Archive for September, 2009

Co-opetition

September 24th

There is a great deal written about alliances among competitors in the increasingly complicated marketplace of the post Internet world. The mailing and delivery industry is no exception.

In fact this summer a former Senior Vice President with the Postal Service and a Vice President from UPS published a paper together congratulating themselves on their collaboration.

Today comes word from the New York Times of a new UPS service, an experiment, to be sure, but a new marketing service direct to the door. (From the New York Times, reported by Postcom.org – see below.)

The description of the service is a milestone of its kind as the UPS innovative product manager explained that the new service will be different from what you would receive from the postal service because (the New York Times adds) you would not feel that you were receiving “junk.” No more Mr. Niceguy?

September 24, 2009
Delivering Something Extra
By STUART ELLIOTT
SINCE 1907, United Parcel Service has been delivering packages ordered by consumers. Next week, the company plans to deliver packages they have not ordered, in a test of an effort to expand into direct marketing.
Beginning on Monday, U.P.S. will experiment in five major markets with a service it calls Direct to Door, giving advertisers and retailers a chance to provide offers and product samples to U.P.S. customers. The marketing materials will come inside small boxes labeled Direct to Door Paks, and will be delivered to customers along with merchandise they actually ordered.
The test, to run through Oct. 2, is intended to gauge whether there is interest in having U.P.S. serve as an alternative to marketing mail delivered by the United States Postal Service or by companies like Valpak.
If Direct to Door goes forward, the added revenue could help United Parcel offset declines in demand for its mainstay package delivery service since therecession started.
In July, U.P.S. reported its sixth consecutive quarter of lower package volume in this country. The decline in the second quarter was 4.6 percent compared with the period a year earlier, which Bloomberg News described as the worst result since United Parcel went public in 1999.
“I wouldn’t say it was developed as a result of the economy,” said Lisa Lynn, marketing director for new-product research and development at United Parcel in Atlanta.
Rather, she said, it stems from “some opportunity we saw at the heart of what we do every day working off our delivery network.”

Read more at the New York Times

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Net Neutrality, Time to Take Sides

September 18th

In the modern equivalent of a story moving on the wire after the close of the stock market, The Wall Street Journal reported that the new FCC Chairman, Julius Genachowski, is expected to outline proposals on Monday to prevent Internet providers from selectively blocking or slowing Web traffic. In Washington buzzword speak this is a “net neutrality” bombshell.

This is one of those issues where someone throws a pebble into a clear pool and the ripples expand forever. You have to decide whether you are going to think about this in terms of this month (Asian nations joining China in limiting internet access), this year (Internet companies agreeing to make it possible for China to limit Internet use and even more insidiously hand over the list of users) or this decade or two.

There was the battle between the phone and the cable companies over who would control network email services (before Telecom Reform in 1996) and then there was the fencing that was taking place over data traffic versus analogue voice before Judge Harold Green had broken up AT&T (1984) or …

Reading the story in the Wall Street Journal can make it tough to figure out who the good guys are. Are the good guys the ones who fight heavy-handed network blockers? Or are they the ones who are fighting government intrusion in the private marketplace? Are the good guys protecting us from network slowdowns from mobile video file sharing? It can give you a headache.

Balancing equities and regulating bandwidth are of course what governments do. So it would seem that with due concern for the technical issues involved, it should be hard to vote against the opportunities that serious net neutrality would create. No doubt the companies involved have some issues here. But the extraordinary social value that gets created when Internet services are allowed to innovate has been demonstrated. Net neutrality could be the next milestone.

Radical Transparency

September 10th

Daniel Goleman, the author of Emotional Intelligence and other related works, has written a new book Ecological Intelligence: How Knowing the Hidden Impacts of What We Buy Can Change Everything. He wrote about his ideas in a Harvard Business Review blog (“Winning in an Age of Radical Transparency” May 27) on the dynamics of the competitive marketplace in coming years.   Given the new transparency that is made possible by technology Goleman argues, everything will change.

The theory, Goleman notes, is that the more transparent a market the healthier it will be.  Giving customers the benefits of social welfare, holding back prices, enforcing consumer protections with competitive services and growing a more concerned and aware consumer constituency for the products that they purchase – all of these are the benefits of the open market and information symmetry.

In seeking to remedy the ills that lead to the financial crisis, there has been a great deal of discussions of using transparency to facilitate the self-regulation that was missing leading to the market crash.  When President Obama took office, he asserted that his administration would use transparency to improve the ethics of government and the performance of programs.  Government-wide there is more access to the inner workings of federal program expenditures and acquisition in ways that has never been possible in the past.

In his new book, Goleman explores the implication for consumer markets of the parallel between transparency in financial regulation and revealing the ecological impacts of consumer goods.  “There are signs of a trend toward greater marketplace openness about the environmental and health consequences of products.”  He notes that the launch this year of Goodguide.com is a significant departure in giving consumers inside information.

Goleman envisions a world of radical transparency in which Life Cycle Assessments are not only available to consumers but are required of future companies.   As secrecy is rendered ineffective by such trends as the obligation to publish the contents of the product, the competitive advantage that could have been gained from surprise will be lost.  Competitors will find it far easier to benchmark the high performing enterprise in their markets.  They can accelerate their movement to the high performance frontier and take away any performance related competitive advantages that their competitors might have enjoyed.

Quoting from Andy Grove’s book, Only Paranoids Survive Goleman notes “When Intel faced its first Valley of Death — the drying up of its market for chips — the company survived because it had a ready alternative: a small microprocessor business it had built on the side.”  The examples of Intel suggest a lesson for companies today, “companies would be prudent to have a strategy ready for an era of radical transparency.” Goleman argues.   “Remember, revolutions that seemed impossible will, in retrospect, seem inevitable.”

California Dreaming

September 9th

Those of us who have spent our lives in the Boston-Washington corridor had learned to look to California for coming trends. At least this was true until the recent budget crises began to throw into question whether California itself was a sustainable venture.

But a report by the (CPUC) certainly reestablishes the state’s claim to offering insights about the future, even if it doesn’t yet nail the case. The CPUC announces that it has approved contracts for 8,300 Megawatts of power to be generated by renewable energy sources. And there is more in the pipeline.

Most of California electric generation’s renewable energy today comes from wind, but in the future solar is expected to surpass wind as a green energy source. Solar thermal and solar photovoltaic sources are playing a larger role in recent bids on power generation.

In 2002 California passed a law requiring Renewable Portfolio Standards for the state’s utilities. The RPS law requires that they get 20% of their power from renewable sources by 2010 and by 2013 it has to be up and running on the grid.

What makes the CPUC’s report huge is that it shows that the utilities are on track to meet the standards.

The Governor upped the ante last November by requiring that the RPS be 33% by 2020. And this is where the debate is today – can 33% be achieved? Can the utilities afford the $115 billion to do it? Can the state meet both its environmental and energy goals? Will the infrastructure be there to make it possible?

All of these questions are important, realistic questions. But when the debate is whether 33% is achievable now that 20% appears to be in hand, this is no longer a dreamy kind of a conversation. RPS will play a large role in the coming Climate Change debate. California now tends to make it seem as though RPS is shifting gears from a philosophical debate to an energy policy and engineering one.

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Markings: The Emerging Networked Enterprise

September 3rd

A global survey of business use of Web 2.0 by McKinsey and Co. (September 09 McKinsey Quarterly) has offered new insight into the use of the Internet social media (How Companies are Benefiting from Web 2.0, McKinsey Global Survey). At this point in the evolution of the Internet this new survey gives powerful impetus to the argument that the new networked, collaborative marketplace is creating a platform for innovation – at least for those who are participating.

In the past several years there has been an explosion in the popularity of social media, what are often called Web 2.0 technologies. Wikipedia explains that Web 2.0  is “web development and web design that refers to interoperability, user centered design and collaboration” on the world wide web.” The technology of web 2.0 – wikis, blogs, “folksonomies” – and 2.0 sites allows the users to change the content as opposed to the interactive sites of web 1.0 which allow only the passive viewing of information that is provided.

The phrase 2.0 is attributed to Tim O’Reilly and a 2004 conference that he hosted in which Internet experts gathered to survey the wreckage of the dot com crash. What they observed was that even though the Internet bubble and its hyperbolic rhetoric (Web 1.0) following Netscape going public in 1995 had clearly crashed, there were many new models that showed promise. Indeed, the users were changing the way in which they used the Internet.

One family of new models that has offered strong hope for the new media has been called Web 2.0.   From Wikipedia, to eBay to YouTube to Google Maps, there have been multiple examples of new web applications in which the users create content. Simply to be able to accelerate the process of reaching out and obtaining new ideas seemed to drive innovation. Many early spotters of new trends such as, the Aspen Institute studied the potential for the use of social media to “co-create value.”

There has been interest in the business community in the capacity of Web 2.0 – interactive social media – to add value in a commercial context. Books such as Groundswell have documented the multiple personalities of on-line information consumers and interactors and contributed to understanding that there are many ways in which individuals consume information on-line. The growing popularity of social media has fostered a mini-industry of comment.

But is it real? Have the Web 2.0 technologies proven to be worth the overhead?  So what did McKinsey find?

➢ Internally, within companies, Web 2.0 tools increased the speed of access to knowledge (68% of the respondents with an average of 30%) and reduced communications costs (54%). In customer facing uses, a majority reported increased marketing effectiveness (52%) and customer satisfaction (43%). And in working with business partners and suppliers there was also an increased access to knowledge and access to experts.

➢ Equally powerful there are reports of faster time to market (25%) and development of innovation (25%). These reports of internal improvements were essentially matched by applications related to the customer and the business partners.

➢ Perhaps it should not be surprising that in considering the applications that are gaining prominence have been the ones that illustrate the revolution in communications – the sharing of video (48%), blogs (47, 51 and 51% – internal, marketing and collaborative applications), RSS (syndication) and social media. In general half of the respondents were reporting at least one instance of seeing an impact from the 2.0 media and a quarter were reporting measurable benefits.

➢ The survey’s results would seem to set aside the discussion of whether or not the social media will find an application in the commercial marketplace. Clearly for many businesses throughout the world there is a significant ongoing development of interactive technologies for internal communications, enhanced marketing communications and communications with partners and suppliers.

➢ Yet there were a third of the companies in the survey who have yet to find any impact from the social media either because they have not yet tried it or found the help needed to make it effective.

In looking across the technologies that were included in McKinsey’s global survey, there would appear to be three categories that are drawing interest:

• Communications technologies: video sharing, blogs, RSS (real simple syndication), microbloggimg

• User generation of content: wikis, podcasts, rating, tagging, and P2P (peer to peer), and

• Analysis or processing of content: mashups (where multiple streams of data are combined in a single tool).

Almost in this sequence the survey respondents reported their observation of at least one instance in which value was created or where they found measurable value through the use of 2.0 technologies.

In sum, and perhaps most interestingly, McKinsey found the emergence of a new corporate model, a networked enterprise, in which these advanced communications technologies were being used to enhance communications within functions and across the enterprise and were then being built into interaction with customers and suppliers/partners.  Expect the next reports to be on the cost effectiveness and productivity of the networked enterprise (results will be mixed) and on the competitive success of the new form (they will be the ones who prevail in their marketplace, often because of their innovative successes.)

The Sound of the Falls

September 2nd

In an ongoing tableau of changes taking place at the center of the U.S. economy, the following notices appeared in the trade press that covers the mailing and delivery industries, postcom.org:

  • Downsizing the workforce.  “In the wake of mounting financial losses, the U.S. Postal Service has offered 30,000 employees financial incentive to retire by the end of this fiscal year. The USPS has targeted two of its major unions, the American Postal Workers Union (APWU) and the National Postal Mail Handlers Union (NPMHU) to accelerate reduction of employees. The majority of employees eligible for the incentive work in mail processing facilities.”
  • Reducing the facility footprint.  “The U.S. Postal Service has finally released its Facilities Plan that it submitted to Congress on June 19, 2008 in accordance with the Postal Accountability and Enhancement Act (PAEA) section 302. The 51-page document lays out what the Postal Service is looking to do in the near future to continue cost cutting and matching its resources to revenue.”
  • Anticipating the policy debate to come.  American Postal Workers Union President William Burrus talks with his members about the challenges and the future of the U.S. Postal Service.  “In his thought provoking piece, APWU President William Burrus summarized the challenge facing the Postal Service and its employees succinctly…as Congress rethinks the business model for the Postal Service, the union President asks…”Is the Postal Service’s business still a governmental function?”
  • Meanwhile the Postal Service and its customers discuss service cuts…”The U.S. Postal Service in conjunction with the Mailer’s Technical Advisory Committee (MTAC) has issued an industry survey regarding 5-day delivery…

In the meantime, in the September Union Newsletter of the American Postal Workers Union contains the following call (unsigned):

“I believe that APWU members should join with other groups and unions that are confronting corporate power. There is a need for education and communication to understand our class interest, not only to enlighten and motivate current members, but to also broaden our base by bringing in new activists.

The Postal Service is suffering from a financial hardship created in part by modern technology. With the use of faxes, e-mail, the Internet, and teleconferencing, there has been a decrease in mail volume. But the Postal Service is also suffering from the failed economy and failed business models.

The result has been the excessing of postal employees at installations all over the country, with jobs continuously being lost or at risk of being eliminated. If the “no-layoff clause” ceases to exist in our next collective bargaining agreement, postal workers would be just as susceptible to losing their jobs in the future as other workers are today.

The time to become alarmed about our welfare as workers is not after a catastrophic event, but before it happens. Our concern, however, should be not just for our jobs and our potential loss of benefits, but for all working-class people in this country who are being denied the opportunity for a decent life.

The problems that we continue to face are numerous. Millions of Americans lack health insurance and have inadequate coverage for prescription medication; the child poverty rate is on the rise; there are serious deficiencies in our education system; and we have major environmental challenges.

America’s poor and its workers are losing the class war. The poor, minorities, immigrants, members of unions, progressives, and environmentalists must join in a national effort to challenge the corporate order and empower themselves so that they can control their own economic and political destinies.

Working-class men and women must unite. There has to be an unrelenting focus on breaking the iron grip that big corporations have on our country and our lives.

Wake up, postal workers! We have a class war on our hands whether we like it or not!”