business news in context, analysis with attitude

Published on: June 3, 2015

by Kevin Coupe

Businesses of all kinds got some great advice from a sage military strategist this week, as retired Gen. Stanley McChrystal appeared on "The Daily Show with Jon Stewart" the other evening. He was there to plug his new book, "Team of Teams: New Rules of Engagement in a Complex World," and Stewart began the interview by showing a chart from the book that focuses on the current military-political structure in the Middle East. The chart had two figures. One was "what we were designed for," and the other was "what we were facing." (See below ... and you can click on the graphic to see the entire interview.)

The subject, at the moment, was the Middle East. But the discussion could have been about any competitive business situation.

While we think of many of the forces in the Middle East to be medieval in their orientation, ISIS, McChrystal said, "is a 21st-century organization that uses some frightening tactics, really quickly, and then they leverage Digital Communications to essentially tie their enemies in knots."

In fighting such organizations and creating a future strategy, he went on, "it is fundamentally impossible to predict. So what we really have to do is go at things with an awful lot of humility that says what we're going to to is approach things with the reality that we're going to have to adapt constantly and iterate. You're not going to come up with a 100 year plan, or a 50 or even a five year plan. You're going to come up with general directions and frameworks, and you'd better learn every day, because that's the world we're in now."

And then McChrystal delivered the business lesson.

"In the military, there is a saying that no plan survives contact with the enemy...I think that's what we're finding in business now, too. You've got competition from competitors, garage start-ups, new technology, all of these things, and organizations that get very happy with being efficient, with very, very wired processes that have worked for their grandfathers, fathers and brothers, now don't work."

One can't assume that the enemy - or the competition - is wired the way we'd like them to be wired, that they are thinking in traditional terms or planning traditional strategies. Rather, one has to assume the opposite - that the competition is going to see the marketplace through a different prism, see opportunities for both effectiveness and efficiency where we've missed them, and use strategies and tactics that we haven't considered.

"No plan survives contact with the enemy." Eye-Opening words to live by.

Published on: June 3, 2015

The Street reports on a study from Cowen and Company concluding that "there are about 36 million (Amazon) Prime subscribers in the U.S., which corresponds to one in three Internet-connected households."

Amazon Prime is the company's loyalty program, offering two-day shipping to customers who may a $99 annual fee; it also offers free streaming of movies, TV shows and music, as well as original, differentiated content.

More Prime numbers from the story:

"About 93% of Prime members visited the site in May; about 72% of non-Prime customers did so. Many weren't just visiting the site, they were spending money too. About 82% of Prime members purchased goods on Amazon in May, compared with about 45% of non-prime members. Prime purchasers now account for 46% of total Amazon purchasers, up from 37% in May 2014."

Published on: June 3, 2015

Bloomberg reports that "merger talks between Royal Ahold NV and Delhaize Group are progressing as the Dutch and Belgian companies seek to reach an agreement as early as this month to create a grocery giant with $60 billion in sales, according to people familiar with the matter ... The retailers are discussing annual savings related to purchasing, supply chain and overlaps in administration and headquarters, said the people, who asked not to be identified because talks are private. They do not see significant store closures because there’s little geographic overlap in Europe and the U.S., the people said."

The story says that both sides are optimistic, while still acknowledging that talks could fall apart at any time.

Published on: June 3, 2015

The Wall Street Journal reports that Amazon "is cutting fees to third-party sellers of 'small and light' products and offering free shipping with no minimum order to shoppers as the company tries to expand sales of smaller goods on its website."

The goal, quite simply, is to continue to build Amazon's identity as the first, best option for consumers of almost any product category and create a path of least resistance between buyers and sellers.

The Journal writes that "The goal is to entice online demand for products like $6 packs of earplugs by taking shipping fees out of the equation for shoppers. Previously, Amazon customers would have to purchase a minimum of $35 in goods to get free shipping, or pay $99 a year to enroll in Amazon Prime, the company’s membership program. Third-party sellers, meanwhile, would pay fees starting at $1.90 per unit to use Amazon’s fulfillment services, compared with $2.50 under Amazon’s catchall pricing for products of all sizes. It is also cheaper than what it costs sellers to pack and ship on their own, the company said."

The story goes on: "All 'small and light' orders, as Amazon calls them, will be shipped from a new fulfillment center in Florence, Ky., dedicated to products no heavier than 8 ounces. Packages must remain within precise dimensions and prices for products generally should be under $10 ... The products will ship free for delivery in four to eight days whether or not customers have free shipping privileges through Amazon Prime membership."

Published on: June 3, 2015

The Hill reports that Judge Robert Pitman of the US District Court for the Western District of Texas has ruled that the National Labor Relations Board (NLRB) can go ahead with its new rule that would speed up union elections within companies, a process that business interests believe hampers their ability to prepare and make the anti-union argument.

Pittman tossed out a lawsuit brought by the National Federation of Independent Business (NFIB) and the Texas chapters of the Associated Builders and Contractors (ABC); the plaintiffs promised to appeal the ruling all the way to the US Supreme Court, if necessary. In addition, The Hill writes, "Another lawsuit from a different set of business groups - including the U.S. Chamber of Commerce, National Association of Manufacturers, and National Retail Federation - is still pending in federal court."

The story notes that "the NLRB’s rule - maligned as the 'ambush election' rule in business circles - could allow union elections to occur as little as two weeks after a petition is filed, critics claim. Currently, it takes an average of 38 days to hold a union election, according to the NLRB."

Published on: June 3, 2015

This is Money reports that Tesco last quarter showed a 1.3 percent drop in UK sales and 0.4 percent loss of market share, dealing yet "another setback" to CEO Dave Lewis, who was hoping that he'd got the company back on a more positive track.

According to the story, "Britain’s fourth biggest grocer Morrisons, which is tipped to fall out of the FTSE 100 index of leading shares this week, was the only retailer to see increased sales. However its market share remained unchanged at 10.9 per cent.

"Sainsbury’s has also held its share at 16.5 per cent despite sales falling by 0.3 per cent and Asda sales were down by 2.4 per cent.

"Lidl saw sales grow 8.8pc and its market share reached a record of 3.9 per cent, up from 3.6 per cent last year. Aldi also grew sales by 15.7 per cent, taking its share to 5.4 per cent of the market. At Waitrose, sales growth was lifted by 1.6 per cent taking its market share to 5.2 per cent."

Published on: June 3, 2015

Re/code reports that Amazon's plan to introduce private label groceries under the Amazon Elements line likely will be different from how it as used the Amazon Basics label.

"The Basics strategy appears to quietly go after product categories where shoppers don’t have a strong brand preference and where big brands don’t dominate," the story says. "But with Elements, Amazon looks to be interested in competing head-on with big consumer brands, starting with a landing page on the site that stands out from the rest of the Amazon shopping experience."

“Amazon is still learning and so they will stumble some,” one e-commerce executive tells the site. “But if they promote it like the Kindle, then it becomes an issue.”

Published on: June 3, 2015

• The San Antonio Business Journal reports that Walmart is taking on H-E-B in San Antonio, "and their respective expansion plans will be both aggressive and similar.

"Currently, H-E-B has more locations than all of the discount retailers active in the San Antonio area combined. The locally based retailer has 50 stores, with SuperTarget coming in at five, conventional Target at 11 and Wal-Mart SuperCenter at 30."

However, "Wal-Mart's newer Neighborhood Center concept - which will give the retailer a leg up in the grocery segment and of which there are five storefronts in San Antonio - has six locations pending for this year alone. And that's just the beginning. The retailer is actively looking for developable sites to draw in some of H-E-B's impressive market share. Walmart Neighborhood Centers, too, will be setting up shop in West San Antonio and a few locations scattered throughout the eastern part of town."

Published on: June 3, 2015

• The Wall Street Journal reports that the US Food and Drug Administration "paved the way for new restrictions on antibiotics given to cows, chickens and other farm animals as the Obama administration pursues ways to fight the so-called superbugs that are growing increasingly resistant to infection-fighting drugs. The FDA on Tuesday issued a set of guidelines for veterinarians who will, as of next year, be responsible for prescribing antibiotics for animals destined for the dinner plate—marking a key step in ending the practice of distributing those drugs over the counter."

According to the story, "The move was announced as the Obama administration convened the White House Forum on Antibiotic Stewardship, which brought together government officials and industry representatives who have committed to taking steps to prolong the usefulness of existing antibiotics ... Widespread overuse in both animals and humans has created strains of microbes that no longer respond to popular forms of treatment, according to consumer groups and public health officials."


• Fortune has a piece about General Electric CEO Jeff Immelt, who says that he like to go "to Walmart and check to see where our light bulbs are placed," saying he finds the act to be "joyful."

“There’s no job that’s beneath me,” he adds, noting that he does not find it to be an "un-CEO task."

Published on: June 3, 2015

• Toys R Us has announced the hiring of David A. Brandon, the former CEO of Domino's Pizza, as its new CEO, beginning in July. He succeeds Antonio Urcelay, who is retiring.

Brandon served as chairman/CEO of Domino's for 11 years, and has remained until now the company's chairman. He also is the former president/CEO of Valassis Communications.

Published on: June 3, 2015

This week, we've been having a conversation about the subject of demotivation, prompted originally by a story about a company where the founder had announced his plan to pay for the college tuitions of all the children of employees who helped him start the company.

One MNB reader asked whether this would "demotivate" people without children, and we've had some mixed reactions ... which continue...

MNB reader Jeff Folloder wrote:

There will always be somebody who feels slighted for the barest whiff of perceived unfairness.  Whether we admit it or not, we all keep score in some way.  Close your eyes and go back in time to the American workplace where cigarettes were not allowed but smokers were still around in droves.  About once an hour or so, the smokers would gather on the porch or the driveway or the loading dock and puff away.  Those who did not have the habit often wondered why they didn't get all those extra 15 minute breaks.  More than a couple.

I always figured that while the smokers were getting occasional 15 minute breaks, non-smokers were getting a whole bunch of years on the back end.

From another reader:

Perhaps this topic has run its course, however the note from a reader today regarding a fellow employees complaining about not being able to fully leverage a benefit and therefore being short changed reminded me of an ugly incident 20 years ago.

My organization announced that we were being acquired. In order to maintain the management structure a lucrative retention package was announced. It was based on tenure but had a very  generous minimal offering.  This package was announced via phone to a peer group who work remotely at that time.  The  first question raised came from a woman who had significant more seniority than the rest of us. She was irate that we would all be essentially get the  same number of months severance as her. Not a male but perhaps no surprise she was and I believe always had been single .

The demotivation here came from none of us in the group really wanting to work with her, support her, back her up or really in any way significantly interact with her in the future.

I get your point. But maybe we're taking too many shots at single people, suggesting that they're more selfish than married people.

Which was the point of another MNB user:

For the first twenty years of my working life, I was on the no spouse/no kids list and the next twenty on the yes/yes side. 
 
The situation is unfair/demotivating in that the company was paying a bonus retention fee for those employees that was unavailable to me.  I considered it then and now to be a cost of keeping and retaining qualified candidates. 
 
But this comment was offensive: "looking back I can see why they were single."  I am surprised and dismayed that you reinforced it. 
 
My voting record paints me as liberal, if the choice is only liberal or conservative.

I actually though it was a joke. But let's not let it get out of hand.