Category Archives: Economics

In defence of Morrisons

Yesterday, reported that retailers were losing millions because of poorly integrated touchpoints. It goes on to say many are playing catch-up and can’t understand why “retailers are allowing sub-standard websites to damage online sales opportunities”. Of course in an ideal world all major retailers would be investing in the digital channel but I think Morrisons has a defendable argument as to why they are late. I should say from the outset this is my analysis and I don’t have an inside track on what Morrisons is doing.

If you drive down the M5 between Bristol and Exeter you will see one reason why, in Morrisons case the website is not currently the centre of attention. They are investing £95million in a new regional distribution centre and the project is slightly behind. However, it is a very important project in support of allowing Morrisons to distribute nationally.

The group is also only half-way through an IT infrastructure roll out at an estimated cost of £310m. The project, called “Evolve” will be completed in 2013 and is a five year upgrade of virtually every system and process the business has. The upgrade will support the groups planned expansion to 600 stores whilst saving support costs and providing operational benefits and efficiencies. Back in 2004 Morrisons also paid £3.35bn to acquire Safeway and has some problems integrating the 327 stores and IT systems into its own.

Also, Morrisons only announced that it would have a go at online sales in 2010 and even then was cautious because of keeping costs under control. Recent news compared Morrisons to the sales Tesco and Sainsburys are achieving online but that hardly seems fair given Tesco’s was the worlds first online grocer and Sainsbury started online in 1998. Having said that, the recent acquisition of a 10% stake in FreshDirect is designed to accelerate the groups knowledge of how to run an online business. They will actually get a seat on the board and the ability to learn about the systems and processes FreshDirect has. They also announced the acquisition of Kiddicare back in February who is an online retailer of cots, nappies and push-chairs.

8th September, Morrisons announced its interim results for the half year to 31st July 2011. Although Morrisons financial performance is good, they can only do so much. Revenue is up as was PBT (to £449m for the period) and cashflow was £667m, £97m up on the previous period but with higher outflows due to capital expenditure. They have also initiated the first phase of the planned £1bn equity retirement. As a result debt grew £238m to £1,055m but they do have a £1.26bn revolving credit facility available until 2016 and with £494m not drawn down.

Can they also invest in a major multi-channel, integrated customer experience programme? I would argue they already are by getting solid building blocks in place both in terms of systems and knowledge. This will put them in a very good position to accelerate development of mobile channels and possibly even overtake some of the competition.

Big data, big opportunity

I visited Adtec today and attended various presentations and seminars. One of these was delivered by Fabric/Infosys and talked about Big data and to kick it off presented some interesting data facts I want to share. You might be surprised to know that:

  • Amex is 85% certain of who will divorce based on transaction data
  • Twitter is 97.3% accurate in reporting box office takings and more accurate than the film organisation responsible for making these forecasts
  • Google’s data predicting flu (influenza) trends is more accurate than The Centre for Disease Control

There was another statistic about Facebook being more accurate than Gallup weekly polls in predicting a political outcome (I think from mid-terms) but the pace was so fast I missed it. After a quick Google search I only found less accurate claims such as this: click link.

Another amazing stat., although not from this session is that 90% of all the data in the world was created in the last two years.

So “Big Data” is hot and a term that will grow in use.

The World is Flat (ish)

I am on holiday this week and right now I am sat pool side in the beautiful Tenerife resort of Los Gigantes. As usual I am trying to read a book, a page at a time, as I juggle the (not entirely unreasonable) demands of my three children with my own needs. The book I am reading is by three time Pulitzer Prize winner Thomas L. Friedman titled “The World is Flat”.

It is an excellent book and even though I am only half way through I have found it thought provoking and informative. It is a must read for anyone in business now, whether large or small. My only reservation is that in many ways the book is ahead of its time – despite the various current and historical examples and case studies.

As I write, the third day of the fifth Ashes test is about to get under way. Last night England bowled Australia out for 160. In an ideal world, I’d like to log in to my Sky Player and watch the 3rd day unfold – but I can’t. The licensing laws apparently won’t allow it so despite paying my monthly subscription, Sky is getting two weeks of my money for very little service delivery. In a truly flat world I would be able to access any of my entertainment services wherever I am and when ever I want to.

One of the stories in the book is about Friedman’s daughter searching addresses through Google by using phone numbers and considering her Mum to be almost backward when she asks if she has brought an address book. That was 2004 and I wonder now what would be the expectations of her and other teenagers like her?

I am far from being a teenager and I am already impatient for a flatter world. I am having to type this blog post in open office writer and then copy and paste it in to the blog because the Internet connection is so unstable. Even if it were stable I still couldn’t do what I want to and access my paid for entertainment.

The world may well be flat if you are UPS, Google or Infosys, but if you are an individual there are still quite a few bumps in the road. Having said that, the fact I can sit here, pool side on my laptop and access the Internet at all, is a world away from just a few years ago. In another 5 years I would expect the connections issues to be a thing of the past. Licensing however, is a political issue that won’t go away any time soon.

Wrist Watches – the last of the single function devices

I was at a lecture recently by Sir Ken Robinson. If you have read my posts before you will know I am a fan but I’d like to make it clear I stop short of stalking him. I did get to meet him this time and he is as enthusiastic and personable one on one as he comes across when speaking and he didn’t put a restraining order on me to boot!

Sir Ken was promoting his new book “The Element” which builds on some of the themes in his last book “Out of our minds” – a review of which you can read in the “what I am reading” section of my blog. (I’ll post a review of The Element when I have read it). During the talk we were asked to put up our hands if we were over 25 and to keep them up if we were wearing a wrist watch. A lot of hands went up and nearly all of them remained up. Next the under 25’s were asked to the same question and although there were fewer of them most of the hands went down when they were asked if they were wearing a watch.

The under 25’s don’t wear watches because they use their mobile phones or other similar digital devices to provide them with accurate information about time. And these devices provide a multitude of other functions that their watch doesn’t. Why carry a compact digital camera and a phone with a decent digital camera built in? You wouldn’t and the same argument, for the young at least, applies to watches.

I have three children under the age of 11 and all of them have been given wrist watches over the years as birthday and Christmas presents but they never wear them. Time at that age, is not important and Mum provides all the scheduling they need. Although I agree with Harwood E. Woodpecker in his blog post “The Wrist Watch and the Digital Age” where he talks about parents using watches and in particular he says Casio Digital watches, to make “our children slaves to time”.

However I think his argument is outdated in device terms. Parents that want to know where their kids are and make sure they come home on time will give them mobile phones and although we are resisting, it is not uncommon at my daughters school for girls as young as nine to carry a mobile phone. There is a dual benefit to this situation. Kids get a device that is cool (like the Casio digital wrist watch once was) and parents make them become slaves not only to time but also to being always available.

The ideas intrigued me and I began to wonder what this could mean for watch manufacturers? As a jewellery item or a statement about our status I should think the watch will have a long life but this is quite a niche market. In 70 years the last of the  mainstream watch wearers will be all but gone and how many people in their autumn years get a new watch other than as a retirement gift?

However if we think about the evolution of the watch it moved from pocket to wrist in the 1920’s and this was for reasons of fashion where women were concerned and the practical demands of war for men. If practical needs drove the humble watch from pocket to wrist could they do the same for the mobile phone? With this in mind I searched for “wrist watch of the future” to learn what developments were taking place.

First item I came across was for the Windows watch of the future which comes complete with Windows CE 5.0, 1.45-inch screen, GPRS, network camera and/or 1.3-megapixel digital camera, Wi-Fi connection, Bluetooth, up to 1 gigabyte of T-flash memory and it also supports Skype, MSN and other applications. And just in case this is actually a joke I also found that HP have a bunch of designers that have actually brainstormed ideas for the watch of the future.

So it looks like the watch may not yet be dead although with the limitations of screen size it will be interesting to see whether what really develops is more an evolution of wearable technology. Thoughts anyone?

Bob Cialdini and the science of Persuasion

Last night, 4th March 2009, I was fortunate enough to be invited by the Chatered Institute of Management to attend an “Influence Masterclass” being given by Bob Cialdini at the Royal Society of Physicians and sponsored by the UK Commission for Employment and Skills (UKCES). To explain why the UKCES had decided to invest tax payers money on a subject with such tenuous connections to its goals, Chris Humphries the current CEO took the podium.

Chris Humphries’ presentation focused on how far the UK is likely to fall behind the rest of the OECD (organisation of economic co-operation and development) over the next 10 or so years in areas such as employment and productivity. He showed how the UK was becoming a nation of haves and have nots with the South East for example having high employment and productivity but the North of England possessing neither. The audience was too polite to point out we were performaning better than his homeland of Australia!

The answer is to train our people more often and more effectively and his hope was that if people with training needs for themselves or their teams could learn how to influence and persuade budget holders better we would be more likely to achieve those goals. A worthy goal but for anyone who had read either one of Cialdini’s books on the subject of persuasion they would have already known there would be little to go on.

Once you get over the fixed facial expression and nasal American accent, Cialdini delivers a good presentation. Whilst there was little different from the research described in his books, he brought the examples to life and his stories and anecdotes meant I left able to share some of the learning with colleagues quite easily.

Cialdini focused the presentation on three of his six principles of “Ethical Influence”. The six are:

  1. Reciprocity – if you do something for someone they will do something for you; but you have to offer up first.
  2. Scarcity – something increases in value if it is shown to be scarce or rare
  3. Authority – people are convinced more easily by people they see as authority figures.
  4. Consistency – if someone publicly commits to something they are more likely to stick with that idea
  5. Consensus – People are more likely to be influenced by similar actions of a group of their peers
  6. Liking – no surprise here, but people are more easily influenced by people they like

We heard a little about each area and in depth about scarcity, authority and consensus. The area of authority was really interesting and the use of the word “but” was revealed as crucial for establishing trust. Cialdini explained that most people in a pitch when trying to get their point of view across, front end the benefits and then, to establish that they are honest, throw in a couple of limitations at the end. For example I might say that Foviance is a world leader in usability and customer experience consulting ‘but’ we don’t do graphic design.

Cialdini argues that people will only hear and retain the information after the ‘but’ and that all we have to do is switch the order  of what we say to be more compelling. So, what I should say is “Foviance doesn’t do graphic design, ‘but’ we are world leaders in usability and customer experience consulting. In order to be an authority that you are likely to believe when I say this, I can improve my chances by having a colleague introduce me and say a little about my credentials. What Cialdini is quick to observe is that his techniques only work where there are genuine arguments and honest benefits, ‘but’ you can’t have everything can you.

Measurement: everyone’s talking about it

In the past few weeks there have been numerous items in the on and off-line press about measurement. It seems that when the going gets tough the tough really do start measuring and for so called “New Media” it has never been tougher in its life time. Expect therefore to see a lot more on the subject in coming months as the recession worsens and ahead of that I thought it might be useful to look at one area that commentators are finding most interesting.

Social Media measurement has received some significant attention and in particular recently because of the elevation of Twitter as the new application of the hour. Before Twitter became mainstream organisations were already looking at how social media could be measured and just this week Matthew Yeomans of Custom Communications was interviewed by Econsultancy on the topic.

On measurement, Yeomans identifies three areas that combine to provide ROI data about social media effectiveness in a campaign context. These are: Reach, captured from how many people are talking about a brand post campaign; Sentiment, from people during the campaign; and Competitor Analysis to identify how the brand compared to peers. It would seem that sentiment presents the most measurement issues when talking with clients.

That measuring sentiment creates the most debate is not a huge surprise.  Methods range from software solutions that track words such as ‘like’ and ‘hate’, alongside mentions of brands, to detailed manual evaluation of comments made by identified influencers. The differences between qualitative versus quantitative methods and hybrid solutions leave marketeers no clearer about what is the right approach. Even within the social media industry there is widespread concern that when talking about social media measurment, too many people are talking different languages and that no concrete answers exist – yet.

Adding to the conversation and to the education is some research carried out late last year by Marketing Sherpa. The US study looked at social media measurement, what worked and where problems existed. It concluded that too many Marketers were hung up on quantitative measures when in fact qualitative measures added the most value. The survey found that the easiest things to measure (advertising for example) were the least effective and the hardest things to measure (user reviews & ratings and relationships with bloggers) were the most effective.

Working in a research organisation such as Foviance, it is easy to understand why qualitative measurement is so important. 60% of the work we do is qualitative but a great deal of that  qualitative work is supported by quantitative findings from parallel research in complimentary areas (i.e. using web analytic traffic data to enrich findings from lab observation studies). In our view both are needed to provide a complete picture but there are cost benefit arguments with every research project.

One thing is certain; that there is a lot more to learn and marketeers are going to have to work through the noise to develop a clear understanding of how measurement should work for them. Establishing a measurement framework and strategy is work that can and should be done before even getting involved with evaluating solutions and should start far higher than at just the social media level. Providing your organisation with a measurement strategy is the gift that keeps on giving as it makes sure any decision making is firmly grounded in the business.

Returning toTwitter offers a good example of where a strategy should be established as measuring the effectiveness of Twitter is extremely challenging. Trawling through pages of “Tweets” to establish which referred to your campaign or website is not only time consuming but also very difficult to get right. Twitter’s use of Tiny URL means that you cannot quickly see your campaign url and have to actually clicking through to see which one works. Knowing what to look for first can only help.

Today, organisations are trying Twitter out and the investment can be written off as innovation. Fairly soon someone senior is going to ask about ROI and when they do expect a range of measurement solutions to hit that market very soon afterwards. By which time of course, Twitter will have been superceded by the next big thing. Do try and keep up!

The wisdom of the crowd

There is a new book out by Jeff Howe titled: “Crowdsourcing: Why the Power of the Crowd is Driving the Future of Business.” The book takes forward the ideas Jeff presented in an article in 2006 for Wired and that have been used in many books and articles since. A book I recently reviewed by Gary Hamel called Future of Management also used crowdsourcing as a central theme for how companies will compete in the future. This book and the blog are worth a look.