
One of the worst sleep deprivers for years has been the fact that the low hanging fruit in drug discovery has pretty much been plucked. The time line and costs for getting a drug, particularly a biotech drug, through Phase III trials have increased wildly over the past 15 years. Even after investing the time and money, there is no guarantee of FDA approval or, in fact, of a reasonable pay back period before generics, competing drugs and even the potential for forced withdrawal of a drug intervene. And as drugs become ever more complex, the R & D pipeline becomes emptier and vastly costlier.
Obama and many forces would like to see Pharma and Biotech margins shrunk, prices pressured into line with the Second or Third World and drugs and devices developed as a charitable good work. Unless the US government is going to cover the costs, down this path lies pain. First, as has been forcefully argued for years, this price control is unfair because the US Pharma and Biotech companies are the ones who invest in the excruciatingly expensive and complex R & D. Obviously manufacturing costs will always be higher in the US merely because we have a higher standard of living, (a standard which we would all be reluctant to see swept away to Chinese or Indian standards). Second, far too much of what is shipped from China and elsewhere abroad is counterfeit or contaminated. Pure, real US manufactured pharmaceuticals are dangerous enough. From Heparin deaths to counterfeit drugs contaminated with rat poison, Chinese products have been repeatedly shown suspect. Third, and related to the foregoing, is the fact that contract manufacturing of pharmaceuticals and vacines was not even permitted in China until very recently. We can hardly know the true conditions. Unlike counterfeit Underwriters Laboratory certificates on Christmas lights or counterfeit autoparts, counterfeit medications kill quickly and silently; the US cannot afford a market flood. Until China and other countries match US R & D and manufacturing investment and deal with their critical counterfeiting and contamination issues, competition is likely to lead only to dwindling drug discoveries and new health concerns. Contract manufacturing is not likely to be a solution.
Pharma had hoped to buy pipeline by buying Biotech, but look at them now: anti-angiogenesis is just one more in the line up of hopeful therapies which ultimately causes more harm than good. Antisense after all these years as yet is an unfulfilled promise. Drug-eluting stents may cause blood clots. Inhalable insulin failed to take hold. That is good for nightmares and waking in the night. Now the FDA has approved GTC’s ATryn, a natural blood thinner produced from genetically engineered goats. Pharma buy Biotech? Pfizer is buying Wyeth instead. That keeps the Biotech CEO’s awake at night as their burn rates churn through cash, credit, angels and venturesome VC’s dry up and they see hope of buy out by Pharma fading in this market.
And now the Wyeth Phenergan loss before the Supreme Court will keep the Pharma and Biotech CEO’s awake at night. Here was a commonly used drug, long off patent, used in surgery and cancer therapy as well as for many other uses from motion sickness to allergies which has now exposed Wyeth to huge liability in Vermont state court despite the human error involved and Wyeth’s clear warnings against such IV-push injection. The feds no longer pre-empt the field? The CEO’s must all losing be losing even more sleep because now the most familiar medications may expose them to liability in state court.
There is enough in every sector to keep you staring at the ceiling or counting sheep. And us as well.