Cadillac was once so strong as a brand that it became an adjective for best-in-class. Today it has a brand problem. Too many of its drivers are old and will soon age out of the car-buying market. Over recent decades, German brands have trumped Cadillac on prestige in the traditional engine market, and Tesla is winning the electric market. (Audi is fast following into electric cars.) Cadillac tried a reboot in the past, through advertising and moving the headquarters to Soho, NYC. However, that did little in an age of transparency when actions define a brand, not spin. The top-of-the-line GM brand began a more genuine reboot in 2018 when it moved headquarters back to its roots, Detroit, and appointed a veteran engineer as president of the brand. The brand is building for the long term, according to a recent NYT article, but let…
A prominent group of CEOs just signed up for a much harder job
The Business Roundtable includes CEOs from some of the most recognizable large companies in the US, such as Chase, GM, Johnson & Johnson, and Apple. Think of it as the bluest chips of the Blue Chip listings. Collectively these companies employ over 15 million people, buy almost half a trillion dollars annually from small and medium-sized businesses, and donate eight billion dollars to charities. Frankly, if politicians followed their advice, we’d have a lot more innovation and infrastructure in our nation. At long last, the Business Roundtable CEOs have outlined – in a policy position – a radical change in the stated intent of a corporation and its leadership. The new direction: that the purpose of a corporation is not to maximize shareholder return but rather to pursue a fundamental commitment to all stakeholders. The stated policy places employees, suppliers, and communities…
Customer-centricity may lead you astray
Fed Ex recently dropped Amazon, the #1 e-commerce retailer, as a customer. Shocking, perhaps. Foolish? Not in the least bit. An era of “customer-centricity,” “customer experience,” and, “the customer can do no wrong” has led many leadership teams astray. They have forgotten that not all customers matter and some customers are not even worth keeping. FedEx’s move to drop Amazon was smart for several reasons. First, it was dropping a customer who likely demanded extra attention for under-market margins. Second, Amazon is investing to become independent of FedEx. Third, the move placed some stones in Amazon’s path forward. Finally, the step allows … or maybe forces … Fed Ex to focus on serving other e-commerce companies better to replace the lost revenue. Since Amazon’s business represented less than 2% of Fed Ex’s revenue, exiting Amazon was not that painful. But the move would…
Define your niche to create a winning business model
Competition is a drag on earnings. Darn, but welcome to life. The key to success comes from reducing or eliminating competition legally. Some companies eliminate competition by being the very lowest cost to meet requirements to be considered by a customer group. High-end bed linen and mattresses are pursuing this strategy with a direct-to-consumer business model, displacing high-end brands sold through retail stores. An approach beyond competing on price is to offer something no one else can do as well. You may be more expensive, but you are worth it. Think of a plastic surgeon with the best reputation in a city. Build loyalty with the customer base you target and then get them to buy more things from you. Independent bookstores have taken this approach in light of Amazon, with Barnes and Noble stuck in an unattractive middle, especially as Amazon opens…
Recession questions: Time for scenario-based planning
The current economic expansion, albeit slower than many in the past, has earned a record in longevity. That fact alone does not indicate an imminent recession. But it is worth asking, “What could be next?” Economic trends can foretell a continued expansion or downturn, so it’s essential to monitor them. An excellent July 29, 2019, WSJ article looks at such trends and concludes storms are on the horizon. Low interest rates are keeping the stock market and consumer economy chugging along, but early indicators like housing and business investment have turned down. Remember that economists, unlike umpires, make their calls well after the fact. Those downturn signals are troublesome, especially when coupled with a slowdown in Gross Domestic Product growth (2018 versus 2017 based on revised numbers and 2019: Q2 versus 2019: Q1). The expected drop in interest rates and continued growth in federal…