IT’S THE TIME FOR SMART WORK

Friday, January 30, 2009

Slowdowns may hit the best of them, but not necessarily the rest of them! Any company, regardless of its size, can return to sustained profitability if it gets its basics right

Southwest Airlines is one company that never fails to inspire. Today, more than ever before, we can learn a lot from the way this company, which was once a startup with cash flow problems, became a hugely successful enterprise – that too in a business where it’s difficult to even break-even; forget about making profits. Think about bad times, turbulence, upheaval; Southwest has seen it all. From fuel shocks, to interest rate changes to the worst of all – the 9/11 attacks which psyched customers away from flights – Southwest has braved every storm and has come out stronger each time. Its probably got something to do with Herb Kelleher’s (founder Southwest) mantra. He says, “In good times, manage as though bad times are just around the corner, because they are sure to come.” It’s life and it’s normal. It may seem that the world is going out of control, but the truth is that you need to have a unique kind of leadership, a unique outlook to come out unscathed.

SMART ATTITUDE

I firmly believe, your attitude determines your altitude. After World War II, Boeing lost more than 90% of its revenues. The US government cancelled most orders for bomber aircraft, which had been the mainstay of the aircraft industry. It could not get worse than this, but Boeing’s Bill Allen saw this as an opportunity. He decided to use his knowledge of military planes and used some of its unique features to build commercial aircrafts. People thought he was crazy, but the $16 million of the company’s profits that he sank into this project paid-off. He got his orders and the company was in business again. By 2001, Boeing remained the only American provider of commercial aircrafts. According to Jim Collins, the author of the famous book Built to Last, 15 of the 18 companies in it had lived through the depression and all 18 are standalone companies today. And if you look closely, you will find a great leader who never looked back, never compromised, however great the pressure was.

Great leaders never let any adversity rule them, instead they turn it into an opportunity. Great leaders create great companies and great organisational cultures. According to Fortune magazine’s list of “100 Best companies to work for,” last year Google featured at the number 1 position. However this time it is beaten by “NetApp”. Network Appliance has survived the dot-com crash, has been growing consistently for years and hit $3.3 billion in sales last year. It’s the company’s “down-to-earth management ethos” that has catapulted it to the number one position. Its business heads don’t make business plans, rather they write “future histories,” where they imagine where their business will go in a year or two. Always frugal, but never foolish when it comes to handling expenses, the company has a great culture. Not surprisingly, it has gained market share during the slump, hasn’t had layoffs and has over $2 billion in cash on hand to help it survive the slowdown.

If you have created a great organisation, worry not. If you haven’t, well the
time to start creating one is now!

SMART COST EFFECTIVE STRATEGIES

Sun Tzu in his book The Art of War says, “On a ground of disintegration, do not fight. On shallow ground do not halt. On axial ground make alliances. On deep ground, plunder. On bad ground, keep going...” and so on. The point is, the best business model is the one that can be adapted to a situation. The one who is most adaptable is the fittest.

Things are changing very fast. Everybody wants to save cost. Everyone wants more bang from the buck. This slowdown is witnessing a lot of brands shifting from traditional advertising to below-the-line activities. ING Life for one has seen how its BTL campaigns have been such huge successes for it. It’s one of the most effective ways of consumer contact. Not just this, the communication can be customised.

Everybody wants to save costs and new techniques are sprouting up to help one do that. “Widgets” are the latest tools that many marketers are enjoying. Nike has one called “Miles”. He is a 3D desktop avataar that stays on your desktop to encourage you to run and keeps track of your progress. Not just that, he keeps track of the local weather, running events etc. and of course reminds you that nothing beats a Nike shoe. In style magazine has a Hollywood Hair Makeover widget which allows you to pick up hairstyles of famous Hollywood actors and superimpose them on your own photos! These “Widgets” engage the consumer, cost less than traditional banner (on the web) and engage the consumer better. Digital media was once dominated by financial services and travel. Today almost everybody wants to try a hand at them. The most attractive part about the medium is its ability to offer accountability. It’s measurable, for you to know who, when, and why visited your site. It works 24x7 and has a global reach too. With recession making people cautious, online does offer interesting techniques. E-mail marketing, blogging, search marketing, viral marketing and social networking are becoming interesting alternatives.

SMART & SMALL

There seems to be a link between success and size. We have seen how giants are falling. What we will witness is also the rise of a lot of “Davids”. Porsche is a small company. Yet it enjoys a profit margin of $14,000 per car; something no Detroit car manufacturer can even dream of. It’s this CEO’s vision that made this possible. He followed the Toyota way and spruced up his company’s operations. Not just this, in 2005, he started buying into the giant car manufacturer Volkswagen, whose stocks were below $50 then and bought VW! That’s an example of brilliant leadership, vision & focus. As its CEO Wiedeking says, “Of course it hurts when the little firm buys up the big one,” but this time, it’s not size but strategies that will matter. No wonder a lot of small advertising agencies are finding this a boom time. They help clients save costs and deliver results too. Nakshatra shifted its account from JWT to CreativeLand Asia Pvt. Ltd., a one-and-a-half year old agency. Reliance Communications shifted from Leo Burnett to a three-year-old agency – Cartwheel Creative Consultancy. Delhi-based Crayons Advertising won the Rs.150 crore election campaign account of Congress.

The success principle seems to be - as long as you are adaptable, creative and convincing you have nothing to fear. Recession will not really bother you much. It’s the time for smart work.

Things you must do in 2009

Thursday, January 29, 2009

Depending on which way you look at it, the global economic slowdown presents both, a dampener and an opportunity. Either you can choose to cut your losses and run for it; or hang in there and carve a scrumptious pie for your brand. Some tips for the strong-hearted...

What’s common to Hyatt Corp., Burger King Corp., Microsoft Corp. or FedEx Corp. or CNN or MTV? They all debuted when the economy slowed down. Yes it’s true, a lot of today’s well-known and successful organisations were born during a slump!

IT’S THE TIME TO BE CREATIVE

It’s said when things slow down, that’s when true winners emerge and they almost always beat the competition by creating something new, something unique. Topping the list is Apple. The company worked on iTunes, iPod and its retail stores during the last slowdown and once the growth momemtum returned, Apple was ready to destroy and crush all competition.

Now is the time for one to innovate. Now is the time when creativity shouldn’t be sacrificed at the cost of squeezing costs. In fact, now is the time to watch, to look around, and to plan. As Stephen Covey put it in his best seller book 7 Habits of Highly Effective People this is the time to sharpen the saw. This is the time to get into the market and create a competitive advantage. This is the time for true entrepreneurs to show the world their mettle. About 40 years ago Mao sent millions of China’s teenagers to villages to learn from the peasants. Many of them became China’s first entrepreneurs and a lot of them today have become really wealthy. The Chinese government is once again embracing Chairman Mao’s “Shang Shan Xia Xiang” or “Climb the mountains and go down to villages” policy of 1968. It’s hoping this will give rise to a new generation of entrepreneurs as it plans to once again send thousands of young people to villages to develop their business acumen.

As the economy slows, the speed with which new ideas services and products are being introduced is increasing. Ben Sann, a 20-year-old has introduced BestParking.com which allows customers to scan the parking lot prices in four major cities and figure out which ones have the best deals. His sales have hit $250,000. Innocent, the famous brand selling smoothies in Europe, has chosen this time to branch out into convenience foods with a new range called VegPot. Tesco is planning to launch a bank. It feels there is a need for this service and people trust it hence this is the best time to introduce it. “Travelodge” has applied the budget airline model to its hotel trade and is seeing an increase in its bookings by 45%.

The trick is to keep your focus on the consumer and be optimistic like these companies. Cut out the pessimism, but don’t cut out innovation and creativity. And yes, the last thing you should cut is the marketing budget. There is some pretty scientific evidence out there that cutting ad spends has a long-term detrimental effect. In fact, now is the time when ads will have to work harder than ever. So it’s the creativity that will matter the most. Remember that if you have a good product offering – whatever the times – people will certainly buy it. After all, it was during the 1982 recession that the now-ubiquitous personal computer was born.

CUT OUT EVERYTHING SAVE YOUR AD BUDGET

The moment the economy slows down, the first things that marketers cut is the advertising budget. However, even though it sounds unbelievable, facts show that since 1854 there have been 28 recessions (on average of one every four or five years) and during each of the recessions of the past 50 years consumer spendings have gone up, not down (on the basis of reports by Jim Cox). So this probably is the best time to advertise. More so because most of your competitors would have slashed their ad budgets, making it easier for you to differentiate your product and stand out from the crowd. It is during such times that winning brands take a lead.

Kellogg and Post were close competitors in the breakfast cereal market in 1929. When the Great Depression started Kellogg’s maintained its advertising spend while Post cut back. Till date Post has not been able to beat Kellogg’s dominance in this category. Similarly Philip Morris and Revlon did not cut back on their advertising spends during the 1975 recession and gained market share, while Avon and Hershey cut and lost. Pizza Hut and Taco Bell ate into McDonald’s market share during the recession of the 90’s when the latter cut its advertising budget. In the same year Kraft salad dressings and Jiff peanut butter, both raised their marketing budgets and their sales increased correspondingly by 70% and 57% respectively! Times are hard, but it is times like these that give you that unique opportunity to stand out. It’s time to be aggressive – but wise. Ads during a slow down need to be positive and sensitive. Look at Walmart’s current ad campaign “Save Money. Live Better.” It seems to work fabulously. Don’t badmouth competitions as it might backfire (remember the BJP advertisements in Delhi badmouthing Congress – they didn’t work). Use your imagination and cost-effective advertising techniques. Have alternative plans and monitor each closely to see which is working the best.

The first reaction of most is to cut budgets. But remember, every time you cut, you give the consumer a chance to forget. According to Thomas Garbett who researched 30 companies during the 1981-82 slowdown, “Memory decay can be as rapid as a few months.” Importantly, ads shape perceptions of consumers and you cannot just stop doing it. After all, clear brand association and leadership comes through communication. From Chevy to P&G, all knew this and kept advertising – for that’s the only way to maintain brand loyalty. People associate stability with brands that keep advertising. Moreover this is the time to get some of the best media deals too. A slowdown in fact is the right time to build a greater share of market through aggressive advertising and marketing. This is the time to do things differently from your competitor and stand out.

John Von Neumann invented the ‘Game Theory’ while playing poker and he realised what winning was all about. He said, to win, you don’t play based on your knowledge of probabilities, but on the knowledge of your competitors’ psychological needs and behaviour patterns. This is the right time to study your competitor and do a little more than him, you will standout doubly. Good times or bad times, never forget your basics. According to Ken Wheaton in Advertising Age, “For all the talk of change, for all the rhetoric about new media, Barrack Obama rode to victory the old fashioned way – he outspent his opponents.” No wonder the media paid him back dearly with positive articles over negative ones by a margin of 7:1, more than any politician in American history.

This is the time for you to be innovative and creative. Go, put on your thinking cap and dream big – if nothing else make friends with Oprah Winfrey. Look what she did to “Kindle”, Amazon’s version of the digi–book. The moment Oprah endorsed it, its sales sky-rocketed and today its back-ordered until next year! Every marketer knows the power of “O”. For the not-so-lucky ones, lets decide that optimistic, creative, aggressive marketing and advertising are the things we’ll do in 2009.

When good times roll in...

Thursday, January 1, 2009

Strikes are a company’s worst nightmare. Look after your people in bad times & they’ll return the favour when the tide reverses


All the Saas Bhi Kabhi Bahu Thi addicts heaved a sigh of relief when on 19th November the industry workers called off their strike. Federation of Western Cine Employees (FWICE) had called for the strike demanding higher wages, better work conditions, and more. As a result, TV channels were forced to begin repeat telecasts of various shows. Of course, not everyone heaved a sigh of relief. Some wished that the strike would go on forever, as they had just about started sharing some family time. And then TV was back! Whatever the feelings – a strike is not one of the best things to happen. It hurts everyone – workers, company and customers. Yet, incidences of strikes and lockouts abound in corporate history.

Paradise Found, Paradise Lost

If there is one place where many dream of working, it’s in a Ferrari factory. It’s ‘Paradise Found’ for many when they get recruited by Ferrari. The ‘Great Place to Work Institute’ named Ferrari as the Best Place to work in Europe 2007. The company worked hard to win this accolade. It built the ‘Maranello Village’ and revitalised all facilities in and around the factory and spent close to €200 million. However, just because you spend your day at the ‘Maranello’ crafting F430s, 599s and your heart swells with pride as you hear the engines roar and watch the beauty come to life, doesn’t means all’s well. It was in 2007 itself (the year Ferrari was voted the best place to work in Europe), that Ferrari workers went on a strike! ‘Paradise Lost’ for the management probably! The reason for the strike was unusual. The workers felt unhappy with the fact that the quality of Ferraris was declining since Fiat was trying to make too many of them, and it was not possible to maintain the necessary quality standards. Of course, among other things, the workers also wanted higher bonuses. But this was a strike with a difference. It had a unique style. The workers would only strike on Saturdays and that too not all of them at one time! Their aim was not to disrupt production, but to just slow it down a bit and make the management see their point of view.

Even Japanese workers had a similar style. A strike in a Japanese shoe factory saw workers making shoes for the left foot only. They never stopped work, but only after the management understood their point of view and solved the problem did they start making the right foot shoe. The best part was that it was a win-win deal. No production hours or man-hours were lost and worker’s demands were fulfilled. However, strikes like these happen only when there is “passion” in workers; and when they take pride in the company they work for. It is only then that they strike not to hurt but to be heard!

It’s a ‘lose-lose’ option

Not all strikes are compassionate though. Most are destructive in nature and cause a lot of loss. Look at Boeing. It ended a scorching 58 day strike in November this year, causing a lot of delays, resulting in losses for the company. The 58 day machinists strike is not the first one that Boeing experienced. In fact, Boeing has been plagued with rocky labour relations. In 1948, workers went on a 140 day strike, again in 1995 for 69 days and in 2005 for 24 days. The most recent strike resulted in Boeing failing to deliver more than two dozen planes on schedule. According to analysts the strike might have cost the company a loss of $110 million a day. When strikes happen in such giant organisations, it not just causes a loss to the company but to the country as well. The Boeing strike harmed US exports too. The strike, which started on Sept. 6th, saw Boeing’s third quarter profits drop by 38 percent. Boeing is now seriously contemplating moving out of Seattle and settling in southern states where unions are weak and ‘right-to-work’ laws are not so rigid. Something similar happened in Detroit when a lot of automakers moved out due to troubled labour relations. And then again in India, when Tatas moved out of West Bengal. Not surprising then, that West Bengal has the highest amount of production related losses due to strikes. In 2006, India as a whole lost 13.75 million man-days and Rs.181 crore.

Dysfunctional unions have always created havoc in the past, as they are doing now. According to some, it’s the unions that have been responsible for the downfall of Detroit by increasing the cost of labour that has resulted in massive outsourcing and offshoring of jobs. With the global economy wilting under pangs of recession, strikes seem to be getting more rampant. In Germany, 8,000 workers participated in strikes at 17 companies. Germany’s largest union IG Metall launched a series of coordinated strikes – fighting for wage increase. Similarly in 2007 a wave of unprecedented strikes swept Egypt. The ‘shut off’ button was pressed for the first time in 50 years at the Shebin–Al-Kom Spinning Weaving Company (SSWC) just before the company changed ownership and became the property of the Indian company, Indo Rama.

In all the above cases, the workers never once felt that they were wrong. In Egypt, the workers went on strike after 50 years because they were loyal, good and committed people who were wronged. In Germany, the union IG Metall said its wage hike was justified because the company’s profits increased 220 percent between 2004 and 2007, while wages effectively increased by only 8.7 percent. Workers at Boeing felt they had made Boeing the company it is today and had every right to be a part of its future. They simply wanted their share of the extraordinary success that this company had achieved over the past several years. The moral of the story seems to be – share your success fairly with the workers and during failure, chances are they will stand by you. When workers are wronged they go to any extent. When 35,000 workers at nearly a dozen textile, cement and poultry farms in Egypt went on strike, people were confused. For this was a nation where strikes were illegal and even the smallest public protest is squelched with police truncheons.

Modern Day Strikes

In the past, strikes had always been bloody and scary. One of the bloodiest strikes in Australian history was nick- named the “Battle of Rothbury” when on a cold December day in 1930, police opened fire on locked-out miners at the Rothbury colliery. A 15-year-old boy survived and this witness of the bloodiest event in national industrial history penned down his thoughts at the age of 92 in a book called Lockout. He gave a detailed account of the conflict and the betrayal felt by workers.

Today, memberships of unions are falling. The economic downturn has reduced the bargaining power of many unions. Yet, workers are becoming smart and finding innovative, effective and quick ways to get their rights.

When some members were fired by the Toronto postal station the workers were angry. Instead of striking, they decided to lock-out their boss. After a lot of TV news coverage, the firings were eventually stopped for some time and the boss removed to another position.

Teachers in New York joined hands with the organisation Living Wage Coalition (LWC) and organised a large number of public events – rallies, marches, vigils, et al, where teachers got a chance to describe their problems at work. After 18 months of community pressure, the teachers won raises of nearly 50%.

In San Francisco, companies guarantee deliveries in under an hour. This urgent-delivery market also has strikes, which last for a few hours. The San Francisco Bike Messenger Association (SFBMA) just makes members park their bikes for a few hours until their demands are met! In 1995, Oregon’s farmworker union used rolling strikes to increase their wages by 20%.

Just before the strawberry season began, they started to publicise about the upcoming strike. To prevent loss of crop and money, some growers raised the wages before the strike started. The State saw its first wage gain in a decade. If employers are smart, then workers are getting smarter and more intelligent. There is no solution to strikes – it’s only prevention. Managers need to understand that suppressed complaints are like a volcano. Don’t wait for it to erupt, it could be too late. When asked how to handle strikes, Professor Hadley said that CEOs should not train people to become “leaders of money” rather “leaders of men.” The bottom line: There is indeed no short cut to avoiding strikes. If your employees feel that they are well taken care of, they will take care of you too. In case of strikes, the old adage rings true: “Prevention is better than cure.” Especially during these tough times – be just and fair to your people during the downturn and they will repay you with their blood, sweat and loyalty, allowing you to reap rewards when good times roll in.