What is Social Currency? (Graham Brown

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Wal-Mart, Scott, Duke. Time to get excited?

I've written and taught a lot about Wal-Mart's missteps in its globalization strategies, looking particularly hard at the situation in Germany, which yielded to a perfect confluence of a Porter Five Forces analysis and my five forces of customer experience analysis. (For more info on the Five Forces of CEM, contact me.)

But Germany wasn't the only market that Wal-Mart was drummed out of. Asia - including Japan - has been hard to the company. But wait -- Germany and Japan, why should they be such a big challenge? They're developed economies with good GDP and a sizeable number of people who want to save money on a range of products.  How on earth could Wal-Mart mess that up?

Nevertheless, clearly Wal-Mart must have a globalization strategy. They need it for the long haul. And the new guy in charge of Wal-Mart, Mike Duke, managed their globalization efforts. His next big foray?


Now, this makes some sense, if you look at all the available research on consumer buying styles (which, frankly, Wal-Mart appears not to have done in Japan and Germany). Australia and the US are pretty darn close on their consumer style preferences. And, because such preferences factor heavily in my five forces of CEM, Wal-Mart might seem to be on track.


One of the things Wal-Mart will have to figure out is how to maintain enough profit in their global operations factoring in global macroeconomic changes bound to be coming down the pike. Currency exchange rates and cost of capital will become a huge part of financial and growth projections and planning, and I believe a huge component of Wal-Mart's risk going into Australia.

And, I have no particular information to indicate how Wal-Mart's brand will be accepted in Australia. One of the challenges I've faced as a global customer management consultant is determining the extent to which global communications affects brand perception. This is a counter-balance to highly localized strategies that focus on local knowledge of a company's value prop. So, for example, the "China" strategy for Wal-Mart would have to be quite different on the east coast as it would be for the interior. Buying styles, consumer perceptions and values, pricing and assortment -- all will vary. And many consumer expectations about a good value prop will be influenced in subtle ways by information they get about companies via the Internet (directly or indirectly).

So, now that Wal-Mart has developed a brand of its own -- and by this, I mean a blend of the brand it intends and the brand as perceived by its publics -- how will Australia process this brand position? Is Australia's consumer base posing another unknown market risk to Wal-Mart?   

I saw a marketing report released on the Internet from an anti-Wal-Mart group, and from what I read, Wal-Mart's market data is so gingerly presented, so heavily filtered by pro-Wal-Mart language, that Mike Duke's first order of business is to get to the truth of the matter. 

Mike Duke has got his work cut out for him. A potentially low-margin play Down Under in a risky economic environment, with potentially huge game-shaping unknowns about how its brand is perceived in Oz ... and elsewhere.


Corporate Social Responsibility - Genuine or Generous?

As a part of my model of customer forces (imagine the Porter Five Forces sweater turned inside-out), I hang corporate social responsibility on the hook of the customer's process of reflecting on a company's values.

The idea is that CSR programs make a statement about a company's values, and that these values can generate an emotional bond with prospects and customers. But the cynical company will develop a CSR program (if they develop one at all) that is just for show. That dog won't hunt. The phrase I heard recently is that CSR should be genuine, not generous. 

For me, that means two things. First, the program should REALLY indicate the company's values, and the company's values should be reinforced internally around a principled CSR program. Second, the program should focus on impact in a nuanced, measurable way. Whereas a company's marketing program should strive for consistency and simplicity in its messaging, its CSR program should respond to the non-commercial needs of the world in a sophisticated way. This is because a customer's expectation of a company's CSR program is set by how the company is performing tasks that a government, or non-profit, would perform them. It's a policy filter, a program filter -- not a marketing filter. 

We're OK with the one-two punch simplicity of Apple's Mac vs PC ads. We won't be OK with Apple simply removing certain chemicals from its products. That's a step in the right direction. But add in their recycling program, you're starting to get the sense that Apple is thinking this through. If Apple were to add additional "green" practices, and to support other "green" initiates even if they don't control them, people would believe in the genuineness of Apple's commitment.

I think a consequence of this analysis is that companies should actually consider tackling complex, hairy problems in their CSR programs. This may fly in the face of compartmentalizing CSR and coming up with simple measures guaranteed to succeed. Even Apple, which I believe is indeed sincere about its green policies, likes to show checklists of things it has accomplished. But the worries that face customers are often complex, multivariate problems. A simple scorecard won't work. And these worries are well-founded.

A beautiful example is the problem of honeybees. They don't just make honey, they pollinate up to a quarter of the world's vegetable, fruit and nut food supply. They make up a critical part of an ecosystem that has sentimental, practical and economic impact. 

They are also probably going to be extinct in 10 years or so, at least in Britain. 

Just as some companies are too big to fail (to use the parlance justifying the current financial bailout program in the US), some insect ecosystems are just too important to fail.

And to fix that sticky problem, who's going to take the lead? Is it a multinational governmental problem? 

Or do global companies have a role to play?

Time for some corporate social responsibility where it really matters, and where we really need it: On the hard, messy, non-linear, hard-to-measure problems. 


You're probably not global. Nor are you domestic. You are semi-global.

Pankaj Ghemawat of IESE has a nice series of videos on the Financial Times web site on globalization strategies. Click here for the first video, and here for the second.

He makes the point in these videos that many companies are really semi-global. In my experience, this is true, for the following reasons:

1. Most companies with a domestic profile are actually dealing with multiple cultures. In the USA, the Latino, African-American, and white populations often have distinct value systems and expectations -- with variations depending on where in the USA you are. 

2. Most companies with a "global" profile are really doing most of their business in just a few countries, and are reluctant to completely innovate their product and service line to be completely compatible with the demands of local markets -- thus making their offerings partially local, partially "global". 

3. Many companies in economically unified areas that are nevertheless diverse in terms of language and culture may have to market across cultures with print, broadcast and cable ads in order to take advantage of their ad spend size -- but run into serious issues when they fail to create ads that speak intelligibly in all the cultures they must address. Not to mention having to deal with some local customs and regulations regarding truth in advertising.

So, taking advantage of one's size, extra resources, range of resources, and so on, can be challenging for a global company -- even more so for a semi-global one whose pockets aren't as deep as huge multinationals, and where the margin for error is therefore smaller. We can't all be Wal-Mart, whose essay into Germany cost them billions of dollars -- a mere drop in their revenue bucket. They tucked tail and left the country. Semi-global companies would find a similar loss disastrous.


What's a company worth?

I was poking around the internet today to get some idea about the distressed asset strategies that JP Morgan is employing regarding WaMu and -- potentially -- Wachovia. I found this fascinating link that looks at the relative merits of the class capital asset pricing model (CAPM). It rains hard on CAPM, and makes some really interesting observations about what market behaviors of stock pricing and purchasing really mean.


Apple Competing on Analytics - and Customer Intimacy

It's been said that companies have a choice. Compete on customer intimacy, product excellence, or operational superiority. Pick one, but it's just too hard to do all three.

But Apple has been doing a great job at operations, with arguably the nimblest supply chain the technology sector, as well as at creating excellent products -- even considering their MobileMe hiccup, which has largely been dealt with. 

As for customer intimacy, the sense of closeness that customers feel for Apple has been much more than Apple's actual leverage of customer data. They've won that warm and fuzzy feeling from top-down branding.

Genius, in iTunes8, changes that. 

Genius analyzes your songs and can make recommendations about playlists, either by showing you a list of compatible songs you already own, or by suggesting additional songs on the iTunes Store. It's fast, it's REALLY good at what it does -- and it leverages customer data to create more perceived value in iTunes.

There are two consequences. First, Apple lovers will continue to love Apple, and barriers to exit will be higher than ever. Genius, after all, does what my beloved Pandora does -- recommend songs similar to what I like. (Microsoft has a Channels tool that does something similar, but I've not tried it.)

The second consequence is bigger. Many of Apple's newest customers are switchers. They have bought iPods, the iPhone, and iMacs, spending billions on a product that seemed far less risky to them now than they might have seemed just a few years ago. But these switchers are not the early adopters -- nor even the early followers. Early adopters and followers behave that way because (for various reasons) their risk appetite is quieter than most. Most people, in fact, rightfully want to know more about product choices before they buy. They want to choose carefully -- and they want to suspend their loyalty to a brand at the slightest hint that the brand sucks.

So, in short, Apple has a lot of new customers that are just waiting for it to fail them, at which point they will (and have been) complaining loudly about how Apple products aren't any better than Microsoft products. Apple products may be great, and their supply chain may be great, but if they're not PERFECT, they will get demerit points from this huge, skeptical market to which the company now sells billions of products.

Genius can help Apple win their hearts and minds. It's powerful, it's fast, it's easy, it's fun. It keeps one's music library popping. And, underneath it all, one gets the sense that Apple knows me, and it cares.

Genius does all this, and it's free with iTunes8. It's a great start. I would look for Apple to do more with analytics over the next 12 months to gain even more customer intimacy. If they're smart, they'll acquire a few companies to accelerate the process, and introduce a few high-profile customer-driven platforms that truly elevate the customer from their current position (at best, worshipping at Steve Jobs' ankles) to an entirely new position. A position to be defined by Apple. 


Customer Analytics and Taking Photos While Blind

This heartwarming story, about blind photographers in Israel as recounted in the CNN video below, has lessons for decision-makers: 

1. If you can't see your subjects (customers), use your other senses.
2. Develop skills you currently don't have.
3. Choose from the results you get by employing people who can see.
4. Make the final decision based on what looks right, and what is important to you (and your business).

The lessons flow from the observation that most companies don't really "see" their customers. They don't have the tools to gather information and create insight about what matters to customers and prospects. Even if they do have the tools, and the insight, final choices about what to do must fit a carefully designed strategy that builds value for the customer and for the company -- defined not as revenues or utility, but as value and values created and exchanged. Revenues ain't enough. A product's usefulness ain't enough.

Business intelligence is hard work. Dashboards require clean data. Actionable data requireproper modeling, extraction, transformation and loading. And the right data are absolutely critical. If you keep measuring the same things each time, you may be missing changes in the competitive or customer landscape. 

Still, just getting started is half the battle. It opens up the right slots in your budgets and alerts your staff that customer data -- and decisions driven by those data -- are now central to operations and market position.

Enjoy the video.


Experiencing Wine

Just got back from a grand tour with my wife of part of Oregon's superb wine country. Thought I'd share some thoughts about wine and experience management.

What is wine? Sure, it's a fermented beverage. But just as sensory transference makes Coca Cola more than just sugar water, multiple components of wine tasting influence a person's experience of this classic drink. 

One of the great things about wine is that it captures just about every marketing hook ever invented by wily strategists. You can get people to love the label, the bottle shape, the sensuality, the location (country-branding is a huge new discipline), the people who make it, the history of the grape, the technology, the food-pairing options ... and with the latter, you bring wine into another marketing category: cuisine. Not to mention travel.

So, what is key to the experience of wine? It depends on what the consumer brings to it. Wine is a classic example of needing to capture the state of mind, value systems, and expertise of the customer in order to properly sell it. As rich as the opportunities are to sell wine, it is a complicated task to identify the right hook for the right customer. 

One hope, in my view, is the social network. Online social networks can develop information about consumers' preferences in related areas: travel, food, friendship, luxury, and so on. Using this information, wine sellers and restaurants can better communicate with customers. 

Who's doing this now? 

No one, as far as I know. 

Gentle people, start your engines.

Photo Copyright (c) 2008 by Paul K. Ward. Photo of the author and his wife Angela at the Sokol Blosser Vineyard near Yamhill, Oregon.


Framing, Russia and the US Election

Russia just voted to recognize the independence of two regions of Georgia, South Ossetia and Abkhazia. 

As background, Georgia claims these regions are part of its own territory, although it has also treated the breakaway republics as being de facto independent since the 1990s. The UN and other bodies encourage Georgia to continue dealing with these two regions diplomatically, which seems to acknowledge their status as valid independent negotiating entities. In short, the issue is truly unresolved.

But criticism of Russia's move around the world is muted because the United States led a similar initiative to recognize Kosovo's independence, which was declared on February 18 -- to much controversy, given that this was seen by many as an attempt to shift Kosovo from a traditional Russian alignment to a NATO/US alignment. 

In a way, Russia's move to geld Georgia is a way of punishing Georgia's president Mikheil Saakashvili, and in another way, it's a poke in the eye of the United States, which has been perceived by Russia (probably correctly) as the architect of a restraint policy. With the Russia/EU split in Ukraine, a Western-leaning Georgia and now missiles going into Poland, Russia is feeling as though it has to play some chess moves.  By recognizing the autonomy of Abkhazia and South Ossetia (partly protected by Russian troops as a bulwark against Georgian incursions), Russia has taken advantage of the moral high ground many believe the US (and hence Georgia) ceded with the Kosovo recognition.

The frame in political terms here is "fair is fair." The US is largely hamstrung on the issue. Any outrage would now be seen as hollow, or -- worse -- hypocritical. 

This frame works because the United States needs to present itself to its own citizens as being sincere and plain-dealing. If this issue were not part of a US government initiative to isolate Russia in US public opinion, then Russia's frame would lose a lot of its power. Frankly, the United States over the years has had a free hand in being insincere or obscure in its dealings with other countries. (The United States is not alone in this -- after all, the German word realpolitik has been conspicuously a part of our foreign policy DNA since Henry Kissinger's days.) But when the US needs to convince the American people that it's doing something based on ideals, it needs a believable frame. Russia has exploited the Kosovo declaration for both tactical and strategic purposes, because the United States has chosen a weak frame.

Now, to the US election. 

Have you noticed how, in the last several presidential election cycles, somehow gay marriage has bubbled to the surface immediately prior to the election? Why is this? My own view is that the conservatives in our country believe that gay marriage is a divisive moral issue that helps them preserve their social conservative base, and by carefully managing the state legislative agendas, they can get states to at least bring up the issue -- and ideally to pass pro-gay-marriage laws -- so that it plays in the national press. The frame they want to use: Marriage is a traditional ritual between man and woman, for the purpose of creating a family. The frame that progressives and liberals want to use (but cannot gain traction for): Marriage is a civil right. Conservative political strategists want this issue to come up, particularly in a legislative context, because it puts our very laws "at risk" of being tainted by ... fill in the blanks -- the tactic is fear-mongering at its worst, in my view.

I won't go into my own views on how progressives and liberals should change their strategy. That's for another posting.

What I want to do here is to warn progressives about another frame that's being introduced, and it will bite the Democratics in the rear if they don't start thinking about it. That topic is underage drinking -- right now framed in the press as reducing binge drinking by lowering the drinking age.

Think about how this is going to play out. If Obama supports it, social conservatives will rally to McCain. He might preserve some of his youth vote, but Obama had better be sure how young people really feel about changing the drinking age. If Obama comes out against it, you can bet that conservatives will say that he doesn't trust American youth, and that he's a hypocrite, since he drank and used drugs as a young man.

And you can hardly be called anything worse in America than a hypocrite. (See the Russia story above.)

So, what do I recommend for the Democrats?

Simply this: Nothing is more important for the future of our country than the health and well-being of our youth. We should not lower the drinking age without looking at the overall risks. And we cannot craft the best solution by leaving families out of the conversation. 

This frame has the merits of being based in values: patience, family, collaboration. The story is probably one of the government being a mentor to the real hero (the family). This shifts the government from the role that conservatives might prefer: the gatekeeper or -- even worse -- the villain. 

It will be worth watching to see how this is going to play out in the next few months. Of course, I could be wrong that the drinking age issue is a stalking horse designed to pull the Obama campaign into a lose-lose situation. We'll see!


Blockbuster finally gets a strategy. Uh huh.

Kiosk at BART/Muni Station, Photo from Metropolitan Transportation Commission, Not representative of Blockbuster's kiosks.

I teach customer experience management. In the context of customer relationship management, CEM includes the usual stuff: identifying your customers, differentiating your offering (which now comprises product, service and experience, chopped up in new ways), interacting with customers (or letting them interact with you in new ways), and customizing your offering (or letting people customize it themselves). You know, IDIC.

Well, I teach people about Blockbuster and Netflix when I teach customer experience management, and I gotta say, it drives the point home. All the things you have to do in modern IDIC are done really well by Netflix, and terribly poorly by Blockbuster. Blockbuster has improved things quite a bit, but they basically affirmed their traditional retail model with their new CEO pick. Their online service, designed to compete with Netflix, is OK, and getting better, but Blockbuster does not have a customer culture. Process improvement in their online offering, and supply chain improvements and store closures in their brick-and-mortar offering, just don't show the passion for the customer that Blockbuster needs to show.

That said, check this out. Reuters is reporting that NCR and Blockbuster have joined forces to create DVD vending kiosks. The idea may be the beginning of a new strategy.

And a flawed one. 

Think of it this way: They are trying to put lots of kiosks in convenient places so people can get a movie NOW, no lines, no waiting for something to be mailed to them. The value proposition is CONVENIENCE. And it might work to move some DVDs.

But will it work to restore Blockbuster's brand? Will customers become loyal to Blockbuster through attitude and behavior? That's what wins total return to shareholders.

Think how this is going to play out. The kiosks go in your drug store, your grocery store, maybe your gym. In a corner. With a skirt of trash and obstructed by chairs or baskets or candy bar racks. 

Kiosk at BART/Muni Station, Photo from This is an NCR kiosk that may not be representative of Blockbuster's kiosks.

Not a lot of brand building going on. Not a lot of customer data being grabbed and stored and used to serve the customer better next time (although I suppose Blockbuster may have something up their sleeves here, exploiting online channels cross referencing your credit card with your email address). No, it's just Blockbuster leveraging what they know how to do better than Netflix: ship things forward and store them. 

Where's the customer? Where's the exerience? Where's the increasingly intelligent level of service? 

Here's what I see. Netflix will continue to keep medium- to high-use customers, those folks who feel as though they want to have more than some low threshold of DVDs in their queue at all times. 

And Blockbuster will get the rest -- people who don't want to commit to a Netflix subscription, so they can just rent the occasional DVD. 

These are, behaviorally, the worst customers.

Go for it, Blockbuster!


Apple's Introduction to the Wild West

Apple has been a beautiful company. People think of it as a superb marketer. It is. It is also a super design company. Apple, finally, is also a world-class logistics company. 

But now, with the iPhone AppStore, they've thrown themselves into new territory. Application developers get to sell their products through the AppStore, with Apple's approval, which helps Apple build a huge repository of software (read: complex code with a multitude of risks) without having to write it all themselves.

Note the paranthetical comment about multitude of risks. 

If Apple approves something for the store, great. Unless it doesn't work. Who gets the heat? The app developer. Some, sure. But so does Apple. And suppose it does work -- but it creates a functional issue for an Apple partner such as AT&T (for example, the "modem" software that allows an iPhone user to set up the phone as a local hotspot for WiFi access). Does the app developer get any blame? None. But Apple does.

And so Apple yanks down software it had previously approved.

And annoys an entirely new community -- app developers. Who blog. And blog. And complain to the tech media -- who blog, and investigate, and so on.

Is there a way around this? Yes. 

1. Apple slows down its approval process and has applications reviewed by a panel of stakeholders. This will probably catch the majority of issues, and the internal nature of the process allows Apple to capture business/decision rules and apply them effectively in the future, whether in EULAs or developer agreements, or in their own processes and R&D.

2. Leave things the way they are and jump in the middle of the conversation. In short, treat the Wild West of the AppStore as an opportunity to influence and balance the conversation, since it cannot be directly managed. 

The first option is more in line with Apple's DNA. The second one is more in line with the open nature of the new economy.

My own advice to Apple? (As if they'd ask.) 

Ride the horse headlong into the Wild Wild West (cue Will Smith). You can't avoid it, and while you have good will with the great iPhone, you can afford to stumble a few times, as long as you wind up in the conversation, publicly, with developers and customers. When you rely on them for your economic strength and good reputation, they don't want to be at arm's length. App developers are hungry for information about what Apple wants to and CAN sell. Customers are hungry for apps, and don't want to be confused by having them constantly yanked on and off the virtual shelf. If that confusion is inevitable -- and I think it is -- then Apple has to figure out how to be more public about the process it uses to approve or disapprove these apps.


What's up with trade agreements? Fear and pride, that's what.

So I was catching up on my Asia news while in Singapore recently, to learn that the ASEAN countries are essentially on notice that they'd better put-up-or-shut-up in creating a more integrated regional trading force. (ASEAN is sort of NAFTA East, but excludes China and India, although they are party to regional discussions with ASEAN.) I've been tracking this for a long time because I predict the Asian countries in ASEAN (and India and China, but especially the fast-rising Malaysia, Singapore, Thailand and Viet Nam) are in a position to both grow and be more powerful on the world political stage via a combination of economic emergence and tighter integration. With all the hand-wringing in the West about the impact of China as an economic superpower, I think China's got nothing on what can happen with ASEAN. After all, the structural and resource disparities among these countries create an ideal opportunity for partnership. Outside of India and China, ASEAN countries have labor, transportation, logistics and targeted industrial support well in hand -- and it's only going to get better.

And now, the WTO talks have sputtered (almost) to a close. The US Trade Representative, a very impressive woman named Susan Schwab, won't quite admit the current round is dead, but as of last Friday, the agricultural subsidy issues seem to have put the trade talks on life support.

So, with ASEAN, what's up? I think the security issues that are being blamed for sidetracking the talks are really a sideshow, as important as they are in the context of the Burma international aid fiasco. India and China have already begun military cooperation (as of last year), but given their very real border disputes, I believe the ASEAN cooperation framework is going to be less interesting to them than occasional bilateral moves between them. The ASEAN countries clearly have a window of opportunity. They need each other more than they would benefit from going it alone in the region. So I'm not really sure what's holding them up -- unless the newly shiny Vietnam, Thailand and now Cambodia are just not as interested in cooperation. Growth can make you heady.

And the farm subsidies that are confounding the WTO talks? It's fear. There are too many vested interests on all sides within the agribusiness arena to let this one be easily resolved. Plus, food supplies are a matter of national security (and, in France, food quality is a matter of national pride). It gets tricky pretty fast. 

I think the argument that the US wants open, free trade of food supplies (except when we don't) doesn't frame the US point-of-view accurately. For many businesses in the US, it's about creating new markets all around the world, in part by dismantling or damaging their domestic markets. While some might view this is economic "restructuring" in the name of free trade, I don't see it that way. Creative destruction can be well and good, but for me the social and national identity issues in a nation's food production are crucial. 

And I admit that's because I like my Croque Madames made with local French farm eggs, EU ham, Poilane bread, and Gruyere. It's not just France's identity at stake. It's my own. 

Think of it this way: Freer trade makes the source and type of food you eat far less "local". While it has been argued (even in the liberal online mag, whose journalism I love) that local produce is not necessarily "green" (burns more fossil fuels per unit than mass distributed food), local produce has something that agribusiness folks can't every package. 


So, what's up with the trade agreements? In ASEAN, country pride. In the WTO -- global corporate pride. And a bit of fear that globalized food supplies will stamp out a lot of valuable things about place, sovereignty and security.

UPDATE: CNN covers this story today (Wednesday) with a nice summary of the WTO breakdown. And Forbes has a brief article as well that summarizes the issues, the winners/losers, and the hope for continuation of this seven-year-old Doha round.

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