Category Archives: Business

Obama: Apple of the political world? Well the resemblance in the path to the apex is pretty similar!

Let’s talk about Apple for a minute. A decade ago, Apple was a company on the verge of bankruptcy. Since then, it has beaten expectations several times over the last decade. Just when we end up thinking that this is the best iPod ever, Jobs comes on the stage with a better one wow-ing the world. Beating super high expectations time and again is the genius of Apple. Apple has put life in fields that were thought to be saturated and dead along with setting new standards. Just like a decade ago you would have never thought of spending this handsomely on a personal music player (year after year) but changed your mind for the iPods, up until two years back, a mobile phone was treated as something that will be given away for free with a service agreement. Along came iPhone, price equations changed and new standards were set. Suddenly everyone in the mobile phone industry dropped their preset three year plans to design the perfect copycat. Today Apple is a cash rich cow with $21 billion in cash. For any brand enthusiast, it is one of the biggest compliment to be called the Apple of your own industry.

Now back to Obama. Obama’s journey to the White House maps pretty well to that of Apple.  A few months before Iowa Democratic primary, he was 30 points behind the presumed Democratic nominee. He was different and he did beat expectations of one and all, time and again. He pumped life into the seemingly dead Democratic primary that people expected Hillary Clinton to wrap up in a few months. The curiosity and political interest he stirred in young people was comparable to the one generated by Apple products in the tech community.  He pulled a whole new demographic of young voters to volunteer for his cause and vote (many for the first time ever) for him. His mavens were extremely vocal and enthusiastic tribe raising his popularity in the community along with winning him almost all the caucuses in the primaries. And above all, he definitely set the standards for the future presidential races in this country.

With economy in slump, terrorism around the world on a rise and image of the country not at its best, people elected Barack Obama with immensely high hopes. Expectations are higher than ever before. It will take us at least a few years to see if he is able to do an Apple with those expectations as well.

I started this year with a post on thinking green. Now that we are approaching end of 2008, I thought it would be good to revisit this topic and see how companies around the World have increased profitability by applying creativity that also made them more eco-friendly. Thinking green over the last year went from a differentiating factor to a necessary checkbox feature for every business. Thanks to the general awareness created around the issue, businesses irrespective of the industry are going an extra mile, trying to get a shade of green and then letting the customers know that they are greener than before.

There are some fascinating examples of how creativity in being eco-friendly has spurned innovation in everything, from how to better recycle waste to how to conserve energy. GE lead the way with their Ecomagination initiative. Through one of several innovations under this initiative, GE designed diesel engines for cars as well as trains to cut fuel consumption and reduced emission.

Retail powerhouses including Walmart, Costco and Whole Foods, among others, played their roles in greening up. Walmart, which operates the second largest truck fleet in the country provided funding to truck companies to develop heavy-duty diesel hybrid 18-wheelers. Costco installed sun-panels in its store to generate electricity and provided flexible schedules for its employees to work longer hours four days a week and save gas on commute. Whole Foods replaced plastic containers and utensils at its hot bars with the ones made by sugar-cane waste.

In technology industry, EPA launched a EPEAT (Electronic Product Environmental Assessment Tool) that provides certification to computers based on several criteria to measure the computers greenness. Major computer makers like Apple, Dell, HP and Lenovo stepped up to voluntarily submit their products for review. Dell is leading the way in being greener by initiatives like launching an Eco PC and recovering about 40,000 tons of unwanted equipments for recycling.

These are just few of thousands of initiatives leading to sustainability. The efforts we are seeing in businesses finding ways to be eco-friendly touches on a much bigger issue. A few leaders stood to raise this issue as an important one, created awareness and motivated customers to think about it as an important feature while making a buying decision. This pushed companies to compete and find ways to be more creative and attract customers towards their product. The entire sequence of events sets a classic example of how something starts, finds a few early adopters and then if it reaches the tipping point, we see a surge in development in that area, just like we are seeing in the think green world.

Here’s another installment (bonus!) of the strategy series: Walmart.

Walmart’s tagline (Save money. Live better.) speaks a lot about Walmart’s strategy: commoditize everything and make it about the price tag. Walmart does an excellent job of treating everything, be it computers, electronics, kitchen supplies, bathroom supplies, shoes or clothes, as commodities. Walmart commoditizes everything in its stores, cutting costs and margins and leading way to lower price tag on goods in there.

How does Walmart get successful in this strategy? I believe there are two main factors leading to Walmart’s success in execution. First, Walmart picks the brands that are willing to sell their products as commodities. With lots of options available in every category and Walmart being a retail powerhouse, it is always possible for them to get enough brands, including the well known ones like Dell and Levi’s, willing to commoditize and be part of Walmart’s machinery. Second, Walmart allocated its resources to develop a phenomenal supply chain that helps them reduce costs and optimize their operations. With zero storage space and inventory on wheels and conveyor belts, Walmart manages to keep costs low and make up on credit from its suppliers.

I believe a very clear strategy with perfect execution makes this one retail behemoth stand tough and consistently beat Wall Street expectations even when every other retailer is going south.

Today I volunteered with Food Lifeline, a non-profit organization in Seattle that supplies food to hundreds of food banks in western Washington. We were a group of about 40 volunteers who were given a task to go through thousands of pounds of apples, discard the bad ones and pack the good ones in banana boxes to be dispatched to food banks. Pretty straightforward, but during the process, I noticed that the definition of a good fruit is drastically different for different individuals. In fact, out of 40 people working there, I guess everyone had their own definition of which piece of apple is good to be packed and which one should be discarded. This made me think, can you shop for grocery items like fruits online?

Putting in context, grocery shopping online means relying on someone else making the decision of whether the fruit you are buying is good enough or not. I believe majority of shoppers will question this other person’s decision with an argument that the fruit they got through the online grocery is not as good as what they would have chosen from a lot in the grocery store. You can say the same thing for something like shoes in terms of fitness, easiness and so on. But the major difference between shoes and grocery is that you can return shoes after trying them on and the store will take it back, but in case of fruits and vegetables with a very limited shelf life, it is quite possible that if you ship a perfectly fine fruit back to the online store, it will be rotten by the time it reaches their warehouse making the return policy a bad business decision for the store.

This takes us back to the age old question of what customers buy on the web and what they don’t. I believe customers are more comfortable buying anything that is WYSIWYG (What You See Is What You Get…a different use of a computing term:-)) like electronics, books etc…but then there are always some exceptions!

I will end the strategy series with Starbucks.

Disclaimer: This analysis is based solely on the strategy discussion in Jack Welch’s Winning.

You enter a typical Starbucks and what do you see? Bunch of people sitting with their coffee cups reading, working on their laptops or talking (usually) softly, soothing jazz music playing in the background and baristas standing at the counter ready to take your order and prepare a fresh cup of coffee. One might argue why people pay the premium on each cup of coffee they buy at Starbucks. Apart from the great tasting coffee, the answer lies primarily in this atmosphere that Starbucks creates at its stores.

This links directly to the strategy of Starbucks: making the local Starbucks as the third place for the people in the community after their home and work. How is this atmosphere created? By providing friendly service, likable music and of course, great coffee.

In the recent years, Starbucks is facing growing competition from the like of McDonald’s, and the interesting thing to note is that McDonald’s is taking potshots at this very strategy of Starbucks in its advertisements. To counter the initial competition, Starbucks still maintained the same “third place” atmosphere and complemented it with serving simple breakfast and lunch options at its stores. This fit pretty well in its basic strategy. Next they started the $1 cup of coffee, which added an economical option to its premium-priced beverage lineup, but still maintained the atmosphere. It will be interesting to see how Starbucks will further reallocate resources to take on growing competition from the fast food chains.

Here’s the next installment of the strategy series (based on the strategy chapter in Jack Welch’s Winning): Trader Joe’s.

Trader Joe’s tagline: Your Neighborhood Grocery Store. And if you visit one of these stores you will definitely get the feel of visiting a neighborhood store with an old-fashioned bell to call for help at the counters, wooden shelves, fresh bread and friendly staff. Another distinctive thing about Trader Joe’s is that, along with the regular products, you get a range of “unique” products including international frozen food, gourmet food and a different selection of wine and beer.

Trader Joe’s strategy, which seems to be ingrained in every part of the company, is very simple: provide a local feel and complement it with a unique selection of products. This is the winning strategy for the grocery chain with more than 300 stores and $6.5 billion in revenue.

This strategy provides Trader Joe’s a way to differentiate itself in the industry. Trader Joe’s distinguishes itself from other local stores by having a unique selection of products, and from competitors like Whole Foods, that carry similar products, by using its local store atmosphere.