Vivek Sood's Blog, page 62

A Business Network to Save Plunging Stocks

 

Award-winning author Vivek Sood’s eagerly anticipated new book, The 5 Star Business Network, is due for release later this month. With further distressing economic news from Europe – Greek bank shares are plummeting and Portuguese shares have fallen too this week – the book could not have come at a better time. Examining complex inter-business relationships and synchronicities, acclaimed international business guru Mr Sood has produced a thought-provoking and inspiring work for any business. Mr Sood shows how in the changed reality business networks are replacing the 3i’s – infrastructure, inventory and interest – to enable businesses to do more with less.

Mr Sood uses current examples to provide engaging demonstrations of the power of 5 star business networks in the modern marketplace, showing businesses both how they can improve and which pitfalls they can easily avoid. The 5 Star Business Network draws on Mr Sood’s extensive international business expertise to show how every company can achieve synchronistic advantage through the appropriate development of its business network.

With influences from mathematicians, historians and psychologists, The 5 Star Business Network is a comprehensive guide to ensuring corporate robustness, expansion and effectiveness. With the global economic downturn continuing, if chief executives read only one business book this year, it needs to be this one. 

Business networks rally to fight record Eurozone unemployment level

 

Official data from statistics agency Eurostat has confirmed that unemployment across the Eurozone reached a record high of 12% in February 2013. With financial institutions and whole countries in crisis and the decline of the Eurozone’s manufacturing sector worsening the economic turmoil that has already caused so much pain, many companies are struggling to survive.

Businesses under pressure often reduce their headcount as a quick means of saving money, but this hollowing out of the corporate structure erodes workforce motivation and loyalty, reducing efficiency and replacing it with uncertainty. Instead, the innovative development of 5 star business networks could allow companies to keep their staff and turn their fortunes around. In The 5 Star Business Network, which is due for release this month, award-winning author and entrepreneur Vivek Sood demonstrates how simply businesses can improve their position and fight the rising unemployment levels.

By using new technologies and taking advantage of globalization and opportunistic plays, strong and loyal 5 star business networks can be built, reducing individual companies’ level of risk and creating synchronicities that lead to massive gains. Packed with real-life examples of companies doing just this, The 5 Star Business Network is the one book that no company can afford to be without during these harsh economic times. 

Ten questions to ask yourself about your business network before adding it to your business strategy

 

Every business needs a business network in order to thrive, but how do you know if your network is strong enough, dynamic enough or cost effective? Award-winning  business author Vivek Sood’s eagerly anticipated new book, The 5 Star Business Network, answers key questions to ensure that your company has a 5 star business network that creates a sustainable competitive advantage.

The book answers 10 essential questions about 5 star business networks:

Will it allow us to earn more cash and keep more of the earned cash for a longer period?
Will it reduce our investment in infrastructure, inventory and interest?
Will it allow us to invent better products, lower our product development time and costs and multiply future options for newer products, creating a flywheel effect?
Will it enable us to cut wasteful activity and systematically optimize profitability on every transaction, while building a loyal and satisfied customer base?
How will we enhance profits by moving beyond Activity Based Costing (ABC) or Cost-to-Serve modelling?
Will it allow us to create a pipeline of multiple generations of products to be launched in succession and enhance our long-term sustainability by allowing us to build a perpetual engine of continual innovation?
How will it impact the balance between maximized current profitability for the current generation of products and maximized future profitability from the next generation of products?
Will matching the supply chain maturity to the innovation stage allow us to launch better products before our competitors can?
Will it allow modularization before outsourcing in order to retain control and enable us to plan our outsourcing properly so that we do not waste a lot of time and money during execution?
Can we win big with little risk by using the leverage inherent in insourced-outsourcing?

The 5 Star Business Network demonstrates how any business can reap the rewards of tapping in to the immense power of 5 star business networks, no matter how big or small. It is, quite simply, the business book that no company can afford to miss. 

Why Cost Cutting Can Sometimes Become Too Costly?

Whenever a company announces a cost-cutting drive, the markets respond with enthusiasm, driving up the share price. There are at least four assumptions underpinning this enthusiasm:

The company had excessive fat, and needed to be trimmed down.

The people conducting the diagnostic of what to cut are capable of identifying where the fat is, and how to trim the fat, while leaving the muscle intact.

The people incharge of implementing the diagnostic will be able to translate the strategy into reality without any ‘loss in translation’.

There will be few long term unintended consequences of the cost-cutting exercise.

In most cases where I have been personally involved in cost-cutting exercises (and these number in hundreds by now), these assumptions hold true. Indeed, the projects are created only when the evidence of excessive fat is readily available. Diagnostics are carried out intelligently and implemented diligently. Long term unintended consequences are minimized by taking these into consideration during the strategy formulation. 

However, there are ample examples in press of one of the four assumptions above not holding up. This news-story from a recent edition of Bloomberg Business Week tells us the case of Walmart. As per the article:

Wal-Mart Stores (WMT) has been cutting staff since the recession—and pallets of merchandise are piling up in its stockrooms as shelves go unfilled. In the past five years the world’s largest retailer added 455 U.S. Walmart stores, a 13 percent increase, according to company filings in late January. In the same period its total U.S. workforce, which includes employees at its Sam’s Club warehouse stores, dropped by about 20,000, or 1.4 percent.

A thinly spread workforce has other consequences: longer checkout lines, less help throughout the store, and disorganization. Last month, Walmart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company has either tied or taken the last spot.

The article goes on to compare the current woes at Walmart with the HomeDepot experience a few years ago.

That’s what happened at Home Depot (HD) in the early 2000s, when it tried to trim expenses and boost profits by cutting staff and relying more on part-time workers. Eventually customer service and satisfaction deteriorated, and sales growth at established stores fell.

Perhaps this is symptomatic of the dilemma faced by all brick-and-mortar retailers. As the customers move to online channels, and increasingly use traditional retailers as mere show-rooms to get a touch and feel experience of products that they later buy online after comparison shopping using smart apps, all retailers are experiencing challenges that require ‘fresh thinking’ and ‘newer business models’. 

However, as per the article, not all retailers are exhibiting the same symptoms of mis-guided cost cutting. The article quotes the case of a shopper who finds the shelves in competitors’ store amply stocked and serviced, as follows:

Margaret Hancock long considered her local Walmart superstore her one-stop shopping destination. But during recent visits, the retired accountant from Newark, Del., says she failed to find more than a dozen items, including certain types of face cream, cold medicine, mouthwash, bandages, and hangers. Walmart’s loss was a gain for Kohl’s (KSS), Safeway (SWY), Target (TGT), and Walgreens (WAG)—the chains Hancock visited for the unavailable items. “If it’s not on the shelf, I can’t buy it,” she explains. “You hate to see a company self-destruct, but there are other places to go.”

This article, and the example quote above, has hit a nerve among Walmart customers – setting the cybersphere abuzz with comments, mostly quoting similar experiences, or worse. Walmart’s drive to cut-costs has not gone un-noticed by its customers. No doubt, online retailers such as Amazon are fast gaining market share due to their lower overheads and drive to gain market share at the expense of margins. It will be very interesting to see the outcome of this particular battle. 

More interesting question is, however, What should be Walmart’s strategic response to the current challenge?

 

Also, if you have read this far, you might be interested in spending 2.5 minutes more to review this new-fangled technology called Prezi, and comment on it:

Business networks shine during a bad month for banking

It has been a bad month for banking. A US Senate panel has alleged that JP Morgan Chase bank has been hiding huge trading losses. On the other side of the Atlantic, KPMG has reported that the UK’s five biggest banks saw a 40% slump of their statutory profits in 2012, when compared with the previous year.

The global economic crisis has changed businesses’ reliance on banks – and governments – forever. Thankfully a new book, The 5 Star Business Network, has stepped in to fill the void. Acclaimed business author Vivek Sood answers today’s most pressing questions. How can companies draw strength from the business networks of the past? How can they maintain momentum in the face of the cyclical nature of success? And how do companies break into the key business networks that will support them to thrive?

With sources of traditional support seeming to falter more each day, this is the book that no CEO who wants their business to succeed in 2013 should be without. The 5 Star Business Network will be released in April 2013.

Barnes and Nobles’ latest public spat with Simon and Schuster – another nail in the Publishing industry?

As predicted in my book 5-STAR Business Networks when a product category, its current form, reaches the end of its life-cycle, the supply chain interaction between the supply chain partners becomes rather unpleasant and coercive. The reason is clear enough. Long standing supply chain relationships are tested as a result of falling profitability. Each of the player starts challenging the value added by other players, and in a bid to maintain profitability, or avoid losses, starts asking for more share of the overall profits in the supply chain. 

Nowhere is this phenomenon more observable today than in the retail supply chain. Within retail too – book retail is perhaps the most hit industry. Amazon has been eating the lunch of traditional retailers for several years now. Onslaught of digital delivery mechanisms and growing popularity of digital readers, iPads, kindles is taking its toll.

New York Times reported the dispute as follows:

 B&N “believes that because its physical display space is so important to publishers, and because it is the last major retail chain remaining, publishers should be doing more to support it.”

And now this report from the Wall Street Journal of 22nd March 2013 says:

Barnes & Noble Inc. BKS -2.67% has sharply reduced the number of Simon & Schuster titles it carries in its stores as well as the promotion it gives those books as a result of a financial dispute between the two companies, say people familiar with the matter.

This is probably only the first chapter in this dispute. Both sides are hurting from their struggle with a redundant business model. Neither side managed to create a new business model to replace their redundant business model, when the time was on their side. Wall Street Journals goes on to 

The dispute was reported by Publishers Weekly in late January, shortly after Barnes & Noble curtailed its Simon & Schuster orders. At that time, the two companies believed they would soon resolve their differences. Instead, the dispute has continued.

The disagreement comes as readers increasingly embrace e-books. At Simon & Schuster, for example, digital-book sales grew 24% in the fourth quarter, even as total publishing revenue fell 6%. Digital books represented 24% of total publishing revenue that quarter, up from 18% a year earlier.

But these two companies are not the only causalities of this dispute. The reading public, as well as the writing authors are also affected; perhaps it is time for the authors to create their own business model by finding other, more direct, ways of reaching their readership! This will not be the first time when non-value adding players are disintermediated out of a supply chain. 

 In fact Guy Kawasaki, a noted venture capitalist and entrepreneur has recently released his new book which encourages writers to do just that, and shows them how to do it. As per the book’s website Guy learned from his experience.

In 2011 the publisher of Guy Kawasaki’s New York Times bestseller, Enchantmenst, could not fill an order for 500 ebook copies of the book. Because of this experience, Guy self-published his next book, What the Plus! 

No wonder then that Simon &Schuster CEO Carolyn Reidy told the New York Times, “In this new world, it is just getting more complicated. There are more factors involved. They get more fraught.”

Wonder how many people will miss the publishing industry in its current form?

Is Cyprus the Sarajevo of 21st century?

Normally I limit my blogs and writings to the topics I am very passionate about – business models, supply chains, strategy and business outcomes.  I do not worry too much about the markets, especially the short term gyrations that occupy the minds of speculators, brokers and the cheer squads.

Despite holding credentials of a Chartered Financial Analyst (CFA), and securing a rare 100% mark in MBA subject International Finance, I do not write much on market movements because of my tendency to think rather longer term – which would be of limited interest to most speculators or investors, the main consumers of market information.

However, when we approach a perilious bend in the road it becomes important, even mandatory to point out a few things.

When Archduke Franz Ferdinand was assassinated by Serbian nationalist forces in 1914, Europe and the world military powers were already sitting on a tinderbox. There are plenty of sources that explain the full series of events going back to the Ottoman empire and its conflict with the Austro-Hungarian Empire, as well as the other worlds powers of the time. After the event, as per Wikipedia:

The murder of the heir to the Austro-Hungarian Empire and his wife produced widespread shock across Europe, and there was initially much sympathy for the Austrian position. Within two days of the assassination, Austria-Hungary and Germany advised Serbia that it should open an investigation… After conducting a criminal investigation, verifying that Germany would honor its military alliance, and persuading the skeptical Hungarian Count Tisza, Austria-Hungary issued a formal letter to the government of Serbia. The letter reminded Serbia of its commitment to respect the Great Powers’ decision … The letter contained specific demands …This letter became known as the July Ultimatum, and Austria-Hungary stated that if Serbia did not accept all of the demands in total within 48 hours, it would recall its ambassador from Serbia.

 

The long term consequences of Sarajevo event were far more disastrous than foreseen at that time. Of course now we all know about it as the First World War.

In today’s world the military power has given way to the monetary power and the trenches in today’s warfare are the monetary trenches. The next great war could well end up being a currency war. Without knowing full facts of the case I will not comment on the settlement of Cyprus crisis so far. As reported in the press by Bloomberg today (25th March 2013):

Cyprus qualified for its 10 billion-euro ($13 billion) bailout by agreeing to close Cyprus Popular Bank Pcl, also known as Laiki Bank, the island’s second largest lender, the EU said in a statement. Uninsured depositors and senior bondholders will be “bailed in,” staying in a so-called bad bank.…

The Wall Steet Journal today (25th March 2013) reported:

The bank restructuring doesn’t need approval by the Cypriot Parliament. German Finance Minister Wolfgang Schäuble said Monday that the legislation needed to complete the restructuring of the Cypriot banking system is already in place…

… Mr. Schäuble said the troika of official lenders—the euro zone, the IMF and the European Central Bank will be “in contact with the Russian government.”

There-in lies the nub of the problem. With monetary trenches being dug now, it will be interesting to see how all this pans out. Already there are capital controls coming in place as per the Wall Street Journal:

Border guards at Cyprus’s crossing with the Turkish-controlled north aren’t searching people to see if they’re taking large sums of currency from the country. But at air and seaports, officials are confiscating amounts over €10,000 ($13,000), says WSJ’s Joe Parkinson.

The key question now is what will be the unintended consequences of this settlement? How far reaching will be the capital controls, and the precedent of bank restructuring? Is this the first domino in the global currency war? Only time will tell the answers – meanwhile, all of us, individuals, businesses and managers, should keep our powder dry and be prepared for the unintended consequences and unforeseen events.

The powerful lessons of history

Business leaders should look to history not the governments for a way out of the current economic morass says the business guru

Businesses that continue to look solely to governments for salvation will ultimately be bitterly disappointed. History is our best teacher, and there are already plenty of lessons in the business networks of the past – says Vivek Sood, an internationally renowned business guru. In his new book, The 5 Star Business Network, award-winning author Vivek Sood explores the best of what can be learned from business networks spanning thousands of years, converting historical lessons into powerful themes and lessons for the corporate world. Mr Sood is available for immediate comment and interview.

What does history teach business people? Is there a lesson within the archives of history that will show way out of the current economic situation? What can we learn from the example of the East India Company – the world’s first multi-national corporation?

Award-winning author Vivek Sood answers all of these questions and more in his new book, The 5 Star Business Network. He takes the reader on an engaging journey from the ancient silk route to the modern corporate world, nimbly demonstrating the reasons behind the rise and strength of business networks, and showing businesses how they can use these historical lessons to improve their efficiency, reduce their risk and enhance the robustness of their companies.

Tinku Grewal, Chief Executive Officer of Biotech Trading, which operates an extensive business network stretching from Australia to India, commented:

“Once every few years a business book comes along that stands far above the clutter, that has more than one single idea, that is based on solid research, that relates theory and models to the real time business, and that is still ahead of the curve. This is one of those rare books. I will buy hundreds of copies and give them to my suppliers, customers and other business network partners. I think it is well worth the expense to orchestrate a business network when everyone is singing from the same song sheet.”

The 5 Star Business Network is available for purchase from April 2013.

What if you could invent your own iPhone 7?

iPhone 6 has not been released yet and the crowd that likes to call itself THE INNOVATORS is waiting with bated breaths to again stand in queues for whole nights for the next re-incarnation of the great innovation. 

Here is the challenge for this crowd – and a thought experiment for the rest of us. 

Why not design and build your own iPhone 7, or at least a phone that rivals the features and functionality of one?

You might imagine that is impossible – but the facts speak otherwise. In fact, we will talk later in this post about a man who has actually done something of that nature.

Afterall, the chipset, the screen, the key componentry – even the assembly service can all be sourced from third parties. A rival operating system can do pretty much what the iOS does. And, the best news of all is that the sum total of all the parts and services add up to far less than what it costs to buy one. Of course, it is not as easy as I make it sound – there is a question of minimum volumes, inventory management, marketing, selling and supply chain management. 

But, as I explain in my forthcoming book 5-STAR BUSINESS NETWORKS, even these services can be modularized and outsourced.

Who is already doing this? 

Sammy Ohev-Zion, the Chief Executive Officer of Bluproducts is in news this week. In the article titled Meet the tiny, Florida-based phone maker that thinks it can beat Samsung, by David Pierce, his story is covered in quite a lot of detail. The article quotes Sammy as follows:

Ohev-Zion told me, “for a startup company to be able to manufacture — if you weren’t one of these billion-dollar companies you didn’t have the access or the technologies to make your own mobile devices.” But that’s all changed, and Ohev-Zion found that he could build a good phone for the same price as the other guys, and sell it for a lot less. He used his connections to get Blu phones in stock at Amazon, Newegg, Best Buy, and others, and began rolling out newer, better phones at a blistering pace. He believes, and says without a moment of hesitation, that Blu is going to be a real player in the smartphone industry sooner rather than later.

If it costs no more than $299 to make a phone of equivalent quality and features, where does it leave the big mobile phone manufacturers when smaller, nimble players such as Bluproducts start creating and using their 5-STAR Business Networks to bring better products to the markets faster and cheaper. The article goes on to quote the features vs. price comparison as below:

Ohev-Zion, CEO of Blu Products, a relatively unknown manufacturer based in Miami, Florida, says it would cost $299. That’s how much the company’s latest flagship phone, the Blu Life One, will cost unlocked from Amazon or a handful of other retailers when it’s available at the end of April. It’s a 5-inch HD phone with a 13-megapixel camera and stock Android 4.2 (save for a Blu wallpaper), in a thin and light body that appears to hold its own next to the Galaxy and Droid devices of the world.

And the reasons for the price differences you ask? Well as per the article it is all in the marketing budgets and corporate headquarters costs of the big guys (which sound at least partly true).  I am sure as a reader you will have your own opinion on that – which you can share below.

But a bigger question to reflect on is this – are we likely to see someone come along and do to mobile phone equipment market what we saw Michael Dell do to the PC market?

When will be able to buy customized hand-sets – with just the right combination of hardware components and features to suit our particular needs? Seems like that day is not far off!

 

Will digitization of retail eventually lead to Balkanization of online retail?

Analysts are openly questioning the survivability of JC Penney. Lurid headlines such as this one abound in press. Will Ashworth opines in the linked article:

When Johnson took over from Mike Ullman last February, the company had weaknesses, but it wasn’t yet on the brink of extinction. Now, though, the American retail icon is in serious trouble … so much so it’s conceivable that JCPenney could be on the same well-known downward path Woolworth’s traveled 15 years ago.

Retail companies around the world are going through a period of intense change. Old models are rapidly dying down and new models are emerging. As discussed in my book THE 5-STAR BUSINESS NETWORKS, newer business models are emerging to replace the redundant models. The pace of change is accelerating at the same time. Again Will Ashworth provides some historical context in the same article:

 

For those unaware, the F.W. Woolworth Company was the original five-and-dime store founded in 1879 by Frank Woolworth. By the time Sam Walton was opening his version of the discount store — Walmart (NYSE:WMT) — in 1962, Woolworth’s had more than 2,000 stores and was a corporate behemoth.

Unfortunately, expansion in the 1950s and 1960s was its ultimately undoing, adding stores but not profits. In 1997, Roger Farah, the current president of Ralph Lauren (NYSE:RL), was the top man at Woolworth’s and the one to pull the plug on the 400 stores that still existed. A year later, it changed its name to Venator Group, and three years after that to Foot Locker(NYSE:FL), its strongest brand.

Walmart, meanwhile, went from startup to replacing Woolworth in the Dow Jones Industrial Average.

It took Walmart more than two decades to replace F.W.Woolworth Company. Today, with the rapid uptake of online purchasing by the masses, the business model is again up for grab. Amazon doubled its revenue by $24 Billion in 3 years, and commands a PE multiple of more than 100. Walmart is nearly stagnant, hunting for growth in developing markets, and get a PE multiple in the teens. Do these statistics portend the things to come in near future? At least the first impression tells us that the market expects Amazon to be the new leader in a few years time.

However, there is another side to the story which is not yet fully explored. As the purchasing moves online, it also becomes increasingly specialized. Consumers buy from retailers who build relationships with them by providing knowledge and specialist information. While Amazon is fighting for margins around 1.5%, and bases its strategy around fast delivery – online specialty stores have proven that in return for product education, customers will pay handsomely and wait for the products longer. This extra margin allows online specialty stores to invest time in formalizing and digitizing their knowledge base, and provide more accurate customized answer to customer queries. For example, see this report from The Times of India which states the following:

“Despite the trend towards mass merchandising, we believe that niche merchants can hold their own very well. To do so, they must find ways to differentiate through high quality merchandise, deeper product catalogues or exceptional service in that category. Apparel and baby products, for instance, are categories where a specialist has several advantages over a generalist,” the report said. For instance, Amazon found it difficult to compete with Diapers.com and Zappos-acquiring both companies eventually.

Added to this is the fact that many online specialty stores are owned by passionate and highly knowledgeable people in the realm of their respective product range. This passion creates the advantage that large format online retailers may not be able to match, and leads us to ask where does the future of online retailers (or retailers in general) lie? 

Any takers to that question?