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Walgreen’s, Nerf Darts and Using Creativity to Create Customer Goodwill

How can an 11 year old wanting to buy Nerf Darts teach us how to maintain both personal and business relationships?  I have one word for you:  Walgreen’s.  Is it just me or does it seem that when you go to buy the $.39 toothpicks advertised in the weekly sales flier, the item is either sold out, scans at the wrong price or that particular location never has and never will carry toothpicks.  As I went into Walgreen’s today I did not intend to buy Nerf Darts although my son did mention that he would like some extra ammo for an upcoming birthday party.  As I went down the toy aisle I saw a closeout on the exact replacement darts he uses.  Along with my other purchases, I brought them up to the register.  Two out of the 5 items scanned incorrectly and my total came to $54.  Upon closer examination I was incorrectly overcharged nearly $25.  When I questioned the manager for the correct price, her answer was, I can refund your money but I can’t sell you these items at the marked, posted price–company policy (Whatever the price scans at is what Walgreen’s will sell at).  This is a classic case of a self-defeating policy.  While a computer managed system of SKUs (Stock Keeping Units) certainly can be efficient, it does no good if a manager does not have the authority to over-ride and use her own judgement.  I left the store and will contact the manager tomorrow.

As usual I started to frame my experience and question what I could learn.  In a poll conducted by IBM among 1500 CEO’s from 66 countries and 33 industries more than 60% responded that the singular element of CREATIVITY will help companies navigate successfully through the increasingly complex global economy.  (here is a link to the poll http://www-03.ibm.com/press/us/en/pressrelease/31670.wss )  The situation described above happens in business even at the best companies.  However the Walgreen’s manager did not use creativity to respond to an error and take advantage of an opportunity to make me a loyal customer.  The Walgreen’s manager had a chance to offer me some type of goodwill but dismissed the opportunity using company policy as a damaging crutch.  While there may be many codes of company policy that are valid, make sure that the freedom to be creative is a part of your business culture.

Go out there and be creative, the worst that can happen is a mistake.  I love learning from mistakes.  At this point my mistakes are too many to count but I will get up tomorrow, learn and try to do better.

Stay tuned loyal readers, tomorrow I will be reporting on Toe Nail Fungus, Excess Capacity and Lessons in Depreciation!

Until next time, be good and cultivate your community of friends.

 

 

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The Illinois Lottery and Really Bad Math Skills–Why the Luck of the Irish Won’t Improve your Odds of Winning

As my daughter becomes more involved with Irish dancing, I have become more acutely aware of Irish culture and heritage.  The annual Illinois lottery‘s St. Patrick’s day raffle apparently is wildly popular.  Today when I attempted to buy a $20 ticket for a chance to become a millionaire, the clerk at my local 7-11 kindly told me that all tickets were sold out.  Now some things are shocking and some simply don’t make sense.  Sold out lottery tickets ring in my head as a huge entrepreneurial opportunity.  What is really at play here?  First in raw numbers the chances of winning a large lottery jackpot are similar to being eaten by a tiger and a shark on the same day (NY Times “Economix Putting your odds in lottery context” 10/19/09).   Since I don’t plan on swimming with sharks and napping with tigers at the same time, I may have to look at an alternative revenue stream.  Surely I am not the first consider why people buy lottery tickets but I would suggest people play the lottery for four reasons:

1.  Operant Conditioning using variable reinforcement (termed by June Foyle of Suny NY Clinton).  In terms we can understand this means fun caused by the possibility of an unpredictable reward, similar to why we like to watch contested sports.  When something is unscripted and our team has a chance to win and we are captivated.  Similarly when an individual has a chance to win a cash prize (termed variable reinforcement), even though the odds are high everyone has a dream to pursue.

2.  The Availability Heuristic is the concept in which you hear constantly about a winner.  Our mind begins to frequently recall success stories often repeating the same instance.  This is why the state lotteries run the drawings on TV and make sure the winners do an ample amount of publicity work.  As we continually hear about lottery winners,  our mind relies less and less on probability and more on the wonderful anecdotes of the lottery winners.  In real terms we equate the probability of winning with how often we hear about lottery winners.

3.  The Slot Machine Fallacy is the assumption that as a gambler we are “due”.  Our run of unsuccessful  winning tickets is about to end any day as the numbers are going to turn our way.  Again probability is temporarily suspended and we know that winning is imminent.  We will be rewarded as our time to win has come.

4.  Selective Memory plays along closely with the Availability Heuristic.  Hence we choose to remember only the instances in which we win rather then the actual facts surrounding the circumstances.   These observations fascinate me as en Entrepreneur because I see the challange as re-creating these elements in a business model.  How can a I create a contest that gets people excited to play?  What do I do make sure only the positive outcomes of my business are well represented across all media platforms.  How do I communicate to customers that if they buy my product or service they will be rewarded?  Finally how do I use the power of customer selective memory in marketing my business so I will satisfy consumers based on a high level of emotion?

Lets part today borrowing a concept from Game Theory.  If I called you on the phone and told you that had just won a million dollars your audible scream measured by a decibel level would be quite high.  However if I called you and reported that you had just won two million dollars would your scream be twice the decibel level as when you were notified that you had won exactly half the sum of money in the previous phone call?  As a teaser I will discuss the economic concept of the utility of money in an upcoming post.  Stay tuned loyal readers.

Until next time, be good and cultivate your community of friends.

Doing God’s Work, Moral Bankruptcy and the Blues Brothers

Does it take the Blues Brothers for us to learn about faith, God and choosing to do the right thing?  In light of Goldman Sachs and Bank of America, I am sending my kids to the movies for a religious experience.  At least Jake and Elwood were convinced they were on “a mission from God” to reunite their band and keep the orphanage they grew up in from bankruptcy.  In fact, you don’t have to rely on my judgement of their intentions.  In observance of the 30th anniversary of the movies release in June 2010, the Vatican’s official newspaper L’Osservatore Romano has dubbed The Blues Brothers a “Catholic classic”.  In contrast Lloyd Blankfein, the CEO of the 143 year old investment bank Goldman Sachs stated in a November 2009 interview with The Times of London that he’s just a banker “doing God’s work”.  I guess in this case, toxic credit default swaps, government bailouts, excessive bonuses and acting with intent against the best interest of his customers are the work of a deeply humble religious man.  To put it bluntly then Greg’s Smith deftly penned op-ed fair-well was the work of an atheist or agnostic.  Another words Mr. Smith began doubting the holiness with which Mr. Blankfien served the creator.  This blight of the pen cost Goldman Sachs shareholders 2.2 billion dollars on paper and will make me think twice about how my business ethics and behaviors intersect with my religious beliefs.

Until next time, be good and cultivate your community of friends.

I am just a banker “doing God’s work”  Lloyd Blankfein CEO Goldman Sachs November 2009

 

Amateurs Built the Ark, Professionals Built the Titanic. Why the Ability to Adapt and Learn Trumps Credentials.

The title reflecting how the Ark and Titanic were built is a famous quote with an anonymous origin.  In an economy where if you want a job you have to create it and the market will dictate the value of your product or service, it is time that we build the “Ark”.  An entrepreneur’s ability to prototype, assess and accept failure will go a long way in determining who will rise and who will fall.

 

A prototype is one of the most effective ways to gauge the viability of your venture.  By creating an original, functional, small scale model of your product or service, you are able to let potential customers see it, test it, taste it, use it and smell it.  This process will point out potential problems in the product’s design, giving entrepreneurs an opportunity to fix the problem before a large-scale launch.  The feedback you receive from your prototype often leads to design improvements, and new features you may have never realized on your own.

Here are some prototype assessment questions suggested by “Corporate Venturing: Creating New Businesses Within the Firm” by Block and MacMillan, 1985.

1. Completion of product testing:  Is there are real market opportunity? Will customers buy the product? How should the product or service be marketed or distributed?  Are your early assumptions about the opportunity still correct?  What level of sales can be achieved?

2.  Completion and financing of the prototype and venture:  How long does it take to produce the prototype?  What is the cost?  What is the time frame in which the prototype can be produced?

3.  Production start-up:  Are operations working as expected and if not how can you improve them?

To complete your assessment don’t forget about continuing to scan the marketplace for competition and potential collaborators.

 

Finally lets put failure in perspective.  Personally I have experienced at least 15 different business failures.  Yet I still get up in the morning ready to try again.  The failure of a venture does not have to reflect on you as a person.  Successful entrepreneurs use failure as stepping stones to success.  As detailed in the November 1995 issue of Entrepreneur Magazine, NBA great Michael Jordan frames his athletic failures to breed success.  Jordan states ” I’ve missed more than 9,000 shots in career.  I lost almost 300 games.  Twenty-six times, I’ve been trusted to take the game-winning shot and missed.  I’ve failed over and over and over again in my life and that is why I succeed”.  I think we can all agree that after 6 NBA Championships and a hall of fame career, most people would classify Michael Jordan’s basketball efforts as a success.

In echoing a great quote from Eleanor Roosevelt who said:

“You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face. You must do the thing which you think you cannot do”

So dear friends I implore you to protoype, get your feet wet, dump cold water on your head and take an honest look in the mirror.  This will lead us to best practices and the promised land.

 

Until next time, be good and cultivate your community of friends.

 

 

Giordano’s and the Moral Hazard of Bankruptcy

As I talked about in an earlier post on the Moral Hazards of Bankruptcy,  here are two relevant links to articles about how the ownership of the Chicago based pizza chain of Giordano’s has been accused of looting the company of cash and assets before its impending bankruptcy.

http://articles.chicagotribune.com/2012-01-17/business/ct-biz-0118-giordano–20120117_1_eva-apostolou-philip-martino-giordano

http://articles.chicagotribune.com/2012-03-06/business/ct-biz-0307-giordanos–20120306_1_eva-apostolou-philip-martino-giordano-s-enterprises

Shareholder Value and Making the World a Better Place–an Argument for the Social Business Model

Is their room for global corporations to make the world a better place and actually have a double bottom line?  I would like to suggest an answer but ultimately this is an idea that marketplace will have to validate.  Lets back up for a minute and dive deeper into the question.

If we operate under the assumption that the singular outcome for a global corporation such as Amazon is to deliver value to the shareholders, is their room for a double bottom line?  That is, can Amazon deliver value to its share holders while at the same time contributing to a social cause or alleviate an injustice.  I strongly believe that this is possible, however the message has to start at the top.  If we look at a company like Amazon, its CEO Jeff Bezos would have to go on record and state that his intended outcome in addition to shareholder value is a designated social cause.  Moving forward Amazon’s shareholders would be able to decide if the monetarily immeasurable value of the intended social cause is important and  brings with it an intangible benefit.  Amazon shareholders would have to be willing to hold the stock knowing that the goal of a double bottom line may have measurable costs.

With all this said I think that Global Corporations have to at least consider what they can gain by supporting socially appropriate causes.  More importantly as consumers we must demand that corporations we interact with not only produce profits but they improve people’s lives.  So for all of the aspiring entrepreneurs out there  your job is to create change for society while maintaining your fiduciary responsibility to achieve profitability. 

Please let me know your thoughts about this.  Can we expect corporations to act for the common good when it comes to social causes?  Only the market will tell us.  In the meantime please take one small step toward making the world a better place before we meet again. 

Until next time, be good and cultivate your community of friends.

Excellent Video on Entrepreneurship

Great Video on the meaning of Entreprenuership.  If you need a little inspiration to keep going, sometimes a good video helps.  This was made by the good people at Entrepreneur Week.

Driven By Ambition

 

What is an entrepreneur to you?

How can you get started in entrepreneurship?

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Bad Business Decisions, Moral Hazards and the Legal Way to Defraud the Public

As a business owner with numerous customers that have gone bankrupt in the last few years, there is one particular striking element that keeps me questioning the structure of our bankruptcy laws.  Recently I received a “Summary of Trustee’s Final Report and Applications for Compensation” from a former customer.  At one time this customer operated six retail stores before some bad business decisions and failure to pivot and adapt to customer demand ultimately caused his business to fail.  What is striking about the Trustees Summary is the amount of money owed to creditors $ 1,754,000.    The receipts from the debtor are $20,587.87.  Of course the bankruptcy attorney and trustee are receiving their fees paid in full.  After these fees totaling 11,217.64 are paid, this leaves $9,370.23 to be split among the creditors that are owed over $1.7 million.  Just as an example, the mall owner where these stores were located is owed $350,000 and will be paid $1,800.  I am owed $1,400 and will receive $1.36.

This begs the question many of have asked regarding the financial meltdown and this situation I describe.  At what point did the principal know he was going to fail and he made a conscious decision to extract as much cash from the entity knowing that there would never be re-payment.  In the case of AIG, Fanny Mae and Freddy Mac there is an inherent moral hazard with the full faith and backing of the federal government.  If profits are declining, increasing risk is a possibility to gain higher returns since a government bailout can be counted on.  I would pose a similar question to my former customer–at what point did he know bankruptcy was imminent yet he continued to spend other people’s money?

As my father taught me many years ago, life is not fair and the sooner you get over this notion is when you can be proactive and address some of life’s inequalities.  So if I walk into Walgreen’s tomorrow and I leave without paying for a roll of toilet paper, I can be arrested and charged with a crime.  However a bad or poor business decision that affects and hurts many more people will not be prosecuted.  I have many more similar stories to share at a later date.

When you wake up tomorrow morning, start your day by being honest with yourself and your product or service and make sure you are providing what the market values and demands.

Until next time, be good and cultivate your community of friends.

Kidnapping, Pivoting, Best Business Practices and the Triple Bottom Line

The FARC, Columbia’s main rebel organization announced today that it will no longer kidnap “for financial ends”.  When analyzed in a business context this is an example of a pivot. Obviously the FARC is willing to forgo the revenue generated to achieve a higher means, even possibly a more peaceful existence.  This is a great story to learn how a political movement has made both a policy choice and business decision based on feedback and facts on the ground.  While not condoning kidnapping or any such violent policies, it is interesting how all entities have to justify their means through which they produce revenue.  When is the last time you thought about all the effects of your revenue stream.  How do your revenues affect production, people and the planet, the ultimate triple bottom line.

Until next time, be good and cultivate your community of friends.

Do you have what it takes? “The Entrepreneurial Personality”

David McClelland‘s book “The Achieving Society” (first published in 1961) detailed six critical traits that entrepreneurs posses:

1.  Desire for Responsibility.  Entrepreneurs prefer to be in control of their resources and take  deep sense in the responsibility of the outcomes they achieve.

2.  Preference for moderate risk.  As detailed by Malcolm Gladwell in his article “How Entrepreneurs Really Succeed”, we are not wild risk takers, rather we mitigate, calculate and monetize risk.  Entrepreneurs serve more as risk eliminaters rather than risk takers.  A good way to minimize risk is to prepare a robust and competent business plan.

3.  Confidence in your ability to succeed.  Entrepreneurs are supremely self-confident in their ability to succeed.  In addition optimism allows us to continue down the path if multiple previous efforts have yet to be fruitful.

4.  Desire for immediate feedback.  Entrepreneurs are always looking for a way to improve and increase effectiveness.

5.  High level of energy.  This is a critical factor given the amount of effort both the emotional and physical  needed to create a new venture.  On average 66 percent of Gen Y entrepreneurs work over 10 hours a day and six days a week (from a survey conducted by American Express Open April 26,2007).

6.   Future orientation.  Entrepreneurs want to define their future for themselves and others.  Sitting passively is out of the question.  We look ahead to what needs to be done rather than revel in today’s success.

So for today, that is it.  Meet me at the next milestone with your acheivement in hand ready to change the world.

Until next time, be good and cultivate your community of friends.