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Unexpected Connections #35: Tabloid Sales and CellPhones

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To keep my edge as an expert on strategic innovation, helping clients turn problems into opportunities, I'm always looking out for key trends and unexpected (or unusual) connections / correlations in the marketplace.

Recently, while stuck in a checkout line at the grocery store, I noticed that I (and others) were using our phones. In the past, people waiting in line used to read the tabloids. It struck me that, now that cell phones are widely available, tabloid sales must be suffering.

I did some research when I got back, and found out that this was indeed the case. Sales were not just down for tabloids, but also for the other merchandise (like mail clippers, candy, mini-flashlights, etc.) that stores stick in the checkout aisles.

Companies need to think about how the accelerating changes around us affect their sales, not just through direct competition, but through indirect means–such as competing for our attention, which is getting more precious as it becomes less and less.

 

Why Your Team Isn’t Creative

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As a frequent flyer I spend a considerable amount of time on airplanes. Although many of us take flight for granted (how a Boeing 787 even gets off the ground is a miracle to me!), every successful flight requires a team effort. A great customer experience starts upon arrival at the gate and continues until exiting the plane at the final destination; requiring no less than dozens if not hundreds of people to make the experience a success.

During a recent flight back to Toronto I was unable to obtain a seat in first class so I politely asked the stewardess if I could have a pillow for my lower back (as I could see extra pillows in the overhead compartment at the front of the plane).

“I’m sorry sir, those are saved for our first class passengers – it’s company policy.”

Always one to pick my battles I let this go, or at least I’m still trying to…

The question I’d like you to consider is whether an abundance of policies and procedures are a good thing. On one hand they do promote consistency and safety, but there are some downfalls to consider.
 
In this week’s video I share how policy and procedures actually diminish creativity, the impacts this can have on your team and specifically what you can do to overcome this challenge to inspire team members to think outside the box.
 
Watch the VIDEO here: https://youtu.be/zO2jnCxdvEY

The Four Seasons' Palm Beach Resort: Real-life Example of Superb Customer Service During Hurricane Matthew

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Last week, I was in Palm Beach, at the Four Seasons, for a conference.  I had attended the conference last October, so I knew how great the Four Seasons was, in terms of room and service.

However, this year's conference turned into an adventure. 

Because of Hurricane Matthew, our conference was cancelled at noon of the first day, after the hotel made the decision to close for the safety of guests and staff.

At that point, we were all in a mad scramble to change flights, and find some way home.  Airlines' websites were unresponsive, their hotlines putting us on hold for hours, and flights being cancelled left and right.

It was at this point, under adversity, where the Palm Beach Four Seasons' staff, especially the concierges, really shined.  They calmly worked with us for hours, helping us make arrangements.

When, later in the evening, Palm Beach ordered a mandatory evacuation, the Four Seasons booked all the remaining guests into the Hilton by the airport, and made the transfer seamless.

I, for one, can't wait for next October's conference, and a return.

I've mentioned in previous blog posts that crisis and problems, even though we do our best to avoid them and hope they never happen,  do occur, and they provide the real opportunity for the customer-oriented innovative companies to distinguish themselves from the pack.

West Elm and Innovation: From Furniture to Boutique Hotels

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I read an interesting article in the Wall Street Journal that furniture retailer West Elm is planning, along with a hospitality management company called DDK, to create a chain of boutique hotels.

This is a cool example of innovation.

What does West Elm know about running hotels?  That is probably why they partnered with DDK. They will probably handle the operational details.  West Elm, however, brings expertise in furniture and design which, if you think about it, is valuable because a hotel room is like a home away from home.

Boutique hotels are in demand because frequent travelers are getting tired of cookie-cutter hotel rooms.

West Elm can use its products to create hotel rooms that stand out in comfort and style.

The other great thing, from West Elm's perspective,  is the synergy created.  Not only can they make money from renting out rooms but hotel guests will also be able to order their room's furnishings online.

Thus, the hotel will not only be an independent source of revenue, but also another way to promote their products.

So what prompted West Elm to be innovative and start hotels?

It turned out that West Elm's leadership was smart enough to realize that opening more stores would not be a path to growth.  Instead, it would cause cannibalization of sales.

Chicago Cubs Economics: Tribune, Taxes, and Tivo

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Just before the Great Recession, when Sam Zell led the ultimately doomed leveraged buyout of the Chicago Tribune, he and his fellow investors planned to sell the Chicago Cubs to help pay down debt.

In 2009, they found a buyer for the Cubs – the Ricketts family. They bought the team for $845 million.  Since the Tribune had bought the Cubs in 1981 for $20.5 million, they were on the hook for a large tax bill.  They tried to avoid paying it by using a leveraged partnership instead of an outright sale.

Fast forward seven years to today.  The Cubs are now worth $2.2 billion and the favorite to win the World Series.

I wonder if the Tribune wishes it held on?

While the Cubs made the Tribune $824.5 million over 28 years of ownership, the Ricketts family made $1.355 billion over just 7 years of ownership.  To add insult to injury, the IRS is still pursuing them for $225 million in back taxes.  The IRS considers the leveraged partnership to be a disguised sale.

Why did the Cubs explode in value during the last 7 years?  The progress on the field had little to do with it. 

The key is Tivo. 

Tivo pioneered the concept of fast-forwarding live TV, time-shifting, and binge watching.  Commercial TV has lost much of its value to advertisers.  The one exception is sports – people will still view them live, without fast forwarding.

Out of all sports, baseball is the one that has the most broadcasts during a season.  TV networks and channels started bidding to win the right to telecast baseball, and the TV money exploded, along with team values.

The Chicago Cubs have always been one of the most watched teams, and are in one of the most TV-friendly markets in the country.  As a result, their economic value was especially affected.
 

Moleskine Knows What Business It's In: How Syntegra Capital Made a 19-Times Return Through Paper Luxury

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 You've probably heard of Moleskines – the fancy hardcover notebooks introduced in France in the 1980's. In recent years, they have become popular with artists, writers, and millennials.


Millennials? That isn't a typo.  When Syntegra Capital bought a majority stake in Moleskine in 2006, some thought it was a risky investment because of the threat from digital technology.

Instead, as mentioned in a recent Wall Street Journal article, it has become trendy to carry both a Moleskine and an iPhone.  The notebooks have been such a must-have that Syntegra, currently in the process of selling Moleskine, will end up enjoying a 19 fold return on their investment in just 10 years.

It probably isn't a co-incidence that, after buying Moleskine, Syntegra hired a new CEO from the luxury jewelry company Bulgari.

Syntegra succeeded because, just as an iPhone isn't just a phone, they considered a Moleskine to be a luxury item – not simply a commodity notebook. 

Credit Card Fees: Businesses Should Reward Customers, Not Punish Them

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There was a recent article in the Wall Street Journal about the Supreme Court agreeing to hear a case about whether local governments can ban merchants from charging fees or surcharges to customers who use credit cards.

This debate is also occurring internationally.  For example, according to the Journal article, the European Union is banning credit card surcharges next year because they say that retailers can't discriminate based on payment method.

However, I think that focusing on the legal issues is missing the larger picture.  From a customer service and innovation perspective, charging customers for using credit cards is a mistake.

Credit and debit payments are the future – whether they are done with "cards", chips, watches, or phones.  Charging an extra fee for the dominate and most convenient payment format will simply drive customers to the competition.

What are some alternatives for merchants?

1. Accept the fee as a cost of business.  Instead, focus your efforts on encouraging your customers to spend more money per transaction.

2. Raise your fees across the board, and offer a discount if customers pay with cash.

3. Offer some other perk (besides discounting) if customers pay with cash.

Never think of punishing a customer, especially when he is actually trying to buy something from you.  Buying should always be a rewarding and hassle-free experience.

My Breakfast Talk: Turning A Potential Negative into a Positive

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This morning, I gave a breakfast talk at my local chamber of commerce. 

It went great, but it could have been in crisis before it started!

Last night, they sent an email saying that the normal conference room they use for talks (which was large, and had an overhead projector / screen for Powerpoint) was severely damaged by a water leak, so they had to move the event to a much smaller conference room.

It meant no projector and, instead of everyone seated comfortably in a large room, they were crammed tightly around a table that took up most of a tiny room.

Instead of panicking, I turned the situation into a strength. I didn't use Powerpoint. Instead, I just talking with them.

I had access to the backgrounds of the business owners, so I used them in my examples. They stopped and paid attention.

It also started a discussion. I ended up only talking for 1/2 the time, and they talked with each other, on my topic (strategic innovation), the info I gave, and their situations.

At the end, they were energized, and I had at least one person interested in doing business with me. A lawyer with an independent practice said he had a corporation as a client who could use my help.

Key Performance Indicators (KPIs) For Innovation

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Most of the common KPIs that executives typically look at are good for measuring the financial performance of their organizations.

But, what are some useful KPIs for measuring innovation?

Here are 2 of them:

1. What percentage (%) of revenue / profits are derived from products / services that are less than X days / months old?

2. Your average sales price (per unit)?

You want both of these metrics to be increasing.

The first KPI helps you track how successful your organization is at creating new products and services that your customers actually value and want to buy.

The second KPI will tell you if your pricing power is increasing (By making it per unit, you discount the effects of customers buying in greater volume).  An increasing average unit price indicates that your customers are receiving (and paying for) increased value, and don't regard your products  / services as a commodity.

WHAT PROCTOR AND GAMBLE KNOWS THAT YOU DON'T

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Making a phone call

Think for a moment about the best idea you’ve ever come up with. Do you have the image in your mind? Now, let me ask you a question. Did that idea come solely from the depths of your mind, or was it prompted by something that you noticed or experienced around you? My guess would be the later.

So shift this thinking into your business today. If you are like the hundreds of CEOs and Executives I’ve encountered during the past couple of years, then your best products or services were the brainchild of a collaboration of sorts between internal company ideas and knowledge, combined with external solutions and creativity. This is how a great product or service is brought into the marketplace. If you’ve studied the history of Apple for example, you’d know that Steve Jobs borrowed and pilfered ideas from Xerox PARC to create the Macintosh computer after stumbling across the “GUI” during a tour.

Here’s the thing. The ideas that will spark your next new innovative product or service are waiting for you, but to find them you must interact with the marketplace. This means that you have to call-off the gatekeepers and actually take calls from new vendors and suppliers who want to pitch you their idea.

I know this seems like a complete waste of time, but if you want to continuously bring new products and ideas to the market, this is the only way to successfully do so quickly.

Don’t think of this as a burden on your time however. Companies like Proctor and Gamble have done a great job at presenting to the market what they are looking for. Take a moment to look up their “Connect + Develop” program, an online platform that solicits the market for any ideas or products that might be the next big thing in the P&G family. It doesn’t matter whether you are an inventor in your garage, or a multi-national corporation. Most importantly, the system works. I’ve met several CEOs who have pursued this route to great success.

Let me leave you with something to ponder. To be first in your market (and in other markets) means you have to solicit the market for new ideas and opportunities. What are you going to do today that will open the flood gates to your next big idea? You can’t go it alone, so call off the dogs (your gate keepers) and start to educate the market on where you are trying to take your business and more specifically how they can help.

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