Stanford's Entrepreneurial Design for Extreme Affordability

As we talk about sustainability and global issues this week - and new product development later in the semester - I wanted to share a write-up and videos about a really cool class at Stanford Graduate School of Business: Entrepreneurial Design for Extreme Affordability.

The class is very similar to the University of Illinois, Chicago's (UIC's) Interdisciplinary Product Development (IPD) class: it includes teams from the school of design, engineering, and the business school. It's a two semester offering at both universities.

What I love about Stanford's program is that the focus last year was on developing new products that really impact people's lives in developing countries. Rather than trying to explain it all, just take a look at some of the things they did! Their projects are exemplars for how to develop really cool products that make people's lives much better at "the bottom of the pyramid." I can not think of anything more noble for using the tools and techniques we learn in Marketing.

Everyday Cases: Bing's Big Picture

Learning marketing is like learning anything else: to really learn it, you need to use it. One of the best ways is to pay attention to "everyday cases:" try to understand what companies are trying to do in everyday life in the context of tools we learn in the classroom.

This week, I received an interesting e-mail regarding Bing.com, from Greg A, a participant in our Monday evening class.

First, here's the video Greg linked me to:

Second, here's what Greg wrote:

I saw this commercial this evening and I think it is a good example of The Big Picture. Considering Microsoft is going up against Google, which has such a large share of the search engine marketplace, it's a good example of share stealing I believe. I want to switch to bing but ugh, it's so hard to not automatically type Google when the need arises haha... "It's not just a search engine, it's the first ever decision engine.. From Microsoft." Great, great clincher.

I agree! To put this in Big Picture terms, I believe Microsoft's Bing.com is looking to build a viable search engine that both realizes the revenue inherent in providing search, as well as challenges Google's hegemony in search and the cash flows that allow it to threaten Microsoft in the browser and operating system markets.

To do this, Bing's Marketing Objective is to Acquire new customers and their Source of Volume is to Steal Share. Their Segmentation scheme appears to be an internet search engine as the Main Variable (the ante to play in this game), with a superior "decision engine" as the Dynamic Variable differentiating Bing.com from Google. Their target audience is (probably) something like "heavy internet search users who are frustrated with the amount of effort required to find fairly mundane things, like local restaurants, specific people, etc." Their positioning is all about the "Decision Engine," which actually ties in nicely to WHY people actually use search engines - to learn something and/or make a decision about something very specific. Their goal is NOT to search; it's to FIND! (Their 5-box positioning encompasses that thought - moving people from thinking they need to search to getting them to realize they want to find and, thus, using Bing.com would be better than Google.)

Nice job Greg. This is a great everyday case!

What's GM's Angle?

Interesting bit in the New York Times today about General Motor's apparent reluctance to sell its German/European Opel Division to Magna Corporation in Canada.

While I agree that part of the Magna deal, where "G.M. might have to subsidize interest payments on Opel’s debts" is unacceptable, it seems that GM might be much more interested in either (a) keeping Opel or (b) selling it to a company that will screw it up worse. Actually, the article all but says as much.

I think GM is very worried that a well-run Opel could really hurt GM, not just worldwide, but particularly in North America (Canada and the US).

Magna is a very well-run international company that already participates extensively in the automotive market, providing products and services to automotive OEMs (Original Equipment Manufacturers). The most interesting business of Magna - to me - and perhaps the most frightening part to GM is Manga's Complete Engineering & Assembly capability. For example, Magna currently produces all of the Chrysler 300M, Jeep Commander, and Jeep Grand Cherokee models to all non-NAFTA (North American Free Trade Agreement) countries - including the right-hand driver versions sold internationally. So Magna could probably run Opel fairly well, it would also create a new entrant into the OEM category (same brand, but controlled by a different owner), therefore increasing competition internationally. Given some Opel cars have already been modified slightly for North American markets - Magna could conceivably consider moving into the North American markets and create yet another competitor for GM's (historically) most profitable market.

Although GM is making motions to sell Opel to the Germany, I'm guessing they believe that Germany will screw up the company worse. Perhaps part of that belief is grounded in the fact that Germany's unions are pushing hard for Germany to acquire Opel. But German unions are not the same as US unions and it's not clear that Germany will hold the company for very long before letting a group of investors take over primary management responsibilities along with the unions. That mirrors the relationship Germany has with most of the German-based automotive companies - except for Opel, since it is owned by GM.

At the end of the day, though, it looks like GM's primary goal is to keep Opel, if for no other reason than to make sure no one else gets it and competes with GM. This is a classic anti-competitive move, the only difference is that instead of buying Opel and shutting it down, GM can keep it and let it die a long, slow death - all the courtesy of the US Taxpayer that's now the majority shareholder of the company.

Yes, I agree that selling the company with "strings attached" to pay for future unseen financial changes is unacceptable. However, GM needs to sell Opel and focus on the core of GM's brands that it's keeping. Consumers around the world would be better off with a well-run Opel, German unions would be better off (and more secure) with a well-run Opel, and GM's majority stockholder - the American Taxpayer - would be better off selling Opel to a company that can run and realize more value from Opel going forward.

When customers attack!

Over the past week or so, I've run into an interesting confluence of things that all relate to the cultural meme of consumers rebelling against brands they were formally loyal to - or at least bought from.

The first of these was Whole Food's CEO John Mackey's rather ill-advised Wall Street Journal Editorial, titled "The Whole Foods Alternative to Obamacare." Well, this caused quite the kerfuffle among Whole Foods customers. Why? Well, Whole Foods is positioned as a place that focuses on selling "whole food" and, basically, all kinds of good stuff, like sustainability, community involvement, best practices for employees, etc.

Their actual core values can be found here. Their core values are much longer and detailed than I've summarized and, quite honestly, I'm also stating how Whole Foods's customers perceive Whole Foods, which is really the important point of positioning - irrespective of how managers might wish consumers perceive them.

Which gets to my point. Who do you think shops at Whole Foods? I'm guessing the majority of customers are progressive people: people who value organics, have higher than average disposable income, have higher than average education levels, believe in social justice causes, vote democratic or progressive, and probably voted for Obama more than the average American. (Disclosure: I actually own Whole Foods stock and I have been Whole Foods Fan ever since I found them in Chicago more than a decade ago. I actually picked my apartment in Evanston based on the fact that there was a Whole Foods between Northwestern and the apartment. That also means I have a pretty good bead on their customer base.)

Anyway, CEO John Mackey writes the above op-ed piece and, no surprise had he been thinking, his customers REVOLT! Although citing every nasty, "let's have a boycott" piece in the blogosphere is beyond the scope of one posting, here's a sampling:

• Facebook has a few "Boycott Whole Foods" groups, the biggest of which is up to 19,000+ members just more than one week after the WSJ op-ed appeared (the Whole Foods page has 115,000, has been up a lot longer, and has an incredible number of people posting who are pretty ticked off),
• The Daily Kos wrote a scathing review of John Mackey's op-ed, and then an equally scathing satirical bit on Whole Food's PR team to address the ticked-off customers (the "annotated version" is pretty spot-on),
• The Huffington Post ran a number of pieces, summarized here, and also had a poll showing that 58% of respondents planned on boycotting Whole Foods and another 20% disagreed with Mackey's views, but didn't think they were boycott-worthy.

Although some postings on Whole Foods website, Facebook, and various conservative blogs suggests that some people are "new" fans of Whole Foods, it's not really clear how long they'll stay once they've shopped there once or twice (or ever).

Instead, it seems that John Mackey really stepped in it. What's amazing to me is that John Mackey's ill-conceived op-ed piece ironically violated one of Whole Foods's Core Values: CREATING WEALTH THROUGH PROFITS & GROWTH.

Seriously, it shouldn't surprise anyone the op-ed piece ticked off a large portion of Whole Foods customers. Assuming John Mackey has any sense of what his customers are like, publishing that op-ed as CEO of Whole Foods was like flipping off a good chuck of his customers. Which is exactly what happened.

What may have surprised Mackey - and the point of this post - is that with today's technology, a CEO can no longer assume he/she can print something in the Wall Street Journal and have only business people see it. Quite the contrary. Various social networks - and Facebook in particular - allow for an incredibly easy way for consumers to communicate and organize very, very quickly. It's not clear when the largest "Boycott Whole Foods" page showed up on Facebook, but it was instigated by the op-ed piece and, therefore, it could not have been more than eight days before it hit 19,000+ fans. That's not good if you're Whole Foods.

Related to all this, Michaela Draganska (Northwestern, PhD) turned me on to Huggy Rao's (Case/Weatherhead Ph.D. in Organizational Behavior) book "Market Rebels: How Activists Make or Break Radical Innovations," via a nice little interview published by Stanford Business School.

One of Rao's points is that the social identity of customers, as the collective core of any market, are an important factor in explaining why some innovations take off and others do not. The challenge, of course, is when a company built on a collective identity has its CEO mouth off in a way that runs counter to that collective identity and the company's customers find out. Maybe as a Whole Foods Stockholder I should send John Mackey a copy of Huggy's book? Then again, that would only be helpful if I had a time machine....

Finally, yesterday I happened upon two anti-United Airlines music videos created by David Carroll, a musician whose guitar was broken by United baggage handlers. He wasn't able to get resolution through United, so he promised to make three videos about United. After the first one - which was a HUGE hit on YouTube and currently has 5M+ views - United changed its mind. Dave said "too late" and has since published a second video. When customers attack, indeed!

Here's the first:

And the second, which has better production values: