Architects Express Concern Over Stimulus Plan
January 28th, 2009 | Posted by innovDriven by a need for speedy delivery and an overarching demand for energy-efficient buildings, federal facilities appear primed for a significant facelift in the near future, if proposed stimulus funds come through.
Within the stimulus package proposed last week by House Democrats, the U.S. General Services Administration (GSA) and Department of Defense-related facilities would be among the bill’s biggest beneficiaries. The current package calls for $7.7 billion for the GSA, including $6 billion for buildings with an emphasis on energy efficiency upgrades and $1 billion for border stations. Meanwhile, more than $10 billion could flow toward defense-related work, including medical facilities and troop housing.
Other significant federal funding proposals include $950 million for Veterans Administration facilities; $1.5 billion for university research facility construction under the National Institutes of Health (NIH); and $500 million for modernization of the NIH campus.
In keeping with President Obama’s call to emphasize green jobs and reduce federal energy use, the stimulus bill focuses on federal projects that have the greatest impact on energy efficiency and conservation. In recent years, the GSA has been pressured by mandates within the Energy Policy Act of 2005 and the Energy and Independence and Security Act of 2007 to quickly ramp up efforts to modernize its facilities with green systems.
Andrew Goldberg, senior director of federal relations with the American Institute of Architects, suggests that the GSA currently has at least $10 billion in work that is “ready-to-go.” “The [proposed package] is a good start,” Goldberg says, “but we don’t think it’s quite enough to meet the GSA’s needs.”
But the breadth of opportunities within any funding package could rely heavily on how legislators define “ready-to-go.” Some have promoted “shovel-ready” projects, which could be interpreted as work that is ready to go to construction. That scenario would leave many architects out of the picture.
Kevin Kampschroer, acting director of the GSA’s Office of Federal High-Performance Green Buildings, says that the agency has yet to compile a priority list of projects for a possible stimulus package but that he expects a broad mix of work to be available for the entire industry. “If we have a design that was done five years ago, before the Energy Policy Act of 2005 was passed, there would be work needed to bring it up to today’s expectations,” he says. “There are a lot of potential opportunities.”
But design industry advocates are calling for a plan that will ensure a broad-range of firms get a fair shake. In an effort to create jobs quickly, House Democrats proposed that much of the work in the stimulus package be let out in three to four months. Goldberg says the AIA is pushing for timelines of up to two years. “The fact is, GSA needs more time to plan these things out properly,” he emphasizes.
Procurement issues could emerge as a critical factor in determining who benefits. Many analysts suggest that traditional design-bid-build methods won’t work under the timelines outlined within the stimulus package. While projects that have been designed but not built might be able to move forward, it could be challenging to get new projects into design.
David Thompson, senior vice president at RTKL of Baltimore, said he expects federal agencies to leverage their emerging experience with design-build and construction-manager-at-risk models to deliver new work. “They can’t afford to go with conventional methods—that would delay things tremendously,” he says.
It’s a scenario that raises concerns among some architects. “We’re hopeful that ‘shovel-ready’ is reinterpreted to be ‘pencil-ready’,” says Steve McDowell, principal at the Kansas City-based design firm BNIM. “Everyone needs to remember that design and planning are part of the economy of building.”
Also at issue is the ability of government contracting agents to handle the heavy load of projects that could enter the pipeline. Larry Bory, vice president of federal government relations at HDR, says that recent slowdowns in workflow have led many agencies nationwide to lay off employees who handle plan reviews and contract negotiations. “There’s a finite amount of capacity in terms of how fast things can move,” he says. “[These agencies] are going to have to go to the industry to find program managers who can administer these contracts. I don’t see how they can do it on their own.”
With so much work primed to move through the pipeline at once, concerns loom over how small firms can benefit. “If the goal is long-term economic recovery, you need to nurture the smaller firms as much as you can,” Goldberg says.
While the prospect of billions in new federal buildings work represents a possible boon for firms nationwide, HDR’s Larry Bory notes that it is only one piece in the bigger picture. Congress is also poised to move forward on the 2009 appropriations bill that was stalled under President Bush and will debate a war supplemental this spring.
“If some projects don’t get into the stimulus package, you could see them come up again [in other legislation],” he says. “That’s where you’ll see a lot of the new construction projects. If you don’t get in on this wave, there will be a few more behind this that you could catch. It will be an amazing year in terms of funding programs.”
Laugh a Little, Innovate a Lot
January 27th, 2009 | Posted by innovHow much fun are you having at work these days? Let’s face it. Having fun isn’t as easy as it used to be, even for the most courageous, creative, and curious. Today just reading the headlines can turn an optimist into a fearful pessimist. The stories all seem to make you worry the very real possibility of losing your job.
Here is a critical insight for you. It is impossible for teams to innovate effectively while they are afraid. Impossible. Nothing kills great ideas like fear.
The good news is that fun is the antidote to fear. So if you are an innovation leader in a company that has become fearful, your people are on the road to failure unless you can change your culture. Cue the music, it’s time to infuse some fun into the workplace.
The place to start? With you.
Leaders know how to laugh at themselves. Show us a person that can stand up in front of his team and say, “Call me stupid, but I have no idea how to do this,” and we will show you a person with great leadership potential. Humble leaders with this trait create cultures that don’t take themselves too seriously; cultures willing to take risks; cultures capable of creating and supporting a greater number of ideas.
Why not start every day with a fun meeting? The daily huddle is simple practice that jump-starts the day and sets the stage for big ideas. Verne Harnish, “growth guy” and chief executive officer of Gazelles, which is an outsourced corporate university for midsize firms, taught us about the daily huddle. He developed the practice after studying and writing about John D. Rockefeller in his book The Rockefeller Habits.
Our company meets every day at 9 a.m. for no more than nine minutes. The agenda is simple. We share good news, bad news, and how well the company is doing. We use video to connect offices so everyone can attend the meeting. We encourage everyone to take a turn at running the huddle. Most importantly, we try to make them casual, transparent, and fun.
In the last year, our daily huddles have included baby pools—where everyone guesses when someone’s baby will be born; whether it will be a boy or girl and what it will weigh—costume contests, music trivia, engagement announcements, love poems, and ballads to welcome new employees. Yes, there is a lot of silliness, and not surprisingly, there is a lot of laughter. Much of the laughter has led to jokes, observations, and comments that have in turn led to ideas that have directly impacted our clients and company. (See www.bringchangehome.com, a viral marketing campaign with the humble goal of simply changing the world.)
Says Harnish, “Of all the practices we teach, the daily huddle is probably the simplest and most powerful way to infuse fun, accountability, and momentum. When companies embrace the huddle, we always see a positive impact to their bottom line and culture.”
He’s right. In fact, our clients actually like to come to these huddles. That should tell you something about the experience.
We first started noticing the liberating possibilities of linking fun and work in the early ’90s in a meeting with an extremely conservative, extremely large utility company. You have probably been in a similar room; think suits; think fear; think awkward silence.
During this “mandatory” brainstorm session, someone offered up an idea as a joke. “I know,” he said, tongue firmly in check. “We can send customers a bill that actually explains all the charges in plain English.” He meant it as a joke, of course. And one joke led to another. Then something amazing happened: At one point the most senior person in the room commented, “You know, that’s really not that bad of an idea. We could actually do that.” Eventually the idea that started as a joke wound up being seen by 40 million consumers as a new kind of phone bill—one that was simple to understand. Not only did consumers embrace the joke, so did other phone companies who have adopted the idea. How great is that?
There are two lessons here. First, it is not difficult to stage events that create this type of result, and leaders should be intentional about creating them. More important, we must learn to pay attention to laughter. Where there is laughter, there is an idea that holds people’s interest. The pleasant by-product of all this: Work becomes more enjoyable, and that, too, increases the chance that you will be able to innovate successfully. It turns out that if you are having fun, you are more creative.
Here is an equation for you to consider the next time you are wondering why nobody is coming up with big ideas: I = F + H.
Ideas equal fun plus humility on the part of leadership to support the idea—and embrace those ideas that may come out of it.
Retail Stocks: A Question of Survival
January 27th, 2009 | Posted by stockThree news items from the last 24 hours should heighten worries about any company that relies on consumer spending:
1. The consumer confidence index hit a record low of 37.7 in January, from 38.6 in December.
2. The National Retail Federation expects retail sales to decline 0.5% in 2009. But, in the first half of the year, sales are expected to plunge 2.5%. (The fourth quarter of 2009 — harder [impossible?] to forecast because it’s further away — is projected to salvage the year a bit with a 3.5% uptick in retail spending.)
3. American Express, which just reported dismal earnings, says U.S. card members spent an average of $2,758 in the fourth quarter, a whopping 13% decline from a year ago.
For the economy, the question of consumer confidence is crucial. “The lack of confidence across the nation is feeding the economic and financial crisis,” says Tony Crescenzi of Miller Tabak. “A recovery in confidence is crucial to ending the crisis.”
We may see an uptick in confidence in the weeks after the inauguration of Barack Obama, Crescenzi says. He notes “confidence levels are often correlated with presidential approval ratings,” which for Obama are quite high compared to Bush’s ratings.
But a new president alone is unlikely to erase the huge problems retailers face. For investors, the consumer discretionary sector is a minefield.
Many retailers (see: Circuit City) have already gone bankrupt. And conditions are obviously getting worse.
Retail companies might seek a buyer who can save them from Circuit City-type liquidation. But investment bankers I spoke to yesterday (for a story on the M&A environment) were not optimistic. Said Mark DeGennaro, managing director at investment bank Gruppo, Levey & Co.:
“That’s a sector [i.e. retail] that is really in free fall,” says DeGennaro. “There is way too much supply for demand in the foreseeable future.”
In such an environment, the calculations of stock market participants shifts significantly. Instead of worrying about growth prospects, investors should worry about survival. Does a retailer — or another consumer discretionary firm — have too much debt to outlast the credit crunch? Or does it have enough cash and cash flow to survive a consumer strike?
“Everyone would be well-served to look at balance sheets now,” independent market strategist Doug Peta told me, referring not just to retail firms but all stocks. Forecasting earnings is very hard these days. An important alternate consideration, Peta says: When will firms have to return to credit markets to get the cash they need to operate?
At least some retailers look well-prepared: In November, the Gap (GPS), for example, had $1.5 billion in cash on its balance sheet and no debt. But, for the Gap and other retailers, we’ll need to wait for until next month for earnings reports to show how much of that precious cash remains after 2008’s brutal holiday season.
These retail and consumer data points are important for the general outlook for the economy. But for stock investors holding retail stocks, the main question comes down to dollars and cents — in other words, survival.
Davos: Musings About This Year’s Meeting
January 26th, 2009 | Posted by innovAs it has done for more than three decades, the World Economic Forum’s annual meeting in Davos (Jan. 27-31) will bring together leaders from around the world in business, government, academia, society, and the media to discuss world affairs. For five days delegates will talk, brainstorm, and forge alliances to tackle top issues on the global agenda.
Looking back over WEFs past, it’s hard to think of a more perilous context or more challenging issues. This year’s principal theme is “Shaping the Post-Crisis World.” Humbled financial-services executives will join with their counterparts in other industries and other sectors to discuss ideas on how to dig out of the avalanche that is smothering the global economy.
The leaders of the WEF have focused on some long-overdue changes that may be required and enabled by the current crisis, and that ultimately could position the planet for stability, growth, sustainability, and justice. Klaus Schwab, who founded the organization in 1971 and also serves as its chairman, told reporters last week that the meeting is among the most crucial in the organization’s history. “What we are experiencing is the birth of a new era, a wake-up call to overhaul our institutions, our systems, and, above all, our way of thinking,” Schwab said.
Music to my ears; I’ll be looking for fresh and innovative ideas for fundamental change.
The Davos meeting is not designed to achieve one all-encompassing statement of beliefs at its conclusion, such as we see at G8 summits. Rather, it brings together leaders from around the world who would otherwise not meet one another in the normal course of business. Bono can talk to Bill Gates, who in turn talks to Tony Blair, Indra Nooyi, Michael Porter, and Condoleezza Rice. Delegates find issues of common interest and form new relationships that will help one another achieve their goals.
Attendees are not permitted to bring staff of any kind—the only guests are spouses. Accommodation is modest as CEOs of Global 100 corporations find themselves staying in three-star hotels in this small, overcrowded skiing town. But as someone who has attended the event for over a decade, I can say that the intellectual stimulation and initiatives that are catalyzed make up for any shortcomings. From my experience, many of the best discussions are in small meetings, in hallway conversations, in the bar, or over dinner.
I’ll be blogging for BusinessWeek during the event. Here are some of the many issues and sessions that have grabbed my attention:
In my view, fresh capital and updated regulations are not enough to solve the current crisis and reboot the system. Bankers and business leaders should collaborate around a private sector solution to the chronic problems undermining the financial services marketplace. They need to rethink many assumptions of the industry’s basic modus operandi. To restore confidence to America’s bludgeoned financial services industry, we need a new operating model based on unprecedented transparency and the sharing of intellectual property among all players. Rebuilding trust takes total transparency, which is completely feasible and affordable in a digitized world. As financial instruments became more complex, they became more opaque, which has proved disastrous. Sunshine is the best disinfectant, and it’s what smart digital tools would provide.
Basic democratic institutions are at risk and in danger of failing due, in part, to the economic crisis in poor countries. (The best predictor of democratic survival is per capita income.) In developing countries, democracies have been captured by military, organized crime, or tribes. Given the crisis, it’s easier for authoritarian regimes to make the case that democracy is inferior or an unnecessary luxury. Close to home, the Securities & Exchange Commission became beholden to the investment banking community.
At the same time, the Internet provides a new global platform for government and citizen engagement. One WEF working group put the opportunity well: “A new kind of public sector organization is required in response to these challenges—one that opens its doors to the world; co-innovates with everyone, especially citizens; shares resources that were previously closely guarded; embraces transparency as a modus operandi; harnesses the power of mass collaboration; and behaves not as an isolated department or jurisdiction, but as something new, a truly integrated organization. The breakthrough enabled by new technologies is found in collaborative, cross-organizational governance networks that leave behind outmoded silos and structures. We call this Government 2.0.”
As an example, one session, called “Power to the People: Politics in the Internet Age” was inspired by President Barack Obama’s 2008 campaign. It examines future threats and opportunities for democracy in the Digital Age.
Clearly, a global leadership crisis has emerged. Russian Prime Minister Vladimir Putin will address the meeting on its opening day. So will Chinese Premier Wen Jiabao, amid unease over China’s ability to provide an urgently required engine of growth for a stalled world economy. British Prime Minister Gordon Brown, wrestling with a recession and a massive bank bailout that he’s promoted as a model for governments everywhere, is also scheduled to speak. Other world leaders attending include U.N. Secretary-General Ban Ki-Moon, German Chancellor Angela Merkel, and Mexican President Felipe Calderon. Notably missing will be the leader of the world’s largest economy and arguably the freshest thinker on the global scene, U.S. President Barack Obama. The timing of the event—during his second week in office—could not have been worse. He is supposed to be represented by senior adviser Valerie Jarrett and Sheila Bair, as well as Laura Tyson, a professor at the University of California at Berkeley who advised Obama during the Presidential campaign. I’m looking forward to meeting with them.
There will be a lot of discussion about the need for better collaboration on a global scale—dare I say global governance? Clearly, domestic regulation is the wrong fit for the global financial services marketplace. Increasingly, the problems of the world—from economic stability to the reindustrialization of the planet to global warming—cannot be solved on a national basis. The WEF has many initiatives in this area, and arguably it could become instrumental in addressing the global crisis of leadership that exists.
One example is a bold attempt by the WEF, called WELCOM (the World Economic Leaders COMmunity), to create a global communications platform for the world’s leaders to solve problems, exchange knowledge, respond to crises, and better govern on a global scale overall. WELCOM is rolling out a range of innovative tools for locating and gaining access to expertise, sharing knowledge, and meeting and working with peers. I’m deeply interested in this initiative and am looking forward to seeing its progress and next steps.
The Tapscott Blog. I’ll be reporting daily from Davos. Please send me your questions and thoughts, and I’ll do my best to respond. You can read me through Twitter.
January 21st, 2009 | Posted by stockThe performance of the stock market so far in January has been disturbing. The S&P 500 is down about 9% so far this year.
In 2008, the S&P 500 tumbled 38%. A rally in December trimmed some of 2008’s losses, but many assumed the market was already priced for a very tough economic environment in 2009.
Bruce Bittles, chief investment strategist at R.W. Baird & Co., says that, given last year’s losses and “the huge sums” of cash already sitting in money market funds, “the persistent selling is surprising.”
“This forces the question whether October and November represented a selling climax and the lows for the cycle?” he asks.
Bittles says there’s historical evidence that stocks correct just before a new president takes office and rally within a week or two after inauguration day. We’ll see whether a post-Obama rally materializes.
The stock market’s performance in the next few weeks could be crucial.
For one thing, there is the “January Barometer,” identified by the Stock Trader’s Almanac. The idea is that as January goes, so goes the year. It’s been accurate 91% of the years since 1950, and it was certainly correct last year. The first month of the year can give investors important clues to the financial, political and business climate of the coming year.
For another thing, a strong, or at least stabilizing, stock market could help prop up a weak economy. Bittles notes:
The stock market is critical to the economy for many reasons not the least of which is the confidence factor. Almost without exception, financial crises that tend to overstay their welcome do so because of the loss of confidence. If the economy is to bottom in the first quarter as expected and stabilize by mid-year, a new low in the popular averages would place that in jeopardy.
Another collapse in the stock market would be bad news not just for investors but for everyone else too.
January 17th, 2009 | Posted by stockWe are in recession, unemployment is growing and expected to get much worse, the Financial institutions are struggling and unable to help themselves, much less in any recovery, municipalities are running deficits with dwindling revenues and higher social program costs, and pessimism dominates the day. With all this, there is some growing optimism, that under a new management we will be able to turn the corner and start what will be a long recovery. Hope grows, but on Thursday, not far from 34th street, was another miracle. The right person was in the right place at the right time and luck placed in him within minutes of rescue. Maybe the pilot and crew are heroes, just as the workers of those commuter ferries and tugs that raced to their help, on no more than knowing that someone had to do something and that they were it. And maybe they should all be given a New York Ticket Tape parade down the Canyon of Heroes. But if we want to start this recovery we are going to need people to start and believe that we can pull things together. I’m not taking about the war effect of 65 years ago, or the buy American of Chrysler’s turnaround, just the reversal of anything we do won’t work or what’s the difference. It took many people and a lot of luck to make that miracle come together, and regardless of weather they are heroes or deserve a parade, the country sure needs one. Something and someone to look at, and maybe even to start believing in again. Believing is a start.
How World of Warcraft Promotes Innovation
January 14th, 2009 | Posted by innovWe are caught in a pincer grip between intensifying competitive pressure and accelerating change in the landscape around us, creating enormous performance pressures. What we know today is becoming less valuable as we struggle with the challenge of innovating faster and learning faster to operate more effectively in these challenging times.
Mention learning to senior executives, and they tend to default immediately to training programs. Here’s the problem: Training programs are effective only at transferring what we already know to others. How do we create powerful platforms jointly to innovate and develop new knowledge that no one had before?
For an answer to this question, executives would be well advised to look at World of Warcraft (WoW), a massively multiplayer online game. Few executives have heard of this game, much less participated in it, despite the fact that over 10 million players are active in it around the world. Upon hearing this, most executives are likely to respond that “that’s an awful lot of pimply teenagers,” falling back on a conventional stereotype about video game players. In fact, the majority of the players are in the 23-39-year-old bracket and are deeply engaged. The average player invests about 23 hours per week playing the game.
In WoW, performance is measured in terms of experience points. Players accumulate these by performing a variety of tasks that become more challenging as the game progresses. As players accumulate experience points, they advance to higher levels in the game, culminating at this point in level 80 (a new add-on recently expanded the number of levels from 70 in order to keep experienced players challenged).
The degree of complexity and challenge increases dramatically as you advance across levels, and the number of experience points needed in order to advance also increases sharply with each level. Yet the number of hours required to get there actually decreases. Experienced players become adept at leveraging the resources available in and around WoW to learn faster and advance faster even as the challenges become more difficult. In contrast to the diminishing returns to learning that we often encounter in business, players in WoW appear to have joined an environment where there are increasing returns to learning.
As with many promising developments on the edge, it is often hard to discern how or why this might be relevant to those playing in core business arenas. WoW matters because it creates a powerful platform for learning, without a training program in sight. Many of the approaches used by WoW could be very helpful to business executives as they strive to improve performance more rapidly in their own organizations.
Reduce barriers to entry and to early advancement
WoW is carefully structured so that anyone can join and quickly gain a sense of accomplishment. The early tasks are relatively simple, but novice players quickly learn to improvise and innovate in their approach to performance challenges.
Provide clear and rich metrics to assess performance
WoW provides players with an overall metric for performance in the form of experience points and levels, but it also enables players to assess in real time their own performance and the performance of teammates along a variety of dimensions. One of the key innovations in the game offers players the ability to craft personal “dashboards” to monitor their performance on certain tasks. Corporations have begun to offer senior executives dashboards to monitor key aspects of corporate performance.
What if these dashboards were made available to everyone in the company? What if these dashboards could be designed and tailored by the individual employee? What if these dashboards provided real-time feedback on individual performance as well as the performance of the broader group? What if this feedback was visible to everyone and not just the individual contributor? Within WoW, this real-time performance feedback helps players to focus their innovation in game play on the areas with greatest impact.
Keep raising the bar
WoW designers have constructed an environment that continually challenges players to develop new skills. Complacency and boredom are rarely encountered, but neither is frustration, since challenges are thoughtfully calibrated to the existing capabilities of players. The next rung of achievement is just in sight, motivating players to invest the time and effort necessary to achieve that next level of performance. In the real world, companies, particularly those pursuing high growth strategies should provide a continuing set of new challenges to drive innovation by their employees.
Don’t neglect intrinsic motivations
Talk about incentives in a business context, and the discussion quickly falls back to cash. With minor exceptions, cash is not an incentive to play WoW, so the designers focused on intrinsic motivations. Players get widespread recognition as they master new skills and successfully address each new challenge. As the game advances, players learn to collaborate and participate in “guilds”—teams of players who must work together to innovate in their game play and achieve the next level of performance. As relationships and trust develop within these teams, everyone is motivated to innovate by the desire not to let the team down.
Provide opportunities to develop tacit knowledge, but do not neglect broader knowledge exchange
The guilds foster the relationships and trust required to generate new tacit knowledge—the kind of knowledge that cannot be easily expressed and develops through shared practice. This is where most of the innovation in game play occurs.
At the same time, the game has generated a rich ecology of online forums where players can share experiences, post requests for help in addressing new challenges, and learn from each other. These forums provide a “pull” platform where players encountering unanticipated needs can quickly reach out and assemble helpful resources. In contrast to knowledge management initiatives in more conventional corporate environments, a significant part of a player’s recognition and status accrues from participation in these forums. In fact, these forums have become a primary vehicle for identifying high performing players to be recruited into guilds.
Create opportunities for teams to self-organize around challenging performance targets
Participation in guilds in WoW is not mandated from above. Players naturally coalesce into guilds as they move into more advanced levels because they realize they cannot accomplish the tasks without collaborating with others with complementary skills. Teams have become important organizational units within companies, but how many of these teams are self-organized? By giving teams the autonomy to recruit new participants and—equally importantly—expel participants who are not carrying their weight, companies can significantly increase the accountability and motivation of teams.
Encourage frequent and rigorous performance feedback
WoW designers built in detailed performance metrics specific to the individual, the role, and the guild. These provide a foundation for regular after-action reviews where all the participants come together after a major initiative to review how they performed as individuals and as a team. The key focus is on how they can do better. This is a catalyst to innovation in game play as players can see performance gaps that are holding back the progress of the team.
These 360-degree performance reviews ensure that everyone from the guild leader down to the newest member receives feedback. Unlike the 360-degree reviews that have begun to crop up in a corporate setting, the reviews are based on objective, quantified performance metrics and visible to all participants. In this environment, poor performers at all levels have a strong incentive to address performance gaps in order to avoid being sidelined in future initiatives.
Create an environment that rewards new dispositions
WoW not only encourages players to develop new skills; it fosters a new disposition. WoW has created a compelling environment that naturally attracts participants interested in gaming, but it also enhances and rewards their dedication over time.
This encourages players to seek out new challenges as an opportunity to innovate and learn faster. Rather than viewing the unanticipated as a threat, gamers learn to welcome unexpected events as an opportunity to innovate, tinker, experiment, and, in the process, learn even more.
They also learn to welcome collaboration as an opportunity to learn faster by focusing on a set of individual strengths while being exposed to the diverse perspectives and experiences of those with complementary strengths. At the end of the day, this is the most powerful contribution of WoW. This disposition creates an amplifying effect throughout the game. Players seek out other players who share this point of view, and they end up performing better than players who bring more conventional ideas to the game.
Companies seeking to thrive in a world of increasing uncertainty and accelerating change will need to foster this disposition among their own executive team and employees. They would be well advised to take a closer look at World of Warcraft, both in terms of the approach taken to foster this disposition and as a potential recruiting ground for employees who can bring this attitude and approach into the company.
The New Focus Group: The Collective
January 7th, 2009 | Posted by innovThere’s probably no better time for an organization to ask the question, “What’s the return on investment?” Given the economic uncertainty, it’s an understandable instinct.
The problem is, traditional ROI, with its focus groups and lab-type settings, is less relevant in a fast-paced digital world. Hyperfocusing on ROI as a key indicator of future success limits the quality of insights that can be obtained when an initiative is launched in a real environment. In the real world, a “mass audience” doesn’t really exist (this is especially true on the Web) and brands that deal in niches are rewarded. In the real world, the collective is the focus group.
It’s time to focus on another type of ROI, one we like to call Return on Insight. Here are some tips on how brands should think about this new form of ROI.
LISTEN
There are many ways to listen to what’s being said about your company, product, brand, service and most importantly, related universe. Services from vendors such as Radian 6, Collective Intellect, Networked Insights, or Nielsen BuzzMetrics uncover and analyze what people are saying both inside communities and on the open Web. For our recently launched Pampers Village community, P&G (PG) partnered with a company called Liveworld (LVWD), which offers such services as building and managing the community. Liveworld helps us listen to and moderate user interactions in the community, which not only helps filter out inappropriate comments so the quality of the community experience is maintained, but also allows the brand to listen to what consumers want to discuss—from parental topics to features they would like to see in the community. Another great technique for listening is using the social network Twitter. Brands can use search.twitter.com to monitor what people are saying about them—in the context of actual conversations.
Crucially, brands need to listen at all times, not just at the beginning of a project. Listening through the life of a campaign or initiative yields insights into attitudes and identifies which consumers have influence, as well as the most fertile ground for digital engagement.
LEARN
If you don’t launch, you don’t learn. Pilot initiatives can be quickly launched using prototype methodologies. We typically perform “rapid design labs,” engaging multiple stakeholders across multidisciplinary teams to flesh out objectives and get into some rough design activity. By the end of a typical rapid design lab, we have the beginnings of something that can be built. Part of the goal is to see what happens so we can analyze findings along the way. When we worked on the NASA.gov redesign, we got the idea of “social bookmarking” content and organizing topics in “tags” from these sessions.
With the site launched and evolving, metrics are analyzed to help determine what’s working. With most initiatives on this scale, the design is ongoing and never really ends. As with “Listen,” “Learn” is NOT a phase; it must be continual. Learning helps reduce risk and helps executives make better decisions on an ongoing basis. Both are critical in a down economy.
ADAPT
If estimating traditional ROI is a predictive exercise, then gauging the Return on Insight is an adaptive one. In order to glean both strategic and tactical insights, organizations have to be nimble enough to measure what is or isn’t working and make adjustments. Think about navigating a small fleet of speedboats vs. a large cruise liner. Analytics again play a big role. From helping to identify consumer sentiment to measuring the effectiveness of a campaign or initiative, the science behind marketing provides insights into how to move forward. But it’s not just about data points. Digital media may be easily measurable, but a combination of analysts, planners and other team members is needed to make sense of the data. That team should think like “digital anthropologists,” sifting through the quantitative data that analytics can provide and pulling insights from the qualitative inputs.
Stage a Revolution Within Your Own Organization
The advent of Web 2.0 and social media has been nothing short of revolutionary. Today, consumers can most likely move faster than your organization or brand could ever dream. To keep up with the changing behavior of customers, your organization may need to undergo its own revolution. As you prepare for this, you might want to ask yourself the following questions:
1. Are you actively listening to your customers in the places they frequent online?
2. Are you launching initiatives that can be easily updated? Are you enabling a “culture of rapid response?”
3. Are you evaluating current processes and updating them as needed?
4. Are you building a culture in which “failure” is acceptable?
5. Are you allowing your teams to create “pilots” prior to scrutinizing them through traditional ROI exercises?
6. Are you planning initiatives that will help your organization learn prior to backing major marketing campaigns?
7. Are you synthesizing qualitative insights in addition to analyzing hard data points?
8. Are you tweaking your strategy along the way—and adapting where change may be needed?
9. Are you empowering all members of your teams to think and act like “digital anthropologists?”
10. Are you evolving the tools and methods to measure success (i.e. going beyond clicks and impressions)?
The Internet has evolved into a highly fragmented and niche medium where the formulae of mass communications and even traditional interactive tactics may not apply. Every day, average users are putting out both content and applications that sometimes compete directly with your own. Now more than ever, executives need to have a solid grasp of the nuances that exist online in order to get—and sustain—the attention of digital consumers. And, critically, insights into digital behavior can help us design the kinds of solutions people want as part of this lifestyle. By listening and engaging the “collective” through all phases of our initiatives, we now have opportunities not only to be more in tune with customer needs, but also to adapt as quickly as they do. In our digital world, that could be the most important ROI possible.
Is It Finally Time to Buy Financial Stocks?
January 6th, 2009 | Posted by stock“Should I be buying financial stocks?” For more than a year, that question has kept investors up at night.
To some value-oriented investors, financials have looked like a steal. Again and again, they’ve been proven wrong.
See Legg Mason’s Bill Miller, who bet on Countrywide Financial and Washington Mutual among others. By contrast, Morningstar’s domestic-stock manager of the year, Charlie Dreifus of Royce Special Equity (RYSEX), won that honor partly by avoiding financial landmines despite having a value focus.
Though the last year has been tough, fund managers know that eventually a lot of money can be made in a rebound for the financial sector. No one wants to be early, but no one wants to be late.
Is now the time to be buying financial stocks?
When I talk to professional investors, I hear a wide range of views. Some previously pessimistic managers are now jumping into the financial sector. Some of them are seeking out the strongest players, betting on the survivors. Other brave souls are looking for firms that may be damaged but are wildly undervalued.
A large number of stock managers still are avoiding the sector as much as possible, figuring the financial system might not really recover until 2010 or 2011. They argue the financial sector is in the process of permanently shrinking as a portion of our economic output.
In the past month, financial stocks as a group are more or less flat (as represented by the XLF ETF for example). But results have varied widely. Goldman Sachs (GS) rebounded 27% in the last month, while and Wells Fargo (WFC) is down 6% and JPMorgan Chase (JPM) has slid almost 10%.
Stifel Nicolaus (SF) analysts on Jan. 2 released their “best bank picks” for 2009. Stifel analyst Christopher Mutascio writes:
Despite the negative sentiment, we believe a class of ‘survivors’ has emerged. Though not unscathed by the credit cycle, these institutions maintain adequate capital levels, in our view, and, in many cases, will capitalize on weakened competitors.
One merit to Stifel’s approach here is they’re not claiming to predict when the financial crisis will end and earnings will return. Mutascio focuses on those firms that will do well in “an eventual turn in the economy,” even as the sector “will remain troubled from an earnings perspective for the next several quarters.”
Stifel’s list of bank stocks to buy: BancorpSouth (BXS), City Holding Company (CHCO), Danvers Bancorp (DNBK), First Horizon National Corporation (FHN), People’s United Financial (PBCT) and TCF Financial Corporation (TCB). Not on the list is BB&T Corporation (BBT), which Stifel rates as a ‘sell.’
January 1st, 2009 | Posted by taxTAX SPECIAL INTEREST SECTION
It’s hard to keep up with the overwhelming changes in federal, state and local tax code. Draw on the collective knowledge of more than 1,400 fellow members through The Ohio Society’s tax special interest section.
Section membership includes access to a listserv where
members can get answers to their questions from fellow members and respected tax experts such as E. Lynn Nichols, CPA, and Michael Mares, CPA, ABV, J.D. Members also receive news digests of the most up-to-date information on tax changes. Section membership even provides access to hot topic conference calls with updates on the latest tax issues in convenient, one-hour programs.
TAX PRACTICE TOOLS
The Society’s Web site is ready to provide you with practical tax practice tools, including:
* The Business Organizations Handbook
* 2008 Tax Calendar
* Standard City Tax Form
* Municipal Income Tax Aids
These aids and more are available at www.ohioscpa.com. Select “Tax Practice” under “Professional Resources” to access these tools.
CPA2CPA PROG RAM
The Society’s CPA2CPA program ensures expert, one-on-one advice is just a phone call away. This program connects members for basic advice or consultation. Volunteers from over 70 areas of practice are available, including tax. To take advantage of the CPA2CPA program, call CPAnswers at 888.959.1212
REFERRAL SERVICE
The Society is concerned about helping members working in CPA firms improve their bottom line. The Society’s Referral Service connects potential clients with members in public practice who can meet their needs. Each year, people call the Society looking for a CPA to do their business or personal taxes. Through the Referral Service, the Society matches them with members based on their location and areas of expertise. The annual cost for a referral service listing is $125 for a single firm location, $200 for two locations and $250 for three or more.
WEEKLY TAX UPDATES
Get up-to-date news on federal tax legislation, court cases and other developments with the weekly podcast “Federal Tax Update” with Nichols, Mares and Edward Zollars, CPA.
Available each week, this timely update offers expert analysis and insight into what is happening in federal taxation on your time and directly on your computer.
Listen to these audio updates over the Internet directly from your desktop or notebook computer or load them onto your MP3 player and take them with you.
THE OHIO SOCIETY IS YOUR RESOURCE
The Society is ready and willing to be your key resource during this year’s tax season. If you are interested in participating in any of these programs or have any questions, don’t hesitate to call CPAnswers, the member service center, at 888.959.1212 or send an e-mail to cpanswers@ohio-cpa.com.
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