MBA Day Camp Blog: Book Smarts and Street Smarts

Netflix - Company at a Cross Roads

Netflix, a stock market and media darling, is a company at a cross roads.  Comcast recently announced live streaming to the ipad, a move that other cable providers are sure to follow.  Consider the following:

1. Netflix doesn't control the device

With the emergence of smatphones and tablets (and one heavyweight contender in Apple), Netflix does not control the platform for the viewing experience. Users are not tied to a "netflix" tablet, TV, or PC that they must watch content on.  They haven't created the "ecosystem convenience" that you can point to with the Kindle or Apple.

2. They are quickly losing control of the distribution

With Comcast & other cable operaters getting more sophisticated in their delivery mechanisms, Netflix will have greater challenges from these providers that have an established foothold in the home.  This landscape gets more complicated with content creaters wanting to get in the game (in 5 years, would anyone be surprised if a movie was directly streamed to TV via the Internet by the production studio themselves?).  To add to this complexity, you have app stores becoming the defacto way in which consumers source content for their devices.

3.  Netflix's key intellectual advance -- a fantastic distribution system -- may be rendered obsolete

And this is the biggest threat.  Their key breakthrough, in the form of a one-of-a-kind DVD distribution system, may soon be obsolete as users move away from the DVD form in its entirety.  In 5 years, the DVD may go the way of the VHS tape, which leaves Netflix with a great solution in search of a problem.

I think this company is in big trouble.  They may end up as pure algorithm company - one that licenses their unique 'recommendation engine' to the mix of parties above.  Look for interesting upheavels in this industry over the next few years.

Aveek Guha,

President, www.mbadaycamp.com

The death (and rebirth) of digital advertising as we know it

Here is why the digital media advertising will inevitably be turned upside down (again).  You have two incredible phenomenons occurring in the present time:

1. Mobile handsets > PCs by 2014 - the mobile device will be the primary method by which users experience the internet, a vastly different form vis a vis the PC

2. "The one-touch user profile" - people have taken to downloading apps of news services e.g., NYtimes, CNN that already have standard websites.  Why do they do this?  Two reasons a) you get one touch access to news vs. opening up a browser, looking up a bookmark, etc b) the content is designed specifically for the mobile form, making it much easier to consume

We are now seeing the rise of content aggregator apps (e.g., flipboard) that just repurpose existing content and make them consumbable for mobile form.  In the old days, this was a portal; in tomorrow's mobile world, these apps will become the kings for user eyeballs. 

Consider two different, yet plausible scenarios:

- What if flipboard or another such app became the defacto place for people to read the NY Times, WSJ, and others? These apps could control, in effect, a good part of the advertising that would normally go to the content provider.  Not too mention they would have startlingly rich information on the consumer that any retailer would covet.

- What if Facebook (which recently became the 4th largest source of media traffic behind Google, Yahoo, MSN) starts keeping users within their four walls to read the news instead of linking out to the original content provider.  They could attribute the content provider, but keep the user experience within Facebook with some fairly simple RSS programmatic elements. 

These will not happen tomorrow, but the trend to me is clear: origination - where the user starts reading content - will become more important than fulfillment - where the content actually is created. 

We can sit back, watch the digital dollars, and let the story unfold.

Aveek Guha

President, www.mbadaycamp.com

BP pays $50M in pubic relations activities -- is this wrong?

Recently, BP has come under fire for spending upwards of $50M on a PR campaign to get in better standing with the public.  This action has been met with outrage, questioning why funds are being spent on anything but the cleanup.

This is a very interesting and complex issue. The Boycott BP Facebook page has 450K+ members and counting.  The story of ineffectual management on BP's side gets more deplorable as additional facts are uncovered.  And the lawsuits coming from this action will likely result in billions of dollars of damages over multiple years.

Which is why BP also has a responsibility to its shareholders, to protect the rapidly diminishing value of their shares. If they believe a PR campaign can get less people to Boycott BP and thus more profits to pay off these impending liabilities, they are duty-bound to follow up on those actions.

We may not like it, but it is a dereliction of duty (another one) if they do not do everything they can to keep the company afloat and profitable.  Its too early to tell if they will come through this catastrophe, but the whole episode provides many interesting business lessons, before and after the incident.

Aveek Guha, President, www.mbadaycamp.com

Goldman and the SEC -- Prosecuting Morality

The SEC dropped a bomb last week by leveling a complaint against Goldman, sending shivers to the financial services sector on the possibility of industry wide investigations.  Essentially, the SEC argues that Goldman should have notified investors that the financial product they were buying was selected in part by a party (John Paulson) that was heavily betting against it .

Usually companies such as Goldman go two routes - a mea culpa followed by a fine or the naming and persecution of a 'rogue trader'.  In this case, Goldman is doing neither and remarkably saying they did nothing wrong... And they have an incredibly strong case:

• Goldman themselves lost $90M in this transaction -- if they were going to defraud, would they defraud.. themselves?
• each one of these bets always has someone on the short and long side -- gamblers take either side, Goldman is just the 'house' arranging the transaction
• last and most logically, who is to say that these bets wouldn't have gone the other way?  would anyone be complaining then?

The SEC is pointing to two things - an email by a young trader suggesting that these products were going to fail and another firm (Bear Stearns) refusal to take on the transaction due to 'moral conflicts'.  But these are incredibly dicey waters that require 20/20 hindsight.  To suggest that Goldman knew with certainty that these products were inferior defies logic in the most material of Wall Street ways - the $90M that Goldman lost.

This appears to me a prosecution on Goldman's morality (they should have done done more), but I don't really see what Goldman, with any amount of certainty, could have done differently. 

Aveek Guha, President, www.mbadaycamp.com

Who is MBA Day Camp for?

We get asked one question a lot:  who is MBA Day Camp for? 

Its simple, our customers are a mix of individuals looking to advance their career, either via an MBA or just becoming a smarter business person. 

They:
--  are MBA prospects that have gone on to top schools (Kellogg, Chicago GSB, Thunderbird, Yale, etc)  [30%]
OR
-- represent business owners in some of the most interesting small to mid sized businesses (Blueair, Randolph Wine Cellars, Chicago Scene, Machete TV) [20%]
OR
-- come from law backgrounds and want to learn about business and get CLE credits (Sidley, Seyfarth Shaw, Bryan Cave) [20%]
OR
-- work for large companies and want to understand other functions (Allstate, PepsiCo, Owens Corning) [20%]
OR
-- are journalists/techies/artists that want to be smarter about business (author Cari Lynn of “Leg the Spread”) [10%]

If you want raise your Business IQ, register now for our global webinars starting on April 8th at https://secure.confertel.net/tsregister.asp?program=MBA2010.  

Are your Business Skills weak? New April webinars announced at MBA Day Camp

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The New Face of Product Launches - You!

The promise of crowdsourcing/collaborative design is filled with frothing-at-the-mouth hype juxtaposed against old world skepticism.  Consider me squarely in the middle of this debate. 

Consider that Nokia, Motorola, etc spent millions of dollars 'listening to their customers' yet were unable to come to the market first with a breakthrough device like the iphone (in an industry that is their 100% focus, no less).  It was the design brilliance of an individual mind that won here (Steve Jobs).

However, consider Mountain Dew's remarkeable Dewmocracy campaign (http://www.dewmocracymediahub.com).  Through this effort, Mountain Dew has incredibly outsourced almost the entire product launch process to its fan base, from concept to design to marketing tactics.  Clearly this is a homerun case study of using social media to drive the product development process.

In the end, both a vision-of-one and extreme customer collaboration work, it just depends on who is steering the ship.  Expect exciting stories of both failure and success as more companies push against each of these models.  Only time will tell which side will emerge as the definitive victor.

Aveek Guha, MBA Day Camp

New webinars scheduled! https://secure.confertel.net/tsregister.asp?program=MBA2010

Why jobless recovery? Too much corporate cash

As companies try to buttress their balance sheet, we are witnessing a healthy, but troublesome after effect: Too much cash on company balance sheets.  Excluding utilities and financial institutions, members of the Standard & Poor’s 500 Index ended mid last year with a record $648bn in cash and short-term securities.

Companies are hoarding cash, even the non-financial ones, having gotten their handslapped by the credit markets but not (yet) facing redistribution pressure from shareholders in the form of dividends or buybacks. 

I'm not in favor of government intervention in the markets, but instead of bank taxes and rhetoric against bonuses, why not give companies an incentive to get this cash off their balance sheets?  Tax the cash!  Give companies incentives to create jobs with this cash and push them back into the hiring mentality.  The money is already sitting with companies, why not use it?

Aveek Guha, President, www.mbadaycamp.com

http://itunes.com/apps/mba101

Is Lou Dobbs right?

Most management academics will adamantly defend outsourcing - a company that can source activities elsewhere for cheaper/better should do so.  Hence the rash of manufacturing, engineering, IT activities that have been sourced to cheaper labor pools overseas.  This is great for the consumer & the company, but terrible for the middle class worker.

Consider this: an Executive recently told me that his manufacturing facility in the US at non-union rates is $15/hr, facility in Tijuana, MX is $4.50/hr, and facility in China is $1.50/hr.  He will shift more and more of his work to the China location.

But where does this leave the community?  Those jobs will not be replaced and there are no other jobs to be retrained too -- there is simply nothing for these people to do.  There is a whole class of worker that thrived in the 80's that is becoming irrelevant now; it seems like we are on an inevitable march to the current Russian society, sharply divided by the have/have nots.

I don't have the answer, but I'm sure we are going to see more and more protectionism.  The American dream is getting increasingly difficult to attain as both blue/white collar jobs are unavailable for the American worker.  I think you will see an increasing number of tax credits, subsidies, etc to create jobs, maybe even artificially, to sustain communities at home -- what's good for the consumer is proving to be terrible for the American societal fabric.

"Too big to fail" fund backed by private companies

Treasury secretary Geithner endorses Barney Frank's recent proposal to have a fund to bailout 'too big to fail firms', funded by companies with over $10B in assets.  This type of security net for your competitors is an astounding concept, one that would be ridiculed in other industries (would Budweiser shed any tears if Miller went out of business?  would they provide any money to prop them up?!)

The beauty of this plan is that it might actually avoid the other Wall Street dirty word: regulation.  Even with the market meltdown, Wall Street has been resolutely against the need for more regulation.

Well here's your solution.  Instead of providing regulation, you create 'unemployment insurance' for Wall Street.  So everyone lives their life, if someone gets sick, you tap this social bailout money, paid for by your well heeled community. Basically government washes their hands of a private sector problem, Wall Street gets to chain smoke/drink all they want, if someone gets in trouble, it comes out of the community kitty.

I like it: its different, but it might be crazy enough to work.

Aveek Guha, President, www.mbadaycamp.com

Now on iphone! http://itunes.com/apps/mba101