customer

Katherine Warman Kern: When the CEO is the Customer

October 18, 2010

According to the Dutchess in Alice in Wonderland , “Everything’s got a moral, if only you can find it.” So when the headlines report that Facebook, Blackberry, Google, Apple are among “The Breakaway Brands” of the last three years, keep reading — you haven’t found the moral of this story. The real news is that Clif Bar beat out Facebook to be the # 1″Breakaway Brand” and Kraft is # 9. The moral of this story is that when the CEO is THE customer, the business will grow – whether a new product or one of the oldest brands in the country. Forbes shares the “Breakaway Brand” survey , conducted by Landor Associates using Young & Rubicam’s Brand Asset Valuator database to measure brand momentum in the US over three years. Clif Bar’s success is remarkable. The snack/confections market is by far one of the most competitive markets, with thousands of SKUs competing for shelf space and customer attention. The co-CEO’s, Kit Crawford and Gary Erickson, make a product which they would buy (what a concept!), and launched it where they would look for it: in cycle shops and health food stores. According to Forbes : “By practicing what it preaches, Clif Bar is a classic story of the little brand that could — and did.” As a result, the founders decided to not succumb to an offer to purchase from Quaker after 10 exhausting years of hard work managing a fast growing company. According to the Wall Street Journal , the founders claim: : “We really value the ability to steer the company and its values, and we just can’t see that happening if we don’t remain private.” Likewise, the idea that Kraft, one of the oldest brands in the US, is a Breakaway Brand is also truly remarkable. Every Fortune 100 “Consumer Packed Goods” (CPG) Company is struggling to maintain relevance in today’s marketplace of abundant choices — let alone be a “Breakaway Brand” among the likes of Apple. Most of these companies are run by men even though women control the bulk of purchases in this market. Forbes credits one of the few women leaders, Chairman and CEO, Irene Rosenfeld: “Kraft Foods Chairman and CEO Irene Rosenfeld set her sights on differentiating this classic American-cupboard stable of brands in the minds of modern consumers, and her efforts have paid off.” The article goes on to explain that Kraft has increased its relevance by “successfully integrat[ing] its product offerings into our daily lives in new and innovative ways.” They refer to the use of custom digital publishing, in which brands publish “lifestyle” websites with brand placements in relevant instances. Kraft is not alone in shifting advertising and promotional dollars into custom digital publishing. Procter & Gamble, Unilever, Anheuser Busch, and many others have experimented. The Kraft approach is more straightforward and transparent than, for example, Procter & Gamble . Is this more transparent approach more appealing to women? I guess that’s what the marketing people and agencies concluded when their image of the customer is the CEO of the company. When the CEO is the customer, as in the case of Clif Bar and Kraft, they lead the company in a way that is authentic, breeding trust throughout the organization and all the way to the customer. As we learned from Sheena Iyendar in The Art of Choosing , trust may be the most important factor effecting the decision to choose. Maybe this is why FORBES recently named Irene Rosenfeld the second most powerful woman in its annual ranking, placing her ahead of Oprah and even Lady Gaga.

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The 14th Banker: Auto Repairs and the Financial Crisis

October 10, 2010

The other day my vehicle was making a rubbing/grinding noise that was noticeable on low-speed turns. From prior experience, I knew it was probably wheel bearings, power steering, cv boots, axles or some such. As you can tell, I did not know much, just what I had paid for in previous experiences with similar symptoms. I received a recommendation for a local auto service place and decided to try them out. After leaving the car with them a few hours, the actual mechanic called me back. Note, it was not a “service advisor” or the intake person. The mechanic told me that the power steering fluid was a little low but he could not detect a leak. He said he topped off the fluid and suggested we just drive the car awhile and see if there is some very slow leak that is undetectable. He also told me that the last person to change the power steering fluid might have just left it a little low. When he paused, my response was “that’s it?”  Yes. I asked if he inspected the front end and he said that he had and there was a cracked CV boot but no wear as yet. He did not recommend changing it because I could drive it awhile and repair the whole thing later, including the axle, for about the same money. Then he put the business owner on and I asked him how much it would be. “Nothing”, he said. No service fee, no charge for time, no charge for fluid. I told him he had a customer for life. The business itself appeared to be quite successful. While not on a main street, there were two nice new buildings and plenty of apparent work, which could only come from word of mouth. This place had zero street visibility. As I was pondering this later, it occurred to me that the staff must not be under “metrics” and “goals”. Rather, they had an innate desire to provide a quality customer experience and to do the right thing for the client. They had a faith that if they did so, they would have a loyal customer that would come back to them when a real repair needed to be done. Do you know what? They are right. I will only go to a new car dealership in the future for a complex problem that only they have the diagnostics to fix, after these guys tell me then cannot handle it. And I trust that they will tell me that if it is the case. I did a quick internet search and quickly found a site that discussed metrics for Service Advisors. The terminology that began to jump out at me reminds me of that we find at large banks and corporations of every stripe. There are lots of metrics and the article discusses how if you compare individuals on the metrics the measures go up. Apparently in the auto repair business, metrics are such things as: Average up-sell per advisor Additional recommendations per Repair Order Additional average Customer Pay per Repair Order Warranty to Customer Pay conversion Customer declining of these additional up-sells are seen as a problem, so the industry has developed tools and techniques to overcome objections. They have found that if the advisor walks the customer through each recommended repair and “prioritizes” its importance, the customer pays for more repairs. They can use printed reports to help with this. The Recommended Action Plan can itemize all the suggested work and highlights in color (presumably red), those that are most urgent. Now I have had some experience with this process. I use a variety of places to service my auto based on convenience. If I am out at one office and there is a quick lube next door and I need an oil change, I will just get it done. I may even flush the radiator, rotate the tires, or do something else. Once at a new car dealership, a service advisor gave me this long list of work that he recommended and I asked where did he get this from? He told me that it was basically the list of everything that had to be done at certain intervals. If for example, my car had 80,000 miles on it, he might recommend a timing belt, even though I had someone else change the timing belt six months before. If I was not paying attention or did not remember what I had done, which is more likely the older one gets, I might just authorize the work. It had nothing to do with the condition of the vehicle. I am not against using metrics. They are important tools for accountability and to compare performance. But they go horribly awry when the metrics are wrong, there is little subjectivity, the compensation is tied to the metrics, the interests of the employee and the firm are elevated above the customer’s interest, the numbers are easily gamed by ethical lapse or cheating, etc. There are also many important work products that cannot be captured by metrics. I would love to see a metric in an auto shop that measures what my mechanic did. We could call it, “Sending The Customer Home Without Charging Them Anything. It might actually be the most important metric of all. What does this have to do with the financial crisis? There are two competing models here. One model is about extraction and consumption. Extract as much as you can so you can consume as much as you can. The other model is about preservation and investment. My new mechanic believes in preserving my money and investing in the relationship. In so doing, he also preserves his time, does not wear out his equipment, and perhaps provides faster service to other customers. With the time he is not spending doing unnecessary repairs on my vehicle, perhaps he is working on another vehicle, helping his spouse, or playing with his kids. There is a benefit to both of us that cannot be measured in currency. The current mortgage foreclosure crisis is a result of “extract and consume” thinking. How many tales are there of borrowers that bought more house than they could afford on false “stated income”. The mortgage originators must have been hitting some great metrics and getting big payouts. What about the lenders that made so many loans they did not have time to process the paperwork afterwards. Great metrics. Big payouts. What about the investment bankers that packaged these deals up and sold them to unwitting investors? Great metrics. Huge millions in payouts. What about the banks that loaded up on this stuff, many of them knowing the shortcomings but also knowing that they could get short-term results and that hopefully home prices would rise forever and everything would be fine? Great metrics and fantastic bonuses. What about the Federal Reserve that now owns much of this crap? Oh, never mind.

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Michael Hudson: Boiler Rooms and Foreclosure Mills: A Brief History of America’s Mortgage Industry

October 7, 2010

The news about the nation’s foreclosure scandal has been coming fast and furious, fueled by tales of backdated documents , false affidavits and “rocket dockets” that push families into the street. A former employee with one of the nation’s largest lenders testifies that he signed off on 400 foreclosure documents a day without reading them or verifying the information in them was correct. Ex-employees of a law firm that serves as a “foreclosure mill” for major lenders describe a workplace where speed — not accuracy or justice — trumps all . “Somebody would get a 76-day foreclosure,” one recalled, “and then someone else would say, ‘Oh, I can beat that!’” Shocking stuff. But surprising? Not for anyone who’s been tracking the recent history of the mortgage machine. Just about every corner of America’s mortgage industry has been blemished by significant levels of fraud over the past decade. Forged Signatures, Fake W-2 Forms On the front end of the process, for example, many mortgage pros used “boiler-room” salesmanship to peddle loans to borrowers who didn’t understand what they were getting and couldn’t afford their loans in the long run. To make these deals go through, some workers forged borrowers’ signatures on key disclosure documents, pressured real estate appraisers to inflate home values , and created fake W-2 tax forms that exaggerated loan applicants’ earnings. At Ameriquest Mortgage, one of the companies I focus on in my new book about the subprime mortgage debacle, The Monster , this sort of cut-and-paste document production was so common employees joked that the work was being done in “The Lab” or the “Art Department.” Here’s a snippet from the book, from a passage about Stephen Kuhn, a young Ameriquest salesman who eventually became distraught about the things he had to do to earn his living: The pressure to produce began to get to Kuhn. After he became a branch manager, he saw a bigger picture of how Ameriquest was treating its customers. Many nights, he had to drink a twelve-pack of beer to get to sleep. He asked for a demotion. He wanted to go back to being a salesman. Even that didn’t work for him. He felt trapped. To hang on to his job, he had to put borrowers in deals that sank them deeper into ruin. One of his customers was a veterinarian who was having tax problems. The IRS was threatening to close down his business. Kuhn arranged a loan for the veterinarian that “had no benefit whatsoever. It was a terrible loan.” Another customer was a small businessman, the owner of a Chinese restaurant. Kuhn put the man into a stated-income loan that raised his payments by $200 a month, even though he was struggling to keep up on his existing mortgage. “He was desperate,” Kuhn said. “So I was told to take advantage of him.” Kuhn said a supervisor ordered him to cut and paste documents to make the loan go through, telling him, “It’s a three-hundred-thousand-dollar loan. Get it done.” The borrower was facing foreclosure on his existing mortgage, so Kuhn forged his mortgage history so it looked like he’d never been late on his mortgage. By the summer of 2003 Kuhn couldn’t take it anymore. He told his manager he was having trouble dealing with things, because he thought Ameriquest’s rates, fees, and business ethics were terrible. Soon after, on a day when Kuhn was out sick, his manager left him a cell phone message telling him it would be in everyone’s best interest if Kuhn and Ameriquest parted ways. Kuhn called back and asked why he was being fired. The only answer the manager would give him, Kuhn said, was, “I think you know.” Kuhn was far from alone, at Ameriquest and other lenders around the country. As the Center for Public Integrity documented in its 2009 investigation, ” Economic Meltdown: The Subprime 25 ,” many of the largest financial institutions in America were key players in the subprime market — and many of them had to make payments to settle claims of widespread lending abuses. Little was done to stop the bad practices when they were happening. Former Federal Reserve Chairman Alan Greenspan would later explain to CBS’ 60 Minutes : “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late. I didn’t really get it until very late in 2005 and 2006.” The Fed took no action even when it became aware of the problems, he said, because “it’s very difficult for banking regulators to deal with that.” With federal officials pushing a soft approach to policing the mortgage market, it was left to the states to do what they could to try and rein in the worst practices. A coalition of state authorities dug into Ameriquest’s tactics, eventually forcing the company to agree to a $325 million loan-fraud settlement . States Again Take the Lead Now that a fresh scandal has emerged in the mortgage industry, the states are once again taking the lead in confronting the problem. At least seven states are investigating questionable foreclosures. On Wednesday, Ohio Attorney General Richard Cordray sued Ally Financial Inc. and its GMAC Mortgage division , claiming that workers at the company had signed and filed false court documents in an effort to “increase its profits at the expense Ohio consumers and Ohio’s system of justice.” Cordray called the alleged misconduct the ” tip of an iceberg of industrywide abuse of the foreclosure process. ” Now the question becomes: How forcefully will federal officials intervene? Key members of Congress are pushing U.S. Attorney General Eric Holder and current Fed Chair Ben Bernanke to investigate. Holder said at press conference Wednesday that “we are aware of the charges that have surfaced in the newspapers in the last couple of days, and we are looking at them.” The White House announced Thursday afternoon that President Obama would not sign a bill that some consumer advocates worry would make it harder for homeowners to fight fraudulent foreclosures. The legislation would generally require state and federal courts to recognize notarizations made by a notary public in any state — and require courts to recognize electronic notarizations. Congress and other powers in Washington failed to get the facts and act the first time around — when lenders were engaged in a frenzy of predatory lending. The foreclosure scandal is a second chance for lawmakers and bureaucrats to prove that they can ferret out the truth and take action. Michael Hudson is a staff writer with a nonprofit journalism organization, the Center for Public Integrity , and author of The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America–and Spawned a Global Crisis (Times Books, October 2010).

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Anna Cuevas: While We Are On the Subject of Bad Foreclosures, What About HAMP’s Compliance?

October 2, 2010

To whom it may concern: Actually the question is, whom does it concern? The current events in regards to the mishandling of documents by major lenders Chase and GMAC are just the tip of the iceberg. There are thousands of homeowners who have already lost their homes because of this problem as well as many, many more problems in the processing of the government Program, HAMP. The present Administration ran an election marketing campaign that will go down in the history books; it was multi-faceted, a media darling, and a social media frenzy. If a similar effort that took place during the election campaign was used to further develop this housing Program, I believe we could begin to see results. The Administration must create a training platform that engages anyone and everyone involved in the Loan Modification process to ensure that the guidelines are followed and communicated correctly from the servicers all the way to the Hope counselors. The American public is losing countless homes due to non-compliance in procedures and incorrect answers being given to homeowners, causing them to either give up or lose their homes. Maybe now is the right time for the Treasury Department has said they will “look into these troubling developments” they can stop turning a blind eye to those “troubling developments” and the non-compliance of the HAMP Home Affordable Modification Program. I wonder what the point is of testifying in front of the Senate Housing Commission and putting together lengthy reports and compiling data on the inconsistencies of the Program, etc., etc., etc., if no one really cares, and no one really does anything about it. If it continues and no one is held accountable, nothing will happen when they do not follow the rules and guidelines of the Program. When mistakes are made it is not about a misapplied payment that you can fix; the mistakes are huge. We are talking about the loss of the American dream for someone and, from what I have seen first hand, no one really cares. Here is an example. I have been working on an advocacy case for the past 3 1/2 months that is truly an instance of The Fleecing of America. During the course my case, I contacted every government agency I could think of. Most emails were deleted prior to reading, and the ones that were read were not replied to. When complaints were made, the response was there was nothing they could do, and the committees said they only do reporting. I was told the Compliance Agent for the Program need not comply with the guidelines, and in calling the major national service, one of Americas’ Largest Banks, we were hung up on. The Congresswoman would not talk to me unless I was a HUD counselor, the woman at the government-backed investor’s office said she would help, then left on vacation and never called back again. Sigtarp said they don’t get involved. All I really got was an experience of finger pointing and passing the buck, which led me to the question angrily at that point: Who then does it concern? Paperwork is shuffled within the lenders infrastructure, misinformation is given out on a consistent basis, countless mistakes are made, incorrect income is used all the time and borrowers are railroaded into accepting modifications whether they are calculated correctly or not for fear of losing their homes even if they ask to be re-reviewed. Borrowers are blamed for missing paperwork but the servicers and lenders have no accountability and do not accept any responsibility for their own actions when they make mistakes, and the answer simply is that the entire onus is on the consumer. Go in and read one of those thick lender/servicer testimonies; the blame is on the borrower. Wouldn’t now be a good time to look into the compliance issues with this Program? If government officials, bank executives and investors could go into the trenches and really listen to their constituents and customers, it would be clear as day that there is a problem that needs to be addressed, and addressed soon. Maybe if servicer employees were thoroughly trained on the HAMP guidelines they could give borrowers the correct information. Maybe then, one less American homeowner would lose his home because of being given incorrect information or because of an internal mistake. Once the mistake happens there is nowhere to turn, no one to complain to, and the situation then calls for drastic measures. People must think for themselves and question authority because if they don’t, it they could cost them their homes. It is imperative that people get empowered with all the information necessary. The American public receives notices such as “denied for NPV” that homeowners have no clue about what that means. If they request the NPV values and property values, they then find out that their servicers’ do not want to disclose the information, refuse to disclose it, or never send it as required by the Treasury’s HAMP guidelines, etc. People are still being told that they can only get help if they are currently 60 days late and others have lost their home because of the very Program that was supposed to help them. Many homeowners actually qualified for the Program, but mistakes are made. But then again, who really cares? Nothing will happen to them anyway. There is no accountability for non-compliance. We are talking about people losing their homes, not little mistakes that are not as detrimental to all of us. When you really listen to the stories like I do, you see that the red tape is strangling homeowners. I think the quality of their job performance is suffering, relationships are in jeopardy and their health is affected, all because the stress and worry they suffer eventually gets the best of them. Again, if lenders and government officials saw what homeowners had to go through to obtain a modification, it would readily become apparent that applying for a modification and making sure it is being processed correctly is a full time job in itself. You need to make sure that the fax that you have to send 17 times arrived along with all 50 pages with the loan number written on each page, and that you just paid Kinko’s money you don’t have 17 times to fax the same information. On top of this, the homeowner either has to be looking for work or working a full time job for less pay, all the while trying to juggle this paperwork nightmare. Otherwise, they cannot pay the modified payment. Then sometimes when the homeowner, after 10 attempts to save their home, finally does get either a trial modification that goes on for 10 months only to be followed by a denial, or a permanent modification that is suddenly lost, guess what? The lender now does not want to honor it. It is really no wonder that homeowners are so frustrated that they give up or they must start the process all over again. Maybe the Surgeon General should require a warning label. I just wonder what incentives the servicers and lenders really have behind the scenes, what back room deals are happening that we don’t know about, and why it is that they would much prefer to kick a homeowner out of the house and sell at a loss at a foreclosure sale instead of working out a loan modification for their customer that simply wants an affordable payment – even when it is more profitable to help them. It is not because homeowners are deadbeats, but because of a broad spectrum of circumstances the current economy has caused. Things that make you go hmmmmm . In light of the latest news of the mishandling of foreclosures, American homeowners need to take their power back by making sure they regain their confidence, know the Program guidelines themselves, know their numbers inside and out so they can push back when the information and answers given to them are incorrect. Verify everything more than once. You must be your own best advocate, question authority, or it could cost you your home. So now that we are talking about the mishandling of foreclosures, I think it would also be a great time to ” look into these troubling events” too!

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Vivian Norris de Montaigu: The Future of Banking

September 30, 2010

Based on the adherence to the Chatham House Rules, no individuals nor companies will be identified by name. A remote location near St. Andrews, Scotland, was a somehow ideal place for bankers and their technology bedfellows to discuss their common future, held under gray clouds and bad financial news brewing in nearby Ireland, and austerity protests in much of Europe. Except these bankers were 90% from Africa, Asia and the Middle East. The rare European and even rarer (expat) American, although often dominating the speaking space, added little to the reality of those who attended. Underlining this fact was a Kenyan banker who announced a 36% yearly profit or an Indian CEO expanding internationally taking the stage just after a gloom and doom American analyst or frankly depressing former Central Bank representative from the West. Will the emerging market economies be able to sustain this optimism or will yet another wave of crisis hit those markets as well? Or had they learned from the ’97 crisis (bankers from countries such as Thailand helped to put that crisis in perspective) and were thus in better shape to deal with any new ones to come? And is this crisis in the West not a kind of karmic payback for that ’97 Asian Financial Crisis, without which China and much of Asia would have already been much stronger? Africa, without violence, famine and AIDS too would have risen up as a financial leader much earlier. At last these parts of the world, where the majority of the poor, those Bottom of the Pyramid citizens of the world, were seeing a brighter future. Our crisis in the West should not be hindering their prosperity, nor should globalization force those who have begun pulling themselves out of dire poverty, fall back because of rising food prices or debts to the IMF and World Bank. Ironically those same countries, which were told they could not bail out their own banks when times became rough, have been watching closely as the US bailed out its own banks. This kind of hypocrisy does not go down well. I doubt that kind of advice will be listened to again. Yet one hopes they do not follow in our Western footsteps and that regulations will indeed hinder the kind of hyper-speculation and virtual splicing, bundling and reselling of thin air. Ironically we ran into an old friend who had been an executive at a large bank in the US (which had failed) who happened to be vacationing, golfing in St Andrews. When he found out we were attending a banking conference he asked questions, and the answers we provided demonstrated that not all was gloom and doom. The demographic charts showed the aging US and Europe while most of the developing world has young populations that are energetic and entrepreneurial… and which can trade with one another. In other words, speaking from a US perspective, in some ways, they simply do not need us. The former banker friend went on to work with manual laborers and has been questioning the way things were done in the past. He witnessed firsthand how cheap credit and over-expansion brought down a once strong economy. And though the first evening a former Irish rock star turned philanthropist and humanitarian took the stage to address and scold those he perhaps believed to be a Goldman Sachs and City crowd, the reality was that I spent much of the free time discussing with Indian, African and expat US bankers, about the good being done by banking the unbanked, how technology could help speed up that process, and how the BRIC economies were not looking towards their Western colleagues for how to build their economies, but rather trying out new architectures and customer-focused approaches that we in the West would be wise to learn from and implement. Microcredit, women, microsavings were all discussed with bankers who all focused on the human needs in their countries. I was impressed time and again that they did not ignore these difficult topics but were extremely straightforward. I was also frankly shocked as I spoke to several expat American former bankers and analysts who had seen the crisis coming and has moved to Australia and other parts of the world. All of them stated they had done so to ensure their children a better future. WE in the West are now finding ourselves having to stare poverty in the face as much of our population is suffering and without work. There was talk of the end of banks as we know it, mobile banking and bank branches in a box, but also maintaining a human connection and knowing the customer. But the most exciting ideas came from ex-bankers or those who had been running big banks and who were focusing on funding projects and businesses created by women, or looking at how the poorest of the poor were fulfilling their financial needs via new technologies. African telecoms buying up banks, non-banks doing business that used to be monopolized by banks — local investments in Africa and Asia were paying off. But perhaps the most moving part of the event was the final evening, as we were bussed to a farm for a Scottish dinner and dance, accompanied by traditional music of the bagpipes and a farewell sendoff by the Scottish guards. As we stood there, bankers who came in many cases from former European, especially former British empire colonies, watching the cultural manifestation of a fading glory, I realized that the world has already changed, things will never be as they once were, and that is for the best. It is a new time. We need to learn from those we thought we were helping, as they will save us in the end.

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Alfred Gingold: THE WEASEL BLINKS

September 29, 2010

Readers of my previous recent posts know that my wife and I are locked in combat with our mortgage bank, which persists in creating false penalties to add to our mortgage bill. Last week, the day after the receipt from our certified letter to Jamie Dimon returned to us, we received a voice mail from Heather Yomboro of the Chase Home Finance Executive Office. Actually, she lavished two calls on us, which we couldn’t return until the next day, by which time a Fedex from Heather had appeared under our door to the effect that if she did not hear back from us, Chase would assume the matter closed. After three months of studiously ignoring us, the Weasel demands action. In 2008, the last time we wrote to Mr. Dimon, the fixer assigned to our case came from the Chase Executive Resolution Committee, which still sounds to me like a branch of the East German Secret Police, and indeed, our fixer would’ve been right at home in the Stasi, her humorless manner balanced between cool politesse and infuriating snottiness. Fortunately, I noticed that she bristled at being called Ma’am, so I called her Ma’am every chance I got. Chase’s Executive Office must be a pleasanter place that its Executive Resolution Committee; at least Heather Yomboro is a good deal pleasanter than Ms. Stasi was. She bore the good news that our September mortgage payment was finally accepted and our fraudulent late penalties removed. To our astonishment, she apologized on behalf of the bank for sticking us with the neighbor’s water bill and acknowledged that the Tax Department “jumped the gun” on our July tax payment, paying it before it was due so we could be escrowed for being late. I pointed out that this is not the first time Chase has pulled this stunt, not even the second. She apologized for that too. Apologized! Be still my heart. But even if Heather Yomboro is pleasant and courteous, she is still a Chase employee, so I was wary. And it turned out that the real reason for her call was that the bank is out of pocket for those improper tax payments. The NYC Tax Office, bless its stony heart, won’t return their dough, simply crediting the funds toward our tax bill. So, Heather said, we must return those funds to Chase. Alternatively, she suggested, we could call the NYC Tax Office and persuade them to return Chase’s money, then pay in our taxes ourselves. Not a chance. Can you imagine the length of the phone tree I’d have to wait through in order to plead the bank’s case? Well, Heather opined, “the real problem here is that the city won’t return our money to us.” I reminded her that the real problem here is her employer’s relentless greed and procedural sloppiness. Heather reminded me that, heck, a bank is really nothing more than a group of individuals who occasionally make, you know, mistakes. If you say so, Heather, although I’m inclined to see your bank, at least, as a sinister cadre of weasels devoted to nicking every penny it can get by tooth, claw or sleaze. I told Heather that before we would even consider paying Chase the money it can’t get back from the city, we require a written statement of what we had discussed, included a listing of the various ways the bank attempted to defraud us: the water bill, the premature tax payment, the cooked up penalties. She agreed readily. That was six days ago and no such letter has arrived. However, Chase did send us a check for eighteen bucks, compensation for the certified letters we sent to Jamie et al. I’d mentioned the cost of those letters to Heather and that our other attempt to get Chase’s attention had failed. They sent us the check without even a receipt from us (good thing too because I still can’t find it). It was a nice gesture, much more convincing than the Weasel’s customary sign-off, which graces this letter too: “Chase’s goal is to provide the highest level of quality service.” Nice, but I doubt the sincerity. As a public service, we offer some advice for all who have issues with Chase Home Weasel: Don’t bother with the indifferent lugnuts of Customer Care or the unscrupulous bean-counters of the Tax Department. Write directly to Jamie Dimon himself, certified mail. In our experience, it’s the only way there is to get the bank’s attention, and he’s probably got time on his hands now that he’s sold his house. Here’s his contact info: Jamie Dimon JP Morgan Chase & Co. 270 Park Avenue New York, NY 10017 jamie.dimon@jpmchase.com Phone: 212-270-1111 Fax : 212-270-1121 Meanwhile, we await Chase’s next missive while, of course, paying our mortgage on time.

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Richard (RJ) Eskow: Wall Street Noir: Moody’s "Double Agent" Ratings

September 28, 2010

What happened to Moody’s is what happens to every “agent” who thinks he can serve two masters. The sad thing is that it keeps happening, even though we’ve seen this movie before. Credit rating agencies are supposed to monitor debt that’s issued by financial institutions and governments. It’s their job to protect investors from purchasing financial instruments that are misleadingly packaged or are riskier than the buyer can afford. These “agencies” hold extraordinary power — to destroy companies, to make people fabulously rich, even to influence governments. The problem is they’re not “agencies” at all. They’re for-profit companies who have their palms outstretched to the big banks for revenue even as they’re “policing” the soundness of their portfolios. Consider the recent checkered past of Moody’s, which holds a 40% market share in the worldwide credit rating business. Allegations have been raised about its CEO’s stock trading, harassment of a whistle blower, and intentional deception of the public for its own financial gain. It got everything wrong when it came to rating debt, despite reports it should have known all along. How is Moody’s handling the public shame caused by its ignominious failures? By lecturing the government on how to handle the disaster its own ratings helped to create. The Moody’s File The SEC declined to file fraud charges against Moody’s last month, not because they thought the “agency” was innocent — the evidence showed otherwise — but because it said there was a jurisdictional problem. As the SEC’s report made clear, Moody’s knew a number of credit ratings had been incorrectly rated too favorably. But rather than face the public embarrassment of admitting its mistake, Moody’s let the public believe the ratings were accurate. Moody’s looked the other way as investors were placed at risk, twiddling its thumbs and whistling to itself like a crooked cop ignoring a robbery. To conceal its mistake, Moody’s s-l-o-w-l-y let the numbers climb back to where they should have been all along. As the SEC makes clear in its report, there is substantial evidence that fraudulent behavior occurred and that investors were misled as a result. The report also presents evidence which shows that Moody’s misled the SEC itself, which is a violation of law. In the latest scandal, a firm that analyzes home mortgages just testified that it told banks that the mortgages they were bundling were a mess , with more than one in four failing to meet even basic underwriting standards — and they kept on doing it anyway. They told the rating franchises, too . But, as the head of the analysis firm observed, “if any one of them would have adopted it, they would have lost market share.” He can’t help it if he’s lucky As if Moody’s reputation wasn’t battered enough, there’s the matter of Kevin Hall of McClatchy Newspapers as follows: “If you look at his major sales in 2007, 2009, 2010, they are all around price peaks and followed by large declines. The likelihood that this is just ‘lucky’ is very low — it appears he is using inside information to time his trades.” Hall and McClatchy had been on the Moody’s story like white on rice, as the saying goes. The headline McClatchy gave to Hall’s October 2009 story, ” How Moody’s Sold Its Ratings — And Sold Out Investors ,” shows how strongly his editors backed his work. Senate panels and the Financial Crisis Inquiry Commission both began investigating Moody’s shortly thereafter, and the FCIC found it tough sledding. Both the FCIC and California Attorney General Jerry Brown found that Moody’s was dragging its feet on providing requested documents. The FCIC was forced to issue a subpoena, and Brown had to go to court to force compliance with a subpoena he had already issued. Revenue over research Moody’s drive to “always be selling” severely compromised its judgment, according to reports. As Hall reported last June , Moody’s executives described its former CEO as “getting in their face whenever they raised obstacles to rating a complex deal, often boasting that they weren’t the ones responsible for Moody’s surge in revenues.” “Agencies” like Moody’s don’t make money by generating accurate ratings. They make it by generating ratings that make the customer — the banks, funds, and insurance companies issuing these debts — look good. No wonder analysts were discouraged from raising red flags about risky deals. A review of emails and other documents generated by the Senate Permanent Subcommittee on Investigations provided more evidence of this pattern. As an internal PowerPoint showed, consultants who spoke with members of the group that rated the riskiest financial instruments found that they saw their roles as follows: Generating increased revenue. Increasing Market Share and/or Coverage Fostering good relationships with issuers and investors Delivering high quality ratings and research Just in case that didn’t make priorities clear enough, the consultants added: “When asked about how business objectives were translated into day-to-day work, most agreed that writing deals was paramount, while writing research and developing new products and services received less emphasis.” A “franchise,” not an agency That’s why the word “agency” is such a misnomer. It’s a word with multiple meanings, but in this case it suggests a quasi-government function. The FBI is an “agency.” The Environmental Protection Agency is an “agency.” Moody’s isn’t that kind of agency. You’d have to look to another definition , like “the capacity, condition or state of exerting power” or “an establishment engaged in doing business for another.” The analysts who placed “writing deals” above research aren’t “agents,” except for the high-stakes gamblers who pay their fees. Follow the money. McDaniel held a “town hall meeting” with employees as the economy was crashing around them, thanks in large part to the great ratings they and their colleagues had given to fraudulent products. He said “… my thinking is there’s a much greater concern about the franchise. Everyone in this room is a long-term investor (ed: presumably in Moody’s stock), for sure.” The raters all own stock in Moody’s and want “the franchise” to succeed. That’s not an agency. It’s a “franchise.” That’s why the company reportedly ” purg(ed) analysts and executives ” who warned that there was trouble coming. It’s why Moody’s and its competitors don’t want to be held liable for “recklessly” issuing bad information. It’s why they withheld their services at a crucial time because they didn’t want to responsible. Now an ex-employee is alleging they defamed him after he raised issues of fraud and inflated ratings internally, and then to investigators. Agencies don’t do that. Franchises do. Ending the rigged game Despite all the evidence, Moody’s is still treated as a credible player … and one that’s powerful enough to send a warning shot across the bow of the United States government . It threatened to downgrade the US government’s debt last March if more wasn’t done to reduce the government’s debt. That’s the kind of rigged game we’re facing: One of the biggest sources of the government’s debt is the economic collapse. That collapse was enabled in large measure by the bad ratings issuing by rating franchises like Moody’s. Now Moody’s wants to hamstring the government’s ability to repair the damage it helped create. And it might. They’re that powerful, and the system is that rigged. Imagine: Moody’s still holds enormous power because it can deny the government a AAA rating — the same rating it once freely gave to mortgage securities underwritten so badly that 28% of them were virtually worthless. It’s a classic film noir ending: The double agents, the cops on the take, they’re the ones who wind up having connections, the ones who seem to come out on top in the end. The Franken Amendment would slow down the profit-driven salesmanship of the ratings franchises. Good idea, but why stop there? Where are the prosecutions? And it’s time to consider shutting these groups down. You’ve seen this movie, too: everybody knows you can’t trust a double agent. _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Gordon Macaw Promoted to Chief Operating Officer of IPRO Tech

September 23, 2010

Will Oversee Day to Day Operations of Customer Facing Departments

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Alfred Gingold: A LETTER TO JAMIE DIMON

September 23, 2010

Readers of my last Chase Home Weasel Update on Huffpo know that we are four weeks past the talk with the Tax Department’s dulcet JoAnne, during which she said it might take the bank as much as two weeks to undue the havoc it had wreaked upon our mortgage. Readers of my subsequent Weasel Update on Joy Buzzer know that JoAnne spoke with forked tongue, and that last Thursday, we sent three certified letters, return receipt requested, to Chase Home Weasel’s Tax Department, its Customer Care Department and to Jamie Dimon, respectively. Dimon is CEO of JP Morgan Chase, the gigantic bank of which Chase Home Weasel is but the home-loan tentacle. The letters, identical aside from their addresses, all stated our intention to file an action in small claims court against Chase unless it clears our account of improper charges and restores our escrow waiver. Going to court of any kind against a corporate behemoth is not my idea of fun, but we have tried every other means we can think of to persuade the Weasel to clean up its mess. In hopes of lighting a (metaphorical) fire under Mr. Dimon, I wrote him a special note: Dear Jamie – The first and last time I wrote you was in 2008, when Chase Home Finance abruptly decided that my wife and I were delinquent in our tax payments and thus in violation of our escrow waiver. We weren’t. After some months of writing letters that were ignored and parleying with numerous Customer Care passive-aggressives, I wrote to you, certified mail, return receipt requested.. Within days, someone from the Executive Resolution Group called and the matter was settled. The time I’m writing to say that Chase is at it again, fabricating delinquencies and escrowing us for taxes we’ve already paid. This time I am so disgusted, angry and frustrated that I’m going to sue the bastards if they don’t stop this crap. Since you are the bastards’ putative boss, I thought you should know. (All relevant documentation, btw, follows this note.) Now that that’s out of the way, allow me to offer some advice, advice originally offered by Elie Wiesel to Ronald Reagan in an unsuccessful attempt to dissuade the Gipper from going to Bitburg, Germany in 1985, to pay his respects to a bunch of dead SS officers. Wiesel said, “This is not your place.” You, Jamie, are the best face your industry has to put forward these days. You are a financial superstar, Obama’s favorite banker (erstwhile anyway), CEO of a bank that didn’t really need its TARP infusion, just took it to be a good sport, paid it back promptly and went right on getting rich as Croesus and too big to fail. You are articulate, measured in comportment, almost as famous as Lloyd Blankfein and less vulpine in mien then he-hardly a challenge, but still. And just as honoring Nazis ought to be beneath the dignity of the POTUS, so penny-ante thievery ought to be beneath the dignity of the House of Dimon. I realize that my problem doesn’t rank high on the scale of evil banking tricks, but then it’s not the worst blemish on JP Morgan Chase’s somewhat grimy escutcheon these days. Those laid off Mexican janitors who came all the way from L.A. to see you and didn’t get past security did not create a shining moment for your joint, even though you didn’t actually have much to do with their plight. More on the money, so to speak, are those distasteful out-of-court settlements for abusive loan practices and unlawful payment schemes, among other charges. And there’s Chase’s widely publicized foot-dragging on loan modifications. And let’s not forget Home Finance CEO David B. Lowman’s embarrassing performance before the House Financial Services Committee; the next time Mr. Lowman faces his public, you should really insist he wear sneakers. Understand, I’m not calling you a petty thief trying to pick my pocket. But you have employees who do that and I think you should tell them to stop. It’s not just illegal, it’s unseemly. It’s not your place. And congratulations on selling the Chicago manse ! Dropping the price by half did the trick. Bet that took some intestinal fortitude. Impressive place, too, with the columns and the chintz and the objets; it looks bigger than Tony Soprano’s crib and classier too. Hope financing doesn’t become a problem for your buyer. I hear banks are being real douchebags about mortgages these days. Tell me, did you simmer a vanilla bean in a little water before showings? Your Truly, etc.

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Brett King: The Customer-Centric Initiative Project

September 23, 2010

Getting a head start on customer centricity As I tour the globe talking to banks and other financial institutions, the issue of how to make the migration to a truly customer centric organization is often agonized over. While many are keen to see that goal materialize, there are just as many who feel organizational inertia and long entrenched silos are just too significant a hurdle to circumvent. Innovation in the customer space is often a challenge too. How do you really create an innovative organization when your traditional roots are all about, well…tradition. The big ships of industry, banks definitely included, are like massive supertankers. Ships that turn slowly and once they have a head up of speed are very difficult to slow or turn when set on a course. In a world where channel complexity, technology adoption and consumer behaviors are pushing the envelop of just about every service organization to adapt at warp-speed, how do we create speedboat type instincts when the organization is lumbering along supertanker style? Big Banks are like SuperTankers – they don’t change direction easily The Google Time Initiative Google gives it’s engineers 20% of their time to work on the project of their choice. The Google time initiative is consistently cited as one of the reasons why employees rank Google as one of the best companies to work for as voted by Forbes, FastCompany, etc. It’s also a great generator of innovations as adhoc collaborations are born out of necessity, common interest or just the pure exploration of a better user experience. Some of those initiatives like Android end up becoming a stable of Google’s core range, while others like Google Wave burn bright for a time, create great learnings, but go on to become something entirely different from what started. Getting a bank to give their employees 20% of their time to work on a project or initiative of their choosing, might be too much of an ask for those ships of industry, but it is a way to drop a speedboat in the water and see how it performs. If the idea works, it can then be incorporated back into the overall business as part of a longer-term shift. The VC Approach If you’ve ever engaged in discussions with Venture Capital firms about a business plan, you’ll appreciate how brutal the process is in dismissing badly thought out ideas or poor business cases. If we ran a lot of the existing bank processes, products and business units through a VC selection process these days, many simply would not survive. But because they are embedded ‘traditions’ they get retained. Good examples of this today are paper statements sent by snail mail, or offering a checking account to new customers by default. If we were a brand new start-up bank, it’s unlikely these would be the preferred approach in a business plan today. Using the VC approach, however, can select the most likely candidates for success in the innovation sandbox. VCs often use the formula of reviewing 100 business plans, selecting perhaps 5-10 for further review and selecting perhaps 2 or 3 for some scale of investment. This is a solid approach to pitching new ideas for seed capital internally to see if individual innovation initiatives have merit versus other competitive ideas or bids. It also means that work isn’t done on the basis of simply cool technology, but real revenue or cost savings thinking. The IDEO Approach I’ve always admired the IDEO design team for their deep dive methodology. I think that the deep dive remains probably the most creative management and design process that there is today. By dividing teams into separate groups to brainstorm innovative approaches, you get not a single idea, but many competing ideas to flesh out. The advantages to this process can best be summed up by a great quote from their design team: Enlightened trial and error succeeds over the planning of the lone genius… IDEO Design Once a month, or once a quarter, try getting your channel team together and brainstorming a new customer journey or experience. Then use the VC approach after you’ve prototyped the idea to come up with something better for the customer. The deep dive process will take you to new heights of innovation much quicker than the planning of the lone banker. Especially if that banker has had 30 years of banking experience – trying to get him to think innovatively is like trying to turn that huge supertanker. The Customer Centric Initiative So putting all of these best practice approaches to innovation together, I propose a new initiative for your bank today to get started on the path to customer satisfaction, deeper relationships, and more profitability. Give everyone in your product and channel team, 20% of their time over the next 2-3 months to spend on improving customer journeys and experience. Underpin this by creating a multi-channel deep dive session once a quarter where all of the channel teams, supported by product representatives, look at new ways of engaging the customer. Prototype the customer journey on paper. Sketch up new web, mobile, or ATM screen flows to show how the interaction could be simplified and improved, or even come up with completely new ideas based on behavioral analytics. Let’s get this customer centric initiative on the road. It takes a long time to break silos, so let’s not even try to tackle that until we can get the team thinking about customers. The Customer Centric Initiative is a way of doing that without breaking the bank…

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Katherine Warman Kern: Change the Game

September 21, 2010

I’ve posted about the “Unrecognized Risk of Coupons” because they are so irresistible to media and business looking for a linear, direct, measurable way to prove they can impact sales. In that post, I introduced the idea that couponing (like any temporary discounts, including the “free” internet market) creates a game in which the business and the customer are adversaries. Either customers win by getting more than they paid for, or, business wins by finding a way to take advantage of the customer. For example, the business which coupons during slow periods, but charges full price when they can be assured of seasonal demand. May seem fair to the business, but the customer is thinking, next year I’ll remember to load the pantry so I don’t have to pay full price. Or the free internet, where, as Alan Patrick says , “. . . someone is subsidising everything, and if you can’t see the free lunch then it’s you :-) ” Many internet companies say they are winning that game, but who knows how many active Facebook users there really are or how meaningful the information shared is to advertisers. People like games. Unless or until they think the adversary has an unfair advantage. When the game is between business and customers and the business takes the advantage, the customer will quit. There is no love lost and getting the customer back is very expensive. Ask the financial community what it takes to win back customers who were screwed during the economic collapse. People like to be “wooed” too. As I mentioned in the above post about coupons, another reason they don’t work is because sales is not a “linear” process. It zigs and zags. As I remember Sarah Barber, an early interactive marketer, saying, ” you wouldn’t ask a girl to marry you on a first date, would you?” Sales is more like the game of courtship. Businesses entertain customers because when you get to know a customer in a more relaxed environment they say things they wouldn’t have told you in a formal meeting. There are other business models that “court” people. When a business invests to create something of value for the customer and it shows. Think Apple. Who knew people would pay for music? When customers invest money, time and assets and get a return on that investment – something better than they started with. Think about a CD cabinet carefully organized by genre replaced by something the size of a business card you can listen to anywhere. When the game is risk-free play value. Think about the touch screen technology on the I-Phone and I-Pad. Change the game: from an economic game like the bait and switch of couponing and most internet business models -> to the game of courting the customer, where trust is the only way to win, and returns exceed the time, money and assets shared by both business and customers.

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Christine Pelosi: Deadly Priorities: Why Did PG&E Spend Millions on Politics not Pipelines?

September 12, 2010

As the San Bruno community struggles to recover from the deadly PG&E pipeline blast and fire, many are asking why the California utility spent tens of millions of dollars on politics before they repaired pipelines that their own surveys said were crumbling beneath their customers’ feet? I drove to San Bruno yesterday with my baby daughter (our 9/11 service activity was to donate clothes to the fire victims). We visited with first responders, volunteers, and community residents putting their lives back together. The spirit in San Bruno was cooperation and concern – people are still looking for loved ones and survivors are in shock. There was also a growing concern for the next one: just as earthquake victims wonder about aftershocks, the PG&E blast victims wonder what other pipelines lie crumbling beneath their feet. This is a terrible tragedy — and it didn’t have to happen. Even before the deadly PG&E pipeline blast ripped through the San Bruno community, killing at least 6 people, destroying dozens of homes, and rendering hundreds homeless, the utility knew that they had a potential problem because their own survey listed the San Francisco peninsula pipelines as “high risk” (PDF). As the investigations begin, the prevailing question is why? Why did the pipeline burst? Why didn’t the utility spend ratepayer money on fixing the high risk problem? Why did management decide to spend ratepayer dollars on political campaigns instead of pipeline repairs? Why set these deadly priorities? If the two decisions were not related — why weren’t they? And what will we do to make it right? Here’s what we know so far: residents reported smelling odors in the San Bruno community in the days before the blast. They called PG&E but nothing was detected. No one took the customer complaints up the chain of command to the bosses who had a report listing the San Francisco peninsula pipelines as “high risk.” After the deadly blast, there was some denial by PG&E that the pipeline was even theirs; then denial that the pipeline was the one in the survey, but federal investigators (who released PG&E’s survey) said the pipeline was PG&E’s. We know the utility had the money — our money — to fix the pipelines because public filings show that just last spring, PG&E chose to spend $45 million in ratepayer dollars in a failed bid to block public power. These are funds that could have been used to repair what the utility’s own survey said was a high risk pipeline on the SF peninsula. So why make the decision for politics not pipelines? If the spending decisions were not related, why not? At the very least, PG&E should have a moratorium on political spending until they compensate the San Bruno victims and fix the pipelines. Who knows what crumbling infrastructure lies beneath our sleeping children? Actually, many people do — they pay surveyors to take a look. We actually know that our crumbling pipelines, roads, and bridges are ticking time bombs. That is why President Obama and Congressional Democrats have pushed to fund jobs that repair our roads, runways, and railways — we can’t have first rate American communities with third world American infrastructure. Will we take this occasion to invest in rebuilding and to insist on ratepayer say on utility pay? Or will we continue with the status quo until the next explosion? The San Bruno tragedy is a clarion call to rebuild America and insist on ratepayer say on utility pay. I think most taxpayers would reject deadly priorities that put politics over pipelines and choose repairs to the ground literally crumbling beneath our feet, and most ratepayers would choose crumbling infrastructure repairs over political campaigns. Wouldn’t you?

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Katherine Warman Kern: The Dog Look

September 8, 2010

Ever get that clueless “dog look”? Here’s an example shared by Adriana Lukas : A Doctor’s office attempts to fix a problem — patients are sitting on hold waiting endlessly to schedule appointments — by buying a turnkey platform designed to speed up the process online. But this solution creates a new problem. Namely, personal data is requested which could make patients vulnerable to identity theft. When a patient, Mary Hodder (the editor of Napsterization.org ) calls with concerns, those concerns are met with the “dog look”. I totally agree with Mary’s concerns about the risk to the patient. But importantly, we need a better way to innovate than this vicious cycle of trial, hope, & error. There are exceptions to every rule, of course, but dogs naturally want to please. If you’ve ever experimented with putting more emphasis on rewarding good behavior than punishing bad you find that you get fewer “dog looks” and more “aha, oh this is what you want me to do.” The purpose of this metaphor is not to suggest that we should reward error with positive reinforcement. This metaphor is about business and customers cooperating for better outcome for both parties. Comradity has a theory that when mass production, mass communication, and mass distribution transformed the US economy from local markets to a mass market we lost a “Culture of We”. The mass marketplace operates on scale. Transactions are numbers. The identity — business or customer — is not always obvious. Moving more quantity is more important than the very expensive challenge of improving reputation or convincing consumers to share more information. So business does it more efficiently by taking information the customer hasn’t offered to share, despite the fact that businesses has yet to develop an efficient way to handle all that information on a large scale to create value. Customers expect the worst, refuse to give the benefit of the doubt, and believe rumors on the internet before they believe articles in traditional media or ads. In a local market, the transaction is human. Identity, buyer or seller, is obvious. The interests, assets, and intent are transparent. Both business and customer benefit when business does the right thing for its reputation and continues to improve in response to customer communication. So there is cooperation – customers and business share information, costumers are receptive to business education, relationships are cultivated — not just between customer and business, but among happy customers who reinforce each others satisfaction. Either we considered the loss of the local market “Culture of We” a trade-off to gain the mass market advantage — making quality of life affordable for more people, or, we just took for granted that business-costumer cooperation would still play a role. But now that today’s interactive technologies make it possible for customers to communicate directly with business, we’re confronted head on with the elephant in the room — the mass market has created a “culture of me”. Customers complain they don’t trust business and business complains that customers are fickle. But customers aren’t going to start making their own cellphones or stop talking on them. And business is still producing enormous quantities which they hope will sell at a profitable price. Although they count on each other, they resent each other. Many say that this is what is and nothing will change it. That’s not the clueless “dog look”, by the way, that’s a dog that’s been abused and only knows how to be abusive right back. These are not innovators. Innovation makes change possible. It does not accept or excuse the negatives of the status quo. So if you are still with me, the first change we need to make possible is a better marketplace for innovation. A place where big companies — who want to support innovation that goes beyond trial, hope, and error — can discover new ideas and those with new ideas can learn what it takes to change the game instead of just creating more problems. Specifically, a place where everyone is less threatened and in a defensive “me” mode and more confident and in an outgoing “we” mode: 1. Start with a promise that if you share information, you will discover where you’ll get the best reception. 2. Use the information to visualize where individuals fit in the community. 3. The roles participants play are obvious. 4. Customers initiate contact when the timing is right for them. 5. Business can see the interests, assets, and intent within cluster they intend to satisfy and anticipate how to capitalize when they are contacted. 6. Each participant, business or customer, controls the information they share, with whom, in what context and timing — when it may be released or destroyed. 7. Communication tools maintain a sense of security that sharing information will not make one vulnerable to exploitation. Who wants a better marketplace like this for innovation? Well, let me know if you do, by tweeting about this post with the hashmark #bettermarketplace.

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Grant Cardone: How to Sell in a Recession

September 7, 2010

What do you do when you can’t sell your products and services because the economy sucks and people are reportedly not spending? A serious recession changes things for everyone. Budgets are tight, uncertainty prevails and bad news is plentiful. So how do you sell your products when it appears that no one is buying? The most important thing is to understand how people spend money during periods of recessions: 1) During recessions people spend money less often. This does not mean they do not spend money but that they are more careful how they do spend it. 2) During recessions value is more important than price. The value proposition, not price, is everything now as your buyer makes fewer decisions. 3) A recession is a terrible thing to waste. Understand there will immediately will be less QUALITY competition with many people closing down completely and others just barely staying open, the winners with the right strategies will dominate. Most companies are only focused on expense reduction not revenue production. Henry Ford said it best, “a man who stops advertising to save money is like a man who stops a clock to save time.” 4) The company that is able to take the right amount of actions and persist with those actions through time will be the winners. The lowest price will not be the winners here – right actions persisting over time will be! 5) Money follows attention and the seller that can get the most attention will end up with the most money. Don’t stop advertising and calling on clients. Now is the time to increase all the ways in which you gain attention by whatever means possible. Whoever dominates the thinking of the decision maker will be the winner during this recession! The companies that focus on things likes consistent sales training and sales strategie s for expanding will win. This is not a time to counter contraction with action. Any goal or target can be achieved, regardless of the economy, with the right amount of actions executed with persistence. The concepts of competition do not work in this type of environment. You must dominate the thinking of your customers and then overwhelm your market so that you are the only perceived player in the environment. Inspire your people to expand in every way possible because those you sell against will not! “Any man who stops advancing just because of the economy will find himself almost always experiencing a bad economy!” Grant Cardone The way to sell products during a recession is ultimately to increase the amount of exposure you have in the market place through every means possible. Increase attention on yourself, your products and your company. The person or company that can dominate the thinking of the customer’s mind will be the winner! Dominate, don’t compete, attack don’t retreat and persist in your actions until you are the only one left standing! Through effectives sales training and sales motivation you can successfully sell your products and services regardless of the economy.

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Rabbi Shmuley Boteach: Status Symbols and the American Express Black Card

August 31, 2010

As a seventeen-year-old student at Rabbinical college, a riddle was put to me. A beggar is invited to a billionaire’s home for dinner. The homeless man has never had such scrumptious food. He throws his entire being into slopping down his soup and devouring his chicken. Meanwhile, the rich man puts a napkin on his lap, sticks out a pinky, and eats with meticulous etiquette. The question, which of the two men is more attached to the food? I answered, ‘Why, the poor man, of course. He’s wolfing the stuff down as if it’s his last meal.’ ‘Wrong,’ my teacher told me. ‘The rich man is much more attached. Want proof? Try taking the food away from each. For the poor man its easy-come-easy-go. He ate on the street yesterday, he’ll find a way to make do today. But the rich man? Just try taking away his meal. His butler will assault you, the police will be called, his lawyer will sue…’ You get the picture. As America endures its worst recession since the great depression, a cleansing of sorts is taking place. All the status symbols that give our lives meaning — designer clothes, fancy cars, expensive jewelry — are becoming outside our reach. Now status symbols are strange things. Who would have thought Dolce and Gabbana on our backside, Prada on our feet, and a $9,000 Birkin bag on our shoulder would make us feel so good about ourselves. But, curiously, we spend our lives pursuing these ephemeral and flimsy objects that somehow lend significance to our lives. Descartes may have said, “I think, therefore I am.” But in America we respond, “I have, therefore I am.” But in this recession, our status symbols are under threat. How attached have we become to these things? Will our egos survive their absence? Most importantly, will we finally fill the void with new status symbols of greater depth and more lasting endurance? Tiger Woods just lost his wife. His career is also going down the toilet. Which makes him feel worse? The answer, of course, depends on which was the real pillar of his self-esteem, his money and celebrity or his family. Values, of course, create character. A love of money creates a greedy character while a love of people creates a nurturing character. But what is often overlooked is how values also determine a culture’s status symbols. A culture that values wealth will develop super-expensive cars and gold encrusted watches that people compete to purchase. And a culture that values virtue will develop status symbols based on public service. After Ted Turner pledged $1 billion in 1997 to the UN, he made the valid point that the Forbes 400 list prevented many of his friends from following suit. They feared that if they gave away a large portion of their wealth they would fall off the list. For many, status is attained through the hording of wealth. But a little over a decade later Bill Gates and Warren Buffet obliterated that model by creating a new status symbol: giving away half your assets in your lifetime, making it almost embarrassing to remain on the Forbes list with all your assets intact. A conversation last week with an executive assistant to American Express CEO Ken Chenault, gave me an epiphany about my own susceptibility to shallow symbols of status, even though I decried all such nonsense in my 2009 book about the near-collapse of the American economy, The Blessing of Enough: Rejecting Material Greed, Embracing Spiritual Hunger . In 1994, while serving as Rabbi at Oxford University, I took my wife for our wedding anniversary to the Winter Olympics in Lillehammer. After an evening event we found ourselves in a freezing village late at night with no way to get back to our hotel in Oslo. I saw a bus passing and it stopped to pick us up. Turns out there were several British executives from American Express on board. One was charged with launching a new card — a black card — in the UK as a pilot. The Centurion Card was meant to be American Express’s most elite card and, though the necessary earnings and spending were completely outside my reach, the executive and I became friendly and, having heard that my organization regularly hosts world leaders lecturing to Oxford’s students, he found what I do interesting and offered me the card. Since it was a few years before the card made it into the US, it was a novelty to all who saw it. I was reluctant to ever show it off. Still, I knew I had it in my wallet. Turns out that amid the status it was far from the blessing I thought it would be. Every year American Express raised the membership fee it until it was completely outside our budget (unbelievably, the policy is to keep the fee even if they cancel the card). Were they crazy? And especially for the abysmal service it offered. A concierge that was often incompetent, travel ‘professionals’ who were well-meaning but so often inept. Account managers who were impossible to reach. I complained numerous times and was apologized to by the head of Centurion in the US, who acknowledged the poor service I had received and promised to make it better. Regardless, the mistakes continued and the service remained highly substandard. Matters came to a head when a temporary hold was put on the card because of a bicycle I bought from my brother’s business and American Expresses’ simple inability to distinguish between me, the cardholder, and my brother, an American Express merchant of many years. The hold was, of course, quickly removed but rather than the apology I had requested from Mr. Chenault’s office, so that he be made aware of the considerable problems with Centurion, what followed was a painful and arrogant phone call from an insufferable corporate type in the CEO’s office which only reinforced for me all the negative stereotypes that Americans have about credit card companies and their contemptuous treatment of those who make their businesses possible. It was then that I had my epiphany. The next day, as I discussed my unfortunate experiences with another of Chenault’s executive assistants, she asked me, given my abysmal experience with the card, why did I even want it? I went silent. I wished to give her an honest response. So here it is. For all the books and columns I had written about how the viper of materialism had coiled itself around the American soul, and for all the lectures I had given to audiences around the world about how we are drowning our children in an ocean of excess, and for all the resources I am prepared to put into giving each of my nine children a Jewish education in religious schools so that they have a values-based education, I somehow found this silly piece of metal edifying. I could not admit it to myself but, having fallen into a club outside my means, I had also fallen victim to a simple marketing ploy that told me that possessing a rarity reserved for exclusive members – however ridiculously exorbitant and useless – somehow made me special. Lois XIV, of France, the Sun King, confronted a dilemma as sovereign. Kings earned the loyalty of Dukes and Barons by granting large tracts of land. But the grants depleted the holdings of the Crown and the taxes they brought in. How could he sustain the loyalty of his most powerful subjects without giving away the realm? He came up with an ingenious solution: create a new status symbol that will cost him nothing and will simultaneously display the subordination of the barons to the King. Thus was born the almost laughable spectacle in Versailles of the daily royal dressing, know as the levee (rising). The King would awaken and the nobles of the realm would compete to take away his chamberpot, remove his nightshirt, and dress him with his britches. Incredibly, the nobles actually purchased the privilege of grande entrée, which commenced when the king’s nightshirt was pulled over his head. When it comes to status symbols you can make anyone your sucker. My black American Express had become my own royal chamberpot. My experience immediately called to mind a recent, brilliant op-ed by Peggy Noonan in the Wall Street Journal entitled, ‘We Pay them to Abuse us,’ which followed Steven Slater’s meltdown on JetBlue where passengers were subjected to his profanity-laced harangue after paying JetBlue to fly on the plane. Here, I was the sucker who had strained to pay a membership fee to be subject to corporate America’s shocking arrogance and to endure degrading phone calls from their executive offices. In the 1980′s American Express conducted a smear campaign against the celebrated orthodox Jewish banker and philanthropist Edmond Safra, brilliantly chronicled by renowned journalist Bryan Burrough in his best-seller ‘Vendetta: American Express and the Smearing of Banking Rival Edmond Safra.’ Safra, who was a major supporter of my work at Oxford University and sponsored an annual lecture for my organization that each year featured a Nobel Peace Prize Winner, including Elie Wiesel and Mikhail Gorbachev, won an apology and $8 million from American Express, all of which he donated to charity. The case, with its insinuations of anti-Semitism from what was perceived at the time to be a Waspy American Express, did much to tarnish the reputation of the bank and ultimately led to a change in management. In 2001 Chenault became only the third African-American CEO of a Fortune 500 company. That is, of course, something to be admired. But it would be nice to know that the executives of America’s most important companies change not only their personnel but their attitudes as well. Every company has the right to promote their status symbols and we, the public, have a right to either buy into them or rise above them. But in this age of Wall Street greed, corporate aloofness, and abusive employees, it would be nice to see companies that still believe, and insist, that the customer is king and should be treated with simple courtesy and respect. Rabbi Shmuley Boteach is the host of ‘The Shmuley Show’ on 77 WABC in NYC, America’s most listened-to talk radio station. He is the international best-selling author of 23 books and was the London Times Preacher of the Year at the Millennium. As host of ‘Shalom in the Home’ on TLC he won the National Fatherhood Award and his syndicated column was awarded the American Jewish Press Association’s Highest Award for Excellence in Commentary. Newsweek calls him ‘the most famous Rabbi in America.’ He has just published ‘Renewal: A Guide to the Values-Filled Life.’ Follow him on Twitter @RabbiShmuley.

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Barbara Roper: Fiduciary Duty: What Investors Need to Know

August 30, 2010

At the end of the day Monday, the comment period officially closes on the Securities and Exchange Commission’s (SEC) study of the standard that should apply to brokers when they give investment advice and recommend securities. Yet as of last Monday, with only one week remaining on the comment period, only 32 individual investors had submitted comments out of 1535 filed. This is arguably the single most important investor protection issue for retail investors, but unless they make their voices heard, this issue is likely to be decided without their input. Most investors choose to rely on a professional – a broker, a financial planner, or an investment adviser – to help them make investment decisions. These investors rely heavily, if not exclusively, on the recommendations they receive from these professionals. Surveys show, for example, that the typical mutual fund investor does little if any additional research on the funds that are recommended; instead, they do exactly what their broker or financial planner or investment adviser suggests, without second-guessing that recommendation. This makes investors extremely vulnerable, particularly given the conflicts of interest that pervade the securities industry and investors’ difficulty in distinguishing between sales- and advice-based services. What many investors don’t realize is that even though the services investment advisers and broker-dealers provide are often virtually indistinguishable, they are regulated under different statutory and regulatory frameworks. Investment advisers are subject to a fiduciary duty to act in the best interests of their clients and to provide disclosures to clients regarding conflicts of interest. Brokers do not have this fiduciary duty. Instead, they are required to make recommendations that are generally “suitable” for the investor. Under this lower standard, brokers are free to recommend a particular product that provides the broker with higher compensation, even if a different product would be better for the customer. And they don’t even have to disclose this conflict of interest to the customer. To add to the confusion, brokers have encouraged investors to rely on them as advisers, by giving their salespeople titles like “financial advisers,” offering extensive advisory services, such as investment planning, and marketing their services based on the advice offered. The recently passed financial reform bill allows the SEC to end this confusion and require all professionals who provide investment advice, whether they are brokers, financial advisers, or investment advisers, to meet the same standard of investor protection. But before the SEC can adopt these new rules, the law requires the agency to conduct this study. Those not currently subject to a fiduciary duty have made a concerted effort to submit their comments. Unfortunately, most investors appear to know nothing about this proposed change. On several of the issues addressed by the study investors should be able to add valuable insights. They can explain how confusing they find the different titles used by brokers and investment advisers, such as financial advisor, financial planner, and investment adviser. They can offer their views on whether services that sound similar, if not identical, to the average investor – services like investment planning, retirement planning, financial planning, and advice about investments – should be subject to the same standards. They can tell the Commission what they believe the appropriate standard for such advice should be. In short, do they want all those who provide investment advice to have to act in the best interests of their customers? We believe the answer is obvious. The dramatic changes that brokers have made in their business model have rendered the old regulatory distinctions obsolete. Brokers have worked hard to convince investors to rely on them as trusted advisers. It is high time they were regulated accordingly. The SEC has a golden opportunity to end investor confusion by requiring that all who offer investment advice to act solely in the best interests of their clients, without regard to their own interests, to take steps to avoid and minimize potential conflicts, and to disclose any conflicts of interest. It can’t happen soon enough.

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Marty Zwilling: Startups Need Focus to Cross All the Chasms

August 27, 2010

Everyone in the business world has heard of the book by Geoffrey A. Moore titled ” Crossing the Chasm ” (1991), but most entrepreneurs have no idea how it relates to them. In fact, it’s all about the “focus” required to get early stage technology products across the deadly chasm from early adopters to mainstream customers. Most investors and startup professionals expand this concept of focus to apply to key issues of every aspect of strategic and tactical planning in a startup. Missions and products that are too broad confuse your team, your customers, and potential investors. There are other chasms out there just as deadly as the technology one, such as the ones below: • Market requirements chasm. The first chasm is getting the customer requirements right, product or service, to satisfy a real need that a large number of customers will pay real money to satisfy. It takes focus to resist adding a long list of features that seem to make the opportunity larger, but dilute to focus on both you and potential customers. • Product development chasm. Another common chasm is never-ending product development. Focus is required to resist adding a few more neat features, made possible by the new technology, which in fact make the product more complex to use, impossible to test, and very expensive in time and cost. • Marketing and sales chasm. Lots of people still believe the major cost of a new product is development. These days, with all the clutter in the marketplace, the highest cost is usually marketing. Focus is required here to pick the low-hanging fruit, break through the clutter, and then move on to the next segment. Marketing costs can be a deep hole. • Customer support chasm. Products that have features which are unfocused, or aimed at too broad an audience, can be almost impossible to support. Customers need lots of help with installation, or can’t make the product work the way they expect. The result is that customer satisfaction in unachievable or at least very expensive. In his book, Moore limits his discussion to the transition between customers that are visionaries (early adopters) and customer pragmatists (early majority), in the context of high technology products that appear “disruptive,” meaning they move innovation in that arena to a new level. Here are the five customer segments outlined in his analysis: • Innovators – they love the challenge of a new technology and expect problems • Early adopters – customer visionaries driven by technology who expect it to work • Early majority – pragmatists that buy only with peer review, references and support • Late majority – conservatives who wait until the product is no longer state-of-the-art • Laggards – skeptics who will only adopt when forced or the need is critical The reason that his book was so popular, and is still studied in MBA programs and talked about by investors, is because his analysis has proven to be right so many times. There is a big gap between people who love to try new technologies, and the rest of us, who tend to be much more “technophobic.” Startups need to show real traction before attempting to cross the chasm. I always recommend focus as the key to avoiding Moore’s chasm, as well as the others highlighted here. Start your business with a narrow niche and a focused strategy, but don’t stay there. As the company matures, and you learn more about your customers and your market, then it is time to go broader or deeper. Build an overt strategy with feedback triggers to enhance the product to meet the needs of another segment of customers, and add more features to serve additional needs for the customers you already have. With this approach, you will find it a lot easier to jump all the chasms without crashing or breaking a leg

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Tony Greenberg: Surfing the WWC (The Worldwide Wine Club)

August 25, 2010

What Happens When A Wine Club Is Anything But Exclusive “I’d never join a club that would allow a person like me to become a member.”Groucho Marx Recently, I got a cold call at the office from a wine club I recently had joined (mostly for research, actually). The club had a hot deal, what the caller said was a great wine at a phenomenal price, and the cases were sure to be gone soon. It seems everyone everywhere has a deal on a bottle of wine. Okay, that got me going. If the wine was selling so fast, and it was already nearly gone, how come he had to call me to sell more of it? Well, he wanted to make sure I got a chance to buy before the wine was gone. But, I asked, won’t you get more if it’s selling so well? Oh no, it wouldn’t be restocked for 18 months, or maybe ever, once it was gone. Now I was really getting wound up. All this hooey grinds my guts sometimes. So I asked what was all that background noise on the call? Of course, the noise came from his co-workers, maybe 30 to 40 of them, he said, all working in what was likely to be a sort of boiler-room operation to push that “hot-selling” wine to club members. I knew the cold caller worked for a company that provides fulfillment services for several wine clubs that are each tied to big luxury brands. So, what was the difference between the clubs, I asked sweetly. He said he couldn’t really answer, and transferred me to Customer Service, to a very nice woman whom I’ll call Michelle. What Michelle then told me was so perfectly goofy, I couldn’t believe this wasn’t a prank call, written by pals just to push my buttons. Amazingly, it wasn’t, and more importantly, Michelle unwittingly illustrated the shortcomings of most wine clubs, and why we can do better for wine lovers. Which, it turns out, Michelle isn’t. Yes, Michelle was there to help customers understand more about wines they were buying from her company. But Michelle said she really didn’t drink wine, except (wait for it) “white zinfandel.” “I really don’t like all those dry wines, ” she said. I asked if her employer had a white Zinfandel wine club. “Unfortunately not,” she said. Then I asked where sweet (and sweet-wine-drinking) Michelle learned about wine, given that she didn’t like it much. Other than a few swills of Sutter Home, she said they gave her two weeks of training in wine issues to handle any consumer questions. Now I wanted to know what the differences were between the big clubs her company ran. She confessed the clubs really weren’t that different at all. Members of each club receive pretty much the same wines the members of the other clubs get, at pretty much the same price. So, what’s wrong here? Nothing, if you want to buy your wine based on a generic branding exercise designed to move a lot of random juice to a moneyed class of not-very-discriminating consumers. But there has to be a better way to run a wine club. Wine lovers deserve clubs that target a specific group of consumers with specific sets of shared taste (not just brand) preferences. Those clubs should provide affordable access to wines that this group is most likely to enjoy. That means some smart cookie will create a White Zinfandel club for Michelle and other sweet blush wine lovers out there. In the interim Michelle, may I humbly acquaint you with a lovely sweeter Rose’? Side bar: White Zinfandel may not be an actual grape, but nor is a Meritage. So stuff that in my pretentious Riedel and quaff it. Cheers and L’chaim to anyone who loves a wine they can afford and they can get when they want it.

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Brett King: Why does my Internet Bank suck?

August 25, 2010

Is it just me or have you noticed that the pages behind the login for your bank haven’t changed much in the last 5 or 6 years? According to the omnipresent Wikipedia, Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members in October 1994. Interestingly, while the Gramm-Leach-Bliley Act introduced some important elements to support internet banking, it wasn’t until 2002 that the The Office of the Comptroller of the Currency issued final regulations on the use of Electronic Banking for US-based banks. This informs another key innovator’s dilemma. That of trailing regulation. In fact, it’s also indicative more broadly of the speed at which the banking industry adapts to changes of the significance of the introduction of the Internet. Far too slow for the rate of change that is occurring these days. Excuse me sir, your Internet banking is looking a little tattered… I wrote recently on The Finanser’s Blog about the problem of lack of investment in Internet banking by the mainstream banks. The issue is that when you categorize Internet banking internally as a channel where you migrate customers to reduce cost, the initial impetus for investment in Internet banking is just getting the required functionality in place – once in place, and cost savings on-track, it’s hard to get further investment in the customer experience behind the login because it’s already doing its job. The problem is – it isn’t doing its job. The assumption that internet banking behind the login is about transactional costs savings for the bank is a very bad assumption. It assumes that customers are using the channel to save the bank money, when customers are actually using the channel for convenience and to increasingly engage the bank on the fundamentals of day-to-day banking. The increase of online banking usage just doesn’t want to slow down because of this behavioral shift, and unless banks understand and adapt to this shift, their internet banking platforms will increasingly isolate customers who want more convenience and control. Here’s how comScore, who has been measuring this since 2006, characterizes the relentless take-up of internet banking: Since the inaugural comScore online banking report in 2006, the number of DDA customers visiting the top 10 online banking sites has increased from approximately 40 million people to more than 58 million people . In any given quarter, nearly 60 percent of the total U.S. Internet population visits at least one of the top 20 financial institution (FIs) sites. Comscore: 2010 State of Online Banking Report This is played out across the world. In looking at data on major website and internet banking redesigns, the fact is that since the launch of Internet banking in the last 90s and early 2000′s most banks update their public website’s look and feel every couple of years, whereas they’ve only updated behind the login capability every 3-5 years at most and in general the last round of updates was largely cosmetic. And yet, the growth keeps coming…Look at the statistics for Commonwealth Bank of Australia for monthly logins between 2007-2010 as reported in The Age of August 12th, 2010. See more details at CommBank Investors site That’s a 92% increase in usage between 2007-2010. This trend is borne out the world over. Internet banking usage is increasingly not only in that a larger portion of the population is logging in, but that existing customers are logging in more frequently. So if Internet banking needs more than just a facelift, what exactly does Internet banking need to become to capture the behavioral needs of the customers who are using it? More than bill pay – my financial control tower What I need more than a transaction dashboard, more than pure functionality is something that helps me manage my finances. Right now Internet Banking is to intelligence, what an old mainframe dumb terminal is to an iPad. Extremely primitive. There are some solutions out there right now that do an admirable job of personal financial management, I’d rank Geezeo’s and Yodlee’s toolset and Mint as solutions every bank should be looking at. Geezeo has taken it once step further of recent times with their customizable widget /dashboard approach. The thing is most banks are not yet using PFM and many claim the jury is out on whether or not PFM really generates strong ROI. Intuit certainly sees differently, their acquisition of Mint late last year for US$170m is telling – they see the future in managing the finances of individuals. The top three activities within Internet banking are still checking account balances, transfers and bill payment. But just adding PFM functionality is not necessarily going to be the answer to solve the flagging, lagging development of the world behind the login. More is needed. The future of behind the login What customers will be looking for from their Internet banking portal moving forward is more control. More than just offering the ability to pay bills, customers will be looking for integrated bill management – this is not just direct debit services. Customers will be looking to see a consolidated view of their billing relationships, and have their internet banking dashboard help manage bill payments automatically. This will require banks to be integrated in respect to data with utility companies, telecomms network operators, cable companies, and the usual suspects. The Internet banking dashboard will become the place I go to see my aggregated monthly expenses, drill down on individual accounts and statements, and setup rules for automated bill management. On the products side, banks are going to have to start to get a lot more proactive. For example, if I have a lump sum sitting in my savings or deposit account, the bank could show me how much interest I could be earning if I invested that in either a term deposit, CD or in something more exotic like an equity-linked investment. On my credit card statement, that large ticket item purchase you made last month…the bank could offer to put that on a 12-month payment plan at a lower interest rate. Observing that you do a lot of travel, the bank could proactively upgrade your credit card to a deal that gets you free air miles with your favorite airline. In addition to those more obvious elements, the whole multi-channel thing will start to come into play here too. For example, the dashboard will also let me manage alerts. Increasingly we’ll have to handle of whole lot of messages in respect to ingoing and outgoing payments, warnings about upcoming bills where your balance is short, location-based offers for retailers that you frequent and where you get a discount for using your NFC mobile enabled credit card, and other trigger-based alerts or offers that you subscribe to. Mobile has to become one of the primary acquisition tools that banks will use in the future, but to ensure that this channel is not abused by overeager marketers, we’ll need a filter mechanism. That means that you’ll need somewhere to tell the bank what you will and won’t accept being sent either by SMS or to the the apps that you utilize on your smartphone. The Internet banking dashboard will need to manage all of this – it will be a critical tool in managing the multi-channel relationship. If you’re a bank you better get serious about investing behind the login – you’ve got a long way to go. If you are on the corporate banking side, stay tuned…I’ll talk about corporate Internet banking dashboards next

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Naomi Wolf: Banks Siding Against the Customer in Fraud Cases

August 23, 2010

Like most consumers, I had always assumed that banks and customers are united in wanting to curtail bank fraud. Unfortunately, I have learned that in fact bank fraud is a big and profitable business — for the banks themselves; and that changes in electronic banking, combined with the power of lobbyists to sustain the status quo that is stacked against ordinary account holders, mean that if consumers’ accounts are corrupted, they can face systemic stonewalling by the banks themselves — and have little recourse. In 2005 I started to notice irregularities in a checking account I held with WaMu; but the irregularities were ambiguous. I sought at various times over the course of the next two years to go over all my statements — but had trouble getting all my records from both online banking and from my branch itself. A busy working parent, I was certainly not as proactive as I should have been — and, like many consumers of bank services, since we had family accounts and two mortgages at WaMu for many years, and had good relationships with our local branch, I also made the mistake of trusting the bank. I noticed eventually that checkbooks were missing from my home, and finally my accountant got enough of the records to see an unmistakable pattern of fraud, and called my attention to it. I filed a police report and alerted WaMu to the fraud. For months thereafter, as you can see in the lawsuit that attorney David Fish and I have filed against J P Morgan Chase, now owner of WaMu, that is up on TheSmokingGun.com , I complied with what the WaMu bank officials directed me to do — which was to leave the accounts open so they could investigate, they said, the fraud. If the fraud is reported within six months of confirmation of fraud, it is liable for the loss. Then the same officials who had directed me to keep the accounts open, disappeared — systematically, for just over six months. When I sought to talk to the fraud department, I still could not get records — including my own missing bank statements — even to see the full extent of my losses. The bank officials who had directed me to keep my accounts open were unavailable at the branch — over the course of many attempts to speak with them. The police at the Sixth Precinct needed to see the missing documents, but even they could not force WaMu to hand over their — my — records. (WaMu’s own internal emails cite a $300,000 figure for my loss from fraud — I still did not have enough of my records to identify the loss. It is illegal, by the way, to withhold from an account holder his or her own records). At eight months after the fraud discovery was confirmed — eight months of trying to communicate with officials and a fraud department who were oddly unavailable or unresponsive — I received a form letter from the WaMu Fraud Department advising me that according to the regulations, I had had a six month window for taking action; and (since WaMu had played out the clock for eight months) the letter asserted that I had waited ‘too long’ and my case was closed. Inadvertently, subsequent to that, a WaMu bank official handed me the wrong file — wrong from his point of view; illuminating from mine, and from any consumer’s. It contained emails, some of which you can see at TheSmokingGun.com , from WaMu bank officials to one another — and including emails from and to their counsel, PR department and and the fraud department — that take as given that stonewalling a client with a fraud claim on the bank is standard practice; and yet one freaked-out bank official in the emails warns his colleagues that if their mechanisms in this regard became known, their practices would be all over the newspapers. I was stunned by what seemed from the emails to be a systemic practice. Why would a bank want to perpetuate bank fraud rather than fight it? As I researched the issue and spoke to other consumer bank account holders whose accounts had been corrupted by fraud, and to consumer advocates, I learned how systemic experiences such as mine — and worse experiences — are becoming. I heard from consumers across the country from all walks of life who had also been misdirected by their banks, or told that for various technical reasons their corrupted accounts could not be closed, and then faced difficulty reaching fraud departments or officials once the fraud was confirmed. As Geoff Kischuck, an actuary in California whose business account was corrupted by fraud, and who then had to go daily to Bank of America for four months before he could successfully close the account, explained, there is a great deal of profit being made by banks with this situation. ‘The shift from paper checks clearing physically, to electronic bank transactions, benefits the banking industry immensely,’ he notes. The reason? It generates interest on the ‘float time’ that is still reckoned by the time that paper takes physically to clear, even while the electronic transaction is instantaneous; so it is in the interest of the banking industry to have as much electronic banking as possible. But electronic banking is much easier to hack — and identity theft and bank fraud have skyrocketed accordingly; but the bank benefits a second time with every case of bank fraud and identity theft — because of the immense fees — overdraft fees, bad check fees, that can amount to hundreds or even thousands of dollars with each corrupted account — racked up by the corrupted accounts. The longer it takes to close the corrupted account, the more difficult it is for the customer to have accountability with the bank’s fraud department — the more revenue for the bank. The bank freezes your ability to address the roblem — but continues to charge you fees for the corrupted account. `Because of the fees that get drained out of an account, banks actually profit from bank fraud,’ explains Kischuk.’ Multiply this by the number of times across the country a consumer account faces identity theft or bank fraud — and you see a mini-industry. Customers assume that banking regulation and Congressional oversight means that if they find fraud on their checking accounts, there is accountability — which is not in fact the case; strong bank lobbyists translate into weak protections for consumers and, as you can see from the emails, the bank’s reasonable assumption that most customers in this situation will not be able to hold them accountable. And indeed, since legal action is time-consuming and expensive, most defrauded bank customers do eventually give up and go away. I am certainly shocked by my own experience — but even more disturbed after learning that such things and even worse have happened and continue to happen to people from all walks of life — immigrants, retirees, people on disability — who have experienced loss of savings, retirement accounts, college fees, mortgage payments and so on through bank fraud — and who do all the things their banks direct them to do, only to find they have no actual recourse. They do not understand — as I did not — that a bank’s fraud investigation department is actually likely fraudulently representing itself as the customer’s, rather than solely the bank’s, advocate. Banks such as WaMu — and now Chase, which bought WaMu — expect such people to simply go away. They — and we — should, rather, reach out to our elected representatives for wholesale reform — and put each and every such case online, so consumers can see the worst offenders for themselves, and, with the power of the internet and their own consumer choices, protect themselves and demand accountability.

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Johann Hari: The Great Management Consultancy Scam — and How it Could Be Coming for Your Job

August 20, 2010

In the long fake boom of the Nineties and Noughties, we were sold a thousand scams. End government regulation of the financial system! Turn banks into casinos! Pay CEOs 500 times more than their staff! Bow, bow, bow before our mansion-dwelling overlords and the Total Efficiency they will bring! Yet from under the rubble left by these delusions, one of the greatest scams has skipped out unscathed, and it is now successfully selling itself as a solution to the fading of the boom-light. It is probably in your workplace now, or coming soon. Its name? Management consultancy. There are now half a million management consultants in the world, and they all grumble that they face one question wherever they go: yes, but what is it that you actually do? They claim to be able to enter any organization, watch its workers for a short period, and then — using graphs, algorithms, and a jargon that makes quantum physics look like Sesame Street — render it dramatically more efficient, for a fee. They are everywhere: in the US, AT&T (to pluck a random company) spent $500m on them in just five years, while the British state will soon be spending more on management consultants than on upgrading its nuclear weapons . Yet the process of management consultancy has always been shrouded in priestly secrecy. Over the past few years there has been a string of memoirs by highly successful former management consultants, finally pulling back the flow-charts. David Craig gives a typical explanation of what the consultants Actually Do. After getting a degree specializing in romantic poetry, he was astonished to be hired by a prestigious management consultancy, given three weeks training, and then dropped into major corporations to tell them how to run their oil rigs, menswear stores, and factories, for tens of thousands of pounds a pop. In his brave memoir Rip Off! he explains: “We were proud of the way we used to make things up as we went along… It’s like robbing a bank but legal. We could take somebody straight off the street, teach them a few simple tricks in a couple of hours and easily charge them out to our clients for more than £7000 per week.” It consisted, he says, of “lies, lies and even more lies.” He worked to a simple model, which is common in the industry. He had to watch how a workforce behaved for a week — and then tell the company’s bosses, every time, that they had 30 percent too many staff and only his consultancy could figure out who should be culled. If he calculated they actually had the right amount of staff, he was told by his bosses not to be so ridiculous and do his sums again: where was the money for them in a properly-staffed company? The company had to be POPed — People Off Payroll. Of course, this advice was often disastrous. His company was sent into a chain of 500 menswear shops. They advised them to cut staff by (surprise!) 30 percent, and to replace most full-time staff with part-timers. The result? The full-time employees had been highly motivated, because they wanted a career in the company; the part-timers only wanted a little extra cash. So motivation levels in the company collapsed, and with it the standard of service. The company was bankrupt within a few years. Yes, you might say, but surely he was just a bad management consultant. The rest must get results. The evidence suggests not. The Cranfield School of Management studied 170 companies who had used management consultants , and it discovered just 36 percent of them were happy with the outcome – while two thirds judged them to be useless or harmful. A medicine with that failure-rate would be taken off the shelves. Matthew Stewart, another former consultant, summarizes his high flying years in the industry by saying: “I felt like a snake oil salesmen without snake oil.” When he was sent into a company, he was told to use complex formulae to analyze the productivity of its staff, but he soon realized that the results were “nearly random… Similar results could have been achieved by having four monkeys throw darts at a few matrices.” Yet on this basis, he was taking a fortune in payments, and firing thousands of productive people. The recession has given a fresh burst to this industry, as corporations beg to be told where to apply the leeches. The number of senior consultants has swollen by 10 percent in the past year, while the number employed by local government has grown by 11 percent. But there is a growing body of academic research showing that the strategies pushed by these consultancies are in fact disastrous – and hasten the collapse of a company or service. Professor Wayne Cascio of the University of Colorado has studied the relative costs and benefits of POPing your workforce. Corporations and governments are receptive to the idea that the quickest, easiest way to save money is to fire workers. But Cascio has shown that, most of the time, the costs outweigh the gains. Obviously, you have to immediately find large amounts of redundancy and severance pay. But the costs don’t stop there. Your workforce becomes very nervous – and a nervous workforce is dramatically less productive and less innovative. The best people leave. The service to the customer deteriorates – so they abandon you even more. The facts backing this up are striking. The OECD has studied developed economies over a 20-year period, and it found labor productivity growth was much higher in the countries where it is hardest to fire people. The better you treat a workforce, the better they work. Professor Peter Cappelli studied 122 companies and found that lay-offs most often shrank their future profitability, instead of swelling it. Yet this is the antithesis of the management consultancy mindset. Stewart says “consultants are the cattle prods of the modern corporation. The chief message to be communicated, in almost all situations, is that you will be expected to work much harder than you ever have before and your chances of losing your job are infinitely greater than you have ever imagined.” It’s a dark, dehumanized vision of workers as cogs in a machine — and it’s been there from the beginning. Frederick Taylor, the founder of management consultancy, compared workers to “an intelligent gorilla” and said “our scheme does not ask for any initiative in a man. We do not care for his initiative.” When challenged, the paltry evidence base of this industry soon becomes clear. Tom Peters, the author of management consultants’ bible Excellence , snapped at an interviewer who asked about his way of analyzing businesses: “Of course, we all know this is to some extent phoney baloney.” David Craig suggests a simple way to call out this scam. Insist that, from now on, all management consultants are paid by their results. If they promise greater productivity or higher sales, fine: don’t pay them until it comes through. Today, almost no management consultancy works on this basis. If they did, they’d all be bankrupt. And yet, and yet… you almost have to admire the rancid chutzpah of it. As the management consultant Bruce Henderson once sniggered: “Can you think of anything more improbable than taking the world’s most successful firms and hiring people just fresh out of school and telling them how to run their businesses — and [getting them] to pay millions of pounds for this advice?” It’s tempting to chuckle at the absurdity — until you realize the cack-handed consultants’ scythe could come for you. em> Johann Hari is a writer for the Independent. To read more of his articles, click here or here . You can follow Johann at www.twitter.com/johannhari101 or email him at j.hari [at] independent.co.uk To read his latest article for Slate, click here

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Brett King: The Shrinking Value of Bank Branches…

August 19, 2010

I don’t know about you, but my time is one of my most valuable assets these days. I work long hours, I travel a lot, when I’m home I am struggling to find quality time (and quantity) with my kids, and I am increasingly trying to eek out a few minutes each day for myself. So anything that adds an additional demand on my time, better be worth it. So when a bank asks me to come down to the branch, or even presumes that I want to visit the branch – the question really is Why would I visit a branch? Read this personal finance ‘forum’ comment from a customer in respect to the branch. This sort of thing is increasingly common these days, and is representative of many customers these days: I’m a full time worker and rarely have the time to get out of the office during the day to eat, let alone do my banking. Last week I finally got my act together and booked an appointment to see my local in branch advisor for an account review – more in their interest than mine I would have thought. Anyway, when I arrived the queues back from the counter seemed endless, not enough staff behind the desk; nothing seemed to be moving AT ALL – and, tear my hair out time – the advisor turned out to be off sick that day!!! Why did no one bother to call me to let me know? No one seemed able to give me an answer. The experience has left me wondering why I bother having a local branch at all. It also made me realise that I’m actually pretty happy doing all my banking online or on the phone. So can someone tell me, WHAT is the need for a ‘local’ bank branch these days exactly? They seem a complete waste of space if you ask me… sezzie33 – MoneySavingExpert.com Forums Deloitte’s Centre for Banking Solutions attempted to answer why customers were less interested in the branch experience in this way… For decades, most people visited the branch for credit approval, to conduct transactions, learn about products and services, and for customer service. However, most credit approval processes moved out of branch networks over a decade ago. Today, many of the core transactions that were once conducted in branches are shifting to electronic forms or are being captured elsewhere. Adapting to a changing environment Evolving Models of Retail Banking Distribution, 2009 So with seemingly a real psychological challenge to why I would invest the time to visit my branch, and with a shift of core transaction types outside of the branch – what is the value of the branch today? The value exchange concept At the heart of marketing and customer theory is a concept of an exchange of value that occurs between two parties, this is compared with the intrinsic value that lies at the heart of a product, service, relationship, etc. In fact, believe it or not Karl Marx was one of the first to recognize this concept in his 1859 Contribution to the critique of Political Economy . It is the exchangeability of ‘value’ that contributes to economic interactions in society. But value has they annoying habit of changing over time. Take two examples of modern businesses whose value exchange has shifted. Pay Phones versus Mobile Phones I was in New York City for the BANK 2.0 launch a couple of weeks ago and I when I was walking the streets I saw something that I can’t recall seeing for, well years actually – a New Yorker using a public phone. Yes…a public phone. They still exist in small numbers in various locations – but the numbers are dwindling. Pay Phones are going the way of the Dodo – are branches next? The reason that Pay Phones are simply not popular anymore is that it is just far too convenient to carry around your mobile phone. Let’s face it. If you meet someone today that doesn’t own a mobile in the western world, it is somewhat anachronistic. So if you are a telephone company, how would you defend the ‘value’ of using a Pay Phone in today’s modern society? It’s tough… there certainly is no value proposition that is unique. In times past you’d say it was about convenience, but with mobile phones you could hardly defend the convenience of Pay Phones. Thus, Pay Phones are already virtually extinct. Blockbuster versus NetFlix If you are a Blockbuster Franchisee right now, you must have a pretty pessimistic view of the world. Blockbuster sprang into existence in the mid-80s to compete with the small mum and pop video stores which were around back then. Today Blockbuster operates about 6,500 video stores, serving more than 87 million customers in the United States, and 25 other countries. The thing is, that today with digital distribution through vehicles like iTunes, Hulu, Amazon, Playstation, Wii, etc and with NetFlix’s approach to both digital distribution and DVD-in-the-post, Blockbuster is in severe trouble. Blockbuster has already closed 1,300 stores last year, and has announced another 545 stores will close this year . However, this is just the start – in the near term physical stores for Blockbuster just don’t make sense. In terms of value – physical brick-and-mortar stores are no longer the mode we’ll get our content. We’re using cable with video-on-demand, and we’re downloading. There is a decreasing legacy business built around physical DVDs and Blue-Ray, but it is just a matter of time before this disappears entirely. In other words, when there is a modality shift like there has been around delivery of movie content – the value of the store in the process evaporates. The value has shifted in respect to branch Metro bank’s recent foray into the UK market has been hailed as the first new High Street bank in 100 years. The bad news is that like Pay Phones and Blockbuster, banks are really struggling to define the ‘value’ in the branch as modality in banking changes. The concept of queuing for even five (5) minutes these days is a negative (David Meister wrote on The Psychology of Waiting Lines also) – the longer the waiting time, the more serious the impact to customer service perceptions. If you don’t believe me – just check out a simple Twitter Search on what people are saying about queuing at banks ( Twitter Search “bank queue” ). In 2006, the European Banking Federation reported that a wait of more than 5 minutes was likely to jeopardize the entire relationship. McKinsey, in a whitepaper of 2007, still believed it was possible to increase value in-branch, by managing the customer experience as a whole. Conclusions… The reality today is that it’s increasingly hard for customers to understand why they should exchange their time for a lengthy, time-costly visit to the branch, when the value returned is poor. Having the ability to cash a cheque, apply for a loan or pay a bill is not a sufficient reason to give up my time at a branch, especially if I have to ‘wait’ in a queue. The reality is, that I can do those same things outside of the branch, which results in a much more efficient value exchange. So if you are in retail distribution for banking today – think about what value you offer. If it is anything I can do from my mobile phone, through the internet, on an ATM or a deposit machine – this has NO value in the branch. What does have value? A human interaction that can’t be replaced through digital channels – a deep advisory, sales engagement, with highly qualified staff (read not tellers ) What are you going to give me for my time? If you think I’m talking trash and the branch has some intrinsic value on its own, you probably are voting for mobile phones to disappear in favor of good old pay phones too…

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Velti Adds Key Strategic Roles

August 17, 2010

Sally Rau Joins as Chief Administrative Officer and General Counsel; Ian Arthurs Named VP, Customer Development

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Katy Welter: You Want Your Banker to Know You — Trust Me

August 13, 2010

When I started working as a teller at First National Bank of Valparaiso, I learned my regular customers’ names. If I didn’t, they’d give me a disappointed or concerned look and usually glance over my shoulder for one of the veteran tellers who did know them. Even though they may have recognized me ( I’d grown up in the bank ), they still wanted me to know them. These customers valued familiarity, and were unsettled by anonymous service when it came to their valuable bank accounts. They chose a bank based upon relationships, and you should, too. Knowing a person’s name is a powerful thing. Not because of the marketing value of customer identification or the power of social media. Because of human nature. When you know someone’s name, she becomes more of a person and less of a customer. As Atul Gawande shares in his enlightening book, The Checklist Manifesto , when surgical team members introduce themselves, by name, to one another, they are far more communicative during surgery — and ultimately successful — than when they operate without formal introductions. When dealing with stressful, complex tasks, familiarity goes a long way. So the next time your loan needs surgery, you’ll want your lender to know your name. Familiarity also builds trust, and trust is scarce in banking . The latest surveys show that almost no one believes statements from financial institutions. But I suspect that those feelings are aimed largely towards the bank as a corporation, not the banker as an individual. Wouldn’t it be nice to trust your banker? If you work with one who knows you, you will. This is simply because humans are less likely to lie to someone they know. A person who knows you is far less likely to deceive you, according to research supporting ” interpersonal deception theory .” If the Wells Fargo bankers knew their customers, then they would have been less likely to manipulate overdraft fees , overcharging to the tune of hundreds of millions of dollars. Moreover, anonymity — the typical state between big banks and their customers — is the enemy of positive human behavior. Spend any time reading Yahoo! News comments and you’ll know that. As I’ve described in the context of telephone customer service, anonymity encourages or excuses rudeness and impatience — on both ends of the phone. Big banks have higher employee turnover than little banks, which inevitably means their tellers and loan officers are less familiar with customers. And less familiarity means a greater tendency to deceive and disrespect you than a local banker who knows you. Big banks may make you think that they know you. Ever get eerily timely or relevant communications from your bank? Banks achieve this veneer of recognition through Customer Relationship Management (CRM) software that gives you the impression that your bank knows you. This expensive software is geared towards providing you with greater numbers of products, not greater service. Customer familiarity is not when a bank knows you went to Iowa last month based on your last ATM withdrawal: it’s when a banker asks about your trip to Iowa for your son’s college graduation. And it leads to better, honest, and more trustworthy service. In the 1995 book, Bowling Alone , Robert Putnam explained and lamented America’s decline in so-called “social capital,” and namely face-to-face social interactions. Community bankers have always been leaders in building social capital, the nexus of all kinds of community members. They are the “Cheers” of businesses, “where everybody knows your name.” You ought to consider stopping in.

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Brett King: What’s in a Twitter name? That which we call a customer…

August 13, 2010

Apologies to Shakespeare for the modified Romeo and Juliet reference, but the question is valid – what is in the ‘name’ of a customer these days? I’m on Twitter, I’m on Facebook, I have various other profiles online on sites like LinkedIn, etc but none of this information appears relevant to most of the service organizations I interacted with daily. But if this identifies who I am – why is that no one asks me for my Twitter name in customer interactions these days? Why is it that today that there are many banks who won’t let me open an account unless I have a home telephone number (a landline) – which quite frankly I haven’t used for a number of years now (in fact I don’t even know my home phone number) – and yet in respect to mechanisms which I use a whole lot more frequently than a home telephone number for communication, namely FB and Twitter, they completely ignore me? I have to say these days I’d probably be a whole lot more likely to talk about my bank on Twitter, than I would wait for their call on my home telephone number, which I don’t use. Customer profiles are out of touch Understanding customer behavior and how we are ‘tribally’ connected to our peers in the social networking landscape is a pretty fundamental requirement for service organizations these days if they want to influence brand perception. At a minimum, a bank should be ready to respond to me via Twitter, Facebook, Mobile or similar mediums, but in respect to traditional customer profile information like my home telephone number, my home address (which is increasingly irrelevant to my bank relationship), my employer’s telephone number, and such – this type of data is practically useless from a behavioral or service enablement perspective these days. Your customer profile today is about two things for a bank, namely KYC and Segmentation. KYC is a industry compliance term which refers to ” Know Your Customer ” – it is seen as the basic information or data set that a bank needs to know to assess your risk profile as far as likelihood of issues around AML (Anti-Money Laundering), etc as is required generally as part of a process by regulators for new customers. On the segmentation front, the classic method of segmentation these days is still based around demographics such as age, salary, where I live, how many kids I have, etc and informs classic marketing campaign development. Increasingly both of these outcomes are out of touch with the reality of the digitally enabled customer. I am here to tell you that despite all the KYC information my bank has captured about me, that in respect to my risk on a financial basis this data is almost certainly irrelevant. Far more important for them would be information on where I am travelling to, which partner ATM machines I use when I travel, how I conduct cross-border transactions, who is having access to my basic information that could threaten the safety of my identity, and how I manage my finances on a daily basis. The fact is, I’ve never been asked about any of this stuff, which is far more informative to my transactional risk profile than what my monthly salary and deposit patterns are. Banks often talk about their knowledge of customers as a differentiator The role our digital footprint plays The key information for a bank moving forward is not demographic data, it’s not about where I live or what my home phone number is, it is about what I do… In that respect, the data trail I leave for banks is extremely informative. The interactions I have with the bank are likewise hugely instructive from a future service and risk perspective. For example, my bank has data on which retailers I like to shop at, which airlines I travel, the cars I drive, the laptop I own, the mobile devices I utilize, the properties I own, the property I live in, and a bunch of other extremely useful information in respect to offers they could present me with. However, this data is just never used. I get credit card usage offers from retailers I never frequent – why doesn’t the cards team send me offers for retailers where I’ve shopped before? I get offered personal loans and increased credit card limits when I don’t need them – when I might be interested these offers are nowhere to be seen. I get offered opportunities for new credit cards for airline loyalty programs that I’m not affiliated with – why can’t they work out which airlines I use and proactively offer to transfer my credit card points to my airline program? Recently the team at Abu Dhabi Commercial Bank in the United Arab Emirates were looking at ways they could improve the suitability of offers for card usage for customers. There were suggestions around using location-based messaging technology through telecommunication providers to target you when you were at various shopping malls around the Emirates, but the Telco network operators proved to be light on this capability. So ADCB looked at behaviors – how did customers behave when they went shopping? Behavioral analysis suggested that a customer who went to a mall was almost always certain to do one of two things. Initially go to an ATM machine upon arrival and pull out cash, or alternatively use their credit card to make a purchase. So ADCB worked out they didn’t need the mobile operators to work out WHERE customers where, they only needed to look at live transaction data for location triggers. So now ADCB can provide you with a time sensitive, location sensitive offer based on your behavior and can simply send it to you via SMS. Far more constructive than flooding me with broadcast messages that are more miss than hit. Conclusion Today banks don’t know me. The data they choose to use in respect to my profile is largely irrelevant. The data they have on me and could have utilize in respect to my behavior is much more relevant to how I’ll interact with the bank in the future. So if you are a bank – do you know my Twitter name, have you friended me on Facebook? Do you know my mobile number and what type of phone I use? Are you matching offers for services and products to me based on what I’ve done or am likely to do? If I talk about you on Twitter, would you know that I’m a customer and could you engage me on this issue next time I call the call centre? If not – you really don’t know me at all.

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Inder Sidhu: How to Give Up Power and Get More Done

August 12, 2010

Cross-posted from Washington Post: On Leadership Would you give up some of your authority and responsibility if it resulted in accomplishing more? For the better part of a decade, management gurus and business strategists have been advising business leaders to do no less. Not surprisingly, there’s been a lot of push-back against “decentralized decision making,” which some business leaders view with suspicion. Relinquish power and influence after spending years trying to amass it? Not likely, many say. But the debate about whether to share power or hold fast to it is evolving. Instead of choosing between a traditional command-and-control management model, or a more egalitarian one, smart business leaders are embracing the power of the “and.” That’s what we are doing at Cisco, where I have been served on the executive leadership team for the past 15 years. For much of its history, Cisco operated with a traditional command-and-control management model. We relied on senior vice presidents, vice presidents, directors, and so on to make decisions, channeling power downward through a hierarchical pyramid of authority. The benefits to this model were many. Among other things, the structure allowed Cisco to scale its best practices and drive accountability throughout the company. These disciplines served us well during the heady growth years of the 1990s, when billions of dollars and thousands of employees poured into the company and a few product lines drove the majority of revenue. But the need for something more became apparent when the company expanded into telephony, the consumer market and beyond. Suddenly, important decisions began lining up on the desks of company executives like planes waiting for clearance at an airport. That’s when the leadership team decided to drive decision making deeper into the organization. But instead of abandoning our traditional management model, Cisco did something truly unique: It adopted a two-pronged model that combines the efficiency and accountability of a command-and-control hierarchy with the creativity and flexibility of a decentralized model. This corporate structure isn’t a choice between command-and-control or decentralized decision making, but a judicious blend of both. By blending the best of both models, Cisco can better anticipate opportunities and prepare for challenges, rather than merely reacting to them. Here’s how it works. Adjacent to its traditional management structure, Cisco established a new leadership mechanism, which draws upon key influencers from across the company. Their mission: Set strategy across key customer segments and market transitions and make quick course corrections when needed. To accomplish their work, the influencers participate on cross-functional teams. These teams are accountable for revenue growth, profit contribution, customer satisfaction, and market share in their customer segments, while the traditional business functions maintain responsibility for efficient functional execution in support of these goals. Thanks to these interlocking management models, Cisco has significantly accelerated its work. Take emerging countries. In 2006, I helped create the Emerging Countries Council (ECC) to support Cisco’s efforts in Brazil, Russia, India, China, Latin America, the Middle East and Africa. At the time, we had just launched our new Emerging Markets region, which reported into Cisco’s traditional leadership hierarchy. That region had wide responsibility for almost everything that Cisco does in emerging countries. But what it didn’t have is the authority to command other parts of the company to work on its behalf. That’s where the council lent a hand. The ECC worked with key functional leaders to set a vision and strategy, and then reached across internal silos to engage manufacturing, legal, IT, and other parts of the company. What is the best way to serve customers who speak Pashto, trade in Afghanis, and have technology needs in Afghanistan, where you need clearance from the U.S. Department of Defense just to make contact? The council helped figure it out. There were dozens of challenges like this. The council established supply lines, institutionalized accountability and aligned functions. When the ECC determined that the sales efforts in the field needed additional financial support, the council secured an additional $58 million for emerging countries in 2007, a year of tight budgets. Results were immediate. In its first full year, the emerging countries business grew by more than 30 percent, and momentum continued thereafter. Over the first two years, Cisco entered more than 30 new emerging countries. Could such a dual management model benefit your company? I believe that it can. The key is operating both models simultaneously and leveraging each for the betterment of the other. Authoritative leadership or democratic decision making? At Cisco, we’re doing both. Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco , and the author of Doing Both: How Cisco Captures Today’s Profits and Drives Tomorrow’s Growth . Follow Inder on Twitter at @indersidhu . Cross-posted from Washington Post: On Leadership

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Robert Siciliano: ATM Security Threats Increase

August 5, 2010

ATM skimming alone is responsible for $350,000 of fraud daily exceeding a billion dollars in losses annually. A recent  news report of a skimming scam in Long Island, N.Y., netted thieves more than $200,000 from ATMs at five branches. Skimming today is far more sophisticated than in the past. Skimmers can include blue tooth and texting technology that send the data to the criminal anywhere. Keypads can be compromised by devices that overlay the exiting pad and transfer the data remotely. ATM scams and fraud go beyond skimming to crimes that are very physical such as ram raiding to remote malicious software hacks. During the Black Hat conference a hacker demonstrated how he forced three ATMs to dispense funds by exploiting the machines’ weaknesses in the computers that operate the ATMs. He purchased machines online and discovered that the physical keys were the same for all ATMs of that type made by that manufacturer.  He used the keys to unlock a compartment of the ATM that had standard USB slots. He then inserted a program he wrote for one of the machines, commanding it to dispense all of its vault cash. Bankinfosecurity.com published “7 Growing Threats to Financial Institutions.” Skimming; Hardware readily available online that is attached to the face of ATM records user card information and pin codes. In this case you may still be able to perform a transaction. Ghost ATMs; A card reader is blocked off and replaced with hardware that supersedes the machine and records all your data without allowing a transaction. The machine reads “Can’t complete transaction.” Dummy ATMs; In some cases an ATM is bought off of eBay  (do a search) or elsewhere and installed anywhere there is foot traffic. The machine is set up for one purpose; read data. The machine might be powered by car batteries or plugged in the nearest outlet. Ram Raids; ATMs built into a wall or stand alone are being rammed by a truck and/or wrapped with chain and pulled out then loaded onto a truck. Once removed the thieves blow torch the machine taking the cash. This is a hot topic in Mexican banks, buy certainly happens everywhere. A bank would be smart to install battery backed GPS in any machine. PIN ID’s; Sophisticated criminal hackers break into a database or skim magnetic strips. They then go to an online banking site with a hacking software that plugs in various well known PINs. These PINs might be consecutive numbers, people names, pet names, birthdates, or other various simple pass phrases people use. When it finds a match it gives the criminal access to your account. Automated PIN Changes; Criminals go through the banks telephone banking system to change the customers PIN. They may try to change the customers ANI (Automatic Number Identification), a system utilized by telephone companies to identify the DN (Directory Number) of a caller. This might be accomplished via ” Caller ID Spoofing .” They use publicly available data on the card holder such as name, card account number and last four digits of the social security number to “verify” them as the banks customer. SMS Attacks; AKA Smishing or  Phexting – phish texting. Customers receive a text from a bank on their Smartphone requesting login information. Malware or Malicious Software; Researchers found a virus that specifically infects ATMs and takes over the machine logging card numbers and pins. To help combat ATM skimming, ADT unveiled the  ADT Anti-Skim ATM Security Solution , which helps prevent skimming attempts and detects skimming devices on all major ATM makes and models. ADT’s Anti-Skim Solution is installed inside an ATM near the card reader, making it invisible from the outside. The solution detects the presence of foreign devices placed over or near an ATM card entry slot, without disrupting the customer transaction or operation of most ATMs. It can trigger a silent alarm for command center response and coordinate video surveillance of all skimming activities. Also, the technology helps prevent card-skimming attempts by interrupting the operation of an illegal card reader. How to protect yourself from ATM skimming; First and foremost; Pay attention to your statements every two weeks. Refute unauthorized transactions within a 30-60 day time frame. Pay close attention to everything you do at an ATM. Look for “red flags”, anything out of place, your card sticks, odd looking configurations on the ATM, wires, two sided tape. Use strong PINs, uppercase lower case, alpha and numeric online and when possible at an ATM and for telephone banking. Don’t reply to phishing or phexting emails. Just hit delete. Don’t just use “any” ATM. Choose ATMs at locations that are “more secure” than in the middle of nowhere. Do not drop your guard if the ATM is at a bank branch. Robert Siciliano personal security expert to Home Security Source discussing ATM skimming on Fox Boston. Disclosures .

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Brett King: Online Privacy and Fraud is not that big a deal…eventually

August 5, 2010

I hear a lot of individuals in the financial services space expressing concerns about the risk of conducting business online, the lack of privacy in social media, the issues of identity theft and so forth. I’m not sure what these proponents of the ‘high-risk involvement’ model hope to accomplish, but if they realistically think that flagging concerns about privacy and online fraud will make ANY sort of dent in the progress of digital engagement through online, mobile, or social media – their mental health may need to be assessed. The best they can hope for is increased awareness of the issues. Dealing with the digital landscape as far as payments and identity is inevitable. The issue becomes how to manage your online presence moving forward, and not if you should be conducting commerce digitally or participating in social networks. It’s easier to commit fraud offline While we hear lots about online fraud, the fact is that when it comes to things like credit card fraud, it is still far, far easier to commit fraud when a physical card or physical process is involved. Recently I was in London launching BANK 2.0, and at every restaurant where I presented my card, the waiter would come to the table with a wireless POS terminal to present my card. This is undoubtedly because of the simple risk associated with letting my credit card out of my sight. It takes just seconds to run a card through a mag reader and replicate that card physically. Even with CHIP and PIN, which is common throughout the EU, it would not be that hard to shoulder surf your PIN number if I really wanted to. I used a foreign credit card in the UK, however, so I am not afforded the protection of PIN when I’m visiting the UK. In most instances I was actually asked to show my card to verify the signature, but in reality if someone had duplicated my card, then the signature they’d be using would be one they had created in any case. In the US , there is not even the protection of CHIP and PIN, and the physical processes allow for easy access to copy a credit or debit card. The fact is, the weakest link when it comes to fraud is always the physical medium. Granted, phishing attacks designed to glean your account number and password for Internet banking is today a major issue, but again the weakest link is not the technology but the customer who willing submits his information to a fraudulent site. Many markets have already solved this problem through two-factor authentication (TFA). The markets who have moved slower on this innovation, are obviously now reaping the reward for their lack of innovation. It is, in fact, not that fraud is easier online, it is that card issuers, retailers, banks and regulators simply are not keeping up with the behavioral shift to digital and have not leveraged the quite simple technologies that actually make digital more secure. The US is only now moving to new POS infrastructures around contactless cards, and the fact that the EU still has yet to broadly adopted TFA are just examples of lack of innovation in fraud management. Customers move with innovations in the digital space, banker’s don’t and fraudsters exploit the gaps while they can. Increasing digital interactions are inevitable – deal with it. I find it amusing that those that are strongest in vocalizing the risks in online privacy are often those that in reality have the most to gain. For example, while check (or cheque) fraud is less frequent today, the fact is that the check in itself is an outmoded payment mechanism. It is not an efficient way to pay in almost any measure that makes sense today. Checks are cumbersome to carry, error prone, easily corrupted, costly and are increasingly difficult to handle, especially if you are trying to cash a check issued cross-border for example. I’ve heard bankers argue till they’re blue in the face that checks are here to stay, and yet in the same breath they admit that they don’t know how they are going to continue to afford to process checks and admit data increasingly shows that in developed markets checks are in terminal decline. So why aren’t banks rushing to embrace person-to-person payment capabilities, improving interbank connectivity, and trying to integrate better, simpler security mechanisms into electronic interactions? The only thing I can figure is that there is so much organizational inertia around traditional mechanisms like checks and TT’s that is often just seen as too hard to change. The fact is today that no government, no bank, no threat on the planet, could viably stop the adoption of social media, mobile phones, payment technologies like P2P and other such innovations. It is simply a question of how soon – not if. How digital will be far safer Commercial interactions in the digital realm are instantaneous, completely auditable, measurable and can occur anytime, anywhere without the requirement of any specific physical instrument, except a browser or mobile phone. The fact that I can pay you in real-time, without any special process or instrument is ultimately the big draw-card. So how do we make it safe. Embedding payments into the phone is the first step. The combination of the phone SIM, the ownership of the physical platform (handset) and the payment process will be safer than today’s credit card process. However, the simple incorporation of biometrics, the most promising being fingerprint, voice or facial recognition, will make such transactions magnitudes safer than current physical payment processes, including cash. The likelihood is that Apple, Google or the handset manufacturers will likely be the ones to lead with these technologies, rather than banks working to incorporate such into the platforms. But the patents are already out there, we’re just waiting for the commercialization. Biometrics are the ultimate solution to digital privacy What about privacy? The reality is, I don’t know of one individual who has stopped using Facebook, Twitter, email or their mobile phone as a result of privacy concerns. That doesn’t mean as individuals we should be complacent. The fact is, that we’ll probably end up with two distinct personas when it comes to the digital space. Our public persona , where we accept a compromised privacy level in respect to our personal details (email, profile, date of birth, etc), and A secure persona , which we will protect fiercely because of the financial implications or risk. The biggest risk to our secure persona today is identity theft. Recent twitter hacks, facebook scams, hotmail account takeovers and other examples occur because it is still relatively easy to get someone’s credentials through an App, phishing site, or other such methods. Again, the answer here is that our secure persona needs to be linked to biometrics and not weak mechanisms around an ID and password. I don’t see anyone working on this as yet, but it is the obvious answer and the core technology is pretty much there. We just need one of the big Social Media networks like FB or say Apple with their iPhone/iPad to embed it and it will become ubiquitous fast. But one thing that won’t happen is a mass exodus away from digital innovations through privacy concerns.

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Edward Muzio: My Dining Hall Name: I’m Not Just Headcount!

August 3, 2010

When I was in college, one of my odd jobs was to work at the dining hall. Not the world’s best employment option, perhaps, but it did have an upside as coworkers quickly became friends. The work was a drag, and struggle breeds solidarity. One of the strangest things about my dining hall experience was the name tag. During orientation, we were told that it was important for everyone to wear a name tag, because it was a key value of the dining hall to provide a personalized dining experience. Customers needed to know that you were not just an uncaring, white-aproned server drone, but a real person. We were then led to a wall of pre-printed tags with a variety of names. “What if my name isn’t here?” someone asked. The answer was unbelievable: “Just pick a name you like and wear it. The point is that customers see you as a person. It doesn’t matter what your name tag says.” Needless to say, this quickly became a joke among dining hall employees: “I’m a real person!” “What did you say your name was again?” “That doesn’t matter.” Of course, this strategy failed miserably at its stated goal. To begin with, it sent an obvious message from management that all employees are infinitely replaceable. Being young and impressionable, we caught on quickly and came to behave as such. Worse yet, when a customer called me “Henry” or “Dale” or whatever name tag I was wearing, I invariably failed to answer, and as a result the customer got the sense that — you guessed it — I was an uncaring, white-aproned server drone. But how could I possibly remember to answer to someone else’s name? How could it not be worth a few dollars — a few cents — for my employer to label me with my own name? Fortunately, I haven’t seen this policy in place anywhere else. Unfortunately, I have seen a similar approach to employees and coworkers in many companies: one that treats them as interchangeable worker drones — “headcount” — and thinks of them as equipment to be moved around. Has this ever been done to you? Have you been guilty of this as a manager, leader, or colleague yourself? I know I have. “I’ll just put so and so on this, or on that, because that’s where we are shorthanded.” More often than I’d like to admit, I’ve thought of employees and coworkers like I was playing checkers, treating all the “pieces” as interchangeable. Staffing levels must factor into work assignments, to be sure, but they needn’t be the only consideration. My best successes as a leader have come when I’ve treated people as people, not as equipment. Yours probably have too. Everyone has unique goals, unique strengths, unique capabilities, and unique situations. It’s only when we comprehend these attributes — when we task people with work suited to their natural skills, motivations, and interests — that we truly lead. When I’ve remembered this fact in my own career, I’ve created more engaged, more effective, and (I daresay) happier organizations. It is not as time consuming as it may sound. Try this exercise: First, choose a coworker or someone who works for you. Make a list of as many unique things about that person as you can. List what you know about that person that differentiates him or her from the others in your workplace. Most likely, you’re already gathering this information, consciously or not. Ask yourself honestly, are you incorporating what you know into your interactions with that person? How might you use what you already know as a basis to learn more? Next, get even more personal. Make a list of the unique things that differentiate you from your coworkers. Ask yourself how aware your own superiors are of those things. How you might educate your management further about your uniqueness? Which of your own strengths or interests would, if made known to those around you at work, serve to improve your workplace experience? How might sharing this information also serve to further your career goals? We don’t have to hold hands, sing Kumbaya , and be best friends in the workplace to be productive. We must, however, learn to see each other as unique individuals, and learn to play ourselves and each other to our specific strengths. The more we do, the less likely we are to treat each other like faceless equipment with interchangeable name tags. The last thing we want, after all, is a work environment populated by uncaring, white-aproned drones.

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Alfred Gingold: CHASE HOME FINANCE: RABID WEASEL

July 29, 2010

Our mortgage bank says we have to pay our next door neighbor’s water bill. Last month, we got a letter from Chase Home Finance [link] stating that we were delinquent in our payments. So Chase paid our neighbor’s water bill and established an escrow account into which it plans to collect and store such money as it says we owe-at that moment, a cool $82.91, but increasing as Chase adds its “expenditures” towards our actual taxes and water bills, which we have already paid in what is referred to in mortgage circles as “timely fashion.” We were not surprised. This is the third time-the third time that we know of-that Chase has tried to make us pay our neighbor’s water bill. We refinanced with Chase in 2004 at a rate that was, and still is, pretty good, not to mention that it was and still is a fixed rate mortgage. Perhaps it’s the fixed rate thing that gets under Chase’s corporate skin, because unlike any of the eight other banks who’ve held our mortgages over the years, Chase keeps trying to make us pay it more money than we owe. The vehicle for this petty larceny is escrow for tax and insurance payments which are, to put it politely, enhanced. At first, we had no problem with paying our taxes and insurance through Chase. We’ve had the arrangement with other banks and none of them ever tried to filch more than we owed, or at least not this obviously. My wife and I share bill-paying and check-writing duties, so neither of us noticed the creep of our escrow payments, nor did we connect it with the regular letters from Chase requiring notification of insurance, which we duly sent along. In 2006 we realized something was amiss; our monthly escrow payment was huge. There were phone calls, some of a highly emotional nature, with the affectless warriors of Chase Customer Care. Eventually a polite lady called to tell us in silvery tones that there’d been a mistake, can you imagine, something about unacknowledged notices of coverage, and that we’d shortly receive a check for $4000 and change-funds, we gathered, Chase had been hanging onto for our own good. We allowed as how we’d like Chase to waive our escrow requirement, so we could pay our taxes and premiums ourselves, and the lady told us we could do that. What she didn’t say was “if you dare.” To Chase, a home loan with an escrow waiver is an unexploited resource, like the Arctic National Wildlife Refuge. Since this is the third time in two years Chase has created tax delinquencies that don’t exist, we know the drill: We faxed a note to Customer Care illuminating our “concerns,” pointing out that our address is not the same as our neighbor’s, the water account number is different, the houses are different, the mortgages are different-you know, we’re different fucking people. We included copies of the receipts for all the timely tax payments we’ve made. We referred to, but did not include, the last letter we sent Chase about our neighbor’s water bill, from December ’09, but we didn’t mention the one we sent on the same subject in October ’08, as we didn’t want to burden Customer Care with too much to think about, much less read. And we ended stirringly by requesting, insisting, demanding that this escrow grift cease immediately. Reliably, Chase took our remonstrance in stride and ignored it. Our new payment coupon already has a healthy chunk of escrow added, for taxes we’ve already paid and which Chase claims to have paid too, or intends to pay. The last time this happened, in 2008, we went through a telephone gauntlet, repeating the story endlessly, receiving assorted “work case numbers,” which were never recognized by anyone we spoke with, and collecting the names of every Customer Care Representative we spoke to, which got confusing because they only offer first names. And we continue to pay our principle and interest on time. No response. Zilch. Eventually we sent certified letters, return receipt requested, to assorted Chase departments-Customer Care, Tax, Escrow Removal-and personally to David B. Lowman, CEO of Chase Home Finance, and Jamie Dimon, CEO of JP Morgan Chase, the mother ship. We made our case, included our documentation and declared that if we did not receive satisfaction we would file reports with the Attorney General’s Office, the CAC, the Better Business Bureau and Santa. Lowman’s receipt didn’t come back to us for three months, so we were not surprised to hear Dennis Kucinich snap at him for Chase’s spectacular foot-dragging on mortgage modification [http://www.reuters.com/article/idUSN2419665720100624] . Yes, foot-dragging seems to be the Lowman Way, except last April, when he told Barney Frank of the House Financial Services Committee hearing that aggrieved Chase mortgage holders should come to him with their concerns, then hot-footed it the hell out of there when a group of them actually did. [http://www.huffingtonpost.com/2010/04/14/jpmorgan-executive-mobbed_n_537508.html] Someone evidently must have read the one we sent to Dimon, because we got a call from an oberleutnant of the Executive Resolution Center (Orwellian, no?), who made it chillingly clear that the only way to get rid of the escrow was to pay it off. Could we find out if we’re still paying for the neighbor’s water? How about copies of the numerous delinquency alerts Chase claims to have sent us and we never received (maybe the neighbors did)? Not a chance. Far be it from me to suggest that Jamie Dimon, a man the NewYork Times calls “a financial superstar” and Huffpo calls “The Most Dangerous Man in America,” tells the troops to squeeze a few extra bucks out of non-risky mortgages. I mean, JP Morgan Chase owns 44% of the derivatives market, whatever that may be. $82.06 doesn’t even qualify as chump change. It’s the principle of the thing, I suppose. Whether it’s billions in dicey investments or just a few bucks of funny escrow, take a shot and if no one’s the wiser, no one’s the wiser. It’s very different from the attitude Matt Taibbi captured so brilliantly in his description of Goldman Sachs, the “great vampire squid wrapped around the face of humanity, etc.” [link] Chase Home Finance is less squid than weasel: a rabid weasel, wrapped around my house, pointy little claws relentlessly poking-behind the sofa cushions, in our wallets, next door on the neighbor’s water meter-for any spare change or folding bills it can sweep into its fetid maw before someone shoos it away with a broom. It is a busy weasel. We thought paying our neighbor’s water bill was a mistake too stupid to be anything but honest, but it turns out Chase pulls this stuff all the time. At the ample Chase Home Finance section on the Complaints Board Website [link], there’s a post from a guy Chase is escrowing for taxes on property he doesn’t own. On the Chase Home Finance Sucks Facebook Page [link], we read of a man escrowed for taxes due (and paid) for the year before his mortgage was taken over by Chase. The Los Angeles Better Business Bureau [http://www.la.bbb.org/Business-Report/Chase-Home-Finance-100018450 ] awards Chase Home Finance an F for reliability, which makes us think Chase really doesn’t give a damn what anyone thinks of it-which is exactly the attitude we would recommend to Chase if we were its therapist or mother. Perhaps it shouldn’t be surprising, but it somehow is, that the same banks and bankers that thought big enough to drive the whole economy over a cliff also think-and behave– really, really small. To paraphrase Lady Bracknell [ http://www.youtube.com/watch?v=tiNVy5nfbcQ ]: To swindle someone once may be regarded as a mistake; to swindle the same someone in the same way repeatedly looks like a business plan. I’ll be chronicling this episode of our ongoing struggle to pay Chase what we owe it on my blog, Joy Buzzer. This time we’re hoping to keep our postage expenditures down and to avoid hyperventilating on the phone. My prediction: they’ll escrow us for David B. Lowman’s water bill.

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Bridgelux, Inc. Announces Appointment of Chief Operating Officer

July 29, 2010

SUNNYVALE, CA–(Marketwire – July 29, 2010) –   Bridgelux Inc. , a leading developer and manufacturer of LED lighting technologies and solutions today announced the addition of Karl Chicca as the company’s chief operating officer. To his role as COO, Mr. Chicca brings extensive experience in building and scaling multinational Manufacturing and Supply Chain operations in the semiconductor and storage industries. Mr. Chicca will be responsible for Bridgelux’s global Manufacturing, Materials, Supply Chain, Logistics, Product and Process Engineering, and Supplier and Customer Quality operations.

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Danny Wong: Our Sincerest Apologies

July 27, 2010

This is certainly a belated apology, but not without reason. We thought about publishing this apology on Blank Label ‘s co-creation blog , but didn’t think it was the best way to distribute this important message, especially because those we wronged would not likely stumble upon our website again, nevertheless our blog, which isn’t one of our conversion goals. Image Source: Nutzandboltz This is an effort to right our wrongs, especially with those individuals who we live and die by, our customers. Things got a little crazy after we were featured in the NY Times . We really had no clue that a media mention like that would bring in tens of thousands of visitors in one day because until then, we were excited when we got a mention that raked in just a few hundred hits. In fact, we were a small operation that was used to selling just 10 co-created dress shirts a day, but to keep up with the thousands of orders that were flowing in, we had to figure out how to AT LEAST scale up to managing 100 orders of co-created dress shirts a day. But the fact was we couldn’t do that. Our supplier didn’t have the capacity to fulfill 100 orders a day, nor were they able to scale quickly enough, so we were in a tight pickle. They sort of gave us the age-old response that they could handle it, and that perhaps only some of the orders would be delayed, but newer orders would DEFINITELY be delayed, so we communicated that with our customers and new visitors. We shot out a few hundred emails to customers telling them that their co-creations might arrive a week late, and that they had the option of canceling their order and then having their money refunded. Out of several hundred, maybe five canceled, so that was a positive sign that we had a community that loved us and we loved them back for bearing with us as we were experiencing the growing pains of a growing startup . We even put up a few HUGE notices on our website that newer orders would be delayed two weeks because of our enormous backlog. It was on the homepage, in the dress shirt design app, and even in the checkout. But we quickly realized that our suppliers had lied to us. They couldn’t scale to 100 shirts a day. They weren’t even fulfilling half that, and they were getting a few orders wrong, so we swiftly ended ties with them and immediately found a new supplier who could scale with us. We were fortunate enough that the new supplier was smart enough to customize their manufacturing processes to accommodate our individually made dress shirts with all the volume we were receiving. We did what we could to communicate the things our business was going through to our community and our followers via email, Twitter, and through our business blog with posts such as: Where is My Shirt and Our Customer Service Sucks . We’re sorry that we weren’t quite on top of things as an amazing business would have been, but with our small team of four, we quickly realized we couldn’t be and do everything, so we brought on additional support to help manage email traffic, phone calls, order processing, web development and more. We’re doubly sorry that we couldn’t process all your co-creations on time , and extra, extra sorry that some shirts didn’t quite come out right or fit properly either. We’ve got new support who can ensure a better quality product (far less mistakes, well, hopefully none, but again, we’re human) and a much higher likelihood that you will have a product that fits. From the Blank Label team , we are all hoping you can forgive us for not being able to meet your expectations, or, heck, even our own. We’ve disappointed you and hope you will accept our sincerest apologies. To the ones that won’t, perhaps you’ll turn around in the future when we fully get our act together. The dust has finally settled on all the craziness and we are back on track with orders, customer service, and everything else. Now we can spend some time on building a better business, one that our customers can be proud of, and perhaps one that can win over the hearts of the customers who we’ve truly disappointed. Can anyone forgive us? Danny Wong is the co-founder and Lead Evangelist of Blank Label , an ecommerce startup specializing in custom dress shirts and men’s dress shirts for the new male.

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Brett King: The 5 stages of social media grief

July 22, 2010

This week I’ve met with some very interesting people and the subject of social media has been high on the agenda. Yesterday, I met with Tom Cannon, who is leading the charge on the Internet Banking initiative that is part of HSBC’s “OneH” project – essentially their customer dashboard, single-view of the customer baseline technology. Earlier in the week with Sam Oakley from WolfStar, John Beck the Technology Editor for the Financial Times/The Banker magazine in London, and my good pal Christophe Langlois from Visible Banking , amongst others. At these sessions we invariably repeated a discussion I’ve had 30 times in the last few months with innovators in the banking space the world over. The question simply being “when will the banking senior executives get social media?” Facebook, Twitter, Foursquare – when will it end? Facebook this week announced their 500 millionth active user . That number is pretty significant. Firstly, any corporation that can claim it’s customer base would make it the third largest country in the world (behind only China and India) has a case for celebration. Secondly, it doesn’t look as if its growth will slow any time soon. Lastly, their growth is not restricted by physical distribution or inventory constraints, their marketplace is anywhere you are. Twitter is not far behind, with 190 million users as of June 2010 , and 65 million tweets a day. Foursquare , the Geolocation Social Networking service is up there too – adding 100,000 new users every week at the moment. When will it end? It’s won’t – that’s like asking when the internet and mobile phones will end. Which brings me to the realization that dealing with innovation in banking is a lot like dealing with grief. So here are the 5 stages of Innovation Grief for Banks and Bankers (It probably works for most companies actually) Stage 1 – Total ignorance When a new innovation comes out banker’s simply ignore it because ‘banking has been around for centuries and it fundamentally doesn’t change…” Stage 2 – It’s just a fad “Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms … Commerce and business will shift from offices and malls to networks and modems … Baloney . Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works … Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we’ll soon buy books and newspapers straight over the Internet. Uh, sure.” – Clifford Stohl, Newsweek, 27 February, 1995 Ok so now it’s on our radar, but it’s just a fad – all the fuss will blow over soon. Stage 3 – I still don’t get it, where’s the money? Because of Stage 1 and Stage 2 banker’s are looking at social media’s incredible rise to fame and then looking at their competitors (who are mostly doing nothing) and saying, “well as an industry no one is making any money out of this, so let’s not bother just yet…” How can you tell you are this stage? You have a Facebook page for the bank, but no one actively managing your social media listening post Stage 4 – The Sonic Boom Tom Cannon gets the credit for this analogy. He said internet banking, mobile banking, social media is all the same for bankers. It’s like them sitting there watching the Concorde or an F15 doing a low-pass, fly-by and not yet registering what they are seeing as significant, until the Sonic Boom hits them and blows them off their feet. By then it is already too late because at Mach 1 or Mach 2 your competitors are already way, way in front of you. This is where the message finally breaks through the ignorance! BOOM! This is the stage we are hitting for most banks today… If you work in a bank how can you tell if you are at this stage – your bank has just hired a Head of Social Media. Social Media is starting to hit banks like a Sonic Boom Stage 5 – The Mad Scramble Excuse the vernacular, but this is the “oh, crap” moment where bankers suddenly realize that they should have been heavily invested in this 3-4 years ago, and their lack of preparedness is highlighting to their customer base, employees and the world just how out of touch bankers are. The mad scramble may have occurred because of a PR disaster like those that BP has experienced with the Gulf Oil Spill, that Bank of America experience with Ann Minch’s Debtor revolt, or that Citibank experienced with the Fabulis debacle. This is when the knee-jerk hiring spree starts with hit and miss initiatives occurring throughout the bank. How do you know when you are at this stage? The CEO of the bank is talking about Social Media in press conferences and how the bank is committed to better reaching customers through this medium. Getting out in front So how do you stop the grief cycle within your organization? The first thing bankers need to do is rethink their organizational structure around customer. Social Media is a tool for reaching customers, for engaging customers. It is as important as investing in branches, it is just as critical as having a telephone number for customers to call, but more than that, it can help you transform your business internally too. To fix your organization to serve customers in the digital and social media age – you need to think independently of channels . We talk about multi-channel alot these days, but clearly social media is showing us that new channels and ways of interacting can grow very fast. Who’s to say what will come after social media? Something will. The key is that channel complexity continues to grow, and no single channel should be singled out as more important. For customers branch is no more important than Internet, mobile than social media, call centre than ATM. These are tools to engage, and increasingly banks need to be more pervasive – everywhere the customer is. So break the back of organization structure silos around channels. Think customer – think total channel engagement, and get moving on Social Media fast: BOOM!

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Brett King: Is improving Customer Experience just too hard for banks?

July 19, 2010

When you read a definition of Customer Experience you invariably will see two elements – the lifetime experience of the customer, and the total experience of the customer day to day as he engages in transactions with the provider of the goods or services he is utilizing. In meeting continuously with UK banks over the last two weeks I find an almost unhealthy obsession with branch experience as the be all and end all of the customer experience challenge. It is as if a poor customer experience across any other channel can be solved simply by a customer walking into a branch having a great service experience. I just don’t buy that. Last week when I was interviewed on CNBC the issue of Lord Levene’s ” Project NewBank ” arose, where his stated goal is to primarily recreate the branch philosophy of the 1960s and 70s where a customer walking into a branch is recognized by the local manager, and given personalize ‘back-to-basics’ service. “Hopefully we can give them all a proposition this time that is fairly straightforward, where when they go into their local branch they know who they are; if they don’t want to go into their local branch they can go on the internet; if they want to phone up they can speak to someone they know – hopefully not a different person every time they call…” - Lord Levene, Chairman Lloyds of London Hang on…what is different about this to my bank today? Someone knows me in the branch, or I can get to the same person every time I call? There seems to be a perception today in the UK that all that is needed to fix the poor perception of banks today, is to offer better service through the branch and telephone. But there are a bunch of other issues. Convenience and expedience are core drivers When a distribution team in a commercial bank look at the possible locations of a branch for a bank – what are the parameters? Primarily the key concern is being able to maximize traffic through the branch – so the real estate must be in the most convenient location for customers to get to, to park (if they have to drive to get there) and to visit the branch. The other concern is obviously the key segments the bank wants to attract to that branch – i.e. High-Net Worth customers, Mass Affluent, SMEs, etc. The problems associated with decision on branch location today, however, are complicated by the fact that individuals are increasingly less likely to want to take their lunch hour to visit the branch, and that on the weekend or evenings when they have time the branches are closed. Thus, we see banks like Metro Bank seeing their differentiation in opening hours (7 days a week, open late) and the fact that they know your dog’s name . Metro Bank in the UK believes that opening hours for branches is a key differentiation The problem is people aren’t visiting branches as much as they used to because when you look at their core drivers in getting stuff done, namely expedience and convenience, the branch simply is no longer the best choice. In fact, if we offered decent customer experience through web, mobile and call centre, I believe it’s likely that branches would be under even more pressure today. That’s because as a customer when I think about banking I am task oriented – I’m thinking of the quickest, most expedient way I can get something done. I’m not thinking I’ll go down to a ‘branch’ because someone will know my name, my dog’s name or that they are open at 9pm in the evening. The question always is – how do I get this done the fastest most efficient way. But isn’t it about a rich face-to-face interaction? There are times when you need to see a human being. I’m told by bankers repeatedly that this is the epitome of the bank-customer relationship, where you meet your banker and have the opportunity to have all your problems solved. This is the core value of the branch customer experience. Where you get that level of service that you can’t get through an ‘electronic’ or ‘alternative’ channel. This is where bankers want you, I’m told, because when you meet with a relationship manager or a teller, there is a cross-sell and up-sell opportunity, which are critical metrics for banks today. That’s all well and good but let’s look at the reality. I’m a “Preferred” customer of three different banks, in three different geographies. I have a relationship manager with each of these banks, either as an SME customer, or as a High-Net Worth individual with a core AuM that makes me theoretically of value to the bank as an ongoing relationship. So do I get a better experience face-to-face? Does my preferred status make my banking experience better? With at least two of the three major banking relationships I have, my relationship manager has changed at least twice in the last 12 months. For one of these banks I’ve had only two contacts from them in the four years that I’ve had a relationship as a ‘preferred’ customer – the first when I joined and the second when my balance slipped below the minimum level and they sent me a warning letter to ask me to top-up my account! See the reality is this – as a relationship manager for HNWIs in the Mass Affluent or SME space, I probably have somewhere between 200-400 clients assigned to me on average. That means I don’t have time to give my customers advice, let alone invest time in a relationship where I give them good advice. Clients are simply a possible source of monthly sales revenue – which keeps me employed. Keep in mind this is a dedicated ‘relationship manager’ which is what the banks tell me is a source of differentiation in the customer experience. Then if we talk about face-to-face interactions for the average customer with a teller at a branch – is this really a positive and pleasant experience? The reality is that today most customers are probably just as informed as tellers about the sort of product they are interested in because they already researched it quite heavily before they’ve walked into a branch. It would be hit and miss as to whether a teller or RM would actually be able to give you ‘advice’ or support that would differentiate the experience at the frontline in my humble opinion. It’s the total customer The sooner banks get over their fascination with branches as the centre of the customer relationship and start to see all channels as equals when it comes to solving the needs of customers today, the better off they and their customers will be. To that end, I see banks working to put in place direct channel teams, and I see more of a focus on ‘customer experience’. But what I don’t see, is a way for banks to innovate the customer experience across the bank. P&L support for mobile, social media, internet and other such elements of the customer experience is still woefully inadequate because their real-estate based big brother still takes the absolute lions share of $$$. So what’s wrong is that the P&L has not yet caught up with the customer. That’s not a measure of willingness to support innovation, that’s a reality of entrenched structures within the bank that don’t want to lose the piece of the pie that they already have. Ask a head of branches how he feels about losing 20% of his annual budget to support ‘direct’ channels and you’ll find out very quickly what I mean…

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Simon Sinek: I Hate You: A Tale About Advertising

July 16, 2010

What do you do if nearly every consumer hates nearly every product you produce? This is exactly what has happened with advertising today. Think about the lengths people go to to avoid watching ads on TV. As soon as they come on, we lunge for the remote to change the channel. We buy expensive DVRs that advertise the ability to skip ads AS A BENEFIT. And we willingly pay a premium for some websites or iPhone apps for which the only additional value is that the paid version is free of advertising. How embarrassing is that? That people are paying NOT to consume your product. The irony is, the advertising industry knows everyone hates what they produce. This is why they keep looking for new ways to force people to stay tuned. There are now ads at the beginning of online news clips or other online video content that are impossible to skip. It’s infuriating. There are ads on BlueRay DVDs now that we can’t fast-forward or skip to the main menu until we’ve endured the pitch. But here’s a more interesting question – how did it come to pass that modern day advertising so painful? The reason is simple, and it has nothing to do with the rise of the internet and other technologies. The reason we hate advertising is because the ad industry has no idea who its customer is; it is we – the general public who are the final consumer of their product. Ironic that an industry devoted to telling others who to focus on doesn’t know who to focus on. Probably not so ironically, it’s the same issue that stymies the music industry, the publishing industry and every other industry that seems to be struggling “to define itself” in this internet generation. They are all looking for an internet strategy when its their customer they are ignoring. Steve Jobs recently shared his thoughts about how the entire music industry failed to innovate something like iTunes. His answer was as profound as it was simple (fancy that). The music industry, he expounds, thought their customer was Tower Records or Virgin MegaStore…but it never was. Those were their distribution channels. The actual customer is the person who consumes the music. And it is the end user, not the intermediaries, whom Apple focuses on in all they do. The ad industry thinks their clients are their customers. They think the companies who pay for the production are the ones they are supposed to serve. So the ads they produce make their clients happy…but infuriate the rest of us. So much so, that the only innovations in the industry are the new ways they find to force us to watch what we are actively trying to avoid watching. Like the music industry, the corporate marketers are the distribution channel. They pay for the production and the media to distribute the creative product. But it is the buying customer who consumes the media. Like any other industry on the planet that has a problem with selling their product (and in the case of advertising, selling doesn’t mean pay for – it means pay attention to), the first thing they do is improve the quality of their product. In this case, that means making something people like, something people will watch without being forced. Leave America and you’ll find that the consumers in many other countries enjoy watching advertising. Not because the products are better, but because the ads are produced to be entertaining. Sometimes they are funny. Sometimes they are dramatic. Sometimes they are just beautiful. But they are, on balance, produced to be more appealing for the people watching them. Here’s what I propose: the ad industry should work to improve the quality of their product to a point where people want to watch it. American companies do this once a year on the Super Bowl – the only time of the year Americans enjoy watching advertising. Why is that quality of entertainment not being produced the other 354 days? Simple – because what gets measured gets done. And the Super Bowl is the only day of the year that the quality of ads is measured based on its entertainment value. The quality of advertising should always be measured based on how entertaining or engaging it is. They should stop measuring how many people are forced to watch (reach and frequency) and start measuring how many people choose to watch. Count how many people skip an ad versus how many opt to keep watching it. The more people that watch means you have produced better, more compelling advertising. Producing a product for the consumers who are the ones actually consuming the product makes more business sense, too. Clients would be able to spend less on media because the work would be more memorable. Plus, if people CHOOSE to watch the ads then they are more likely like the brands, products and companies featured in those ads. In other words, if advertising was made for consumers and not clients the ultimate benefactor would actually be the client…and isn’t that supposed to be the job of good advertising?

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Halsey Minor: Why I Fight

July 15, 2010

CHARLOTTESVILLE, Va. — Here in the shadow of Monticello, I often wonder what Thomas Jefferson would think of today’s America, a nation that is rapidly but silently abandoning the individual in favor of faceless corporations, rapacious banks and a collusive, unresponsive government. The Founding Father who envisioned a republic built on the unalienable rights of “life, liberty and the pursuit of happiness” would be sickened at how the very institutions built to protect average citizens from repression have instead become weapons of the rich, the powerful, and mostly the corporate. Whole branches of government have become enablers and enforcers for the corporations and banks that created the economic crisis out of greed and irresponsibility and now are exploiting the mess they themselves created to tighten their grip on America. Big bailouts of Merrill Lynch, Bank of America and AIG get the press attention. Far more corrosive are thousands of unpublicized, self-dealing transactions overseen by bureaucrats following laws written by a pliant Congress and enforced by lifetime-tenured judges trained to believe in the bank over the debtor. A prime example of how the common good is subverted can literally be seen from the gardens of Monticello. Prior to the financial crisis, I was building a hotel in my hometown of Charlottesville. As its own balance sheet faltered, Silverton Bank, the Atlanta-based institution funding the project reneged on its commitment to finance and simply cut off funding. I sued the bank; the bank sued me. Within two months, Silverton was taken over by the Federal Deposit Insurance Corp. in the largest bank failure in Georgia history. I am sure you would expect that the FDIC’s priority would be to maximize the value of the asset for the public by working with me to wrap up the problem caused by the failed bank. We could have put more than 100 people back to work, injected millions of dollars into the Charlottesville economy and finished a half-built structure that now stands as a nine-story testament to hard times. Instead, Chairman Sheila Bair’s FDIC did nothing of the sort. The FDIC accused me of defaulting on the loan, but unlike the actions banks usually take in a default, they did not foreclose. I thought that was extremely odd — until I learned that the loan had been split up among eight banks and as long as there was no foreclosure the banks could say the loans were “good.” In other words, the banks can say the loan is good even though the project is a see-through concrete-and-steel skeleton that has sat idle for more than a year. How fitting, then, that the person overseeing my project for the FDIC is Claire Cotter, a former employee at Ameriquest, which established a fund to settle accusations that it had engaged in unlawful mortgage lending practices during the real estate boom. When Cotter’s bank went belly up, she joined the FDIC knowing the ropes. She immediately went to work to protect the balance sheets of the eight lending banks by wasting millions of taxpayer dollars continuing to fight Silverton’s misguided legal battle, all so these banks don’t have write down my loan. (I’ve already won arbitration against the bank’s developer on the project; I face the FDIC in October.) Between the government and me, roughly $10 million already has been spent in legal fees on a dispute over a $10.3 million loan. Ridiculous, I know; so why do I fight? The simple answer is that someone must or we will emerge from this recession with wealth and power concentrated in a few tiny financial institutions representing a new ruling elite, not unlike the one that inspired Jefferson’s generation to revolution. The same day I heard Bank of America pledge to pay back its taxpayer-funded loan from the government my babysitter told me the interest rate on her Bank of America credit card doubled — from 14% to 28%. When the FDIC carves up the assets of failed banks, it cuts incredible deals with other financial institutions — offering loans for pennies on the dollar and even guaranteeing future losses. So banks bailed out because they were too big to fail get bigger as they swallow the portfolios of those smaller banks the government decides are expendable. And they are aided in this bulking up by the so-called regulators, who can clear pesky obstacles (formerly known as bank customers and clients) by just legally dismissing their claims or offering up threats of litigation funded by a bottomless federal purse. Countless projects like mine, with countless jobs attached, feeding countless people are considered collateral damage, if they are considered at all. Every time I called Claire Cotter, the FDIC official overseeing my project’s failed lender, to discuss a solution she told me to talk to her lawyer and hung up the phone on me. Litigation is expensive and very few people have the money necessary to fight a bank, let alone the federal government. That’s what they count on. Forget the notion of equal access to justice. A minor dispute can easily cost half a million dollars to try, not counting appeals which big companies and the government always take. Even then, it’s the individual who bears all of the personal risk: lose, and the court can seize possessions; win, and face the prospect of a draining appeal. That’s why small businesses have watched helplessly as their credit lines are unilaterally slashed or capriciously revoked, leaving them without the flexibility they need to hire or expand or order fresh inventory. Most can do almost nothing beyond cycling through the push-button responses on the customer service line and hope that things change. The first step toward that change is for people to know what their government is doing with their money in their name. When people hear terms like FDIC “financial protection,” they should understand that it doesn’t necessarily refer to their financial protection but to the banks that hold their mortgage or their credit card. All that FDIC sign in the bank means is that if the banks really screw it up, you and I will pay ourselves back. FDR would be appalled by the FDIC, created in 1933 and designed to help people. Americans are rightly suspicious of moneymen, and not just in the last few years. Jefferson himself once said “that banking institutions are more dangerous to our liberties than standing armies.” When it exists to support businesses and create jobs and fund innovation, finance is integral to a modern economy. But when finance becomes an end in itself and morphs from tool to master, it’s easy to imagine Jefferson’s fear realized in a system that deprives “the people of all property until their children wake up homeless on the continent their fathers conquered.”

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Robert F. Brands: Innovation and the "I" in Team

July 14, 2010

Innovation counselors and organizational consultants alike extol teamwork as the key to shared success. For projects or new initiatives to succeed, it’s said all involved have to be “on the same page” or working together as one. But does that include innovation initiatives in the corporate environment? Actually, look at the basketball court for comparison. This month, Lebron James, Dwyane Wade and Chris Bosh — each highly successful and well-paid athletes — gave up a chance to make millions more in salary to play together on the Miami Heat. Their belief: By bringing their individual skills together on the basketball court, they had a better shot at winning an NBA title. Then there’s the tale of Michael Jordan. Some years ago, an assistant coach on the Chicago Bulls chided the star player putting on a stellar — albeit individual — performance in a team win. The coach stated the now famous line, ” There is no ‘I’ in team. ” The statement has come to epitomize the place of players in a team performance. For a team to be successful, the thinking goes, there is no individual. To the contrary, there are many “I’s” in team . Individual initiative is the hallmark of successful innovation. Certainly, everyone must collaborate in the push toward a common goal. Each has his or her place in the process: One person or group performs market research, another crunches the numbers, a third may draft a marketing plan to support the product or initiative. Then there’s the heterogeneous nature of corporate teams. Aside from differing skill sets, these individuals bring unique characteristics — their own outlook, style or points of view — that help place their stamp on the project. In my experience, homogeneity that leaves the “I” behind also jettisons the desired results. A diverse team is a more productive team. Each is working toward that common goal. But each also is a soloist — even within the smaller subset of the individual teams. Each knows his or her brand is on the line, ready potentially to shine with success, or tarnish with failure. It’s been said there are two types of successful people in the business world: Those who are entrepreneurs, and those who think like entrepreneurs. The “I’s” among us fall into the latter group. They are leaders, champions of the cause. They’re passionate and willing to stick their necks out for a cause or to deliver on a project or promise. They represent the best that individualism in the corporate environment has to offer. They take ownership and focus their individual efforts on their part in accountability and ROI . They eschew the resistance common with team-think. They’re willing to speak up and speak out. They put their beliefs out there – and the whole is better for it. A team can be full of these people. Team managers ( Chief Innovation Officer s or Champions tasked with creating the teams to pursue innovation initiatives) must seek them out. They should look for the heterogeneous characteristics that bring diversity in the ideation process. With such variety across the teams that comprise innovation (including R&D, Customer Service, Marketing, F&A, and the like), there’s no missing dimension. The result promises to be more complete. Once his assistant coach spoke that famous line, Michael Jordan’s response was even more telling: ” There’s an ‘I’ in ‘win’ ” By Robert Brands with Jeff Zbar Robert Brands, professional speaker and the founder of InnovationCoach.com , and the author of ” Robert’s Rules of Innovation “: A 10-Step Program for Corporate Survival, with Martin Kleinman, published March, 2010 by Wiley.

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Danny Wong: Venture Capital’s Excitement for E-Commerce

July 14, 2010

Mark Suster of Both Sides of the Table and This Week in VC gave us an interesting update on what was new in e-commerce and venture financing. To reiterate his summary: ThredUp received a $1.4 million round of financing to further expand their online clothing exchange for a more eco-friendly environment and a more affordable way to get clothes for your continually growing kids. As your kids outgrow their clothes, since they just grow so quickly, you can send them over to ThredUp and exchange them for clothes from other families who have children who outgrew their clothes, clothes which can now fit your child. My-Wardrobe raised a $9 million Series A to provide consumers with an outlet to purchase affordable designer clothing. This business clearly has legs with how much it’s proven the concept so far. While the business model isn’t too differentiated from what normal retailers do, it seems like there are some (modest) discounts for the products sold on this site, and there is just the ease of having all those brands in the same place and online which might be enough to keep this business growing. Side note: Mark was not too impressed with the hyphen in the business’ URL, but to be honest, small businesses can’t always afford an un-hyphenated URL. My company, Blank Label , an e-commerce business focusing on custom dress shirts , has a hyphen in the URL because the squatter on blanklabel.com wants us to fork up $15,000. Should a lean start-up really pay $15,000 for a special URL when they capture 8 out of 10 of the search results for their branded term? Any research on how useful a proper URL is? What’s the worth of an un-hyphenated URL vs a hyphenated URL? We have thought about just sucking it up and buying the domain, but we can’t justify the cost right now. ModCloth just closed a Series B with $19.8 million raised. The business is an outlet for vintage and retro clothing for that indie individual that’s not quite interested in trying to look like everyone else, but wants to express their independent and unique style. There’s definitely proof that e-commerce is booming , there is no doubt about that, and clearly investors want a piece of the action and want to support it’s growth. Why is e-commerce exciting? It’s improving the customer shopping experience by making it easier for people to find a product they want, filter what they don’t want, and not have to rummage through racks and racks of clothing or shelves of product to find the one size that fits them best. People also like it because it’s a heck of a lot easier than running between Store A and Store B with fingers crossed that one of the stores might have what you’re looking for in-stock. E-commerce companies have also spent a lot of time and resources on improving the usability of their service so that visitors are having a really amazing shopping experience. It’s a lot easier for web businesses to be agile and re-vamp the visitor experience for smoother, and more fun interactions with the service, than to try to change the user experience for shoppers in physical retail stores. Brick-and-mortar is going to be outdated within the next few decades, especially if e-commerce continues to innovate the way people shop to provide more benefit in shopping online rather than going to a physical retail outlet. While there is a loss in the general experience of actually touching, feeling, trying on or testing out product before you purchase it, e-commerce businesses are figuring out ways to make their shopping experiences far more compelling, such that consumers find more benefit in shopping online.

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Robert Reich: Why We Can’t Rely on Foreign Consumers to Rescue American Jobs, and Why Today’s "Jobs for America Summit" Is a Bad Joke

July 14, 2010

Fred Hochberg, president of the Export-Import Bank of the U.S., thinks I’m wrong to worry about a trade war, and that the president’s goal for doubling U.S. exports over the next five years is on track. Writing here on HuffPost , Hochberg says: Reich’s argument contradicts the message I’ve heard from leaders of the world’s emerging economies who know that American innovation will help sustain their rapid infrastructure growth. According to data released yesterday by the Department of Commerce, U.S. exports of goods and services increased by 17.7 percent during the first five months of 2010, compared to the same period last year. If this trend continues, the President will meet his goal of doubling exports in five years. The key: targeting export markets strategically. At the Export-Import Bank, we’re focused on countries that have weathered the global recession and want to grow in areas where U.S. companies have a comparative advantage…. Commerce’s May data illustrate the potential of an export strategy tailored to countries and sectors that suit our strengths. With due respect, Mr. Hochberg is being misleading. The same Commerce Department report shows that America’s trade deficit with the rest of the world has continued to widen. American businesses sold $152.3 billion of goods and services overseas in May (an increase of just over 2 percent from April) but the U.S. imported $194.5 billion (a jump of 2.9 percent). In fact, according to the Commerce Department, America’s trade deficit expanded in May to its highest level in 18 months — rising 4.8 percent to $42.3 billion. Our monthly trade deficit with China alone jumped $3 billion, to $22 billion. When the president promised to double exports over five years in order to create more jobs in the US, most people assumed he was talking about net exports — that is, exports minus imports. A doubling of net exports would help fill the demand gap caused by American consumers who can’t spend what they used to spend because they can no longer borrow to the gills. But regardless of how much we export, if imports continue to exceed that amount, we’re heading in the opposite direction. Trade can’t possibly be a source of new American jobs. To the contrary, it reduces overall demand in the United States. The widening trade deficit remains a drag on the nation’s economic growth. As a practical matter, the widening trade imbalance means no more trade agreements because Americans, worried about their jobs, don’t want to risk losing more of them to foreign workers. Today (Wednesday), leaders of big business are meeting with the President and Vice President (along with former President Bill Clinton) to urge that the White House push stalled trade-opening agreements with South Korea, Panama, and Columbia. And the U.S. Chamber of Commerce is holding a so-called “Jobs for America Summit” to pressure the Administration. The irony is that many of America’s surging imports are coming from these same American-based companies. They’re either employing foreign workers to make things for sale in the U.S., contracting with foreign companies to do so, or contracting for parts and supplies. Jobs for America Summit? These executives don’t care about American jobs. They care about their own bottom lines. That’s what they’re paid to care about. But their bottom lines have little or nothing to do with good jobs for Americans. They have to do with good returns for American investors. Not all corporate executives are marching to the same drummer. Recently, Andy Grove, chairman of Intel, wrote that America should levy an extra tax on the product of offshored labor and give the money to American companies that will use it to grow their U.S. operations and create more jobs in the United States. The only small problem with this idea is it violates international trade law and would almost certainly lead to retaliatory tariffs against American exports. Grove doesn’t seem too bothered. “If the result is a trade war,” he writes, “treat it like other wars — fight to win.” But trade wars damage everyone, as we should have learned in the 1930s from Smoot-Hawley. What Grove doesn’t say is that over 70 percent of Intel’s revenues now come from its sales abroad. A trade war is the last thing Intel (whose share prices are rocketing) needs. Yes, America must keep the pressure on our trade partners to open their markets and not manipulate their currencies. By the same token, America also has to reduce its dependence on oil (which accounts for a large portion of our trade imbalance). But the essential point is we can’t expect foreign consumers to fill the shortfall in demand left by American consumers who can no longer maintain their pre-recession standard of living. The only answer is to lift the standard of living of Americans. How? That question has direct bearing on the other part of the business agenda at the faux “Jobs For America Summit” at the U.S. Chamber of Commerce. Business executives (all of whom are now raking in just about the same seven- and eight-figure salaries and bonuses they did before the recession) are also telling the President to hold off increasing taxes on the rich (that is, ending the Bush tax cuts that had been scheduled to end this year) and to cut the budget deficit. But the only way the President could meet both these objectives – other than by cutting Medicare, Social Security, and defense spending, which he won’t – would be to cut back even further on services going to the lower middle class and poor, including those that rely on federal support to state and local governments. Without these, including extended unemployment benefits, tens of millions of Americans are being forced trim their family budgets even more than they did last year. And that means fewer customers to purchase what these companies are selling in the United States. Someone should remind business executives that their plan for America is eroding their customer base in America. The way to get jobs back is to increase federal spending in the short term in order to make up for the gap left by consumers and businesses (the fastest way to get this money into circulation is by extending unemployment benefits and aiding stranded state and local governments). Over the longer term, we can lift the wages of the vast majority of Americans by expanding and extending the Earned Income Tax Credit — an income supplement — up through the middle class, and pay for it by a higher marginal income tax rate on the top. And while we’re at it, exempt the first $20,000 of income from payroll taxes, and pay for that by lifting the cap on Social Security taxes on all incomes in excess of $250,000. Beyond that, and over the still longer term, America’s vast middle class and the poor more need to be more productive and innovative, so they can add more value to an increasingly integrated global economy. That means better education. Instead of firing school teachers, closing libraries, and increasing tuitions at public universities, we have to do exactly the opposite. This post originally appeared at RobertReich.org .

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Credit Scores Sink To New Lows For More Americans

July 12, 2010

NEW YORK — The credit scores of millions more Americans are sinking to new lows. Figures provided by FICO Inc. show that 25.5 percent of consumers – nearly 43.4 million people – now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use. Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery. “I don’t get paid for loan applications, I get paid for closings,” said Ritch Workman, a Melbourne, Fla., mortgage broker. “I have plenty of business, but I’m struggling to stay open.” FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com. More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual’s score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past. On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown. There’s also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent. This group is significant because it may feel the effects of lenders’ tighter credit standards the most, said FICO’s Jennings. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with mid-range scores that had been eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans. Workman has seen this firsthand. A customer with a score of 679 recently walked away from buying a house because he could not get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been a half-percent lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000. “There was nothing derogatory on his credit report,” Workman said of the customer. He had, however, recently gotten an auto loan, which likely lowered his score. Studies have shown FICO scores are generally reliable predictions of consumer payment behavior, but Workman’s experience points to one drawback of credit scoring: lenders can’t differentiate between two people with the same score. Another consumer might have a 679 score because of several late payments, which could indicate he or she is a bigger repayment risk. On a broader scale, some of the spike in foreclosures came about because homeowners were financially irresponsible, while others lost their jobs and could no longer pay their mortgages. Yet both reasons for foreclosures have the same impact on a borrower’s FICO score. In the past too much credit was handed out based on scores alone, without considering how much debt consumers could pay back, said Edmund Tribue, a senior vice president in the credit risk practice at MasterCard Advisors. Now the ability to repay the debt is a critical part of the lending decision. Workman still thinks credit scores alone play too big a role. “The pendulum has swung too far,” he said. “We absolutely swung way too far in the liberal lending, but did we have to swing so far back the other way?”

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eBags.com Names Chris Wilson Chief Marketing Officer

July 8, 2010

DENVER, CO–(Marketwire – July 8, 2010) –  eBags.com announced that Chris Wilson has joined the company as Chief Marketing Officer and Vice President, Marketing. In his new position, Wilson is responsible for marketing, web design and branding. He will also play a key role in improving the customer experience throughout all eBags.com touch points.

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Michael Tasner: Virtual Reality Worlds: The Hows and Whys of This Unique Marketing Universe

July 8, 2010

Marketing using virtual reality worlds and methods is one of the more advanced Web-3.0 tactics that you can use to generate leads, close business, even to communicate with your team. It also takes the biggest time commitment, requiring the most work and the largest initial expense to get the platform designed. The upside: when put into place, these 3-D worlds can prove to be your most effective lead generator, sale closer, and cost saver. Let me take a step back now that I have your eyes curious, your ears more attentive and your full attention. Virtual reality worlds are just that. They are 3-D, Web-based communities that allow interaction among users and devices by way of the Internet. In general, virtual reality has a variety of uses. The whole intent of virtual reality is to convince you and your mind that you’re actually there, alive in this make-believe world. It brings the experience and interaction to life, even though you are behind a computer or another device and not there live, in person. Picture this: •3-D people walking around, interacting and talking. They don’t really exist, but they represent people who do in some way. • Communication using webcams, headsets, microphones and text chat. • People from all walks of life and from around the world who might never have met otherwise. • Houses decked out with all the latest electronics. • The ability to walk around, drive cars, purchase goods and services and do pretty much anything you would do in your actual life. • A world that seems so real, you start thinking it is real. Sometimes your mind continues to believe this can’t be real, it isn’t real, and it’s fake. It will take some conditioning of your mind (after you start engaging in these virtual worlds) to understand the concept. Here are some of the common myths of virtual reality worlds: • Everyone is fake or acts fake. Eighty-four percent of people reported that when they join the various virtual worlds, they create people — avatars — that represent themselves. Yes, that does leave 16% of avatars who are not entirely representative of their true selves. Typically these people make minor adjustments, rather than entire modifications of their real persona. • It’s nowhere near real life. Many times this is more like real life than your own real life. People host parties and business events. Attend trainings. Interview for jobs. Shop. Practice foreign languages. Work in global teams. All virtually. • It’s only for kids. The average age across most virtual reality worlds is just over 30. The only thing to do in these communities is play games. Yes, you can play games, but this is only a small fraction of what’s done in these worlds. Why should you care? Here are the key driving factors to the rise in virtual reality usage: • Limited time. • Less discretionary income (across the map). • Further adoption of the Web by everyone, including consumers, businesses and even the government. • It’s user-generated content. People, businesses and agencies are continuing to move to using virtual reality worlds because they are tired of traveling, have less money to spend on travel, and are realizing the power associated in these worlds. My motto is, “Essentially everything that can be done in person can be done over the Web using various technologies.” This is the concept that people are finally starting to understand. Everything continues to move to the web. So instead of simply resisting, both consumers and businesses are starting to jump on the bandwagon. An additional factor that has helped the rise of virtual reality worlds is their ease of use. Two to three years ago you needed to have a very fast computer and connection just to view one of these worlds. Today things open up much quicker and are much more intuitive. Anything you would want to do in person (yes, everything) can be done over the Web in the comfort of your own home or office. Why do you think Amazon.com had one of its best holiday seasons ever in 2008, while Circuit City closed its doors? Granted, there were a variety of outside factors as to why Circuit City failed. But from the customer’s perspective, if I can buy the same products on Amazon.com and save time and money (including sales tax and shipping charges), there is absolutely no need for me to visit a real store, deal with a salesclerk who probably doesn’t know what he’s talking about, stand in line, and risk having my credit card information misappropriated. And so, virtual reality-world usage continues to climb. According to The Gartner Group, it’s anticipated for over 250 million people to be in virtual worlds by 2011. There are hundreds of popular virtual communities and worlds with thousands of users in existence that are much less popular. Let’s zero in on the most popular ones that you need to be concerned with. There are a variety of common threads among most virtual worlds: • Typically they are run by user-generated content rather then people at the particular company adding content. • Users can purchase and own virtual land. • Currency can be exchanged and typically needs to be converted. • There are various e-commerce applications and functionality so you’re able to buy products and services in real time. • They are regulated to comply with the various, real, international laws. Here are some of the virtual-world terms you should be aware of: • Avatars: The term is derived from Sanskrit and relates to a “mental traveler” in Indian fairy tales. In the virtual world, it is the character you use to represent yourself and communicate with others. • Community: The people or residents who inhabit the virtual space. • Currency: Most of the virtual worlds have their own form of currency which typically can be converted into USD or other forms of real money. • Emotes: Expressing emotions in a virtual world (laughing, crying, smiling, etc.). • Grid: The technology and platform behind the virtual world. • Latency: The lag of movements in motion. It’s measured in the delay of the actual change of position versus the response time. The faster your computer and Internet connection, the lower the latency you will experience. • Teleport: The ability to fly to another location in the virtual space. • Universe: The collection of all entities and the space they are embedded in for a virtual world. Each virtual reality site has it’s own “universe” so to speak. Here are some of the most popular and growing Virtual Reality Worlds: SecondLife.com Let’s start with the community that has received the most media attention. SecondLife.com does not have the largest amount of registered users, but it has received more media coverage than most of the other major players as they have poured money into PR and have also had some notable people use their site. Second Life was launched in June 2003 by Linden Labs. It allows its residents to interact with each other, socialize, conduct business, and so on, across its grid. You must be 18 or older to use Second Life, and between the ages of 13 and 18 to use Teen Second Life. This is an important distinction for marketing purposes to know that users are 18 and older. They have over 15 million registered users. Registration is free for personal use. If you want to purchase land, there are monthly fees ranging from $5 to $295 per month, depending on the amount of space you are looking to purchase. For $295, you can have your own private island. A big advantage to purchasing land is to start controlling the marketing space. Most of your competitors will not be on these virtual sites. Get your land before them. Much like the other virtual worlds that will be outlined below, currency can be exchanged. In Second Life the currency used is Linden dollars. The exchange rate from Linden dollars to USD and to other currencies varies based on market factors — buy and sell rates. There have been live concerts in Second Life, government embassies established and education and training going on pretty much 24/7, just to name a few of the applications. Keep a close watch on this virtual reality world, as it has the most potential for continued and massive growth. ActiveWorlds.com Active Worlds is a little bit different than the rest. It is a 3-D world platform with a browser that runs on Windows. (Yes, this helps Bill Gates’ wallet grow even larger!) Originally, Active Worlds’ programmers wanted to integrate a 3-D browser. Think of Firefox or Internet Explorer in 3-D. Instead, it has morphed into another Second Life. For consumers, they can play around with their avatar in one of the 1,000 different worlds across the platform, interacting with each other, playing games or purchasing goods and services. For businesses, this has been a solid platform to develop buzz, sell products, support customers and to provide demos and training. The advantage of ActiveWorlds.com over SecondLife.com is that the cost to develop a presence is easier and much less expensive. To develop a full-blown store on SecondLife.com you are looking at upwards of $5000-$10,000 or more. Your time to market will be much quicker than on SecondLife.com. They also are very business-centric. They understand virtual reality-world marketing is growing in popularity and have catered many of their offerings and support to businesses while making it effortless for consumers to buy They are trying to bring the Amazon.com experience to their virtual world! EntropiaUniverse.com Entropia Universe is in a different league than the rest as they have a real cash economy. Some consider this a good thing, others do not. Entropia Universe is an online, 3-D, virtual universe for entertainment, social interaction and trade, using a real-cash economy. The virtual world was developed by the Swedish software company MindArk, based in Gothenburg. What MindArk really understands is monetization. Instead of charging a subscription price, they use an alternate micropayment model, asking people to buy in-game currency (the PED) which then, in turn, can be exchanged back to USD. MindArk claims to offer the first virtual universe with a real-cash economy. They want people coming to the site to spend money, rather than just to be playing around. And this is stressed across their website and promotional materials. Entropia Universe has been quite busy attracting various businesses and even government entities. In May 2007, they were chosen by the Beijing Municipal People’s Government endorsed online-entertainment company, Cyber Recreation Development Corporation, to create a cash-based virtual economy for China. This is huge in terms of adoption and possible numbers. They have been working toward creating the largest virtual world ever. Their proposal was accepted over many others, most notably Second Life. This was a blow to Second Life as they assumed they were the front runner! Entropia Universe has a goal to attract 150 million users from around the globe. Even more impressive, they expect to generate over $1 billion annually in commerce. But this is not the go-to place for business meetings. Instead, it has been a good place for entrepreneurs to sell their E-Commerce products and services to consumers and businesses. But, to date, they have some new plans in the works to make the site less gaming-intensive and more centered on business. Check out the site for free and get a feel for it, but don’t make a major investment of your time or money just yet. The above is an adapted excerpt from the book “Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First” by Michael Tasner. The above excerpt is a digitally scanned reproduction of text from print. Although this excerpt has been proofread, occasional errors may appear due to the scanning process. Please refer to the finished book for accuracy. Copyright © 2010 Michael Tasner, author of “Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First”

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Simon Sinek: Spot The Northwest Flight Attendant

July 6, 2010

I flew to London and back on Delta Airlines , which was great because I got to play my new favorite game: spot the old Northwest Flight Crew. Northwest and Delta merged last year to form America’s largest airline. Though the planes are now painted the same and the crews all wear the same uniforms, they do not all act the same way. The cultures of the two companies, more specifically how management treated their people, significantly impacted how their people treat their customers. So much so, you can tell from which company a flight crew came from simply by observing how they treat customers. The rules are pretty basic, when you fly Delta Airlines, try to guess if your crew is native Delta or ex-Northwest. The game goes beyond just a couple of bad eggs – those employees who, no matter what the corporate environment is like, will always do the wrong thing. This game is about identifying a common pattern or theme among a group of employees that provides clues as to how they have been managed or treated in the past. I admit, it’s a pretty easy game. Northwest must have treated its people so badly for so many years that the difference between the two crews is stark. Here are some pointers to help you should you ever decide to play: Impatience: Ex-Northwest employees have no patience for customers. They can regularly be seen rolling their eyes when passengers ask for anything or perform even the slightest infraction of any rule or command. The native Delta crews, in contrast, are more likely to smile if a passenger asks for anything and show a little more patience. Hate Thy Customer: The ol’ Northwesters can often be heard in the galleys complaining about a passenger or two (this among other things they can find to complain about). If someone who has a customer-facing job seems to have such contempt for customers, think about how that will impact their behavior towards the customer. In contrast, you may stumble upon a conversation of Delta folks gossiping about their personal lives or figuring out how to solve some issue that was raised on the flight. Short Fuse: The grumps from Northwest are all on short fuses. It takes barely a squeak from a passenger for a flight attendant to berate that customer. Public shaming of a passenger over the intercom is also a favorite. I find Delta natives to have much more patience for those with whom they are charged to look after and will often address specific customers directly should they need to. Pass the Buck: Despite the ease of this game, you’ll be hard pressed to find a Northwest crew who accept accountability for how they act. Northwest employees, you see, don’t like to take any responsibility for anything that happens. If they are abusive, impatient or generally unhappy, they will justify anything they have done by passing the buck. “It’s not our fault. If we don’t do it that way,” they rationalize, “we’ll get in trouble.” There is a side of me that feels sorry for the old Northwest people. Like abused dogs who become unfit to have as pets, so too have many Northwest employees been so abused over the years, it is actually left many of them unfit for to work with people anymore. Like any person on the receiving end of an abusive relationship, they have completely lost trust in management to help them in anyway. They hang all their hopes on their union to protect them even though, with their union, they received lower pay and poorer benefits than the non-unionized Delta flight attendants. The mistrust runs so deep, that they will work to preserve their unions for fear of what would happen if Delta management had direct influence over their jobs even though Delta crews like their jobs…and their management much better. In this humble passenger’s opinion, if management has the option, axing some of the most abusive staff may not be such a bad thing for all involved. The point is, corporate culture matters. How management chooses to treat its people impacts everything – for better or for worse. Gordon Bethune, the former CEO of Continental Airlines, was able to transform Continental Airlines from the worst airline in the industry into the one of the highest rated without changing the equipment or the people. He did it by focusing not on the customer, but on the employees. He managed the culture and worked to empower his employees. He showed them that keeping a plane clean serves their interests more than the passengers. The passengers leave the planes, the flight attendants often have to stay and fly one, two or more legs on the same aircraft. The same goes for helping people or being nice to them. It makes for a better day at work when you treat people well. Well-treated customers are also nicer to be around. On a recent cross-country trip, I met a Delta flight attendant who plays a similar game to me. It’s called Spot the ex-Northwest Elite Passenger. She told me she can tell if a passenger used to fly Northwest based on how the passenger treats the crew. Apparently, the abused Northwest employees abused their customers for so long that the customers also became combative and mean. Sadly, they tell me, it’s a really easy game to play for them also. The moral of the story: corporate culture matters. A sour corporate culture can actually make an entire society unhappy. This means that a strong corporate culture can have a positive impact on a society. So for the good of the planet – treat your employees well.

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Peter Crawfurd: Why Customization Could End Amazon

July 6, 2010

For many years e-tailers have been relying on the Amazon-style model of online commerce, whereby a ready-made, in-stock item is shipped to the customer upon purchase. While other methods – like groupon.com, which allows customers to get together and buy products at a lower price – have come along and become successful, few have really challenged the basic Amazon concept. Over the past two years, online shopping and consumer habits have been evolving. Many shoppers now want products they can say no one else has, and they want them at an affordable price. While online stores can offer lower prices by avoiding certain overhead fees and other expenses, traditional e-commerce sites lack the personal touch today’s customers are craving. In response to this demand, a slew of new start-up companies have rushed to carve out a niche in the expanding market for customized products. With the help of some clever web development, customers now have a never-before-seen level of creative control over the products they purchase. The Start Ups Among Amazon’s extensive clothing range are a great number of mass produced and uninspired dress shirts. ShirtsMyWay.com is one of the clothing companies which have filled the personalization void by allowing shoppers the chance to design their own custom made shirts ; including choice of collar, fabrics, buttons, buttonhole color, monograms and a host of other options. Customers can also input their measurements to ensure a great fit. This model solves two problems shoppers face when buying clothing: the fit and lack of flexibility when it comes to the design and style. ShirtsMyWay.com offers shoppers complete customization at a price well below many off-the-rack brand name dress shirts sold through online retailers. ShirtsMyWay.com has so far sold mens shirts to over 30 countries and has garnered worldwide attention from the press. Another interesting company, focused on food, is Chocomize.com . This site allows customers to design and purchase their own personal milk, white or dark chocolate bars by mixing and matching dozens of ingredients – like chocolate chips, bacon, nuts, sesame seeds, coconut flakes and cinnamon to name just a few. Chocomize.com has received attention from O! – The Oprah Magazine as well as numerous newspapers and food-oriented websites. So far, the same degree of customization has yet to make its way to Nestle’s Kit Kat or Hershey’s Almond Joy. The Giants Of course, some of the world’s largest brands have also embraced customization to branch out to a wider market. This is especially true in the world of footwear. Several years ago, Nike launched Nike ID, their own online store that allows customers to design their own sneakers in minute detail. Other giants like Puma and Adidas followed suit into the realm of customized products. Another company, Zazzle.com , managed to make it big through customization. Of all the companies and websites offering customized products, this one perhaps comes closest to Amazon in terms of the range of products it offers – everything from clothes, mugs, hats, postage stamps, stationary and calendars. Already Zazzle.com has managed to rack up more than 50 million dollars in capital and now visited by nearly 3 million unique visitors every month. When so much is happening in the online customization space, it’s surprising Amazon has not taken a more aggressive stance to this angle of e-tailing (although they have attempted to make one acquisition of a some what customization focused start up). Soon the day may come when the giant e-tailers of the world may need to stop resting on their low-priced/ready-made laurels and respond to ever growing demands for unique, one of a kind goods. If they don’t, they may be loosing out on a big part of the online retailer market and weakening their position as the main player.

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Brett King: Compliance and Social Media – Friends or Foes?

July 6, 2010

A consistent theme keeps popping up as I discuss social media innovations with bankers these days. It is increasingly frustrating for innovators who want to use mobile, social media, the web and other such tools to get these past hyper-risk-adverse compliance specialists. It seems as if many of the banker’s I’m meeting are saying that the favorite word of the compliance officer of today is simply “No”. That needs to change… Compliance holding up social media adoption In a recent American Banker’s Association survey they reported that 74% of participating banks confirmed that all ‘social media efforts were to be vetted by compliance first’. In an environment where minutes matter, and the response is key, such a logjam to social media participation is a frustrating mismatch with the realities of dealing with customers in todays uber-connected world. On Sunday I enjoyed brunch with Matt Dooley who heads up Direct Customer Experience for HSBC’s Commercial team in Asia, and his wife Maria Sit who runs Heath Wallace’s Asia division. Over lunch the issue of culture, compliance, philosophy and the reluctance to experiment to broadly with social media, mobile engagement and other such issues came up. Matt used a brilliant illustration to identify the problematic compliance hurdles we face today as bank innovators. He asked me whether or not a compliance department of a major financial institution would approve “snail mail” as a new initiative if it was proposed today? Let me explain. If snail mail did not exist today, what would your average compliance officer think if you came along and explained you wanted to use this great new technology for distribution of bank material like statements, new credit cards, PIN #’s, etc. You’d have your PowerPoint deck ready to go explain the process where you stuff an envelope, hand it on to someone you don’t know in the bank (likely a very junior staff member), he then puts it in a bag which is picked up by a truck with another person you don’t know, they take it to a large warehouse and sort it according to Geography, etc, etc… There just ain’t no way that snail mail would make it through the compliance check list of today’s modern financial institution. The compliance officers would no doubt quote scenarios like this to justify why it would be absolutely impossible for the bank to consider using this new ‘snail mail’ technology. This is the dilemma. Today there are those of us trying to improve customer experience, knowing full well that compliance departments are citing risk mitigation, regulations and laws, bank policy and procedures, and other such issues as reasons why innovators can’t release a new mobile app, engage in social media conversations in real-time with customers, and so forth. In the meantime, there are existing processes, procedures and systems that are far more riskier than things like social media, but they are immune to the compliance department’s gaze because they are already in place. Is it riskier to do nothing? Let’s take Twitter as an example. Today it’s rudimentary to do a Twitter search on major FI brands to see topics trending that in the old days if they were carried by mainstream media would turn a banker’s hair on end. In many cases, however, such interactions are simply ignored because there are no dedicated resources listening and responding to such social media conversations. The processes internally around getting compliance approval for a formal response simply make any such response useless by the time it is approved. But aren’t social media free form responses risky? Take for example the very public Twitter faux pas recently committed by a Westpac employee who stated “Oh so very over it today…”. Honestly, this is probably about the worst that it could get on Twitter – and it just isn’t that bad. I hear Compliance departments the world over rejoicing and justifying their stance at the next Social Media strategy review meetings – saying, ‘See, see – we told you so!”. The reality is, that this particular faux pas actually ended up humanizing the Westpac team and probably won them new supporters more than anything else… It is far more likely that a serious breach of customer trust, a poor service or policy decision, or some other very public social media trending topic could do far worse brand damage if left unanswered out in the social media conversation. Classic examples are those of Ann Minch with Bank of America and Citibank with the Fabulis debacle . In observing the Facebook and Twitter effect of such PR nightmares, the lack of timely response by the bank across the social media landscape made these issues far more impactful and damaging than they needed to be. So the real risk is in not responding quickly enough. The reality is that banks are increasingly likely to face a major PR disaster and have it escalated more rapidly than they can every imagine through social media networks. Take the example of BP and the recent Gulf Oil Spill – their lack of maturity in handling PR issues over social media has absolutely punished their brand . The spill is bad enough, but BP’s response to the social media conversation has simply made it much worse than it had to be. No amount of brand advertising and traditional PR can ever undo the sort of reputation damage that is possible to your brand in the social media landscape. Compliance as an enabler Compliance needs to understand the negative risk of increasing workload on the frontline in respect of customer service perception, and decreasing the ability of the organization to respond to social media events in real time. They need to start thinking about their function as an enabler of the core business with customers, rather than just risk mitigation. They can also be lobbying regulators to help regulators adapt and make their processes more user-friendly, while retaining security of identity and the assets of the customer. Customer experience is being hampered by compliance heavy processes that look to reduce risk, but make the engagement unnecessarily complex. Translating the Terms and Conditions from a paper application form onto the first 7 pages of a web-based application process might seem legally sound, but is quite ridiculous from a Usability and Customer Experience perspective. Compliance departments need to learn to stop saying no, and be embedded within social media, customer advocacy and customer experience teams so they understand the implications of ‘risk’ and ‘legal’ decisions that actually hamper the organizations ability to respond to customer needs.

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Tech Customers Question Industry’s Takeover Spree

July 6, 2010

SAN FRANCISCO — The world’s largest technology companies have been on a buying spree, spending billions to snap up smaller companies. And often the buyers say they’re doing it for their customers – businesses, hospitals, schools and government agencies. As tech companies get bigger and bigger, they say, they can offer a broader variety of products and make it easier for their customers to do one-stop shopping. Yet if you ask the customers, you hear a different story. Often they get new headaches with multibillion-dollar deals by the likes of Oracle, IBM, SAP, Dell and Hewlett-Packard. When you add the challenges that come with any corporate acquisition, it’s not hard to envision a reverse trend eventually building: a drive to split up tech companies that have grown too large. In other words, the tech consolidation of the past few years could turn out to have wasted shareholders’ money. “The demand is not coming from the customers,” says Gopal Khanna, who oversees a $600 million technology budget as chief information officer for the state of Minnesota. “On the contrary, I’m best served when there’s a phenomenal amount of innovation happening. … Sometimes creating behemoths slows down that innovation engine.” Technology companies have spent more than $350 billion buying other companies worldwide over the past 3 1/2 years, according to Capital IQ, a division of Standard & Poor’s. Hewlett-Packard Co., the world’s biggest information-technology company by revenue, has been one of the most active, in a hunt for more profit in markets other than printer ink. So has Oracle Corp., which wants to sell more types of business software and now makes computer servers after its $7 billion pickup of Sun Microsystems Inc. IBM Corp. plans to drop $20 billion over the next five years on acquisitions to strengthen its services and software divisions. The companies making these deals say they want to give their customers more options, better prices, and smarter service. It’s somewhat like buying Internet, cable TV and telephone service from one company instead of three: You’ll save money by buying the bundle, and when you need things fixed you have only “one throat to choke,” in tech-industry parlance. The flip side is that a customer accustomed to dealing with a specialty maker of software or hardware often gets worse service after that supplier is taken over. Larry Bonfante, chief information officer of the United States Tennis Association, started battling recently with one of his suppliers, which supports USTA’s computer applications and runs its help desk. Bonfante won’t name the company but says it was bought a year ago by a large, publicly traded company. “Our service and our relationship with that company since then has gone absolutely into the tank,” Bonfante says. Bonfante used to be able to call the supplier’s CEO with problems. After the takeover, Bonfante’s contact became a lower-level staffer, and USTA employees had trouble getting their questions answered. Bonfante says he’s dumped suppliers three or four times in his nearly 30-year technology career because their service suffered after an acquisition, and he has considered jettisoning this supplier too. Service improved after he put the company on notice, but he says he’s still watching the situation closely. “When the smaller guys are gobbled up by bigger guys, in theory it’s supposed to be better, but in our experience it’s been worse,” he says. “It’s certainly not something that I’m really excited about. It has the potential to be a positive experience, but my experience has told me that more times than not, it’s problematic.” Rob Ewing, senior vice president of systems and technology for InterCall, which sells conference-call services, says his company stopped buying new licenses from a provider of database software just six months after it was acquired. The main problem: The support staff was cut. “Resolutions to issues went from less than a day to more than a week,” Ewing says. “It was very frustrating.” Tech acquisitions aren’t the only ones that often go bad. A seminal study by Harvard Business School professor Michael Porter examined 33 large U.S. corporations over a 36-year period and found that that they sold off many more acquisitions than they kept. Companies with acquisition strategies reduced, instead of created, shareholder value. Porter’s findings were first published in 1987, but recent studies have reinforced the conclusion. Deals in technology can be even riskier than average because of the complexity of the industry’s products. Although acquisitions can offer short-term financial boosts for the buyer, technology ages quickly, and acquired companies require substantial investment to keep their edge. “When technology companies merge, you often have a two plus two equals three equation,” says Michael Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management. Undoing the poor results can be costly. VeriSign Inc. spent more than $20 billion bulking up on acquisitions in a spree started during the dot-com days. The Internet technology company got too unwieldy, and it has spent the last three years selling most of what it bought. VeriSign has gotten less than $1 billion selling off such acquisitions. It can take years for an acquired tech company to be fully integrated with its buyer, which is one reason history is peppered with examples of acquisition flameouts that repelled customers. One of the most famous was Compaq Computer’s 1998 takeover of computing pioneer Digital Equipment Corp., known as DEC. Like many frustrated DEC customers, Robert Rosen, who at the time was director of information management for the Army Research Laboratory, bailed on DEC because the company’s performance deteriorated under Compaq. The lab replaced its DEC servers with machines from IBM and Sun Microsystems. Rosen, now chief information officer of the National Institute of Arthritis and Musculoskeletal and Skin Diseases of the National Institutes of Health, says he learned to try to pick computing suppliers that aren’t likely to be acquired. “I sit here and I think: What mergers have really benefited everybody, both the companies and the customers? And there aren’t a whole lot. There are a lot more that go bad than are successful,” says Rosen, a former president of Share Inc., an organization of IBM customers. “I have never seen a merger that saves the customer money.” IBM and several other large, acquiring companies declined to comment or connect The Associated Press with customers who are happy about the industry’s consolidation. Hewlett-Packard, which also declined to comment, referred the AP to one customer, Christopher Rence, chief information officer of Fair Isaac Corp. That is the company behind the “FICO” consumer credit scores, and it often relies on tech suppliers for custom software that can help Fair Isaac accomplish specific tasks. Rence says most acquisitions among his suppliers have worked out for his company. Still, he worries that consolidation leaves him with less negotiating leverage. He also says he and other tech buyers he knows worry about “getting hit out of left field” by an acquiring company eliminating product lines. “When they consolidate, you’re always going to lose something – that’s just reality,” he says. “But I guess I look at it as: When a big company acquires something, they’ve got the pockets to go invest in some of those areas and whatever they invest in, it’s definitely going to benefit me.” Resigned to the idea that the industry is consolidating, many tech buyers try to plan accordingly. Leo Collins, chief information officer of Lions Gate Entertainment, says smart tech buyers look for suppliers that are the likeliest to stick around over the long haul. If a supplier starts to struggle, he tries to move away from it before it is bought, which reduces the risk of being stuck with outdated or unsupported technologies. Failure to do that, he says, could leave a customer “isolated in technology backwaters.”

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Nancy Lublin: The Power of ZERO in Business: Branding

June 30, 2010

Not-for-profits know a lot about managing with zilch. That’s right. A bit counter-intuitive, eh? Cherished, valuable brands like Teach for America, Habitat for Humanity and Make a Wish could teach a lot to start-ups, government, even ginormous businesses about how to build brand equity… without taking a Superbowl ad or spending gazillions of dollars on a fancy Madison Avenue firm, focus groups, and pretty PowerPoints. Here are five simple lessons from terrific not-for-profits that will help you build a brand, without breaking the bank: 1. Open source your tagline . Ask your customer to describe your product or service in a sentence. 2. Rub up against your vendors/partners . Do some of these collaborators have shiny brands that appeal to your target market? Ask them to Tweet about you, publicly post you on their website, or have your CEO’s co-author an Op-Ed (or HuffPo piece). When DoSomething.org partners with Pepsi, we’re saying we’re a fighter brand. Another great example is the American Heart Association’s stamp of approval on Cheerios. 3. Write it down . Does everyone in your company know your key words? Your banned words? Even the tech guys and finance team at Nothing But Nets have a one-page version of their brand overview brief. It’s not just an email that was sent out by the head of marketing, it’s something everyone lives and breathes. 4. Be your target market . You should be your focus group. Your office should be full of people who actually use your product or service. Instead of constantly hiring focus groups and agencies, live it! Dress for Success often hires former clients and the CEO of Livestrong is a cancer survivor himself. Does your CEO — but also your receptionist, your legal counsel, and your mailroom clerk — love your product or service? 5. Look in the mirror . Do you only evaluate your brand position when there is a crisis? That’s like waiting to wash your face until you have a pimple. Great brand management requires daily use of Clean and Clear. Nancy Lublin is the CEO of DoSomething.org, the founder of Dress for Success, a columnist for Fast Company, and the author of Zilch: The Power of Zero In Business .

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Brett King: Cloud Computing and SME Banking – A perfect match

June 24, 2010

I met Friday with Mike Hirst , CEO of Bendigo and Adelaide Bank , one of the top banks in Australia today. As we discussed the need for community banks to get better at servicing SME business needs moving forward, we had a really interesting brainstorming session on where to go next. Mike is an easy going guy and I think he’s created a really positive, open culture at Bendigo that will pay dividends as they take market share away from the majors in Australia. I guess it’s an obvious statement, but for small to medium size businesses, banks provide a logical partnership as an enabler for a range of bank services. Mike explained that Bendigo and Adelaide Bank has, in recent times, been providing a range of services to small businesses beyond the traditional merchant, trade finance and credit services including extended services such as cash flow and accounting analysis, SME advisory, website/minisite development , telecommunications deals as a reseller, and similar services. Recently ANZ launched The Small Business Hub , as a way of extending more services to their SME clients. American Express has gone one step further with their Open Forum platform as an attempt to engage the broader business community in actively sourcing solutions. Bendigo Bank has tried to facilitate community involvement through their PlanBig portal. As Mike Hirst and I discussed Bendigo’s wish to provide a better platform for SMEs to grow their business, it occurred to me that almost all the services we were discussing were candidates for the cloud. Here are a few that came to mind: Accounting, Cash Flow Modeling and Credit Services: Plugged into an SME’s basic accounting package (think MYOB, etc) the ability to provide some intelligent tracking of cash flow, help businesses to think about aged receivables and rightsizing a credit or overdraft facility is a very valuable tool. A plethora of these are being introduced into Internet Banking facilities this morning, but extending a basic accounting facility with cash flow analysis tools that is an extension of your banking relationship is not a stretch. Ben May, MD of OnlineFactor, recently showed me a new tool they had been playing with called Imagineering Profit which allows users to plug in their basic financial statements and get some great analysis on break-even, cash flow, and various what-if scenarios. If this could be married with basic account information, accounts and invoicing data, etc – this could give SMEs a nice tool embedded within banking to start to look at a basic overdraft facility, factoring, inventory financing and a whole range of complementary services. Easier Merchant and P2P Enablement By 31st October, 2018 the UK Payments Council has mandated that central cheque clearing will be phased out. The decline of cheque use in the UK has been widely documented. In 2000 cheques represented 25% of all non-cash transactions, but by 2008 they accounted for less than 10%, this year they will be less than 5%. This is also where the mobile device and P2P platforms come into play. While debit cards have had big success in recent times, as credit and debit cards are integrated into your mobile phone for contactless payment capability, it is obvious that the use of cheques and cash will further decline. With the introduction of Square and Verifone PayWare it is becoming increasingly simple to provide merchant type services to accept payments. But Person-2-Person is the big innovation for SMEs and businesses. In 2009, financial institutions including Bank of America (BAC), ING Direct and PNC Financial (PNC) rolled out so-called P2P technology that lets customers use the Web or a mobile phone to transfer money from their account to any other account. Within the next 3 years our phone will become the payment device of choice for paying SMEs who work in the service arena. This makes cloud services even more viable as SMEs will increasingly rely on virtual platforms to effect and receive payments. The ability to augment basic banking services to capture the need for virtual P2P and payments capability is a no-brainer. SME Community Building There are hundreds of thousands of groups currently active on LinkedIn, many dedicated to SME forums and the like. Ecademy is an social networking site based in the UK, but active globally with more than 17 million members. A survey by O2 in the UK showed that more than 600 SME businesses were joining Twitter everyday, and that 17% are already actively using Twitter to support their business. SME community building is a great way to empower businesses and is a logical extension of the already powerful network that banks have with their customer base. Banks don’t use their community of clients to encourage interactions, but as a trusted intermediary it makes absolute sense for bankers to utilize their community to encourage internal business between their SME clients. The cloud and online communities such as LinkedIn, Ecademy and others seem like the perfect partner to kick this off. SME banking services and the cloud make a great partnership Conclusions The cloud is increasingly critical for SMEs not only for facilitating business, but also for enabling closer connections with partners, integrating shared services, improving payments and cash flow and marketing their services. Banks have a huge opportunity to be not just a trusted partner for banking services, but extending their platform to help SMEs build their business. There’s one key problem with banks extending platform for SMEs. To illustrate, the current e-Invoicing and Accounts Payable Integration services banking provide today, a process designed ostensibly to reduce paperwork for an SME and improve cash-flow, is saddled with an antiquated, compliance heavy sign-up/application processes that mean the initial onboarding for such services is erroneous and time consuming. The benefits aren’t there for SMEs if the application process takes more effort than the benefits.

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Brett King: Cloud Computing and SME Banking – A perfect match

June 24, 2010

I met Friday with Mike Hirst , CEO of Bendigo and Adelaide Bank , one of the top banks in Australia today. As we discussed the need for community banks to get better at servicing SME business needs moving forward, we had a really interesting brainstorming session on where to go next. Mike is an easy going guy and I think he’s created a really positive, open culture at Bendigo that will pay dividends as they take market share away from the majors in Australia. I guess it’s an obvious statement, but for small to medium size businesses, banks provide a logical partnership as an enabler for a range of bank services. Mike explained that Bendigo and Adelaide Bank has, in recent times, been providing a range of services to small businesses beyond the traditional merchant, trade finance and credit services including extended services such as cash flow and accounting analysis, SME advisory, website/minisite development , telecommunications deals as a reseller, and similar services. Recently ANZ launched The Small Business Hub , as a way of extending more services to their SME clients. American Express has gone one step further with their Open Forum platform as an attempt to engage the broader business community in actively sourcing solutions. Bendigo Bank has tried to facilitate community involvement through their PlanBig portal. As Mike Hirst and I discussed Bendigo’s wish to provide a better platform for SMEs to grow their business, it occurred to me that almost all the services we were discussing were candidates for the cloud. Here are a few that came to mind: Accounting, Cash Flow Modeling and Credit Services: Plugged into an SME’s basic accounting package (think MYOB, etc) the ability to provide some intelligent tracking of cash flow, help businesses to think about aged receivables and rightsizing a credit or overdraft facility is a very valuable tool. A plethora of these are being introduced into Internet Banking facilities this morning, but extending a basic accounting facility with cash flow analysis tools that is an extension of your banking relationship is not a stretch. Ben May, MD of OnlineFactor, recently showed me a new tool they had been playing with called Imagineering Profit which allows users to plug in their basic financial statements and get some great analysis on break-even, cash flow, and various what-if scenarios. If this could be married with basic account information, accounts and invoicing data, etc – this could give SMEs a nice tool embedded within banking to start to look at a basic overdraft facility, factoring, inventory financing and a whole range of complementary services. Easier Merchant and P2P Enablement By 31st October, 2018 the UK Payments Council has mandated that central cheque clearing will be phased out. The decline of cheque use in the UK has been widely documented. In 2000 cheques represented 25% of all non-cash transactions, but by 2008 they accounted for less than 10%, this year they will be less than 5%. This is also where the mobile device and P2P platforms come into play. While debit cards have had big success in recent times, as credit and debit cards are integrated into your mobile phone for contactless payment capability, it is obvious that the use of cheques and cash will further decline. With the introduction of Square and Verifone PayWare it is becoming increasingly simple to provide merchant type services to accept payments. But Person-2-Person is the big innovation for SMEs and businesses. In 2009, financial institutions including Bank of America (BAC), ING Direct and PNC Financial (PNC) rolled out so-called P2P technology that lets customers use the Web or a mobile phone to transfer money from their account to any other account. Within the next 3 years our phone will become the payment device of choice for paying SMEs who work in the service arena. This makes cloud services even more viable as SMEs will increasingly rely on virtual platforms to effect and receive payments. The ability to augment basic banking services to capture the need for virtual P2P and payments capability is a no-brainer. SME Community Building There are hundreds of thousands of groups currently active on LinkedIn, many dedicated to SME forums and the like. Ecademy is an social networking site based in the UK, but active globally with more than 17 million members. A survey by O2 in the UK showed that more than 600 SME businesses were joining Twitter everyday, and that 17% are already actively using Twitter to support their business. SME community building is a great way to empower businesses and is a logical extension of the already powerful network that banks have with their customer base. Banks don’t use their community of clients to encourage interactions, but as a trusted intermediary it makes absolute sense for bankers to utilize their community to encourage internal business between their SME clients. The cloud and online communities such as LinkedIn, Ecademy and others seem like the perfect partner to kick this off. SME banking services and the cloud make a great partnership Conclusions The cloud is increasingly critical for SMEs not only for facilitating business, but also for enabling closer connections with partners, integrating shared services, improving payments and cash flow and marketing their services. Banks have a huge opportunity to be not just a trusted partner for banking services, but extending their platform to help SMEs build their business. There’s one key problem with banks extending platform for SMEs. To illustrate, the current e-Invoicing and Accounts Payable Integration services banking provide today, a process designed ostensibly to reduce paperwork for an SME and improve cash-flow, is saddled with an antiquated, compliance heavy sign-up/application processes that mean the initial onboarding for such services is erroneous and time consuming. The benefits aren’t there for SMEs if the application process takes more effort than the benefits.

Read the full article →

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