business news in context, analysis with attitude

Published on: April 13, 2017

This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

So, I'm in the pundit business. Which means, I think, that I'll get drummed out of the union if II don't do a commentary this week about United Airlines, a company that has had about as bad a public relations week as I can imagine.

The thing is, I'm trying to figure out what to say about it. We've all seen the video of that guy being dragged off the plane by authorities, body limp, bleeding from the mouth, screaming at the top of his lungs ... all because United needed four seats for a flight crew that needed to get to the destination.

I do have some thoughts, though ... lessons that can be learned from a situation that is, to say the least, FUBAR.

• Employees cannot behave like automatons. They have be engaged and empowered enough to make decisions. Like, maybe, look around and see that as they are planning to drag the guy out, pretty much everybody is shooting video with their smartphones. You'd think someone would've said, this isn't a good idea.

• People have to use common sense. The plane in question was going from Chicago to Louisville, Kentucky ... and if they'd thought about it, the flight crew or the passengers could've taken an Uber there in less than five hours ... and it would've cost the airline a helluva lot less than this little disaster is going to cost them.

• People have to think long-term. My understanding is that the airlines lobbied the federal government so that there is a thousand-dollar cap on how much they are allowed to offer passengers being bumped off flights. That might've looked like a good way to avoid bigger payments most of the time, but again, if they'd offered $2000 or a year of free flights to the folks on the Chicago flight, I'll bet they would've gotten some takers. On the other hand, if I had to get somewhere to give a speech, that wouldn't have been nearly enough to get me off the plane. But long-term thinking beats short-term thinking.

• People have to communicate...and understand that everything they say will eventually be heard by everyone. Clearly, the ground crew did not communicate the issues clearly to the passengers ... and CEO Oscar Munoz, when sending a memo to employees saying he was "emphatically" behind them, didn't think (or didn't care) that he was telling his paying customers that he wasn't on their side. If you are in a customer-facing business, that's a bad idea.

The thing is, as bad as United's situation is this week, it strikes me as entirely possible that the same sort of thing could happen to any customer-facing business.

Sometimes, employees follow procedure even when procedure clearly is leading to disaster. Sometimes they don't use common sense, because a culture has drilled it into them not to use their best judgement. Sometimes they make short-term decisions without thinking about the long-term implications. And sometimes...in fact, frequently...people and companies do a lousy job of communicating value and values to customers and employees.

I think most companies and most leaders probably looked at United's situation and said, what a mess.

But what they should've said is, how do I make changes in my organization to insure that it doesn't happen here.

That's what is on my mind this morning, and as always, I want to hear what is on your mind.

Published on: April 13, 2017

by Kevin Coupe

Burger King this week created a marketing/technology kerfuffle when it introduced a television commercial designed "to prompt voice-activated Google devices to describe its burgers."

In the ad, the Burger King spokesperson uses the wake-up phrase "OK, Google" to get any nearby Google Home device to describe a Whopper ... effectively getting the device to provide information that could not be included in the commercial.

However, the New York Times reports that it did not take long for the rest of the world to take notice and respond.

"Within hours of the ad’s release - and humorous edits to the Whopper Wikipedia page by mischievous users - tests from The Verge and BuzzFeed showed that the commercial had stopped activating the device," the Times writes.

"Burger King, which did not work with Google on the ad, said Google appeared to make changes by Wednesday afternoon that stopped the commercial from waking the devices, in what amounted to an unusual form of corporate warfare in the living room. Google, which previously said it had not been consulted on the campaign, did not respond to requests for comment."

The Times story makes the point - and even I, a dedicated Amazon/Alexa user, would agree with this - that this commercial might prove to be counterproductive for both Burger King and companies such as Google and Amazon that have invested enormous sums in developing the voice-activated computers. Burger King's gambit doesn't persuade consumers that the devices can be helpful to them; rather, it makes the point that the devices can me helpful to the marketer, and that it is possible for the device owner to lose control of how it is used.

When this happens accidentally, it is sort of funny. For example, when I learned that I could set up my Amazon Echo so it could emulate the Star Trek computer, waking it up with the word "computer" instead of "Alexa," we quickly discovered exactly how often we use the word "computer" in our house. The thing was constantly being awakened, and so I went back to using "Alexa." It still happens from time to time, but usually only when an Alexa commercial runs on a nearby television.

But these are accidents. The Burger King commercial is a manipulation, and I think it crossed the line.

Devices like Google Home and the Echo/Alexa systems are useful and desirable as long as users see them as helpful, but they will lose their appeal when they start being invasive. I'm sure that this is something of which Google and Amazon are aware and vigilant ... these folks are smart enough to know that long-term viability requires a sensitivity about consumer sensibilities. Burger King, being Burger King, made a short-term play without regard for the long-term implications.

These devices have enormous potential, but also enormous potential for abuse. Companies need to keep this in mind, and know that there are lines not to be crossed.

Think of the Burger King case as an Eye-Opener.

Published on: April 13, 2017

The Wall Street Journal has a story about how Whole Foods CEO John Mackey, after a career spent trying to differentiate his company from traditional supermarkets, now "is being forced to try conventional grocery-store pricing and other supermarket tactics to reverse his company’s flagging fortunes."

While Whole Foods pretty much owned the organic supermarket business for years, that has changed both with the entry of new and less expensive competitors (think Sprouts) and the willingness of conventional stores to invest in the organics business. This week, when hedge fund Jana Partners became Whole Foods' second-largest shareholder, it came with calls for "Whole Foods to more quickly adopt standard grocery-industry practices it long had eschewed: loyalty cards that would allow it to target shoppers with coupons based on their buying habits; centralizing product purchasing to improve efficiency; and advertising sales and discounts."

Mackey tells the Journal that "he is confident that Whole Foods will survive and be on surer footing in a year. 'We have a billion dollars in the bank,' he says. 'We are not in crisis mode.'

“'When times are good, people think I’m like a visionary leader,' he says. 'And then the company hits a down cycle, and then everybody questions that.'

“'I’m like a duck,' he says. 'The water goes off my back'."

Published on: April 13, 2017

On National Public Radio, Marketplace has a story about how, while many traditional malls are in trouble because stores and anchor tenants are closing down and shoppers are staying away in droves, "at least one part of the bricks-and-mortar retail industry is still thriving: outlet malls. These centers are a surging source of profits for retailers and pitch themselves as shopping destinations for tourists and cost-conscious brand hunters."

Over the past five years, the story says, "sales at outlet malls have doubled to about $50 billion, according to Green Street Advisors. Experts said that growth shows that shoppers are looking for experiences like the bargain-hunting thrill that outlets provide ... Developers have been savvy, building outlets in places where people are already in the market for experiences, like near theme parks. They’ve also made them easy to get to, putting them just off busy highways."

At the same time, Marketplace reports that "retailers have found that when it comes to bricks and mortar, outlets are a better bet. They’ve become the most profitable distribution channel for some brands."

But, "The challenge for outlet malls will be to maintain shoppers’ excitement. Remember, once upon a time, traditional malls were the place to be."

Published on: April 13, 2017

A couple of stories this morning focus on Amazon CEO Jeff Bezos' annual letter to shareholders, which provides insight into how he is thinking, in addition to what the company is doing.

• The Seattle Times writes that Bezos, who constantly says that "today is day one" at Amazon, writes that he recently was asked what "day two" looks like.

"It’s a fair question," the Times writes, "for a one-time start up that has grown to dominate internet commerce, book selling and cloud computing, and now has become the fourth-largest publicly traded U.S. company. But settling into success unsettles Amazon’s founder.

“'Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death,' Bezos wrote. 'And that is why it is always Day 1'."

The Times goes on to say that Bezos' letter "repeats a theme that the executive touched on in last year’s missive to shareholders: how to keep alive the animal spirits that led Amazon to greatness. Last year Bezos focused on the value of experimentation and the acceptance of failure.

"This time he gave more elements of a management road map to staying vibrant. Some of the ingredients are well-known Amazon principles, such as 'customer obsession.' But there’s also the 'eager adoption of external trends,' examples of which, according to the executive, are automation and machine learning.

"Then there’s 'high-velocity decision making,' and interestingly, a 'skeptical view of proxies,' meaning that measuring success by anything other than actual customer satisfaction might lead to dead ends.

“'We can have the scope and capabilities of a large company and the spirit and heart of a small one. But we have to choose it,' Bezos wrote."

• The Wall Street Journal story about Bezos' letter highlights a passage in which he wrote about how he "recently thought a new show the Amazon Studios team was considering was too boring and complicated to produce. But he gave it the green light anyway because the team thought it had potential.

"Mr. Bezos told his team, 'I disagree and commit and hope it becomes the most watched thing we’ve ever made,' he wrote in a shareholder letter published Wednesday. 'Consider how much slower this decision cycle would have been if the team had actually had to convince me rather than simply get my commitment.'

"The letter, an annual exercise, offers a window into Mr. Bezos’s management philosophy, describing how he can disagree with employees but still back their projects, as well as his opposition to relying on market research and other core company tenets ... The Amazon Studios example offers a glimpse into how Mr. Bezos tries to keep Amazon nimble. He says he thought there were better opportunities out there, but followed his team’s lead. 'And given that this team has already brought home 11 Emmys, 6 Golden Globes, and 3 Oscars, I’m just glad they let me in the room at all!' he adds."

Published on: April 13, 2017

The New York Times had a piece this week about Locol, "the self-described 'revolutionary fast food' chain opened last year by the chefs Roy Choi and Daniel Patterson," which has begun selling high-quality coffee for $1 a cup.

"Locol’s stated mission is to bring wholesome, affordable food to underserved neighborhoods," the story says. "The coffee delivers. Obtained and roasted according to the same lofty standards found at Intelligentsia Coffee, Stumptown Coffee Roasters or any of the small, innovative companies that have transformed the high end of the industry in the past decade, Locol’s coffee is clean and flavorful.

"But unlike those shops, where a cup can cost $3 or more, Locol charges just $1 for a 12-ounce coffee, or $1.50 if you want milk and sugar. Rather than offer free condiments and pass on the cost to all customers, those who want milky, sweet coffee pay for their pleasures, while drinkers of black coffee get a break. As for getting it chilled, that’s on the house: Iced coffee costs the same as hot."

Furthermore, the Times writes, "Locol is rolling out a coffee brand called Yes Plz and plans to eventually open coffee windows and stand-alone shops in addition to supplying its three locations: a restaurant and a bakery in Oakland, Calif., and the restaurant in Watts. A 12-ounce bag of Yes Plz coffee sells for $8 to $9. (By comparison, a 16-ounce bag of Dunkin’ Donuts Original Blend is $8.99.)"

One of the factors that keeps costs down is the simplicity of the model: "There is no waste. Black coffee is easy to scale up; stand-alone coffee shops, with their intricate menus (cortados, almond milk lattes, iced matcha spritzers) can’t compete ... There is no gastro-sermonizing at Locol, no talk of farms or varieties. The coffee on the menu is either hot or cold, and served with a cheerful lack of ceremony."

Published on: April 13, 2017

• Meijer announced yesterday that it "will expand home delivery throughout Ohio with Shipt ... The service launches in Cincinnati and Dayton on April 27; Columbus on May 4; and Toledo later this summer ... Using the Shipt app or website, members will be able to access more than 55,000 items available at Meijer stores, note any preferences, choose a one-hour delivery window and pay for their order."

Published on: April 13, 2017

...with brief, occasional, italicized and sometimes gratuitous commentary…

• The Financial Times reports that Tesco appears to be making progress in its turnaround efforts, saying that the company's core UK same-store sales in 2016 were up 0.9 percent, with food up 1.3 percent - "the first full-year growth since 2010."

CEO Dave Lewis, brought in to right a severely listing ship, described the company as being ahead of where he thought the company would be at this point in the turnaround.

Of course, sales were up in part because, as FT put it, the UK saw "the first signs of food price inflation following a bitter price war that has hit the profitability of all supermarket chains." That price war continues ... as Tesco has pledged to keep prices low despite inflation, mindful of the ongoing pressure put on mainstream retailers by discounters Aldi and Lidl.


• Reuters reports that "U.S. payments startup Remitly has launched services in Britain, expanding its international footprint to a third country from which users can send money abroad, the Seattle-based firm told Reuters on Tuesday.

"The digital money transfer service, backed by Amazon.com founder Jeff Bezos, sends more than $2 billion in remittances annually to India, the Philippines, Mexico and other Latin American countries for users based in the United States and Canada.

"Customers in Britain will be able to use Remitly's desktop and mobile app, and will initially be able to send money to India and the Philippines."

Published on: April 13, 2017

Got several emails about Kate McMahon's column this week about a social media brouhaha in which Cracker Barrel found itself after it fired a woman, apparently without cause, and never defended itself after social media blew up.

MNB reader Joel Scott wrote:

Nice article this morning regarding Cracker Barrel. Ironic that their company logo is meant to convey an old timey chat around a barrel, and the old fella leaning on it is unaware of that dang ol intraweb causing such a fuss.

Every company should take note and handle every employee and customer with
care.

MNB reader Jackie Lembke wrote:

When I saw this I looked to see if I could find any information that would explain the firestorm. Nothing, not a statement one. I feel for Cracker Barrel, with personnel issues there is little that can be shared. It almost feels like an Amy and Sheldon experiment. How quickly will a # on twitter ignite a firestorm? How prepared is any company to master the storm? I still have no idea why Brad’s wife was fired, I really shouldn’t have any idea. If Brad’s wife has no idea than somewhere within the Cracker Barrel organization things need to be changed. Even if you disagree with the firing, you should always know why.

From another reader:

Ok, funniest story I have read in a long time.  But you have to also put it next to the United Airlines story this week and ask, who is in the room when these decisions are  made?  Bad leadership... not so funny....

MNB reader Jeff Reinartz chimed in:

Pitchfork Nation is out of control. Wouldn't it be judicious of us to wait and find out for what cause a person was fired before we all go nuts and attack the employer until an answer is produced, assuming along the way that the employer is by its very nature inherently evil and must be stopped? Nah, it's easier if we just all lose our minds since we can type and post whatever we want without repercussion. Makes us feel good....like we're somehow involved.

Cracker Barrel may very well have had good cause for terminating this person, maybe not. I don't know. Do you know? Do any of the social justice warriors know? Whatever....as long as we can make this terrible empire pay for its indiscretions until it gives the answer we want, who cares?

Depending on how far this goes, there could potentially be people's livelihoods at stake as a result of this, but we'll just have to take the good with the bad, because - GASP - this doesn't agree with my world view!

Sad state of affairs that this is our new normal....all of us victims who KNOW we're right, shout first and ask questions later.

I would agree that this illustrates how quickly social media can blow up on a company ... but the point is that the company didn't offer answers, and didn't even say it couldn't address personnel issues in public.

You're right that sometimes social justice warriors can get out of control and can make mistakes. But I, for one, think we probably are better off in the long run if social justice warriors have the tools to do battle with what you call "terrible empires," whether they be political, governmental, commercial, cultural or religious.




We continue to get email about the New York Times piece by 17-year-old Jonah Stillman, who recently joined the advisory board of Blackboard, an educational software company. Invited to attend his first meeting, Stillman was enthralled and engaged ... until he got an unexpected criticism from a vice president named Craig Chanoff during a break in the session. Chanoff told him that if he wanted to be successful, Stillman had to stop texting friends and checking his Twitter feed during the meeting. Stillman, however, wasn't doing any such thing. He was taking copious notes on his smart phone, and Stillman acknowledged that this reflected a generational chasm that needs to be addressed.

One MNB reader wrote:

Like you, I too teach a class as an adjunct professor. And the challenge I set myself is ensuring my students don’t pick up their phones. It is incumbent on me to maintain attention. And when still in corporate life I trained colleagues on “story-telling” in presentations of research data. My advice would be get to the essential point very quickly. It is my belief that in any corporate presentation, the presenter has 5 to 7 minutes before the most senior person picks up her phone. Use that time to communicate the essence. Everything thereafter is gravy.

From another reader:

I’m a Gen-X  mom of two teenagers (16 & 15) who live on their phones.  While I understand where Stillman was coming from, most of the time when people (of ALL generations) have their faces in the phones, they are not taking notes.  Just this weekend my daughter and I were at a dance competition.  During the awards portion of the day, all the dancers sit up on stage to find out their scores and how they placed.  I would say at least 90% of the kids onstage had their phones with them.  I can also tell you about 80% of them were not paying any attention to the announcer – they had their faces in their phones, showing things to their friends or taking selfies onstage.  They were so busy, some winners had to be called twice.  What really disappointed me was the lack of sportsmanship conduct on that stage.  There was barely any clapping not only for other studios, but for their fellow studio mates.  Interestingly, our dance studio had just recently incorporated phone etiquette into their ‘Code of Conduct’ for all dancers.   I understand how integrated phones have become to our daily lives – but there needs to be some semblance of balance between the digital and real worlds.  As adults who remember how it is to live without phones constantly in our hands, it’s important for us to teach this to the next generation(s).

You can blame the kids, and they certainly deserve a percentage of the blame. But it sounds to me like the dance instructors didn't earn any medals for teaching the kids about sportsmanship. And if I were a parent to one of those kids, I'd be questioning whether I'd instilled the right values in those kids.

The phones aren't the problem.

Published on: April 13, 2017

It is Thursday, but I have quick notes on a couple of movies, each of which I liked a lot more than I expected...

Gifted is a lovely little movie, directed by Marc Webb, about a custody battle over an intellectually "gifted" seven year old girl. It stars Chris Evans as the girl's uncle, who serves as her guardian, and who has dedicated himself to giving her a "normal" upbringing. This brings him into conflict with his mother, played by Lindsay Duncan, who believes that the girl's math genius needs to be nurtured through special schooling and tutoring, away from the ordinariness of public schools.

This could've ended up being a by-the-numbers movie, but the chemistry between Evans and McKenna Grace, who plays the gifted child, helps raise the level of the drama - they root it in real feelings that make Gifted genuinely touching and not manipulative. Octavia Spencer and Jenny Slate are excellent in supporting roles, and while Gifted may not be an enormous hit in theaters, it deserves to be ... and I suspect it'll do very well once it finds its way to home screens.

I was very skeptical about the new, live-action version of Disney's Beauty and the Beast; after all, the animated version was terrific, and I saw no reason to make this new version except to make money.

And then Emma Watson came on screen and started singing, and frankly, I didn't much care why they made the new movie - she's terrific, and imbues the movie and her character with so much natural charm, and verve that I didn't care about much else.

There are scenes, I think, that are overdone - the "Be My Guest" production number struck me as an over-the-top effort to out-do the animated version, when it might've been more effective to go the other way. But largely, surprisingly, the movie works. I suspect that this largely because they got a great cast that makes it work through sheer talent - folks like Kevin Kline, Dan Stevens, Josh Gad, Ewan McGregor, Stanley Tucci, Ian McKellen, Audra McDonald and Emma Thompson who have real performing chops.

Talent will out. But I'm still skeptical about Disney's plans to remake much of their animated catalog as live-action films. It seems like a money grab to me.

Published on: April 13, 2017

Tomorrow is Good Friday, and MNB will be taking the day off.

We’ll be back Monday. Have a great weekend.

Slàinte!