The End of Trumpism

The End of Trumpism

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Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

Businesses need to plan for the future. And part of planning are the assumptions you make. As Biden takes office, there is a lot of talk about whether the “movement” that Trump led is at its end, or just beginning. The good news is we have the tools to be predictive when answering that question, and those tools tell us that for the most part Trumpism is over.
As I wrote in August when California put to vote its “Gig Economy Law,” not even a state legislature can stop a trend. The Gig Economy is one of the biggest mega-trends out there, so trying to legislate away the trend and return to old methods of employment was simply not going to work. California needed to make changes that aligned with needs of gig workers, not try to outlaw the practice. And the measure failed.

It’s this same logic that makes me confident the policies that applied the last 4 years will go away, and any “movement” to try and return to that course will not succeed.  Like California’s effort, the policies of Trumpism were anti-trend.  While these policies could be enforced for a short time, they simply could not withstand the power of the long-term trends, and thus were doomed from the outset.  Let’s take a look at some of those policies and trends, and review why they were (at best) short-term actions. {Note, this is not predicting an end to the Republican Party, nor Conservative politics.  This discussion is focused on the American policies of the last 4 years during the Trump administration.}

 

    • Anti-globalization is doomed to fail. We have the internet now. Everybody can see what’s happening in the world, and everybody can talk to everybody else. Borders have meaning, but trade across borders cannot be stopped. We all buy and sell products internationally daily. Even the Trump website sold apparel made in China. To try and stop trade is impossible, and tools like tariffs are simply woefully out of date. Those who try to interfere with globalization will have economic suffering, while allowing stronger international traders to grow. { Side note read column on why Brexit is Economic Destruction vs. Creative Destruction  }
    • Anti-immigration is doomed to fail. America, like almost all mature economies, is an aging demography. If you don’t add new people economic activity will suffocate under the weight of caring for the aged. You need demographic growth, and it needs to be younger people who are working. Simultaneously, companies that need skills need access to international markets to recruit people to work under visas. Immigration is good for economic growth, and an inherent part of globalization. Simply put, America needs immigration to keep growing. { Side note read column on why Japan’s aging demographics is an economic “time bomb”.  }
    • Chronic tax cuts without equal (or greater) investment is doomed to fail. The argument for low taxes is to provide more money for investing in business to grow – thus creating jobs that see higher pay due to increased demand for workers. However, recent tax cuts did not have associated policies for re-investment, and thus much of the money was used to repurchase shares of stock, make acquisitions of existing businesses and simply build a cash hoard. Simultaneously, tax cuts led to a reduction in government spending on infrastructure and other jobs creating projects, which further worsened the economic growth opportunity. This led to enormous income inequality – which has quite literally led to people “taking to the streets.” At some point policies have to shift toward investment to generate economic growth. { Side note read column on why share buybacks are not good for the economy nor good for shareholders. }
    • Isolating China only makes them stronger. We have a balance of trade deficit with China, but tariffs and attempts to stop trade only made the balance of trade WORSE. The net is we want Chinese labor, and products, a lot more than they need American products. Retaliation is very real, and the USA is woefully unprepared for economic retaliation. The biggest market hurt by Chinese retaliation is agriculture, as witnessed by the incredible number of farm failures last 4 years. Them not buying from us doesn’t affect them nearly as much as it affects us. Meanwhile, China keep investing in global projects, their economy keeps growing, and now China’s economy is larger than the USA’s. We desperately need to focus on how to compete with China in global markets, not blindly think we can simply walk away. { Side note column on changing economic positions and how China’s growth is impacting global positions including currency valuations. }
    • Sanctions and other policies to try controlling middle-east behavior are doomed. US policy was historically built on petroleum demand. But now these countries must move beyond oil sales to grow, and they desperately know this. The only successful long-term policy is to help these nations grow diversified economies so they can create jobs and keep their citizens happy. {Side note column on how falling petroleum demand is affecting global markets and changing the winners. }

     

  • These are just some of the long-term trends that Trumpism ignored. Short-term shear force of will, lying about the data and ignoring the obvious could allow naysayers to hope they would change the trajectory of history. But long-term, trends always win. Evolution always moves forward, never backward. While Trumpism was a very interesting effort to fight trends, it was doomed to fail. And now that we can see the almost wholly negative economic implications of these policies it is extremely unlikely any such “movement” can re-establish itself. People do not act against their own self interest very long.

  • Winners don’t fear trends and the change they create. Rather they accept the trends on build on them to grow. Looking forward business should not plan for Trumpism to return in any meaningful way. As a set of policies they are as likely to succeed as storming the capital was likely to change the course of an election. Short term a lot of noise, long-term meaningless. So we can move forward building our plans based on trends, and a shift to economic policies much more aligned with long-term trends.

    Key lessons?

    First, the world is growing and leading businesses will grow. If you’re not growing, you’re dying.  Second, never plan from past success, but instead plan for the future. You don’t grow value by being operationally excellent, because the world is forever changing and it will make your past business less valuable even if you do run it well. Third, make sure your plans are all built on trends. Let trends be the wind in your sales, or the current under your boat, or whatever analogy you like – just be sure you’re using TRENDS to drive you business planning, product development and solutions generation. Customers buy trends and help for them to achieve the future.

  • Here at Spark Partners, we are experts at trend analysis, trend planning and effective resource allocation. Don’t let a comfort level on doing more of the same get in the way of your future growth. Embrace trends in the market and let us help you identify critical trends and invest smarter to build on trends and grow.

    Don’t Miss Adam’s Recent Podcasts!

    Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

    TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

    Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384

The Decline and Fall of Chicago and Illinois

The Decline and Fall of Chicago and Illinois

Chicago, and Illinois, are in big economic trouble.

  • 7th straight year of population decline. Losing 235,000 people in 10 years, 3x the amount of any other state. Last year saw a decline of 79,500 people – second only to much larger New York – and the rate of people leaving is accelerating.
  • Illinois has, on average, property taxes 2x the national average. If you owned the “Home Alone” house in suburban Chicago, since the movie was made in 1990 you would have paid $890,000 in property taxes.
  • Chicago is the worst residential real estate market of any large city in America. While values have been rising elsewhere since the Great Recession, in the last decade, property values in Chicago have declined 20%.
  • Sales tax is 9%, and on some products 10%+, one of the highest rates in the USA. On-line purchases are taxed at 10.25%, for example. Illinois is one of only 7 states to charge sales tax on gasoline. And Illinois has the highest cell phone tax in the country.
  • Illinois roadway toll fees are widespread, and among the highest in the USA, with the majority of those funds going NOT to road improvement but rather into the general budget to cover state expenses.
  • Illinois is 46th in private sector job growth – and would be 50th except the #1 source of job growth is government jobs. And 40% of the government workforce makes $100k+/year. The total number of jobs in Illinois December, 2019 was 6.2M – unchanged since 2015 – and up only slightly from 5.9M in 2010 – yielding a pathetically low growth rate for jobs of 1/2 of 1% (.5%) per year
  • 1/3 of the state budget is pension payments, and pension debt is 26% of state GDP – highest in the country. Lots of retirees, very few new jobs to pay their pensions.

Click for ebook

Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

Gibbon wrote “The Decline and Fall of the Roman Empire” as a treatise to uncover how such a powerful empire could lose its greatness. There is no doubt, Chicago and Illinois were once great. The area was known for great jobs, great infrastructure, great transportation system, great homeownership – and for many decades considered one of the best places to live in America. Back when agriculture and manufacturing dominated the economy. But quite obviously, as the world changed, and the sources of economic value (including jobs) changed, the late, great state of Illinois kept pushing on with “business as usual” instead of changing policies and investments to re-orient for the Information Era.

Things were not destined to become this bleak.  Chicago could be Austin today – but obviously it isn’t.  Where Austin, and Texas, looked at trends and made investments beyond the old “core” of oil and gas, Chicago and Illinois completely failed to look at trends that indicated a clear need to change. Problems, and the path to solve them, have been obvious for years.  It was easy to predict this would happen.  But a chronic focus on the short-term, rather than the long-term, combined with a complete unwillingness to change how investments were made caused state and city leaders to consistently ignore warning signs and make one bad decision after another.

Indicators of Decline

I’m an expert on trend-based planning, so let’s take a look at the telltales this was coming and how those telltale indicators were ignored:
  • In February, 2006 (yes 15 years ago) I wrote that Illinois was the #1 net job loss market in the country. This factoid highlighted an emerging problem in the underlying economy.  The state was still considerably dependent on old-line agriculture/food giants, those businesses were crumbling and unlikely to recover as the economy shifted.  Notably Kraft was in its 5th year of what was to be a turnaround (that never happened) and Sara Lee was under incompetent leadership that kept selling businesses to shore up declining revenues and earnings.  The state, and city, had failed to develop an infrastructure for investment in start-up companies.  There was a total lack of investment money for entrepreneurs from paternalistic large companies such as Motorola and Ameritech. And a lack of money for innovation from banks, venture capital and private equity firms.  Existing businesses were aging, cutting jobs and none were focused on investing in new companies to keep the local economy tied to the emerging Information Economy [ link  ]
  • In February, 2009 Forbes selected Chicago as the 3rd most miserable city in the USA, citing high taxes, no job growth, infrastructure decay, congestion and bad weather.  An uproar ensued – but no change. I then noted my 2006 column, and recommended a very serious Disruption in how Chicago was managing its resources. Clearly the “more of the same” strategy trying to defend its past was not working.  Unless there was a disruption, Chicago would get worse – not remain the same, and certainly not get better.  The signs were clear that from ’06 to ’09 nobody was thinking about the big changes needed [ link  ]
  • In June, 2010 it was reported that Illinois lost 260,000 jobs between 2000 and 2010 – and that was an indicator of why Chicago and the state were having so many economic problems.  I recommended the city and state make significant changes in resource allocation to keep more start-ups local.  The University of Illinois was the #4 engineering school in the US, but the vast majority of graduates left to one or the other coasts. Local businesses were not developing new businesses, thus not hiring these top students.  Start-ups at the universities, and by recent grads, could not obtain funding, so they fled to where the money was.  Economic reliance on stalled companies like Kraft, Sara Lee, Motorola, Lucent, Sears and United had created a Growth Stall that was sure to lead to additional job losses – when the best talent was right there in the state! [link ]
  • I followed up a week later that same June with a column on how Mayor Daley was very popular with voters and local businesses, but he was setting up the city (and state) for failure.  There was a focus on keeping the “old guard” happy, and doing so by completely ignoring opportunities for future growth.  Offering tax breaks and subsidies to recruit corporate headquarters (like Boeing) created very few jobs, and was a poor use of resources that should be diverted to funding start-up tech and bio-tech companies.  And financial machinations, like selling the city’s parking rights, gave a short-term lift to the budget, hiding significant weaknesses, while creating massive long-term problems. Chicago and Illinois politicians were focused on short-term actions to get votes, and ignoring the very real jobs problem that was tanking the economy.  [ link ]
  • By April, 2014 I was able to clearly demonstrate that my predicted economic stagnation spiral had taken hold in Illinois.  Defend & Extend investments to shore up declining companies – like Sears – robbed local governments of funds for job creating programs.  And a decade + of no job creation was forcing taxes up – at a remarkable rate – which kept businesses from moving to Illinois; kept them from opening software labs, coding facilities, research centers, pharma and bio-pharma production plants, etc.  With no growth, but rising costs, the death spiral had begun and needed immediate attention [ link  ]
  • In September, 2016 the outward migration from Chicago and Illinois had become a powerful trend.  Looking at demographics, the market was aging.  Rising costs and no growth had pinched budgets to the limit, while pension costs had become an unsustainable burden on the state’s citizens.  Just like Japan was in an aging crisis, Illinois was in an aging crisis.  And this was destined to create even more problems for the economic death spiral that began before 2006. [ link  ]
  • So by January, 2017 the demographic tailspin was clearly creating a vacuum pulling people out of Chicago and Illinois.  Fully 4 years ago it was obvious that the predicted trends had taken hold, and nothing short of an incredible disruption would save Chicago from becoming the next Detroit. Using the simplest trend planning tools made it clear that unless there was radical change in investments the Chicago empire was at its end. [ link  ]

Lessons for business?

Far too many businesses act like Chicago. “Business as usual” dominates.  Resources are automatically routed to defending old business lines, rather than investing in new products and solutions.  Focusing plans on historical customers, products and markets create blindness to market shifts, and a reluctance to move forward to new technologies and markets.  Very little energy is put into trend analysis, and plans are not built based on trends and likely future outcomes (planning from the past dominates over planning for the future.)  People who point out likely future bad outcomes unless serious change is undertaken are ignored, or shouted down, or removed entirely. Short-term financial machinations (selling assets, or a business, or offering deep discounts to keep customers) create an illusion of security while long-term trends are undermining the business’ foundation.
We are experts at trend analysis, trend planning and effective resource allocation.  It was clear 15 years ago that major resource reallocation was necessary for Chicago to continue growing its economy. Don’t let a fixation on doing more of the same get in the way of your future growth, like Chicago.  Let us help you identify critical trends and invest smarter to build on trends and grow.

Key lessons?

First, the world is growing and leading businesses will grow. If you’re not growing, you’re dying. Just like GE and Exxon. Second, never plan from past success, but instead plan for the future. You don’t grow value by being operationally excellent, because the world is forever changing and it will make your past business less valuable even if you do run it well. Third, make sure your plans are all built on trends. Let trends be the wind in your sales, or the current under your boat, or whatever analogy you like – just be sure you’re using TRENDS to drive you business planning, product development and solutions generation. Customers buy trends and help for them to achieve the future.


Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384

Trends Drive Value- Apple, Amazon, Google, Facebook, Microsoft

Trends Drive Value- Apple, Amazon, Google, Facebook, Microsoft

Click for ebook

Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

When looking at America’s 8 largest companies, a LOT has changed in 15 years. Back in 2005 the most valuable company was GE. The list was dominated by oil & gas companies; ExxonMobil, BP, Royal Dutch Shell. The biggest bank (Citi) and biggest retailer (Walmart) and 1 pharma company (J&J.) There was only 1 tech company on the list (Microsoft.)Value of top eight tech companies

But the world has changed, and that has impacted these companies dramatically. Most had GREAT pasts, but they did not adapt to a changing world. GE’s market cap has fallen 75% as it failed to keep up with trends. Oil companies failed to move into renewables and other industries (like electric car production) and they’ve lost over HALF their value. Walmart is most noted for missing the e-commerce trend, the big banks were clobbered by the Great Recession and “big pharma” hasn’t produced a blockbuster for many years. All down significantly.

But, the value of the top 8 companies is MUCH higher than 15 years ago – 5X more. These losers were replaced by some very serious winners. From $2.1T in combined value, the top 8 are now worth $10.5T. But notably, only 1 company is still on that list – Microsoft – which is up 620%!

The list is now dominated by 7 technology companies.

And for good reason – they all followed trends. Apple, Amazon, Microsoft, Alphabet (Google,) Facebook, Alibaba and Tencent all built their strategies around developing solutions for people to follow the major trends of being mobile, operating asynchronously, supporting gig work and adding artificial intelligence (AI) to their customers. By refusing to rest on past laurels they have become the mega-giants of today. (Hartung, “Thrive to the Future – The 4 Top Trends for 2021 and Beyond)

 

Value of top eight tech companiesThat these companies would overtake old leaders was not a foregone conclusion – nor an obvious one to most people. Not only were the previous giants big, they had incredible reputations and extremely strong management teams. And these tech companies were not without problems.

  • Apple almost went bankrupt just a few years prior to 2005, trying to be the “Mac” company. But Apple built one innovation after another helping people meet the emerging big trends – until it became the most valuable company on the planet (10 yr value increase 540%)
  • Microsoft was locked in to its Windows/Office domination and seemed unable (or unwilling) to acknowledge the big trends and its value languished under a terribly myopic CEO (Ballmer.) Yet, new leadership was able to see the trends and moved radically to build out cloud services and support for alternative customer solutions that changed the company and its fortunes (10 year value increase 330%)
  • Amazon was a former book seller turned general merchandiser. But Amazon started applying technology to understand its customers and help them be better shoppers, using AI to make them the leader in all things e-commerce. Simultaneously Amazon built the worlds largest and most secure cloud services business (AWS) helping support all major trends (10 year value increase 1,350%)
  • Google was a search engine, with an unclear business model. But Google went to unexpected lengths to make ALL forms of information digital, and accessible, and searchable. And it monetized that digitization in ways far beyond anyone expected leading to the end of newspapers and many other publishers (10 year value increase 370%)
  • Facebook was considered a fad for young people. Most business leaders thought Facebook’s users would disappear, and its young leaders would learn there was no revenue in attracting eyeballs (just as News Corps learned and shut down MySpace.) But Facebook built out the trend for social contact in a mobile, asynchronous smart way creating an entirely new business market called “social media.” Facebook looked at trends in how people connected, making brilliant acquisitions early of Instagram and WhatsApp that allowed Facebook family of products to become the #1 use of the internet (10 year value increase 450%)

Key lessons?

First, the world is growing and leading businesses will grow. If you’re not growing, you’re dying. Just like GE and Exxon. Second, never plan from past success, but instead plan for the future. You don’t grow value by being operationally excellent, because the world is forever changing and it will make your past business less valuable even if you do run it well. Third, make sure your plans are all built on trends. Let trends be the wind in your sales, or the current under your boat, or whatever analogy you like – just be sure you’re using TRENDS to drive you business planning, product development and solutions generation. Customers buy trends and help for them to achieve the future.


Do you know your Value Proposition? Can you clearly state that Value Proposition without any linkage to your Value Delivery System? If not, you better get on that pretty fast. Otherwise, you’re very likely to end up like encyclopedias and newspaper companies. Or you’ll develop a neat technology that’s the next Segway. It’s always know your customer and their needs first, then create the solution. Don’t be a solution looking for an application. Hopefully Uber and Aurora will both now start heading in the right directions.

Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384

Why Uber’s Autonomous Car Project Flopped

Why Uber’s Autonomous Car Project Flopped

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Business Trends from COVID19 impact hartung

Thrive to the Future – 4 top trends for 2021 and beyond.

On December 7, Uber announced it is spinning out its autonomous car development effort to a new company- Aurora. On December 8, NASA announced a large flare from the sun was going to produce auroras over the northern hemisphere. NASA’s solar flare fizzled and there was no light show. What about Uber’s Aurora?

After spending what was likely a billion dollars on development, Uber is pushing its AGV out the door, along with $400 million, to be a separate company all on its own named Aurora. After a lot of development, serious steps forward in self-driving technology, and some problems, Uber is simply walking away. Expensively. It begs the question “what went wrong.”

The #1 problem with this investment was created at the outset. What is Uber’s value proposition? That was at the very least complicated, and at the worst never quite clear. Uber was always supposed to be a lot more than an alternative to taxi and limo services. Ostensibly Uber was a tech company that matched up unused resources with people who could use those resources – which is why Uber is often lumped into discussions with AirBnB. Both are supposedly tech companies that allow the unleashing of locked-up value in underused resources to marginal users who could benefit from the marginal increase in resource capacity.

If that’s the case, why would Uber invest in autonomous car technology? That’s what went wrong. People driving their own cars as gap-filling cabs is a value delivery mechanism. It is one use of the technology in one application. The value of Uber is supposed to be its matching technology with some elaborate pricing capabilities (surge pricing, for example.) But autonomous cars were an improvement in the delivery system – an effort to eliminate the costly driver and thus compete more specifically against taxis in ferrying around people. Uber confused its Value Proposition with its Value Delivery System – and thus it made huge investments in the latter when it should have remained focused on the former.

Uber needs to refocus on its Value Proposition.

How can Uber help me unlock value in my underused resources? How can Uber help me get better access to resources, help me access underused resources? Neither of those are met if I have to turn my car into an autonomous vehicle, at my own cost. In a way it actually defeats the Value Proposition, because rather than unleashing locked-up value in my resource (car) it causes me to invest in technology I don’t need and may not even want. And as an Uber user I get no additional value from the car being driverless – that doesn’t inherently help me meet my needs any better. Overall, autonomous vehicle technology really misses the point of the Uber Value Proposition.

Lots of companies make this mistake. They get so focused on how they are delivering value that they over-invest in the Value Delivery System, and lose sight of the Value Proposition. Encyclopedias got so focused on printing books they forgot their value proposition was instant information – thus letting Google drive them out of business. Newspapers were so focused on the process of daily newspaper prep and delivery they forgot their Value Proposition and let on-line news outlets kill them. Sears and ToysRUs got so focused on running traditional stores (and traditional retail metrics) they forgot their value proposition and let Amazon steal customers away. ABC, NBC, CBS, BBC got so focused on running broadcast television networks they let streaming services (Netflix, Disney+, Hulu) steal all the entertainment eyeballs.

Uber’s mistake just happens to be really costly, and really dumb.

They should never have invested in autonomous vehicle technology. Leave that for someone who identifies a very real unmet customer need that is fulfilled with an autonomous vehicle. The leadership of Aurora first and foremost have to define their value proposition – and then figure out how to deliver that value with their technology. Nobody succeeds by inventing a technology that solves no real problem – that’s how you get Segway! Or the Amphicar that turned itself into a boat. Instead, you identify the need then develop the delivery mechanism to fulfill that need.

Do you know your Value Proposition? Can you clearly state that Value Proposition without any linkage to your Value Delivery System? If not, you better get on that pretty fast. Otherwise, you’re very likely to end up like encyclopedias and newspaper companies. Or you’ll develop a neat technology that’s the next Segway. It’s always know your customer and their needs first, then create the solution. Don’t be a solution looking for an application. Hopefully Uber and Aurora will both now start heading in the right directions.

Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384

Disney and Uber – Using Trends To Great Success

Disney and Uber – Using Trends To Great Success

Click for ebook

Business Trends from COVID19 impact hartung

Thrive to the Future – the 4 top trends for 2021 and beyond.

In February, Disney appointed a new CEO from inside the company. I was not a fan. He came from the traditional,old Disney businesses – studio movies and theme parks. Both of those businesses are historical artifacts, not growing, and clobbered by the acceleration of trends due to the pandemic. But…… after crashing almost 50% shortly after changing CEOs (and the pandemic hitting the USA) the stock just reached a new all time high – recovering all those losses and pushing ahead an additional 16%.

A lot of companies are complaining about how bad the pandemic has affected them. They were tied to their historical value delivery system, and working hard to keep optimizing that business model. They weren’t following trends, so when the pandemic accelerated trends to more mobile, more asynchronous work, greater use of gig resources and ever greater expectations for AI (artificial intelligence) they simply were not prepared.

uber business pivot

But smart companies moved really fast to implement their plans for new business based on trends. For example, while everyone thought of Uber as an alternative to taxis, leadership had already been looking at changes in package distribution. They could see problems in the post office, limitations (and pricing) to UPS and Fedex, and the “last mile” delivery problem everyone local had — as well as alternatives being tested by Amazon.com. So when demand for local deliveries picked up, Uber was ready to change. In a year demand for taxi type services fell 45%, but deliveries rose 100%!! And even though it was small, freight jumped 35%. The net was that in an extremely fast changing marketplace, gross bookings for the first 3 quarters of 2020 were $40.7M vs. $46.8M in 2019. In a terrible year, Uber was ready (and able) to move fast to implement changes to keep revenues moving forward.

And Disney is another great example. Theme parks and studio entertainment seemed to be relics of a bygone era, and in 2020, demand was hit hard. Theme parks fell 37% and studio movies fell 13%. I thought Disney would go into cost cutting mode exclusively and start down the road to irrelevancy.

Disney business pivot

But I was wrong. Yes, Disney did cut employment in those two divisions. Extensively. But that was an acceleration of something bound to happen. Those businesses were shrinking and outdated. However, simultaneously, Disney poured resources into Media Networks and Direct-to-Customer, two business units highly aligned with trends! Basically, Disney went from that old-line movie and parks company to a very well positioned e-commerce vendor and competitor to Netflix!! In just 9 months. Already, Disney has 80M subscribers for Disney+, compared to Netflix 200M, and is targeting 260M by 2024!!! Disney has demonstrated it is ready to launch first run movies, at much higher prices, on its network – building out new pricing schemes as well as new business models for streaming content!

The lesson here is to be prepared for change! Don’t build your plans just on the past – past products and customers. Instead, look hard at trends and build scenarios for the future based on trends. Be ready for those trends to accelerate. And then TAKE ACTION. Don’t wait. Don’t stall. Go to the future by implementing those plans.

If you are planning based on trends you will be prepared for big changes in your “base” or “core” business. And you’ll develop plans for new solutions that meet emerging trends. So when the opportunity presents itself, like in a pandemic – or something a lot less dramatic – you’ll be ready to implement a new business. You can shift your value delivery system quickly to continue meeting the Value Proposition that you offer your customers.

Congratulations to Uber and Disney for doing good trend planning and being ready. Are you properly planning? Are you ready for change?

Don’t Miss Adam’s Recent Podcasts!

Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384

Now’s The Time To Buy FAANG Stocks

Now’s The Time To Buy FAANG Stocks

Since 2012, I’ve been a huge fan of Facebook, Apple, Amazon, Netflix and Google. And they have dramatically outperformed the market. In the last few weeks their values have fallen dramatically, and I’ve heard grumblings that these are no longer the stocks to own.

I virulently disagree. Great companies are where you should invest. If you don’t think these are great companies, you would be right to sell them (such as GE, Sears, and many others.) But despite complaints about privacy, usage rates, nefarious users, and other attacks on technology, the reality is that we love the convenience these companies gave us. We may not think things are perfect, but we are a lot happier than we used to be, and we are pretty happy with how these companies respond to product concerns.

  • These companies are still global leaders in some of the biggest and most powerful trends everywhere
  • The shift to e-commerce from traditional retail continues unabated
  • The movement to mobile devices continues
  • Using the cloud to replace device storage and network storage will not slow
  • Entertainment continues to move to streaming from TV and other sources
  • Ad growth remains firmly on the internet and mobile devices
  • Platform usage (such as social networks) keeps growing as more uses are developed

These mega-trends are the foundation of the FAANG companies. These companies became great by understanding these trends, then developing products for these trends that have attracted billions of customers. Their revenue growth continues, just as their product development continues. And their profits keep growing as well. Nobody ever saved their way to prosperity. To increase value you must increase profitable revenues. And that capability has not left these companies.

Some of these company’s leaders have recently been called to Washington to testify. Will they be attacked, split up, further regulated? Will the government kill the golden goose? Given that the US House of Representatives has not firmly moved to the Democrats, I see almost no sign of that happening. Democrats like happy constituents, and given how happy consumers are with these companies the Democrats are very unlikely to intervene. There has long been a deep friendship, built on significant campaign financing and lobbyist involvement, between these companies and Democrats. The change in government almost insures that the actions in Washington will prove to just be a lot of short-term heat, with little change in the overall lighting.

I don’t know when these stocks will reach a short-term bottom. Just like nobody can predict market highs, it is impossible to predict lows. But the one thing I feel very strongly about is that in a year these companies will be worth more than they are valued today.

For insight into my strong favorability for these companies, take a look at the infographic I’ve provided regarding Facebook. Despite the Facebook stock ups-and-downs, this infographic explains why long-term it has been very smart to buy Facebook. Despite how people have “felt” about the company, it is a GREAT company built on powerful trends. To understand even better, buy the ebook “Facebook, The Making of a Great Company” on Amazon for 99 cents.

Facebook Launches “Portal” – Why You Want to Pay Attention

Facebook Launches “Portal” – Why You Want to Pay Attention

As all readers know, I am a fan of owning Facebook’s stock. For years I have pointed out that Facebook has been incredibly innovative at bringing people together. First, it was Facebook.com, but then leadership added WhatsApp and Messenger to expand the ability to communicate, and after that, Instagram which augmented communications via pictures and video.  These capabilities, largely asynchronous, have expanded how easily we can communicate with friends, colleagues and business connections. It is this capability that made Facebook a success, because it brought people to the platforms – and as the audience grew advertising dollars grew as well.

(Watch my 2 minute video on Facebook the Innovation Engine)

Now, Facebook has launched “Portal.” It’s a piece of hardware, similar to a tablet in size. It has a speaker and a microphone, like a smart speaker on steroids, or like an enhanced tablet designed for communicating. Built on Android, it supports a plethora of apps, and it integrates with Alexa so you can not only talk to up to 7 people at the same time, but you can all listen to music via Spotify or Pandora, etc., and you can use it to make purchases on Amazon.com

At first you’d probably say this doesn’t sound very exciting. After all, aren’t we awash in hardware from smart phones to tablets to laptops to smart speakers and connected home devices? Why would we want another piece of hardware, when we already have so many that do so many different things? And didn’t Amazon infamously try to launch a enhanced smartphone (Fire Phone) and enhanced tablet (Fire Tablet) targeted at shopping, only to fail miserably? You could say Portal is likely to follow Fire into the tech archives.

And, on top of this, aren’t people paranoid about Facebook and privacy? After Cambridge Analytica manipulated Facebook data in the last election, and then the recent breach which could have revealed information on 50 million users, aren’t people going to quit using Facebook products?

There really isn’t much data to indicate people care about these breaches, or possibly illegal uses of data. Almost everyone now realizes that whatever they post on any Facebook platform, the information is public. And the reality is that by putting their information out there it actually makes users’ lives easier. Users get connections they want, information they want, and products they want that much faster, and easier. These platforms make their lives more convenient, and billions of people have no problem exchanging somewhat personal information for the convenience it provides. The more Facebook knows about them, the easier their lives are, and the richer their network communications.

That is why I’m optimistic that Portal will have an audience. Facebook Messenger has 400 million users. Those users generated 17 billion messages in 2017. Now, imagine if those users could use Portal to make those messages clearer, more powerful. And, as of June, 2018 Instagram has 1 billion monthly active users. If you have Portal it makes Instagram connecting much easier and more interesting.

Portal doesn’t have to replace an existing smartphone or tablet. It merely has to help the people who use Facebook platforms have a deeper, more powerful connection with those in their network. If it does that, there is an enormous installed base of users who could find Portal helpful, in many ways. More helpful than a stand-alone, limited use Echo (or Dot) speaker, for example, which have sold over 47 million units so far.

Facebook is good at understanding its value proposition which is connecting people in powerful ways. Facebook has shelved products that didn’t augment this value proposition – like a generalized smart phone. But Portal has the ability to further enhance user experiences, and that gives it a decent chance of being successful. And when Facebook adds its Oculus technology to Portal, allowing for 3D communications, Portal could become a one-of-a-kind product for communicating with your network.

For a look back at Facebook’s history, and my forecasts for the company, read my new ebook, “Facebook – The Making of a Great Company.” (At Amazon.com for just 99 cents!) It will help you take a longer look at Facebook’s leadership, and give you a different view on Facebook’s future than the current negative press is providing. With the stock $70 off its high, and trading at the same price it was a year ago, you just might think this is a buying opportunity.

New ebook from Adam Hartung on Facebook

New ebook from Adam Hartung on Facebook

In the recently published, “Facebook- The Making of a Great Company”, Adam Hartung analyzes the rise of Facebook and its impact on the financial community, business marketing and innovation.

Adam’s posts over the years have predicted key milestones in Facebook’s growth and its transformation into a driver of social trends.  He tells the story of this company that has overcome negativity and skepticism in the financial community and has adapted to its users.

“So last week, when Facebook reported that its user base hadn’t grown like the
past, investors fled. Facebook recorded the largest one day drop in valuation in
history; about $120B of market value disappeared. Just under 20%.

No other statistic mattered. The storyline was that people didn’t trust Facebook
any longer, so people were leaving the platform. Without the record growth numbers
of the past, many felt that it was time to sell. That Facebook was going to be
the next MySpace.”

“That was a serious over-reaction.”

Adam Hartung, “Facebook-The Making of a Great Company”

Buy ebook now

 

Gladiators get killed. Dump Wal-Mart; Buy Amazon


Wal-Mart has had 9 consecutive quarters of declining same-store sales (Reuters.)  Now that’s a serious growth stall, which should worry all investors.  Unfortunately, the odds are almost non-existent that the company will reverse its situation, and like Montgomery Wards, KMart and Sears is already well on the way to retail oblivion.  Faster than most people think.

After 4 decades of defending and extending its success formula, Wal-Mart is in a gladiator war against a slew of competitors.  Not just Target, that is almost as low price and has better merchandise.  Wal-Mart’s monolithic strategy has been an easy to identify bulls-eye, taking a lot of shots.  Dollar General and Family Dollar have gone after the really low-priced shopper for general merchandise.  Aldi beats Wal-Mart hands-down in groceries.  Category killers like PetSmart and Best Buy offer wider merchandise selection and comparable (or lower) prices.  And companies like Kohl’s and J.C. Penney offer more fashionable goods at just slightly higher prices.  On all fronts, traditional retailers are chiseling away at Wal-Mart’s #1 position – and at its margins!

Yet, the company has eschewed all opportunities to shift with the market.  It’s primary growth projects are designed to do more of the same, such as opening smaller stores with the same strategy in the northeast (Boston.com).  Or trying to lure customers into existing stores by showing low-price deals in nearby stores on Facebook (Chicago Tribune) – sort of a Facebook as local newspaper approach to advertising. None of these extensions of the old strategy makes Wal-Mart more competitive – as shown by the last 9 quarters.

On top of this, the retail market is shifting pretty dramatically.  The big trend isn’t the growth of discount retailing, which Wal-Mart rode to its great success.  Now the trend is toward on-line shopping.  MediaPost.com reports results from a Kanter Retail survey of shoppers the accelerating trend:

  • In 2010, preparing for the holiday shopping season, 60% of shoppers planned going to Wal-Mart, 45% to Target, 40% on-line
  • Today, 52% plan to go to Wal-Mart, 40% to Target and 45% on-line.

This trend has been emerging for over a decade.  The “retail revolution” was reported on at the Harvard Business School website, where the case was made that traditional brick-and-mortar retail is considerably overbuilt.  And that problem is worsening as the trend on-line keeps shrinking the traditional market.  Several retailers are expected to fail.  Entire categories of stores.  As an executive from retailer REI told me recently, that chain increasingly struggles with customers using its outlets to look at merchandise, fit themselves with ideal sizes and equipment, then buying on-line where pricing is lower, options more plentiful and returns easier!

While Wal-Mart is huge, and won’t die overnight, as sure as the dinosaurs failed when the earth’s weather shifted, Wal-Mart cannot grow or increase investor returns in an intensely competitive and shifting retail environment.

The winners will be on-line retailers, who like David versus Goliath use techology to change the competition.  And the clear winner at this, so far, is the one who’s identified trends and invested heavily to bring customers what they want while changing the battlefield.  Increasingly it is obvious that Amazon has the leadership and organizational structure to follow trends creating growth:

  • Amazon moved fairly quickly from a retailer of out-of-inventory books into best-sellers, rapidly dominating book sales bankrupting thousands of independents and retailers like B.Dalton and Borders.
  • Amazon expanded into general merchandise, offering thousands of products to expand its revenues to site visitors.
  • Amazon developed an on-line storefront easily usable by any retailer, allowing Amazon to expand its offerings by millions of line items without increasing inventory (and allowing many small retailers to move onto the on-line trend.)
  • Amazon created an easy-to-use application for authors so they could self-publish books for print-on-demand and sell via Amazon when no other retailer would take their product.
  • Amazon recognized the mobile movement early and developed a mobile interface rather than relying on its web interface for on-line customers, improving usability and expanding sales.
  • Amazon built on the mobility trend when its suppliers, publishers, didn’t respond by creating Kindle – which has revolutionized book sales.
  • Amazon recently launched an inexpensive, easy to use tablet (Kindle Fire) allowing customers to purchase products from Amazon while mobile. MediaPost.com called it the “Wal-Mart Slayer

 Each of these actions were directly related to identifying trends and offering new solutions.  Because it did not try to remain tightly focused on its original success formula, Amazon has grown terrifically, even in the recent slow/no growth economy.  Just look at sales of Kindle books:

Kindle sales SAI 9.28.11
Source: BusinessInsider.com

Unlike Wal-Mart customers, Amazon’s keep growing at double digit rates.  In Q3 unique visitors rose 19% versus 2010, and September had a 26% increase.  Kindle Fire sales were 100,000 first day, and 250,000 first 5 days, compared to  80,000 per day unit sales for iPad2.  Kindle Fire sales are expected to reach 15million over the next 24 months, expanding the Amazon reach and easily accessible customers.

While GroupOn is the big leader in daily coupon deals, and Living Social is #2, Amazon is #3 and growing at triple digit rates as it explores this new marketplace with its embedded user base.  Despite only a few month’s experience, Amazon is bigger than Google Offers, and is growing at least 20% faster. 

After 1980 investors used to say that General Motors might not be run well, but it would never go broke.  It was considered a safe investment.  In hindsight we know management burned through company resources trying to unsuccessfully defend its old business model.  Wal-Mart is an identical story, only it won’t have 3 decades of slow decline.  The gladiators are whacking away at it every month, while the real winner is simply changing competition in a way that is rapidly making Wal-Mart obsolete. 

Given that gladiators, at best, end up bloody – and most often dead – investing in one is not a good approach to wealth creation.  However, investing in those who find ways to compete indirectly, and change the battlefield (like Apple,) make enormous returns for investors.  Amazon today is a really good opportunity.

Grow like (the) Amazon to Succeed – Invest outside your “core”


“It’s easier to succeed in the Amazon than on the polar tundra” Bruce Henderson, famed founder of The Boston Consulting Group, once told me.  “In the arctic resources are few, and there aren’t many ways to compete.  You are constantly depleting resources in life-or-death struggles with competitors.  Contrarily, in the Amazon there are multiple opportunities to grow, and multiple ways to compete, dramatically increasing your chances for success.  You don’t have to fight a battle of survival every day, so you can really grow.”

Today, Amazon(.com) is the place to be.  As the financial markets droop, fearful about the economy and America’s debt ceiling “crisis,” Amazon is achieving its highest valuation ever.  While the economy, and most companies, struggle to grow, Amazon is hitting record growth:

Amazon sales growth July 2011
Source: BusinessInsider.com

Sales are up 50% versus last year! The result of this impressive sales growth has been a remarkable valuation increase – comparable to Apple! 

  • Since 2009, valuation is up 5.5x
  • Over 5 years valuation is up 8x
  • Over the last decade Amazon’s value has risen 15x

How did Amazon do this?  Not by “sticking to its knitting” or being very careful to manage its “core.”  In 2001 Amazon was still largely an on-line book seller.

The company’s impressive growth has come by moving far from its “core” into new markets and new businesses – most far removed from its expertise.  Despite its “roots” and “DNA” being in U.S. books and retailing, the company has pioneered off-shore businesses and high-tech products that help customers take advantage of big trends.

Amazon’s earnings release provided insight to its fantastic growth.  Almost 50% of revenues lie outside the U.S.  Traditional retailers such as WalMart, Target, Kohl’s, Sears, etc. have struggled in foreign markets, and blamed poor performance on weak infrastructure and complex legal/tax issues.  But where competitors have seen obstacles, Amazon created opportunity to change the way customers buy, and change the industry using its game-changing technology and capabilities.  For its next move, according to Silicon Alley Insider, “Amazon is About to Invade India,” a huge retail market, in an economy growing at over 7%/year, with rising affluence and spendable income – but almost universally overlooked by most retailers due to weak infrastructure and complex distribution.

Amazon’s remarkable growth has occurred even though its “core” business of books has been declining – rather dramatically – the last decade.  Book readership declines have driven most independents, and large chains such as B. Dalton and more recently Borders, out of business. But rather than use this as an excuse for weak results, Amazon invested heavily in the trends toward digitization and mobility to launch the wildly successful Kindle e-Reader.  Today about half of all Amazon book sales are digital, creating growth where most competitors (hell-bent on trying to defend the old business) have dealt with stagnation and decline. 

Amazon did this without a background as a technology company, an electronics company, or a consumer goods company.  Additionally, Amazon invested in Kindle – and is now developing a tablet – even as these products cannibalized the historically “core” paper-based book sales.  And Amazon has pursued these market shifts, even though these new products create a significant threat to Amazon’s largest traditional suppliers – book publishers. 

Rather than trying to defend its old core business, Amazon has invested heavily in trends – even when these investments were in areas where Amazon had no history, capability or expertise!

Amazon has now followed the trends into a leading position delivering profitable “cloud” services.  Amazon Web Services (AWS) generated $500M revenue last year, is reportedly up 50% to $750M this year, and will likely hit $1B or more before next year.  In addition to simple data storage Amazon offers cloud-based Oracle database services, and even ERP (enterprise resource planning) solutions from SAP.  In cloud computing services Amazon now leads historically dominant IT services companies like Accenture, CSC, HP and Dell.  By offering solutions that fulfill the emerging trends, rather than competing head-to-head in traditional service areas, Amazon is growing dramatically and avoiding a gladiator war.  And capturing big sales and profits as the marketplace explodes.

Amazon created 5,300 U.S. jobs last quarter.  Organic revenue growth was 44%.  Cash flow increased 25%.  All because the company continued expanding into new markets, including not only new retail markets, and digital publishing, but video downloads and television streaming – including making a deal to deliver CBS shows and archive. 

Amazon’s willingness to go beyond conventional wisdom has been critical to its success.  GeekWire.com gives insight into how Amazon makes these critical resource decisions in “Jeff Bezos on Innovation” (taken from comments at a shareholder meeting June 7, 2011):

  • “you just have to place a bet.  If you place enough of those bets, and if you place them early enough, none of them are ever betting the company”
  • “By the time you are betting the company, it means you haven’t invented for too long”
  • “If you invent frequently and are willing to fail, then you never get to the point where you really need to bet the whole company”
  • “We are planting more seeds…everything we do will not work…I am never concerned about that”
  • “my mind never lets me get in a place where I think we can’t afford to take these bets”
  • “A big piece of the story we tell ourselves about who we are, is that we are willing to invent”

If you want to succeed, there are ample lessons at Amazon.  Be willing to enter new markets, be willing to experiment and learn, don’t play “bet the company” by waiting too long, and be willing to invest in trends – especially when existing competitors (and suppliers) are hesitant.