Archive for category Company

CE#490: P&G To Lay Off 1,600 After Discovering It’s Free To Advertise On Facebook

Reality appears to have finally arrived at Procter & Gamble, the world’s largest marketer, whose $10 billion annual ad budget has hurt the company’s margins.

P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise. More interestingly, CEO Robert McDonald finally seems to have woken up to the fact that he cannot keep increasing P&G’s ad budget forever, regardless of what happens to its sales.

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CE#484: What Happened To Kodak’s Moment? (Techcrunch)

We all had them: times you reached for a camera to stop life for a second, to grab a memory. For decades, Kodak was the rock solid standard in photography and as the 131-year old company files for Chapter 11 bankruptcy, “Kodak moments” may be all that’s left of what was once one of the most powerful companies in the world. Kodak can’t compete let alone survive in this new world. The only thing keeping them alive is a trove of 11,000 patents, and even those don’t seem to be piquing anyone’s interest.

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From household name to also-ran in a few years. This isn’t a story of a stubborn buggy-whip manufacturer going out of business for refusing to change. This is a carriage maker making a seemingly successful transition to the automobile and then, just as quickly, failing catastrophically.

So what happened?

Click.

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CE#483: Kodak and the Brutal Difficulty of Transformation (HBR Blog Network)

2012 has not gotten off to a great start for Eastman Kodak. Three of the company’s directors quit near the end of last year, and word recently emerged that the company was on the brink of filing for Chapter 11 bankruptcy protection.

The easy narrative is that Kodak is a classic case of a company blind to the disruptive changes in its marketplace. Like many easy narratives, this one is not quite right.

In the 20th century, Kodak was truly one of the world’s powerhouses. Its rise to prominence began when it launched its affordable Brownie camera in 1900. In the decades that followed Kodak established a dominant position in the lucrative film business, with its “you push a button, we do the rest” slogan demonstrating its commitment to making photography accessible to the masses.

Of course, being a dominant film provider became increasingly irrelevant in light of recent technological shifts. Today people turn to digital cameras embedded in their mobile phones, share pictures over the Internet, and eschew prints altogether.

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CE#414: Amazon: The Walmart of the web (The Economist)

A COUPLE of years after it launched its website in 1995, Amazon was the subject of an unflattering report entitled “Amazon.Toast”. The pundit who penned it predicted that the fledgling online bookseller would soon be crushed by Barnes & Noble (B&N), a book-retailing behemoth which had just launched its own site.

Far from being crushed, Amazon is doing the crushing. Borders, a once-mighty book chain, was flattened this year. B&N looks like a frightened capybara running from a fierce Brazilian she-warrior. Amazon is now one of the web’s most successful e-tailers. Even Apple is feeling the heat.

On September 28th Jeff Bezos, Amazon’s boss, unveiled a tablet computer called the Kindle Fire. It will compete with gadgets such as B&N’s Nook Color tablet and Apple’s iPad. The new Amazon tablet, which has a somewhat smaller screen than the iPad and only offers Wi-Fi connectivity, is likely to be just the first salvo in a titanic battle.

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CE#371: Google’s Six-Front War (Techcrunch)

Google must battle on at least six fronts simultaneously.

The Browser Front: Users have a choice between Internet Explorer (Microsoft), Firefox(Mozilla), Safari (Apple), and Google’s offering, Chrome. The speculation is that Facebook is interested in a browser, too, since Mozilla co-founder Blake Ross is an employee, but that hasn’t happened yet. More recently, the social browser RockMelt has captured some peoples’ interests, and last week secured $30M in financing, adding Facebook board members Jim Breyer and Marc Andreessen to its board. Andreessen obviously knows a thing or two about browsers. Though most browsers enable users to power their search by Google as an option, Googe’s Chrome offering isn’t the lead browser by market share, and not even in second place.

The Mobile Front: Apple’s iOS took the mobile world by storm in 2007 with the first iPhone. Then Google’s Android operating system roared alongside it, turning into a freight train of downloads, as Bill Gurley said, only recently to be slowed by Apple’s release of a phone with Verizon. While Android may have more installs, they don’t have the developer community to build killer apps because the Android marketplace (both for hardware and firmware) is highlyfragmented, whereas iOS is about symphonic convergence. All the along, there’s been ample speculation about whether Facebook was building its own mobile phone device, or as the company has publicly hinted, how it would integrate social layers into different mobile operating systems and platforms.

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CE#363: Lessons in Longevity, From I.B.M. (NYT)

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AS it turned 100 last week, I.B.M. was looking remarkably spry. Consumer technologies get all the attention these days, but the company has quietly thrived by selling to corporations and governments. Profits are strong, its portfolio of products and services looks robust, and its shares are near a record high. I.B.M.’s stock-market value passedGoogle’s earlier this year. Not bad for a corporate centenarian.

Yet, not so long ago, I.B.M.’s corporate survival was at stake. In the early 1990s, it nearly ran out of money. Its mainframe business was reeling under pressure from the lower-cost technology of personal computing.

New leadership was brought in, and thousands of workers were laid off. It was part of the company’s painful journey to what might be called “post-monopoly prosperity” — that is, a new path to corporate success once a dominant product is no longer the turbocharged engine of growth and profit it once was.

“I.B.M. faced the challenge that all great companies do sooner or later — they dominate, they lose it, and then they re-create themselves or not,” observes George F. Colony, the chief executive of Forrester Research.

I.B.M. met the challenge, moved beyond the mainframe and built a business increasingly based on software and services. So as it celebrates a milestone, the company holds lessons for others.

Evolving beyond past success is a daunting task for companies in all industries. But that problem is magnified in the technology arena, where companies can quickly rise to rule a market, seemingly invincible, until a shift in the technological landscape opens the door to a new generation of corporate dynamos.

That is certainly the test that Microsoft is struggling with today, as it seeks growth beyond its lucrative stronghold in personal computer software. If they are to prosper for the long haul, Google and Apple, too, must reach beyond their dominant businesses. Each of these companies, in its way, is trying.

So, then, what broader insights are to be drawn from the I.B.M. experience?

One central message, according to industry experts, is this: Don’t walk away from your past. Build on it. The crucial building blocks, they say, are skills, technology and marketing assets that can be transferred or modified to pursue new opportunities. Those are a company’s core assets, they say, far more so than any particular product or service.

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CE#353: Why Groupon Is Poised For Collapse (Techcrunch)

Imagine you’re a small business owner. You have to choose between two propositions:

  1. You can pay $62,500 for marketing. You’ll get a whole lot of customers coming through your door. No guarantees if they will ever come back, but they’ll come once.
  2. I’ll pay you $21,000. You get $7,000 in about 5 days, another $7,000 in 30 days and the remainder in 60 days. In exchange, you’ll give my customers cheap products for the next year.

I’ve been working on local for a long time and I know it’s hard to get small businesses to spend money on advertising. Really hard. Even getting $200 a month ($2,400 a year) is a high hurdle to meet.

There’s no way a business will sign up for #1. Most merchants would laugh you out of the store if you asked for $60,000.

Except they are. In droves.

Although they sound completely different, #1 and #2 are really the same—it’s the Groupon business model.

Businesses are being sold incredibly expensive advertising campaigns that are disguised as “no risk” ways to acquire new customers. In reality, there’s a lot of risk. With a newspaper ad, the maximum you can lose is the amount you paid for the ad. With Groupon, your potential losses can increase with every Groupon customer who walks through the door and put the existence of your business at risk.

Groupon is not an Internet marketing business so much as it is the equivalent of a loan sharking business. The $21,000 that the business in this example gets for running a Groupon is essentially a very, very expensive loan.  They get the cash up front, but pay for it with deep discounts over time.  (This post applies to Groupon operations in the United States and Canada; it’s different in other parts of the world.)

In many cases, running a Groupon can be a terrible financial decision for merchants. Groupon’s financials also raise questions about its ongoing viability. Buying Groupon stock could be as bad a deal for investors as running a Groupon offer is for merchants.  This is my opinion, but I have some facts to back it up.

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