Category Archives: Blogologue

Has the Best been Bought from Best Buy?

StorefrontBacktalk recently ran a couple of pieces on Best Buy that followed up their recent pieces on “Best Buy’s Black Friday Fiasco” and “Best Buy’s Wifi Porn”, which was expanded upon by SI in its recent posts on how if you wanted a best buy experience, you weren’t going to get it at Best Buy (Part I and Part II). In its first piece on “Best Buy’s Last Hope”, the author says that Best Buy has one shot — an expensive, painful, highly disruptive shot — to truly turn itself around. It must embrace customer service in-sore to an extent that would make Nordstrom, Trader Joe’s and Whole Foods blush. That means store associates who are true experts in the electronics they are selling.

Frankly, I don’t think this is going to happen. The mentality would have to change from “who will work for us for minimum wage and pretend they know enough about this product to actually sell it” to “where can we find someone who knows what they are talking about, is passionate about the products they sell, and will actually work for us as a sales rep” and “what is it going to take to get that kind of people”. Right now, the type of service I’m used to is “this isn’t my department, you’ll have to find someone that is working in this department” to queries as simple as “can you tell me if you still have any of this product in stock” (which any associate can do simply by logging into one of their terminals and doing a query) or, my favourite, in response to “I’d like that” (pointing to something in a cage). Get the key, open the damn cage, give it to me and/or walk it to the cashier. An untrained monkey could do it! (And monkeys are smarter than you think. Pete the Monkey taught himself to do dishes.)

Plus, as the author notes, they would probably have to fire most of their staff and replace them with Apple-store caliber employees. And any employee of that caliber is probably going to go work for Apple or, if they prefer Windows, Sony where knowledgeable associates are preferred.

After all, as the author notes, they currently think they can win a price war with Amazon. A company with massively deep pockets, minimal physical overhead (compared to a retail store chain), and a willingness to go eight years without turning a profit just to conquer a market. Winning a price war against Amazon in the electronics space is not going to happen. Amazon can, and will, win on margin every time if that’s what it takes to be the next major electronics retailer and put Best Buy and its competitors out of business. (And it won’t be hard when it’s customer service reps often give better service over the phone than Best Buy associates in store!)

The other piece that got my attention was that “Best Buy Planned Outages Due to Its Move to the Cloud”. If you believe the hype (and the doctor does not), the whole point of moving to the cloud is so that you don’t have outages. But the most ironic aspect to this story is that Best Buy is cutting Amazon a check for its cloud efforts. They might as well just sell to Amazon.com now and become Amazon’s mobile presence. One little glitch and a propagated purge command and — voila! — no more Best Buy online. (Not that it would make a huge difference anyway. What good is a web store that a growing portion of your market can only order one item from at a time anyway? [See Best Buy Experience? Not at Best Buy! Part II.] the doctor is now ordering more electronics from the local office supply depot because their web site actually works! And if you send them an e-mail, customer support actually responds! On the other hand, it seems that Best Buy’s method of dealing with problems is just to ignore them. It’s not a problem if you don’t recognize it, right?)

The nostalgic part of me would like to say that Best Buy still has a Bright Future, but, in the doctor‘s view, the only chance of Best Buy lighting up the sky is if the same thing happens to it as happened to the Buy More in the season three finale of Chuck. The way things are going, it’s going to be closing 50 stores on a regular basis. And I don’t think China’s going to save it. If Best Buy truly takes off in China, there’ll likely be so many indistinguishable clones in three months that it will just be hastening its demise.

Any Blogger Can Benefit Your Brand — But It Takes a Great Blogger to Benefit an Organization!

Late last year, Apparel ran a good article on How Bloggers’ Influence Can Benefit Fashion Brands that is worth a read by all Supply Management Professionals because blogs can be used to influence more than just consumer trends in brand preference. They can be used to influence trends in technology, transition, and even talent management — the three T’s of the modern Supply Management organization. How? We’ll get back to this — first we’ll discuss the article.

The article notes that leading creators and distributor of fashion are working with bloggers big and small in both traditional media (TV, Radio, etc.) and new media to get their brands out there. Why? Because, despite the rumblings that “blogs are dead” now that we have the Twitter-Generation who believe that conversations can happen in 140 characters (and to whom I respond ha ha ha Ha ha, ha ha ha Ha ha, ha ha ha Ha ha, heh-heh-heh-heh-heh-heh-heh-heh-heh), they are doing better than ever. The links have shrunk (thanks to temporary link shortening services), the virtual access locations have changed (as many people read them in a central online access point like Google Reader or their own RSS feed manager), and the promotion strategies have shifted (from SEO and sites like Digg to Facebook, LinkedIn, and Twitter promotion), but blogs are stronger than ever. Established authorities are read day-in and day-out and draw a more regular audience than some newspaper columnists as more and more people go on-line for their daily dose of content. Plus, since bloggers have more freedom to choose whom they do and do not work with, and what they do and do not promote, than advertisers, readers can trust that the blogger is promoting his or her opinions and not that of the company (unless the two happen to sync up).

And the proof that blogging is mainstream is in the pudding — if there are agencies that can make a profit simply through the promotion and management of independent bloggers, willing to work with companies and brands they identify with, that shows the acceptance of the medium. No one stays in business supporting a medium that isn’t supported. And since more of these firms are popping up, it’s obvious that blogging is mainstream — even if it isn’t on Facebook.

But the real point is that many people trust independent blogs for advice more than they trust mainstream media, which needs to be heavily supported by advertisers to stay in business, and, in essence, often needs to promote some of those views and products whether or not the media outlet personally supports or identifies with the views and products it is promoting. This is what gives blogs power of influence, and that power of influence is not limited to brand. It extends to technology, transition, talent management, and other forms of thought leadership. An idea astutely put forward on a blog can often take hold faster than an idea put forward by a vendor who obviously wants to promote a product or service. And that’s why organizations need to work with great bloggers to advance the level of practice in their industry. Unless the blogger can put forward the idea in a clear, well-thought out, and defended manner, the message will be lost and the organization will be better off focussing on brand (and sales) than thought leadership.

But fortunately for Supply Management organizations, product, and service providers, there are a number of great bloggers in this space. And if these organizations are as great as the bloggers, they will learn to make better use of them both as outlets for best practices and inlets for thought leadership in their organization.

That’s my virtual 2 cents. Any differing opinions?

Reverse Auctions: Old Is New, But One-Time is Still Just One-Time!

The IBM Center for The Business of Government’s recent report by David C. Wyld (the Director of the Strategic e-Commerce/e-Government Initiative at Southeastern Louisiana University) on “Reverse Auctioning: Saving Money and Increasing Transparency” is a great read for government organizations and a good read for Supply Management organizations that are on the back-end of the supply management innovation curve, as long as these organizations don’t fall for some of the claims that are hyped beyond reality (with respect to the private sector). While a private sector organization will generally see all of the following benefits the first time they use reverse auctions:

  • downward prices
  • increased competition
  • real-time market pricing
  • process efficiencies
  • time savings
  • increased number of suppliers
  • sustainable cost savings

These are the benefits a private-sector organization will generally see the second time it runs a reverse auction:

  • real-time market pricing

That’s right. The only additional benefit an average private-sector organization will see continue to see the second time it runs a reverse auction on a category is real-time market pricing. Why? Let’s take the suggested benefits one-by-one.

  • downward prices
    Generally speaking, the first time suppliers are invited to take part in a transparent winner-takes-the-contract auction in a market that favours the buyer, the suppliers will compete so aggressively that they will even jeopardize profit margins. As a result, the prices they offer will generally be unsustainable in the long term. That is why auctions started to fall out of favour with market leaders in the mid-noughts. While the first auctions returned amazing results, the subsequent increase in raw material costs as demand rose resulted in their initial bids being unsustainable. Thus, the suppliers had to raise prices just to stay in business (and as soon as the power shifted back to them, the suppliers increased their prices substantially to make up for the loss).
  • increased competition
    Generally speaking, suppliers get so competitive the first time with their pricing that there is little, if any room, left to increase competitiveness the second time around.
  • process efficiencies
    Once you have shifted to the reverse auction model, you have already gained the process efficiencies you’re going to gain. Reverse auctions don’t get more efficient over time.
  • time savings
    Since reverse auctions don’t really get more efficient over time, once you have switched to the model, there are no more time savings to be gained.
  • Increased number of suppliers
    While electronic reverse auctions do allow more suppliers to be invited to the table without too much extra work, if the auction is opened up, all suppliers that want your business are going to jump in. And, when they fail to win your business, some of them will even back out the next time around.
  • Sustainable Cost Savings
    Simply ensuring that the organization gets real-time market pricing does not lead to savings. In fact, if raw material prices or demand is going up, it can lead to significant losses. The way to sustained savings in the private sector is through negotiating long term cost-reductions, process-improvements, and innovation commitments that will find additional ways to drive down costs once the fat is taken out of the supplier margin. This often requires a decision optimization, PLM, or SPM solution to find these new savings opportunities.

In short, properly used, auctions can be good for the private sector, but the greatness will only bee seen in the public sector where, on the other hand, organizations will generally continue to see the significant benefits each time a reverse auction is run on a category. Our next post will address why.

Should You Be The Best?

This sounds like a silly question as it sounds like a question where the answer should always be a resounding yes, but a recent Harvard Business Review blog that said you should stop competing to be the best, which made some good points, makes you think about it.

The blog, which quotes the current thought leadership of Michael Porter, known for his five force analysis, says that “may the best X win” is absolutely the wrong way to think about competition, because it’s practically a guarantee of mediocre performance. Why? First of all, in the vast majority of businesses, there is simply no such thing as “the best”, so this would make the competition-to-be-the-best mindset completely wrong.

This is because many consumers in a market segment have different needs and wants. Some just want functionality. Others want style. Some want goods with average durability. Others want goods that can can take extreme abuse. Some want basic designs. Others want luxury. How can you define best when there are so many market needs?

Business, despite the claims of those who promote Sun Tzu’s Art of War as the ultimate business strategy rulebook, is not war and, in many markets, there can be more than one winner that can thrive. Consider retail. As the blog points out, both WalMart and Target co-exist and thrive and win in their market segment by offering different types of value to their customers.

And when rivals all pursue the “one best way” to compete, they find themselves on a collision course, trapped in a destructive, zero-sum competition that no one can win. Eventually all products and practices become almost indistinguishable, leading to pure price wars, which leads to a deterioration of profitability. This isn’t good for anyone.

The real way to win, according to Porter, is to compete to be unique. Innovate and deliver superior value to your chosen customer segment, not market segment. Make price only one factor in a multi-factor consideration. In doing so, generate positive sum competition and grow the industry — and, in the mean time, earn sustainable returns from the value generated.

How Do You Embed Sustainability in Organizational Culture?

A recent article over on the ISM site in their eSide Supply Management publication on “Embedding Sustainability: A 5-Step Approach”, discussed a report by Simon Fraser University and the Network for Business Sustainability that recommended five tried-and-true strategies for making sustainability part of an organizational culture, where sustainability was defined as operating in ways that meet the needs of the present without compromising the ability of future generations to meet their own needs.

In brief, the five informal practices that were recommended were:

  1. Engage
  2. Signal
  3. Communicate
  4. Manage Talent
  5. Reinforce

For each of these practices, they recommended that actions, which included:

Engage

  • Foster Competition
    between teams and business units
  • Make It Easy
    for employees to make choices that favour sustainability
  • Support Grassroots Efforts
    that come from the workforce
  • Capture Quick Wins
    and use them to overcome resistance
  • Prioritize Recognition
    and reward employees who foster commitment and get results

Signal

  • Be a Role Model
    and walk the walk (don’t just talk the talk)
  • Support
    your subordinates when they make decisions to prioritize sustainability
  • Allocate Resources
    to back up your sustainability commitment

Communicate

  • Tell a Story
    that promotes sustainability behaviours through examples
  • Customize
    the message to be authentic and relevant for the organization

Manage Talent

  • Hire Appropriately
    and select individuals with a passion, attitude, and competence to deal with sustainability issues
  • Make Sustainability a Way of Life
    and make it part of the job descriptions, goals, and benefits review process

Reinforce

  • Inform and Repeat
    the message over and over and over

These are all good practices, but will they really embed sustainability? First of all, nothing takes hold in an organization if it does not support both the business goals and the individual goals of the people who need to carry it out. If the ultimate goal is to please Wall Street by increasing profitability by 10% by cutting costs 3%, then no effort will be approved unless costs are reduced. Furthermore, if most managers and decision makers are compensated through productivity increases, and the most effective way to increase productivity is the least sustainable option, guess what option is going to be picked?

As a result, unless the organizational goals have sustainability embedded in them, and unless those organizational goals are mapped to unit goals that have sustainability in them, and unless those unit goals are mapped to individual goals that have sustainability in them, the chances of sustainability truly taking hold for the long term are going to be low. Thus, the organizational culture must first be tuned to sustainability. However, as we all now, just creating the right environment isn’t enough. People need to change — and this requires creating an atmosphere that not only supports the change, but that will support the inevitable hiccups that will result when any process is changed. So a change management initiative will also be required. And then the people have to want to change to truly make a big change. And how do you make people want to change? Incentives and rewards often work well, but those are specific to the types of individuals in your organization. As a result, no roadmap or 5-step plan will work as is. And if you don’t have a set of leaders who want the change to happen, it could be difficult to figure out what you need to do and get it done. And therein lies the challenge. So while I applaud the effort summarized in the report, is it enough?