Archive for Big Lessons

Are you sending the right messages to your B2B prospects?

Do you know what B2B prospects are looking for in a supplier? Do you know what B2B prospects want to hear? Is there an opportunity for mid-size B2B companies to brand around messages that bigger players miss?

Recently McKinsey did some research on branding themes among major B2B companies and answered some of these questions. The purpose of the resarch was to determine how well branding messages of global B2B players matched up to the interests of B2B customers. Read More→

The best sales video ever

If we all had this much enthusiasm for our businesses there wouldn’t be a recession.

Thanks to Jim McGee for the link.

Three Big Lessons from the Info Products seminar

As I mentioned, this past weekend I attended Fred Gleeck’s Info Products seminar. Before it recedes too far into my memory I wanted to list out three of the biggest lessons that I think apply to traditional business owners. These are what I call Aha! moments – moments when a misconception or prejudice falls away. Read More→

Steve Hannaford Tells Us Why Chrysler is Dead

The US auto industry is in turmoil – rising gas prices, changing buyer tastes, stiffer environmental laws, and massive labor costs, among other things – have cost US automakers tens of billions in losses in recent years. And now the pompous jackasses at Daimler-Benz have killed Chrysler. It’s bad enough that my beloved IBM ThinkPads have been sold to Lenovo – I can’t even imagine buying a Chinese-made Jeep! Chrysler was in trouble when Daimler bought them in 1998, but the Germans were supposed to make it better, not spend $40 billion to make it worse.

Schumpeter’s “creative destruction” may well be at play here. In fact, then entire auto industry may be heading for fundamental change not only in product design, but in who it sells to and how [see Shaping the Future by Charles Stross.] What Hannaford describes is very much a “Barbarians at the Gate” scenario. Pay particular attention to his analysis of what Cerberus Capital (the distasteful but quite necessary carrion eaters of the capitalist world) will do with the decaying corpse. Oh, and you can be sure that somewhere the government (that means you and me) will get pegged to pickup the tab for some significant portion of this fiasco.

The Chrysler deal

What to say about the Chrysler deal that already hasn’t been said. A few thoughts:

The deal was even worse for Daimler than the putative $7.4 billion that was announced. That sum was just for show, a pitri enough remnant of the $36 billion Daimler paid for Chrysler. What Daimler will receive for the Chrysler division when all is said and done is nothing – in fact it will pay over half a billion dollars for Cerberus Capital Management to take the US automaker off its hands. As we’ve said before, this makes the merger the 1998 Daimler-Chrysler “merger” in year the worst deal ever. As one commentator said on NPR, “It like when you have a broken down car in your front yard, and pay someone to haul it away.”

The deal is likely to end up in the chop shop. The valuable bits will be sold off eventually, and the brand names (especially Jeep) may be attractive to, say, a Chinese company. Cerberus will be ruthless in cutting pensions and healthcare costs. It may operate a much reduced business, with SUVs and pickups as the main assets, at least for a while. It will dump dealers mercilessly, lay off workers, and move more operations overseas. And, like the airlines, it will plead extreme duress to outflank the unions.

Meanwhile, Cerberus will suck the company dry, so that the investors get their money back with a hefty profit quickly. It set up a labyrinth of holding companies to preserve the good assets from an eventual bankruptcy, much as was done at Kmart.

It will be curious to see if the company has any development in the pipeline, now that Daimler will have all the R&D assets. It’s hard to believe that, for example, a hybrid or electric car, or even a cool sports car or luxury vehicle could originate form a stripped-down Chrysler.

buying a company that looks like it is in freefall. What value will a five-year warranty have, for example, if the company could close its doors at any time. And how motivated will workers be to make dependable cars when their health benefits and pay are threatened?

It’s hard to imagine a renaissance, especially in new product areas. And it seems clear that with $5 gasoline looming, auto companies are going to have to adapt quickly in the next decade, something Chrysler is certainly not ready to do.

As for Cerberus, it’s interesting to speculate on their motivation. They have been make increasing bets in the auto industry. Lat year they bought 51% of GMAC, General Motors’ financing subsidiary. They recently bought Tower Automotive for $1 billion. They also one auto parts suppliers CTA Acoustics and GDX Automotive, and were in hot pursuit of Delphi, the parts maker spun off from GM. Do they think they can derive some synergy form these vaguely related firms and weld them into a new auto empire? Call me a skeptic on that one. These guys are investors, not “car guys.”

For Daimler, it’s a retreat from an attempt at world dominance. Like Ford and GM, Daimler’s dreams of profitable investment in other companies have become a liability. No synergy, but plenty of culture clash and inner turmoil, has made both brands-Mercedes and Chrysler- weaker. Meanwhile, the single-minded, organic -growth approach of Toyota and Honda seems to be the winning one.

IBM Rumored to be Planning Unprecedented Offshoring Switch for 2007

I worked for IBM from 1995 to 1998. During that time I met some great people and had the privilege of working on more than one world-class project. As part of the benefits package I was allowed to buy IBM stock at a discount, and I did so. A few years ago I sold the stock off, as it had stagnated for a while and my general fondness for the company had dwindled. I still have friends there, many of them working for IBM Global Services. Now Robert Cringely reports that Big Blue is planning to axe more than 100,000 people from IGS, moving all the work offshore:

I, Cringely:The Pulpit – Lean and Mean

[…]
The IBM project I am writing about is called LEAN and the first manifestation of LEAN was this week’s 1,300 layoffs at Global Services, which generated almost no press. Thirteen hundred layoffs from a company with more than 350,000 workers is nothing, so the yawning press reaction is not unexpected. But this week’s “job action,” as they refer to it inside IBM management, was as much as anything a rehearsal for what I understand are another 100,000+ layoffs to follow, each dribbled out until some reporter (that would be me) notices the growing trend, then dumped en masse when the jig is up, but no later than the end of this year.[…]

This cannot be good. As Cringely notes, offshoring of this scale creates massive communication and support problems – at least if the customer is in the US. My experience with BellSouth’s lame, dysfunctional, globalized tech support has been a disaster. Dell, same story. In fact, if you have ever had a good experience with offshore tech support I’d like to hear about it. But more importantly, if Cringely is right IBM management is going to axe 100,000 jobs knowing full well that it may cripple the company. I don’t care if the stock price rockets upward for some brief period. I’m glad I no longer have any financial stake in Big Blue.

The “Chrysler Unit”

Business pundit Steve Hannaford needed a new term to describe the value of today’s billion-dollar-plus mergers and acquisitions. The disaster that is DaimlerChrysler has given Steve just what he needed:

How Many Chryslers?

Truly the Daimler-Benz purchase of US-automaker Chrysler in 1998 was a stupefying disaster. Through the alchemy of its business acumen, Daimler management transmuted the value of Chrysler from an estimated $40 billion to a value of, to judge from the current bidding, around $5 billion, give or take a few hundred million.

[…]
But some good can come out of the merger. Based on what seems to be the approximate price of the company, we will describe big mergers and acquisitions henceforth in terms of Chrysler unit, that is to say, in $5 billion increments. For example: