Japan Demographics- A “Trend Bomb”

Japan Demographics- A “Trend Bomb”

“Business Insider says Japan has become “a demographic time bomb.” I guess it’s about time somebody realized that demographic trends are important, and that they can be effective for planning!

Japan demographic trends, National Institute of Population and Social Security Research

It was September, 2016 that I pointed out how important using demographic trends was for planning – and made it clear that Japan was facing a huge problem due to an aging population and unwillingness to allow immigrants. In January, 2017 I reiterated the importance of incorporating demographic trends into planning, demonstrating how they can be important for predicting workforce availability, cost of living, taxation and other critical business issues.

Take for example the NFL. In 2017 the league took another big ratings decline. The second consecutive year. But this was not hard to predict. In September, as the season started, I made it clear that kneeling players were not the problem for the NFL – the demographics of its primary viewers was the big problem. And I predicted that ratings would take a hit in 2017. Demographics have been clearly working against the league, and unless they find a way to bring in younger viewers – probably through rules changes – things are going to get a lot worse, affecting revenues and thus owner profits and even player salaries.

Are you incorporating demographics in your planning? If not, why not? Don’t know which demographic trends are important, or how to apply demographic trends to your business? If you’re stuck, not understanding this critical trend and how it will impact your business, why not give us a call?”

The NFL Has A Bigger Problem Than Kneeling Employees – Demographics and Trends

The NFL Has A Bigger Problem Than Kneeling Employees – Demographics and Trends

LANDOVER, MD – SEPTEMBER 24: Washington Redskins players link arms during the national anthem before their game against the Oakland Raiders at FedExField on September 24, 2017 in Landover, Maryland. (Photo by Patrick Smith/Getty Images)

A recent top news story has been NFL players kneeling during the national anthem.  The controversy was amplified when President Trump weighed in with objections to this behavior, and his recommendation that the NFL pass a rule disallowing it.  This kind of controversy doesn’t make life easier for NFL leaders, but it really isn’t their biggest problem.  Ratings didn’t start dropping recently, viewership has been declining since 2015.

NFL ratings stalled in 2015

NFL viewership had a pretty steady climb through 2014.  But in 2015 ratings leveled.  Then in 2016 viewership fell a whopping 9%.  During the first 6 weeks of the 2016 regular season (into early October)viewership was down 11%.  Through the first 9 weeks of 2016 ratings were down 14% before things finally leveled off.  Although nobody had a clear explanation why viewership declined so markedly, there was widespread agreement that 2016 was a ratings crash for the league.  Fox had its worst NFL viewership since 2008, and ESPN had its worst since 2005.

Colin Kaepernick kneels 2016, CNN photo

Interestingly, later analysis showed that overall people were watching 5% more games.  But they were watching less of each game.  In other words, fans had become more casual about their viewership.  People were watching less TV, watching less cable, and that included live sports.  And those who stream games almost never streamed the entire game.

And this behavior change wasn’t limited to the NFL.  As reported at Politifact.com, Paulsen, editor in chief of Sports Media Watch said, “it’s really important to note the NFL is not declining while other leagues are increasing.  NASCAR ratings are in the cellar right now.  The NBA had some of its lowest rated games ever on network television last year… It’s an industry-wide phenomenon and the NFL isn’t immune to it anymore.”  So the declining viewership problem is widespread, and much older than the recent national anthem controversy.

Live sports is not attracting new, younger viewers

Magna Global recently released its 2017 U.S. Sports Report.  According to Radio + Television Business Report (RBR.com) the age of live sports viewers is scewing older.  Much older.  Today the average NFL viewer is at least 50.  Similar to tennis, and college basketball and football.  That’s second only to baseball at 57 – which was 50 as recently as 2000.  But no sport is immune. NHL viewers are now typically 49.  They were 33 in 2000.  As simple arithmetic shows, the same folks are watching hockey but few new viewers are being attracted.  Based on recent trends, Magna projects viewership for the Sochi Olympics and 2018 World Cup will both decline.

I’ve written before about the importance of studying demographic trends when planning.  These trends are highly reliable, even if boring.  And they provide a lot of insight.  In the case of live sports watching, younger people simply don’t sit down and watch a complete game.  Younger people have different behaviors.  They watch an entire season of shows in one day.  They multi-task, doing many things at once.  And they prefer information in short bursts – like weekly blogs rather than a book.  And they are more interested in outcomes, the final result, than watching how it happened.  Where older people watch a game play-by-play, younger people simply want to know the major events and the final score.

To understand what’s happening with NFL ratings we really don’t have to look much further than simple demographics — the aging of the U.S. population — and the change in viewing behavior from older groups to younger groups.

Unfortunately, according to a recent CNN poll, while 56% of people under age 45 think the recent demonstrations are the right thing to do, 59% of those over 45 say the demonstrations are wrong.  In its “core” NFL viewership folks don’t like the kneeling, so it would appear the NFL should heed the President’s advice. But, looking down the road, the NFL won’t succeed unless it finds a way to attract a younger audience.  With younger people approving the demonstrations NFL leadership risks throwing the baby out with the bathwater if they knee-jerk control player behavior.

Understanding customer demographic trends, and adapting, is crucial to success

The demonstrations are interesting as an expression of American ideals.  And they are gathering a lot of discussion.  But they are not what’s plaguing NFL viewership.  Today the NFL has a much bigger task of making changes to attract young people as viewers.  Should leaders shorten the game’s length?  Should they change rules to increase scoring and create more excitement during the game?  Should they invest in more apps to engage viewers in play-by-play activity?  Should they seek out ways to allow more gambling during the game?  Whatever leadership does, the traditions of the NFL need to be tested and altered in order to attract new people to watching the game if they want to preserve the advertising dollars that make it a success.

When your business falters, do you look at long-term trends, or react to a short-term event?  It’s easy for politicians and newscasters to focus on the short-term, creating headlines and controversy.  But business leaders have an obligation to look much deeper, and longer term.  It is critical we move beyond “that’s the way the game is played” to looking at how the game may need to change in order to remain relevant and engage new customers.

Note how boxing recently brought in a mixed martial arts fighter to take on the world champion.  The outcome was nearly a foregone conclusion, but nobody cared because it brought in people to a boxing match that otherwise would not have been there.  If you don’t recognize demographic shifts, and take actions to meet emerging trends you risk becoming as left behind as cricket, badminton, horseshoes, bocce ball and darts.

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What the NBA All-Star Game Venue Change Teaches Us About Decision-Making

What the NBA All-Star Game Venue Change Teaches Us About Decision-Making

Most leaders think of themselves as decision makers.  Many people remember in 2006 when President George Bush, defending Donald Rumsfeld as his Defense Secretary said “I am the Decider.  I decide what’s best.”  It earned him the nickname “Decider-in-Chief.” Most CEOs echo this sentiment, Most leaders like to define themselves by the decisions they make.

But whether a decision is good, or not, has a lot of interpretations.  Often the immediate aftermath of a decision may look great.  It might appear as if that decision was obvious.  And often decisions make a lot of people happy.  As we are entering the most intense part of the U.S. Presidential election, both candidates are eager to tell you what decisions they have made – and what decisions they will make if elected.  And most people will look no further than the immediate expected impact of those decisions.

However, the quality of most decisions is not based on the immediate, or obvious, first implications.  Rather, the quality of decisions is discovered over time, as we see the consequences – intended an unintended.  Because quite often, what looked good at first can turn out to be very, very bad.

NBA-All-Star-ExitThe people of North Carolina passed a law to control the use of public bathrooms.  Most people of the state thought this was a good idea, including the Governor.  But some didn’t like the law, and many spoke up.   Last week the NBA decided that it would cancel its All Star game scheduled in Charlotte due to discrimination issues caused by this law.  This change will cost Charlotte about $100M.

That action by the NBA is what’s called unintended consequences.  Lawmakers didn’t really consider that the NBA might decide to take its business elsewhere due to this state legislation.  It’s what some people call “oops.  I didn’t think about that when I made my decision.”

Robert Reich, Secretary of Labor for President Clinton, was a staunch supporter of unions.  In his book “Locked in the Cabinet” he tells the story of visiting an auto plant in Oklahoma supporting the union and workers rights.  He thought his support would incent the company’s leaders to negotiate more favorably with the union.  Instead, the company closed the plant.  Laid-off everyone.  Oops.  The unintended consequences of what he thought was an obvious move of support led to the worst possible outcome for the workers.

President Obama worked the Congress hard to create the Affordable Care Act, or Obamacare, for everyone in America.  One intention was to make sure employers covered all their workers, so the law required that if an employer had health care for any workers he had to offer that health care to all employees who work over 30 hours per week.  So almost all employers of part time workers suddenly said that none could work more than 30 hours.  Those that worked 32 (4 days/week) or 36 suddenly had their hours cut.  Now those lower-income people not only had no health care, but less money in their pay envelopes.  Oops.  Unintended consequence.

President Reagan and his wife launched the “War on Drugs.”  How could that be a bad thing?  Illegal drugs are dangerous, as is the supply chain.  But now, some 30 years later, the Federal Bureau of Prisons reports that almost half (46.3% or over 85,000) inmates are there on drug charges.  The USA now spends $51B annually on this drug war, which is about 20% more than is spent on the real war being waged with Afghanistan, Iraq and ISIS.  There are now over 1.5M arrests each year, with 83% of those merely for possession.  Oops.  Unintended consequences.  It seemed like such a good idea at the time.

This is why it is so important leaders take their time to make thoughtful decisions, often with the input of many other people.  Because the quality of a decision is not measured by how one views it immediately.  Rather, the value is decided over time as the opportunity arises to observe the unintended consequences, and their impact.  The best decisions are those in which the future consequences are identified, discussed and made part of the planning – so they aren’t unintended and the “decider” isn’t running around saying “oops.”

As you listen to the politicians this cycle, keep in mind what would be the unintended consequences of implementing what they say:

  • What would be the social impact, and transfer of wealth, from suddenly forgiving all student loans?
  • What would be the consequences on trade, and jobs, of not supporting historical government trade agreements?
  • What would be the consequences on national security of not supporting historically allied governments?
  • What would be the long-term consequence not allowing visitors based on race, religion or sexual orientation?
  • What would be the consequence of not repaying the government’s bonds?
  • What would be the long-term impact on economic growth of higher regulations on banks – that already have seen dramatic increases in regulation slowing the recovery?
  • What would be the long-term consequences on food production, housing and lifestyles of failing to address global warming?

Business leaders should follow the same practice.  Every time a decision is necessary, is the best effort made to obtain all the information you could on the topic?  Do you obtain input from your detractors, as well as admirers?  Do you think through not only what is popular, but what will happen months into the future?  Do you consider the potential reaction by your customers?  Employees?  Suppliers?  Competitors?

There are very few “perfect decisions.” All decisions have consequences.  Often, there is a trade-off between the good outcomes, and the bad outcomes.  But the key is to know them all, and balance the interests and outcomes.  Consider the consequences, good and bad, and plan for them.  Only by doing that can you avoid later saying “oops.”

How the NFL and NBA Corrupted American Universities

How the NFL and NBA Corrupted American Universities

This week saw two big stories develop around the big money in college sports.  It makes one wonder, when did sports become more important than academics in American universities – and why?

The first story was how the football team at the University of Missouri was able to fire the university President.  Ongoing racial tensions, and some horrible acts of aggression, had been problematic at Mizzou, leading to a student hunger strike.  But the President remained uninvolved and taciturn on the topic.

Until the football team threatened to strike.  Within 48 hours the President was booted out, allowing the team to play this Saturday and keep the big money flowing.

Separately, the NCAA shut down a web site set up by the family of LSU running back Leonard Fournette to sell merchandise plugging his catch phrase.  The concern was ostensibly whether the family received discounted services in creating the site due to the player’s popularity.  But more important was whether anyone other than LSU and the NCAA was going to make any money off a college football player.

ncaa_coachesv4The USA is the only country where university coaches make multi-million dollar salaries.  Elsewhere, one must coach a professional team to earn such sums. And the USA is the only country where alumni donations for sports are greater than alumni donations for academics.  And the USA is the only country where college sport venues (coliseums nonetheless) consume as much, or more, capital budget than the entire balance of the university.  And the USA is the only place where more money is spent to recruit and retain athletes than the brightest academic minds.

The United States is the only country where sports have become more important than academics at many (most?) major universities.  Around the world, colleges are about education first, foremost and pretty much entirely.  Sports are left to professionals.  How did Americans turn their universities into sports leagues rather than institutions for research and learning?

Blame it on the NFL and the NBA.

Prior to the rise of both major sports leagues, college athletics were not that important.  Sure there were teams, but they were very clearly for fun.  Players had to take a full regimen of classes, and they were expected to pass those classes.  Players were students first, and athletes just for the pleasure.  Athletes were expected to obtain a degree in 4 years, then move on to professional lives.  Sure, there were alumni booster clubs supporting athletes, and some schools (especially in the south) were notoriously crazy routing for their home teams, but the school was more about education than playing ball.

Years ago professional sports was dominated by baseball in America and soccer pretty much everywhere else.  Baseball and soccer both developed “farm systems” by which the professional teams created other teams that recruited and trained young players. And in northern climates hockey developed similar farm systems.

Often starting well before players finished high school (or its equivalent outside the USA) recruiters would approach athletes and their parents to ask if they could place the youth into their training program.  Players would improve their skills level by level, moving up through different teams until they reached the top level of performance.  In American baseball, for example, these “farm teams” run 4 levels deep, and when a player makes it to the top it’s called “reaching the show.”

The cost of identifying, recruiting and training athletes for baseball, and soccer, has always been carried by the professional franchises.

But the rise of the NFL and the NBA changed this dramatically.  By relying on colleges to do the recruiting and first level of training, they could avoid an incredible amount of cost.  An “unholy alliance” was born between the NCAA and the professional leagues.  The professionals would not create “farm systems.”

Instead, universities would act as the recruiters and developers of “pre-professional” athletes.  These athletes would be called “amateurs” and thus receive no compensation for playing, nor would they receive compensation for promoting the school, nor would they be able to receive compensation for using their likeness, personality or any individually created brand elements.  The schools would receive 100% of any revenues related to the athletes and other branded elements of college sports.

collegefootballteamsIt did not take long for colleges to realize there is BIG MONEY in fan-crazed athletics.  Just like the NFL and NBA, colleges could create brand franchises around their athletic programs, and top players. The value of a top athlete to the university could be measured in millions of dollars, far more than the grant raising ability of top research professors with long-standing academic programs tied to industry.

Suddenly, it was worth great value to a college to recruit a “student” who possibly could barely read and write.  Who cared if that student ever graduated?  That wasn’t his purpose.  Who cared if this “student” had limited respect for women’s rights, or otherwise struggled to behave like a “gentleman and a scholar”  What mattered was whether he could play ball – whether he could bring in the fans and all those merchandise dollars.

For many university leaders the allure of the BIG MONEY was simply too hard to ignore. The BIG MONEY for the university was by building a brand around semi-professional athletics.  Not academics.  The old non-profit approach of running a school was replaced by the very much for-profit business of college athletics. Winning ball games replaced winning research grants, or even Nobel prizes, as the measure of a successful university.

And that is what we’re now seeing in the news.  The Mizzou trustees weren’t all that concerned about swastika’s made of feces, nor student hunger strikes, or name calling of professors.  That was just “campus life.”  But if the football team doesn’t play – OMG, that’s a crisis!!  The former has little impact on university economics, the latter could be catastrophic.

It is doubtful anyone is willing to separate athletics out of America’s universities.  But not recognizing the corruption this has done to the original academic purpose of these institutions is turning a blind eye to the obvious.  For far too many universities job #1 is about running a sports franchise.  And oh, by the way, there are faculty and students and all that other stuff out there – but that’s for the academics to worry about.  We’re here to make money off sports teams.

And the biggest winners of all are the owners of NFL and NBA franchises, who get a farm system at no cost.  Thanks to the financial corruption of modern university leadership.  More is the sadness for America, when ball teams matter more than great research and education.



The Week Microsoft Lost Relevancy, and Apple Stole the Show

The Week Microsoft Lost Relevancy, and Apple Stole the Show

Few businesses fail in a fiery, quick downfall.  Most linger along for years, not really mattering to anyone – including customers, suppliers or even investors.  They exist, but they aren’t relevant.

When a company is relevant customers are eager for new product releases, and excited to talk to salespeople. Media want to report on the company, its products and its leaders.  Investors want to hear about what the company will do next to drive revenues and increase profits.

But when a company loses relevancy, that all disappears.  Customers quit paying attention to new products, and salespeople are not given the time of day. The company begs for coverage of its press releases, but few media outlets pay attention because writing about that company produces few readers, or advertisers.  Investors lose hope for big gains, and start looking for ways to sell the stock or debt without taking too big a loss, or further depressing valuations.

In short, when a company loses relevancy it is on the downward slope to failure.  It may take a long time, but lacking market relevancy the company has practically no hope of increasing revenues or profits, or of creating many new and exciting jobs, or of being a great customer for suppliers.  Losing relevancy means the company is headed out of business, it’s just a matter of time.  Think Howard Johnson’s, ToysRUs, Sears, Radio Shack, Palm, Hostess, Samsonite, Pierre Cardin, Woolworth’s, International Harvester, Zenith, Sony, Rand McNally, Encyclopedia Britannica, DEC — you get the point.

Many people may not be aware that Microsoft made an exclusive deal with the NFL to provide Surface tablets for coaches and players to use during games, replacing photographs, paper and clipboards for reviewing on-field activities and developing plays.  The goal was to up the prestige of Surface, improve its “cool” factor, while showing capabilities that might encourage more developers to write apps for the product and more businesses to buy it.

NFL Surface user

But things could not have gone worse during the NFL’s launch.  Because over and again, announcers kept calling the Surface tablets iPads. Announcers saw the tablet format and simply assumed these were iPads.  Or, worse, they did not realize there was any tablet other than the iPad.  As more and more announcers made this blunder it became increasingly clear that Apple not only invented the modern tablet marketplace, but that it’s brand completely dominates the mindset of users and potential buyers.  iPad has become synonymous with tablet for most people.

In a powerful way, this demonstrates the lack of relevancy Microsoft now has in the personal technology marketplace.  Fewer and fewer people are buying PCs as they rely increasingly on mobile devices. Practically nobody cares any more about new releases of Windows or Office.  In fact, the American Customer Satisfaction Index reported people think Apple is now considered the best PC maker (the Macintosh.) HP was near the bottom of the list, with Dell, Acer and Toshiba not faring much better.

And in mobile devices, Apple is clearly the king.  In its first weekend of sales the new iPhone 6 and 6Plus sold 10million units, blasting past any previous iPhone model launch – and that was without any sales in China and several other markets.  The iPhone 4 was considered a smashing success, but iPhone 4 sales of 1.7million units was only 17% of the newest iPhone – and the 9million iPhone 5 sales included China and the lower-priced 5C.  In fact, more units could have been sold but Apple ran out of supply, forcing customers to wait.  People clearly still want Apple mobile devices, as sales of each successive version brings in more customers and higher sales.

There are many people who cannot imagine a world without Microsoft.  And the vast majority of people would think that predicting Microsoft’s demise is considerably premature given its size and cash hoard.  But, that looks backward at what Microsoft was, and the assets it previously created, rather than looking forward.

Just how fast can lost relevancy impact a company?  Look no further than Blackberry (formerly Research in Motion.)  Blackberry was once totally dominant in smartphones.  But in the second quarter of last year Apple sold 32.5million units, while Blackberry sold only 1.5million (which was still more than Microsoft sold.)

The complete lack of relevancy was exposed last week when Blackberry launched its new Passport phone alongside Apple’s iPhone 6 actions. While the press was full of articles about the new iPhone, were you even aware of Blackberry’s most recent effort?  Did you recall seeing press coverage?  Did you read any product reviews?  And while Apple was selling record numbers, Blackberry analysts were wondering if the Passport could find a niche with “nostalgic customers” that would sell enough units to keep the company’s hardware unit alive.  Reviewers now compare Passport to the market standard, which is the iPhone – and still complain that its use of apps is “confusing.”  In a world where most people use their own smartphone, the only reason most people could think of to use a Passport was if their employer told them they were forced to.

Like with Radio Shack, most people have to be reminded that Blackberry still exists.  In just a few years Blackberry’s loss of relevancy has made the company and its products a backwater.  Now it is quite clear that Microsoft is entering a similar situation.  Windows 8 was a weak launch and did nothing to slow the shift to mobile.  Microsoft missed the mobile market, and its mobile products are achieving no traction.  Even where it has an exclusive use, such as this NFL application, people don’t recognize its products and assume they are the products of the market leader. Microsoft really has become irrelevant in its historical “core” personal technology market – and that should scare its employees and investors a lot.



Will Steve Ballmer Be a Good LA Clippers Leader?

Will Steve Ballmer Be a Good LA Clippers Leader?

Anyone who reads my column knows I’ve been no fan of Steve Ballmer as CEO of Microsoft.  On multiple occasions I chastised him for bad decisions around investing corporate funds in products that are unlikely to succeed.  I even called him the worst CEO in America The Washington Post even had difficulty finding reputable folks to disagree with my argument.

Unfortunately, Microsoft suffered under Mr. Ballmer.  And Windows 8, as well as the Surface tablet, have come nowhere close to what was expected for their sales – and their ability to keep Microsoft relevant in a fast changing personal technology marketplace.  In almost all regards, Mr. Ballmer was simply a terrible leader, largely because he had no understanding of business/product lifecycles.

lifecycle slide  Microsoft was founded by Bill Gates, who did a remarkable job of taking a start-up company from the Wellspring of an idea into one of the fastest growing adolescents of any American company.

Under Mr. Gates leadership Microsoft single-handedly overtook the original PC innovator – Apple – and left it a niche company on the edge of bankruptcy in little over a decade.

Mr. Gates kept Microsoft’s growth constantly in the double digits by not only making superior operating system software, but by pushing the company into application software which dominated the desktop (MS Office.)  And when the internet came along he had the vision to be out front with Internet Explorer which crushed early innovator, and market maker, Netscape.

But then Mr. Gates turned the company over to Mr. Ballmer.  And Mr. Ballmer was a leader lacking vision, or innovation.  Instead of pushing Microsoft into new markets, as had Mr. Gates, he allowed the company to fixate on constant upgrades to the products which made it dominant – Windows and Office.  Instead of keeping Microsoft in the Rapids of growth, he offered up a leadership designed to simply keep the company from going backward.  He felt that Microsoft was a company that was “mature” and thus in need of ongoing enhancement, but not much in the way of real innovation.  He trusted the market to keep growing, indefinitely, if he merely kept improving the products handed him.

As a result Microsoft stagnated.  A “Reinvention Gap” developed as Vista, Windows 7, then Windows 8 and one after another Office updates did nothing to develop new customers, or new markets.  Microsoft was resting on its old laurels – monopolistic control over desktop/laptop markets – without doing anything to create new markets which would keep it on the old growth trajectory of the Gates era.

Things didn’t look too bad for several years because people kept buying traditional PCs.  And Ballmer famously laughed at products like Linux or Unix – and then later at entertainment devices, smart phones and tablets – as Microsoft launched, but then abandoned products like Zune, Windows CE phones and its own tablet.  Ballmer kept thinking that all the market wanted was a faster, cheaper PC.  Not anything really new.

And he was dead wrong.  The Reinvention Gap emerged to the public when Apple came along with the iPod, iTunes, iPhone and iPad.  These changed the game on Microsoft, and no longer was it good enough to simply have a better edition of an outdated technology.  As PC sales began declining it was clear that Ballmer’s leadership had left the company in the Swamp, fighting off alligators and swatting at mosquitos with no strategy for how it would regain relevance against all these new competitors.

So the Board pushed him out, and demoted Gates off the Chairman’s throne.  A big move, but likely too late.  Fewer than 7% of companies that wander into the Swamp avoid the Whirlpool of demise.  Think Univac, Wang, Lanier, DEC, Cray, Sun Microsystems (or Circuit City, Montgomery Wards, Sears.)  The new CEO, Satya Nadella, has a much, much more difficult job than almost anyone thinks.  Changing the trajectory of Microsoft now, after more than a decade creating the Reinvention Gap, is a task rarely accomplished.  So rare we make heros of leaders who do it (Steve Jobs, Lou Gerstner, Lee Iacocca.)

So what will happen at the Clippers?

Critically, owning an NBA team is nothing like competing in the real business world.  It is a closed marketplace.  New competitors are not allowed, unless the current owners decide to bring in a new team.  Your revenues are not just dependent upon you, but are even shared amongst the other teams.  In fact your revenues aren’t even that closely tied to winning and losing.  Season tickets are bought in advance, and with so many games away from home a team can do quite poorly and still generate revenue – and profit – for the owner.  And this season the Indiana Pacers demonstrated that even while losing, fans will come to games.  And the Philadelphia 76ers drew crowds to see if they would set a new record for the most consecutive games lost.

In America the major sports only modestly overlap, so you have a clear season to appeal to fans.  And even if you don’t make it into the playoffs, you still share in the profits from games played by other teams.  As a business, a team doesn’t need to win a championship to generate revenue – or make a profit.  In fact, the opposite can be true as Wayne Huizenga learned owning the Championship winning Florida Marlins baseball team.  He payed so much for the top players that he lost money, and ended up busting up the team and selling the franchise!

In short, owning a sports franchise doesn’t require the owner to understand lifecycles. You don’t have to understand much about business, or about business competition. You are protected from competitors, and as one of a select few in the club everyone actually works together – in a wholly uncompetitive way – to insure that everyone makes as much money as possible.  You don’t even have to know anything about managing people, because you hire coaches to deal with players, and PR folks to deal with fans and media.  And as said before whether or not you win games really doesn’t have much to do with how much money you make.

Most sports franchise owners are known more for their idiosyncrasies than their business acumen.  They can be loud and obnoxious all they want (with very few limits.)  And now that Mr. Ballmer has no investors to deal with – or for that matter vendors or cooperative parties in a complex ecosystem like personal technology – he doesn’t have to fret about understanding where markets are headed or how to compete in the future.

When it comes to acting like a person who knows little about business, but has a huge ego, fiery temper and loves to be obnoxious there is no better job than being a sports franchise owner.  Mr. Ballmer should fit right in.

Why Twitter Won the SuperBowl While Traditional Ad Execs Don’t Get It

Reading reviews of Super Bowl ads I was struck by two observations:

  1. The reviewers got the value of most ads backwards
  2. They missed the most important ad of all – on Twitter

Super Bowl ads cost $1M+ to make.  Then they cost $2M+ to air.  So it is an expensive proposition.  This isn't fine art, like a Picasso, with a long shelf life to create a rate of return.  These ads need to pay off fast.  They need to build the brand with existing and/or new customers to drive sales and make back that money now.

So let's start with one of the best reviewed ads – Chrysler's "God Made a Farmer". Reviewers liked the home-spun approach of using a dead conservative radio commentator voicing over pictures of farmers in pick-ups.  Unfortunately, from a rate of return perspective my bet is this ad will end up near the very bottom.  

  • Firstly, the 50 year trend is to urbanization.  In 1900 9 out of 10 Americans had something to do with agriculture.  Now it is fewer than 1 in 20.  Trucks are used for lots of things, but farming makes up a small percentage.  It has been a full generation since most 2nd generation Americans had anything to do with a farm.  Showing people using a product in ways that almost nobody uses it, and with a message most of your target market doesn't even recognize, leaves most people confused rather than ready to buy.
  • Secondly, first generation Americans are changing the demographics of America quickly.  First generation Americans (can I say immigrant?) proved large enough, and powerful enough, to play a spoiler role in Mitt Romney's run for the Presidency.  To them, farming in America has no history, appeal or meaning to their lives. 
  • Thirdly, no one under the age of 35 has any idea who Paul Harvey is.  Perhaps Chrysler could have used Bill O'Reilly and achieved its message mission.  But as it was, there were two of us +50 people who spent 5 minutes trying to tell the group watching the game at my home who Paul Harvey even was – and why he was being quoted.

A 24 year old boy watching the game with me in suburban Chicago listened to my explanation about Paul Harvey and farming.  He drives a Ford F-250 4×4 pick-up.  After I finished he looked me square in the eyes and said "Swing, and a miss."  And that's what I'd say to Chrysler.  Whoever made this ad had more money than market research and common sense.

Simultaneously, reviewers hated GoDaddy.com's "Perfect Match, Bar Rafieli's Big Kiss." This portrayed a very stereotypical engineer enjoying a long kiss with a pretty girl – referring to how the company's products well serve client needs.  Reviewers found the ad in bad taste.  My bet is this ad will have immediate payback for GoDaddy.com

Have you ever heard of the monstrously successful situation comedy "The Big Bang Theory?"  At just about any time you can find this in reruns on at least one, if not more than one, cable channel.  The show is so successful that to pull people viewers to its Monday night schedule CBS actually chose to rerun "Big Bang" episodes amidst new episodes of its other programs in January.  The show thrives on the tension of male technical professionals seeking to solve the age old question of how a man can appeal to desirable ladies.  Politically correct or not, the show is successful because it is a timeless message.  Most boys want to be liked by girls.

Today the world of people who have technical, or quasi-technical jobs, is HUGE.   GoDaddy's target audience of people buying, and servicing, web domains just happens to be mostly male under-40 men with technical or quasi-technical backgrounds.  This little, tasteless demonstration may have upset the high ethics of ad execs (or has "Mad Men" unraveled that myth?) but to its target group this ad was pure gold.  And same for GoDaddy.com.

But most importantly, none of these ads will have the payback of 9 words a marketer tweeted when the lights went out at the game.  Because it had blown a huge wad of money on a traditional game ad the Oreo brand folks at Mondelez were watching the game with their media agency 360i.  Thinking quickly the creatives came up with an idea, and the brand guys approved it – so out went the tweet from Oreo Cookies "No problem.  You can still dunk in the dark."

"Booya" as my young friends say.  10,000 retweets and an entire Monday news cycle devoted to the quick thinking folks who posted this tweet.  ROI?  Given that the incremental cost was zero, pretty darn high. If I was investing, I'd take the tweet over the video.  The equivalent of a kick return for a TD.

The world has changed.  We now live in a 24×7, real-time, always-on world.  We no longer wait for the weekly magazine for analysis, or the daily newspaper for information.  Or even the 11:00 television daily recap.  We pick up alerts on our mobile devices constantly.  Receive highlights from friends on Facebook and Twitter.  We want our information NOW.  And those who connect to this new way of living for providing us information are not only accepted, but admired by those thriving on the social networks.

This year's Super Bowl social media postings were triple last year's; over 30million.  This is the world of immediate feedback.  Immediate discussion.  And the place were ads need to be immediate as well.  Those who understand this, and connect to it, will succeed.  Others, who spend too much to make and then distribute ads on traditional media, will not.  Just as newspaper ads have lost of their relevance – TV ads are destined for the same conclusion.

The good news is that Mondelez and its Oreos team was ready, and willing, to take advantage.  Where were most of the other advertisers?  Audi, VW and P&G's Tide also jumped in.  But of all those millions spent on once-run ads, these major corporate advertisers – and their extremely highly paid ad agencies – were absent.  When the easy money was to be made, they simply weren't there.  Off drinking beer and watching the game when they should have been working!

Today we learned Twitter is buying Bluefin to make its information on who is tweeting, about what, in real time even better.  This will be helpful for any smart advertiser.  And not just the multi-billion dollar giants.  The good news is anyone, anywhere in any size company can play in this real-time, on-line social media world.  You don't have to be huge, or rich. 

Where were you when the lights went out?  Were you taking advantage of what we may later call a "once in a lifetime" opportunity? 

Where will you be the next time?  Are you ready to invest in the new world of social media advertising?   Or are you stuck spending too much to come in too late?

Business Lifeblood – Innovation – Amazon Kindle and Management’s role

I recently listened to a great presentation on innovation by Bill Burnett, partner at Launchpad Partners.  I recommend you download the slides to his presentation, "The CEO's Role in Innovation," in order to understand just how important innovation is to profitability as well as the CEOs role in creating the right culture.  I also hand it to Bill that he not only lays out the CEO's role, but discusses what it takes organizationally to implement innovation – including getting the right people involved to go beyond just coming up with good ideas.

Markets shift.  Sometimes there are long periods in which the market is reasonably the same (like newspapers).  And sometimes it seems like new changes are happening rapidly (like computers).  How long between shifts is impossible to predict.  But it is certain that all markets shift.  Some new technology, or a new form of solution, or a new way of pricing, or a new competitor will enter the market and change things such that the profitability of previous solutions declines.  And it is the role of CEOs to create an open culture in which the management team feels it must keep its eyes peeled for market shifts, bring them to the company for discussion, and propose innovations which can increase the longevity of company sales and profits by addressing the market shifts.

Take for example the current shift in the sports market.  This is important, because a throng of businesses advertise in the sports market.  Everything from TV or radio ads during games, to ads inside event brochures, to putting logos on equipment and uniforms, to paying athletes as endorsers.  Being aligned with the right sports, the right teams and the right athletes is worth a lot of money.  You can legitimately ask, would Nike be Nike if they hadn't been the first company to sign up Michael Jordan – and later Tiger Woods?  So the money is very large (billions of dollars) making mistakes very expensive.  But getting it right can be worth billions in returns.

So catching a recent MediaPost.com blog "The Allure of Action Sports" is important.  While most of us think of basketball, baseball, American football and possibly NASCAR – for GEN Y (young folks) sports is taking on an entirely new meaning.  These are sports with almost no rules – just technique.  They pack the stands at events such as the Dew Tour and X Games. Active participants include almost 12 million skateboarders, 7 million snowboarders and 3 million BMX riders.  Not only do people watch these sports, but the most popular performers have their own cable TV shows – like "Viva La Bam.Just like football and basketball overtook our fathers' love of baseball as America's pastime – young competitors are shifting to watch and practice action sportsFor people in consumer goods and many retailers, it becomes critical that the CEO provide an environment where the company can Disrupt its old marketing practices and create White Space to explore how to link with these new markets.  The winners will rake in millions of higher profits.  The laggards will see the value of their sports market spending decline.

Have you recognized this shift in the sports market?  Are you prepared to take advantage of this shift?  Are you considering sponsoring a local skateboard competition – for example – to promote a restaurant, quick stop, or T-Shirt store?  You can react faster than Wal-Mart, Coke or GM – are you considering the options to grab loyal customers when they are still "McDonald's targets"?

A great example of the right kind of CEO has been Jeff Bezos of Amazon.  As I reported in this blog back in January, book sales declined about 10% in 2008.  You would think this would spell a huge problem for the world's largest bookseller.  But SeattlePI.com recently reported "Amazon Profits Jump Despite Recession."  CEO Bezos recognized long ago that book readership was jeapardized by changing lifestyles.  Fewer people have the willingness to buy printed books, carry them around and take time to read them.  So he Disrupted his retail Success Formula and implemented White Space to develop something new.  This led to Kindle, a product which is small, light, can hold hundreds of books, can be read "on the go", accepts downloads of journals (magazines and newspapers) and can even read the book to you (Kindle has an audio feature.)  And that's just product rev 2 – who knows where this will be in 3 years.  By focusing on the future he could see the market for reading shifting – and he created an environment in which new innovation could be developed to keep Amazon growing even when the traditional products (and business) started declining.  Kindle is now outselling everyone's expectations. 

Innovation is the lifeblood of businessesWithout innovation Defend & Extend management leads to declining returns as competitors create market shifts.  So it is crucial leaders, from managers to the CEO, keep their eyes on the future to spot market challenges and obsess about competitor actions that are changing market requirements.  Then be willing to Disrupt the old Success Formula by attacking Lock-ins, and use White Space to test and implement new innovations which can lead to a new Success Formula keeping the business evergreen.