Tag Archives: Business

Companies forget that they pay wages; don’t understand complexity of economy

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Apparently 68 out of the top 100 retailers are concerned about flat or falling wages. Huffington Post did some poking around their 10-K forms and aggregated the top risks for the top 100 retailers. Huffpo found that low spending, unemployment, and falling or flat wages were the top 3 items. To me this is really interesting. Apple was recently identified as part of a wage fixing scheme that looks like it could have cost employees something on the order of $3.2 Billion, Wal-Mart has cut hours of their employees as to prevent themselves from paying for ObamaCare for those employees, which means that those employees have to pay for their insurance out of pocket, as they have to insurance now.

All of these things together impact the web of our economy. What we’re seeing is local optimization which leads to sub-optimization of the entire system. Companies that are cutting wages or benefits to maximize their profits are likely taking a cut out of their own revenue stream. It’s likely that many Wal-Mart employees shop there because it’s the lowest priced place in most areas for most goods. The fact that WinCo is Wal-Mart’s largest threat now, is pretty indicative that wages are falling.

When Henry Ford raised the wages of his employees to a real living wage, it wasn’t out of kindness or some perceived social good. It was so that his employees could buy his car. If a large mass of people are unable to buy a good you produce because of your own wage policies you’re creating a problem for yourself. Furthermore, economies are networks, they interact with each other. Each and everyone of those employees would then become representatives for the Ford brand and be able to show off the good they were manufacturing. With every new employee hired, Ford knew that there would eventually be one more sale.

Companies today have clearly forgotten this. Retail is one of the largest segment of our economy, with a huge number of employees. If this entire swath of our population cannot afford to buy consumer goods, then it’s likely that we’re going to be continually be at risk for another recession. People buying stuff is what keeps our economy going. If the companies that staff the most people do not pay them well enough to keep buying stuff beyond food, then we’re at a great risk.

Wages are a very difficult thing. There’s a Socialist party in Seattle that’s trying to get minimum wage up to $15, but offered a job starting at $13/hour. Employees have gone on strike to get higher wages. I’ve written about it several times, however, whenever companies are indicating that low wages are a risk to their business, it’s time for them to start looking in the mirror. There are large retail industry groups, these groups should start to investigate the root cause of these risks and propose recommendations to address these concerns.

Should the Fed look to take action to protect the companies from themselves in order to protect the economy? Should the minimum wage be increased to address the problem? Should the government take action at all, it’s the businesses fault if they fail because they didn’t pay their employees enough. What do you think?

Retail and payment intermediaries

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In recent months there have been multiple instances where a major retailer has had their data infrastructure breached. This has resulted in millions of customer’s credit card information being compromised and stolen by some variety of criminal organization. It’s likely that the organization used skilled computer experts to hack into the system in some fashion. I also would not be surprised if some type of social engineering was used to ease their access to the data systems. Furthermore, if their Point of Sales devices were not fully secure that information could be gathered using a credit card that could also read information from the system.

This is the problem that applications like Google Wallet and Paypal are trying to solve. They are trying to position themselves as an intermediary between the customer and the retailer to protect the consumer and provide a common transaction method for many platforms including in person point of sales. I think the fact that I’m just now thinking about this has really shown that companies like Google and Starbucks have failed at showing where the true value in their product is.

I didn’t come to this conclusion without help though. Truthfully, it’s because of PalPal ads that I’ve been seeing on Huluplus. This ad walks through how unsafe we are using our credit cards with online retailers and that they protect your creditcard and bank account information from ever being seen by the retailer. Which, is a really powerful argument to use their services. Of course, that’s if you trust PayPal as an organization.

Personally, I’m concerned about using PayPal as they’ve had their own networks hacked with some account information stolen. They aren’t perfect, and honestly it’s likely going to be impossible to maintain and prevent any data breaches, but a company like PayPal should have that as their goal.

With that in mind, it’s kind of helped me think of the true value of both cash and a BitCoin like solution. At this point, it’s pretty clear that BitCoin has been compromised at least on some level. It’s not truly anonymous any more. Cash is still though. It’s the best way to buy anything from a store. It also reduces the rate that you spend your money compared to buying everything with a card. As you actually see the money disappear. Although, some times it doesn’t feel that way, especially when you’re out drinking at a bar.

I’m not sure I truly trust any of the large companies that offer these intermediary services. PayPal, Google, Apple, Samsung, Starbucks, and etc… all have their own version and all of these companies make money by locking you into their services. Google, Apple, and Samsung have the most incentive and potentially access, as they are selling you the only other thing you’ll have with you besides your cards, your phone. Locking you into not just their device but payment methodology is powerful. Not because it keeps you on their network, but also because it provides them with a huge amount of information about the rest of your life. Google likely will already have a lot of it based on your search history, but they don’t know what you’re actually buying. At this point they don’t have the full data to connect search results to purchases. Using Google Wallet closed that gap and provides a really valuable set of data for their customers.

Intermediaries are going to be really important moving forward because they will help reduce customer risk. It’s going to be important to figure out how to balance the risk of not using an intermediary with using one and providing them with massive amounts of data as well as extremely personal data that if all your eggs in one basket could be devastating.

Silicon valley, new tech, and how we use it

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Last night as I was watching Hulu, an interesting comercial came on that was all about jabbing Silicon Valley and its love for the newest of the new. I think it was for a new Toshiba Tablet. This comercial was really self-aware of the environment in which they sell as well as the types of people they are actually trying to sell their devices to. I think that the commercial also does a great job pointing out that the Internet of Things and 3d Printing both might be part of a hype machine that is out of control. All of these technologies could do great things, but they aren’t preordained to do anything amazing. It’s up to the user to really enable that.

I think that the book I’m reading “Enchanted Objects” does a bit of this as well. I’m torn if I should love these ideas or hate them. The Smart scissors mentioned in that ad would definitely fit under the definition of Enchanted Objects because it’s something ordinary that through sensors, haptic feedback or other do-hickeys has some extra-ordinary capabilities. Many of these things seem gimicky and unlikely to catch on. Others, like the author’s Glow Pill – which is a lid for a pill container to remind people to take their pills – would be really helpful to a lot of people out there.

I also agree with the author’s sentiment that the black screens we peer into day in and day out, are somewhat ugly, unweildy and have never lifted up to their hype. Which means that they likely haven’t made our lives significantly better and mostly just incrementally. I think this is born out through the drop in sales in tablets, the saturation of the smart phone market, and the resurgance of sales in PCs. People have found the tablet ecosystem limited in someway and awkward to use and have opted to refresh their capability with a cheap laptop rather than springing for a new tablet (an exception to this trend could be a Surface 3, but we’ll see how that pans out in the long term). Another concern with all these devices is of course security and safety from prying eyes. I’ve been talking about this for a number of years, but I believe that people will actually start listening after seeing the result of the Ferguson MO police action. Your twitter feed and location is on twitter, the police can find that. What other data are you sharing out there without truly understanding it. How can it be used against you by a militarized local government?

I think much of this goes back to my questions of ethics and technology. At what point does a technology become unethical or, rather, the use of a technology become unethical? Is a smart trashcan ethical because it helps you save the environment and support local business, what happens if that impacts your taxes or gets you on an eco-terror watch list? We don’t understand how our data is being used and to me that is scary.

I think this is played out a great deal with the fact that AirBnB, Uber, Lyft, and similar sites are the biggest booming sites in Silicon Valley. These aren’t truly technological innovations, they are business model innovations, which is why they are so devastating. Sure they are leveraging technology in an appealing way, but they aren’t really technology companies. Their innovation is in the way they engage with their customers, the delivery method is the same in many cases, a room or a car, as their competitors. The competitors haven’t been able to figure out how to combine the nimbleness of the app with a dynamic business model. Based on historical evidence, it’s unlikely that they will be able to catch up and compete. Which is fine, because I’m sure their data usages will be as opaque as the new companies. We don’t know how they are collecting our data or what they are doing with it.

Words, what are they good for?

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At work, I’ve recently been given the task of redesigning all my training documentation and plans for Lean process improvement to something else. Apparently, despite successes, some of my leadership team doesn’t believe in Lean. However, they fully expect improvements such as reduced turn around times, quality improvements, and reduced non-value add activities to just happen. That it’s simply expected to occur without any top down pressure or support. Without clear direction or proper tools to measure improvement or even productivity, how can anyone expect to drive improvement in their organization?

Lean is a tool to do that, but since some leaders don’t believe that’s the proper way to drive improvement, we’re having to monkey with the idea of what it means to be an efficient organization. Therefore, I’m going to be rebranding everything to Process Innovation because Innovation. This does an interesting thing, it forces us to change the language we use for continuous improvement. We can’t use words like Gemba (the place where work is done), Kaizen (continuous change), Jidoka (automation with a human touch), Poka-Yoke (idiot proofing). or Muda/Muri/Mura (waste, overburden, unevenness). Using these words isn’t just to try to force people to learn some Japanese. It forces people to slow down and think differently.

Regardless of your thoughts on Malcolm Gladwell, he raises some really valid points about language in his book Blink, where he discusses the example of Korea Air and the usage of English as a language in the flightdeck because it changes the way the first officer and captain think about each other. Lean emulates this idea by forcing English speakers to use Japanese words. It forces people to stop and think about what they are doing. Yes, it’s a foreign word, but the meaning drives a change in behavior simply because it forces the people listening to slow down and think. According to Daniel Kahnman, system 2, deep and introspective thinking, is lazy and lets system 1, Blink thinking, do most of the work. A change of language and specific words triggers system 2 to actually pay attention and not just accept what is said as fact.

Now with Process innovation, I’m going to have to invent my own language and rules to try to force a similar behavior. I’ll have to lean heavily on Lean, Six Sigma, and other improvement methodologies rather than just Lean. However, this might confuse Lean folks.

It’s amazing the impact of a few phrases on changing the way people behave and it’s amazing how they can cause people to react in a negative way. Figuring out how to work around other people’s language hang ups is key for a successful work life, unfortunately.

Venture Capitalists goals to exit will drive winner-take-all growth

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While watching a friend stream on twitch today, his radio station played a commercial from Audible an Amazon company. Which made me think about how Audible was a really up and coming company that a lot of people were interested in. Companies like Audible are funded by Venture Capitalists to help them in a few ways – pay for more developers, pay for access to content, hire marketing folks, or any other litany of things that a business needs. They come in at a stage when a company has little to no revenue.

These VC’s then put pressure on the companies to become profitable through new businesses, increasing the number of number of subscribers, or even changing markets or product types (pivots in their language). This is for a pretty simple reason, they make money in a boom or bust manner. If they fund 64 companies having at least one of them profitable means it needs to raise a massive amount of money to break even or to make all of those investments profitable for the company.

This means that whenever a company like Amazon approaches the leadership board of a company like Audible, the board will likely push for a higher price, but will likely be willing to sell. This is because Amazon, Google, Apple, and other companies similar in size, breadth, and depth in the market, offer absurdly deep pockets. For example, Facebook bought Oculus Rift, a company that’s only had a few prototypes released for $2 Billion. This is a huge amount of money which likely made the VC’s extremely happy.

Because of these market conditions we’ll likely continue to see a winner take all approach to markets that these players are in. Since most of these companies are competing in the exact same space, a company like Audible, that could offer a distinct advantage in the market place would be extremely valuable. It would actually have significantly higher value than if there weren’t 4 giant companies competing in the same space.

It’s likely we’ll see this continue to expand as Sony tries to figure out how to move into these spaces more adeptly, as well as Microsoft resurgence in consumer markets. Fully expect more and more of this to happen and greater and greater valuations for these companies in the coming months and years.