BlackSand Research Blog

The World's Second Oldest Profession

2008-04-01T11:02:00.001-07:00

So, there I was, standing in the front of a restaurant full to the brim with members from the Business Women’s Network of Howard County, Maryland talking about prostitutes and Eliot Spitzer. Now, there's a sentence I didn't think I would ever write, but it's true. The funny thing is, the metaphor worked like a charm. The question, "what does she have that I don't have and what do I have that she doesn't have" was just what these small business women needed to hear. I gave them a few more, like "stand in your customers shoes" and "be your competitor's customer," but the first really captures the essence of CI for small business. Beware the suited-wonder who tells you that you must have a sophisticated portal and web agents to do competitive intelligence work - it really is the world's second oldest profession and all you need is a pair of eyes, or ears, or somebody else's to look and listen for you. All you need to know is "what does she have that I don't have".

I must admit that at a certain point I was worried that the reference to prostitution would offend some of the women in the audience, just the notion of comparing ourselves to a hooker might be too edgy. But these very smart women caught on immediately and I could see them (or thought I could) visualizing their customers, their business, and their competitors business' in a new way. They were seeing customers as they made a choice between them and the competition. They were seeing themselves as the customer making that choice. And they were seeing that they could do competitive intelligence for themselves and do it well simply by asking a few key questions:

Why would a potential customer choose my competitor over me?
What do my competitors offer that I don't offer?
How can I distinguish myself from my competitors?
What are my customers looking for?
What are my competitors trying to accomplish?
What is my position in the marketplace?

Just the basics are far more than most businesses ever collect. The idea of stepping outside of yourself and your business to find out what is going on in the market is something that so many small business owners never do, never thought to do. My job, standing in front of those women was to introduce them to the idea of doing just thought, doing it purposefully, and asking the right questions. If I had to invoke the business practices of a prostitute that makes $3,400 an hour and it works, then I have Eliot Spitzer's indiscretion to thank for helping a lot of small business owners see the possibilities. You never know, one of them might grow to be a mighty market force and they might even give Spitzer a job out of gratitude....nahhh.

Enjoy!

Know the Guy

2007-11-02T07:08:00.000-07:00

Wow, April was my last blog? How the time flies when you're having fun out there. I have a few things to say about fun since I really do like having a little myself; duathlon, mountain biking, running, skiing, snowboarding, cycling, and general outdoor activity. You can Google me "Kellyann Davis" and see for yourself. Think about what that might tell you about me, I'm competitive, I write a blog, I own my own company, you'll even find out that adopted a blue-eyed Saint Bernard and named her Bette Davis if you just "Google" me. Wouldn't you like to know that before you begin working with me, or even more importantly, negotiating with me? I think it might help. I'll know more about you than you think before I ever shake your hand and say "very nice to meet you" because it gives me an edge. Competitive Intelligence includes people, I cannot emphasize that enough. When you think you have a company pegged and can predict its every next move, remember the people and remember that people aren't necessarily rational.

Consider CEO number one, a guy who likes marathoning and you know that because you "Googled" him. You know he runs about three marathons each year and has run more challenging events every year.

Now consider CEO number two, she's the former president of the local business association, she is the mother of two elementary age kids, attends and comments in City Commissioner meetings, and is on the board of a local charity.

CEO number three, no bio, no "Google" results, no pictures, nothing. You don't know anything about this guy, zippo, zilch, nada. However, you did find out that his wife posted a not-too-flattering comment about him three months ago in a discussion board dedicated to helping jilted spouses get over their bitterness. His wife said that he left her for a "slut at the office."

You're headed into a meetings with all three of these people, you're selling them on a new knowledge management system. You know about the IT systems they operate in their companies, you know the latest deals their companies have done, you know all about their products...but the guy selling a KM sitting next to you knows everything I just listed above. Who is more likely to get the deal? The more you know, the more you can smartly appeal to personalities, build relationships and trust, and sell like crazy. Same goes for any dealings. One caveat, it freaks people out if you flaunt your knowledge about them, it's a deal breaker so don't ever do it...as we say at BlackSand, "just know."

More about the personality of companies later, and about the persons who set the tone of the work environment. Know the people before you go into a meeting, know what motivates them and how they express that in their lives. You'll have an edge and that's what this is all about.

Competitive Intelligence, Know Thyself Too

2007-04-10T09:40:00.000-07:00

Good competitive intelligence can provide a company with a clear view of their position in various markets, and it should help company executives to become more magnanimous. Good competitive intelligence will allow a company to predict their competitors' next moves, exploit their weaknesses, become proactive to disruptions in the marketplace, and successfully launch new products and services. After all, cCompetitive intelligence is the world's second oldest profession, no matter what you're selling, you need traditional knowledge about:

Pricing
Customer Views
Market Share
Regulations
Market Culture
Relationships Across the Market space
Deal Structure
Product Distinction
Disruptive Technology
Competitors New Product Launch Plans
M and A opportunities and threats
Marketing and Advertising Efficacy
Media Coverage

A company also needs to look inward for threats and opportunities. It's important to know what employees think about market position and products. A company that gathers information from employees about products and markets will find gold in them. But an often overlooked aspect of CI efforts is an internally facing view. It's important to know if you have employees looking to leave, why they are considering jumping ship, and furthermore, where they are looking to go. Your company will benefit also from learning what your employees think of products and services, what they know about the marketplace, their ideas for improving existing offerings and ideas about new products and services. If you have low morale, a high turnover rate, and/or are about to lose key members of your team it could significantly impact your competitive advantage. Let's say that a regional sales rep with key relationships in the mid-Atlantic marketplace suddenly springs his or her two week notice on you, how will you ensure that their market knowledge and key relationships don't disappear with them. Better yet, how do you keep them on board? Knowing your employees is a key piece of competitive intelligence that is often overlooked.

Internal intelligence can be achieved using a variety of methods including personnel file review, interviewing key employees, employee focus groups, and incentives to share ideas and feedback about various practices and products. These methods have a dual positive effect by letting employees know that you care about their feedback and ideas as well as gathering vital intelligence about the overall health of your workforce.

There, of course, are other methods of finding out what your employees are talking about, but do they cause more harm then good? Some companies conduct credit checks, email scans, and general secondary scans for resume postings, blog postings, or other indicators that an employee may be in trouble or looking for other opportunities. The question is, how much do you need to know about your employees to ensure your company's health and at what point does the perception of mistrust make the issue of unhappy employees a self-fulfilling prophecy. Some methods can be toxic, even if they provide some valuable information, they may create more issues than they help to resolve.

I have some thoughts about creating a CI system that organizes intelligence and prompts research in both traditional and internally focused areas based on need. The system would be aligned with company metrics, strategic planning and marketing efforts, and R and D. In my next entry I'll outline this system.

Market Research and Strategic Marketing Unite!

2007-03-24T21:25:00.000-07:00

Market researchers can provide the insights necessary to develop strategic marketing plans but, as I explore the world of marketing professionals more and more, I find most marketing plans lack the basics. First, you must know your customer. Not just where they live, how much money they make, and how much they have paid attention to your products and services in the past, but how they really think. You have to know how they talk about your products, how they use them, and how you can find others that speak and think in a similar way. Most marketing plans I have seen consist of customer demographics, and the best I have seen pinpoint persons in various markets that fit the same basic profile. It's just not enough, it doesn't hit on the key reason a person might open their wallet, the WHY.

I've been wondering about this seemingly obvious disconnect for some time and I'm beginning to think that there is a gap between market researchers who really understand how to get and mine appropriate data, and marketers who create the collateral, the messaging, and the visuals that are used to expose customers to the product. There has to be a joke in here somewhere about three guys walking into a bar, if it hits me later, I'll be sure to put it in the comments section of the blog. What we have here is a case of left brain people and right brain people not communicating well... as the Warden might say "what we have here, is a failure to communicate." How do number crunchers like me talk about the results, and how do the more artistic types utilize them. Sometimes the number crunchers are one trick ponies (I'm a number cruncher so bear with me) and don't know to look at the materials their counterpart marketing professionals are doing enough to know what research they need to do next, they just crunch what they're told. For example, I recently saw a case where the marketing department created a very nice magazine for their customers but had no idea that they could make a lot more advertising money if they would only cross match their customers with other products like energy efficient appliances and cars. And the market researchers were fixated on finding out if the customers liked the content of the articles in the magazine..big missed opportunity. And it happens all the time.

The solution is a little "touchy feely" perhaps, but I think it could work, they have to find a way to build relationships with each other. They have to find some common ground, or a person who can help them find common ground (a shameless plug for BlackSand Research consulting services available at reasonable prices). The kind of communication that takes place when the groups get together and start talking about what comes next, the next level I hear about all the time that so often goes undefined. Ideas like "what if we find out what language our customers use when they talk about our products" may seem simple but is so often ignored in favor of the marketing people thinking they know, and the number crunchers really not caring about the qualitative crap. Uh oh, not crap if it's properly coded.

It's time to move beyond the simple demographics of the markets we sell into. Time to really understand the people in those markets and deliver messages that match the sometime idiosyncratic styles of customers and potential customers in those markets, specifically. If a message can sell a product because a customer gets it, then it makes a lot of sense to do the research on what will help them along in their understanding. We need both sides of our brain to make sense of this crazy world, and we need both to reach customers. Put them together and get them communicating!

Understanding People in Markets Brings Better Insight and Better Decisions, the Case of Chinese Bicycles

2006-12-21T08:23:00.000-08:00

I've been thinking about bicycles a lot lately, just part of the Summer and Fall litany of hobbies that keep me from getting too ummmm, robust. Plus, I just plain like riding bicycles. Since I also think about selling things in China a lot, the two subjects converged and fell in love with each other in my head. Seems like everyone rides a bike in China, from kids to great grandmothers. It's not a game for Lance Armstrong wannabes, kids and psycho trail junkies, it's the principal form of transportation for the Proletariat masses. So, you'd think that non-Chinese bicycle manufacturers should be licking their collective chops about the market, all those riders mean big business, right? Not necessarily.

The most popular bike in China,the Flying Pigeon one speed costs about $35 bucks on the street in Beijing, or Tianjin, the bike manufacturing capital of China. But some will tell you that it isn't worth buying a bike since they are so often stolen, brazenly stolen. Some guys treat stealing and reselling bikes like it's their job, and it is. You can buy a slightly hot Pigeon for about ten bucks. In fact, think of it as a different business model, you are actually paying money to rent a community bike and the thieves are really just ensuring appropriate circulation of the bikes, not committing any crimes. Given this social context, it doesn't make a lot of sense to think of China as a burgeoning bike market for a company like Santa Cruz or even Trek bikes who produce some of their low-end stuff in China.

Sometimes we get caught up in our own way of looking at the world and forget that though we are all human beings with similar hardware, human societies can work in very different ways. If you want to understand how a market works, study the people and beware of market reports and market researchers that look only at the numbers. Lots of statisticians are socially challenged (I'm one of them so I can make that joke), it's no excuse for failing to consider how the market really behaves. In this case, considering the underlying traditions and the numbers you might want to consider exporting "liberated" bikes rather than importing your most expensive two wheeled rockets.

If you're interested in Chinese attitudes toward bicycle ownership and you're in the mood for a good indie film, check out Bejing Bicycle by Xiaoshuai Wang.

Innovation, With a Capital I

2006-08-04T09:50:00.000-07:00

Innovation is the key to success at the X Games, it's true for tricks and for equipment. Eric von Hippel, Professor and Head of the Innovation and Entrepreneurship Group at the Sloan School of Management at MIT, says that followers of extreme sports have become expert at adapting and refining the equipment they use. This week we and Professor von Hippel finally get to see a few of the new tricks the athletes and the engineers have kept up their sleeves for the past year and they aren't leaving anyone hanging. Anyone who is interested in how to innovate, what innovation really is, or feels a need to prove to themselves that sometimes, innovation is more than a buzzword, should spend a few hours watching ESPN's coverage of the X Games in California this weekend.

The increasing popularity of Freestyle sports, including motocross drives athletes and engineers to new heights. Travis Pastrana, one of the premier athletes in “Extreme” sports has innovated past the wildest expectations of fans executing tricks like the double back flip previously possible only in video games. Now, the engineers have joined him in attempts to create a motorcycle that will allow the rider to spin the handlebars as they jump. Engineers had to completely rethink motorcycle fork and suspension design spending $250,000 on the “one-off” bike Travis used in the August 2006 Summer X Games.

The bike's front end cost over $250,000 to design and produce. And although it looked like it was heavily derived from bicycle technology, Pastrana's people assured me it was 100% moto-inspired. The mini-forks only allowed for a few inches of travel so the landing was tricky. The bike was also equipped with a Recluse auto-clutch to give engineers one less cable to worry about. The process was so secretive that Cernics-Suzuki spokespersons would not reveal the identities of the design team members or allow any pre-X games pictures of the bike.

This serves as a reminder that innovation is inherently risky, especially when testing involves jumping 65 feet on hard, packed dirt. Look at the new fork design above, it represents a year’s worth of work for a team of engineers and hundreds of thousands invested. This also reminds us that innovation is hard, in this case for the hardware and for the human. Those new barspin forks broke during taking off for a jump during X Games competition. Despite this setback, the new design promises to revolutionize motorcycle suspension design.

Check Out how Diet Coke and Mentos Scored Without Lifting an Advertising Finger

2006-07-02T10:20:00.000-07:00

This is such a good example of the new paradigm discussed under the post on Social Computing that I had to share it with you. Millions of hits on this Internet Video produced by two amateurs who like to dabble in mad science can't be wrong. Long live distributed marketing! And, congratulations to Coke and to Mentos on scoring big without spending a dime.

From an article published in the Washington Post, Sunday, July 2, 2006 - by David Sharp of the Associated Press

Americans have a new way to celebrate the Fourth of July: Drop Mentos candies into 2-liter bottles of Diet Coke and watch as the soda shoots skyward. For the messy technique, thank Fritz Grobe and Stephen Voltz of eepybird.com, "Entertainment for Curious Minds."

The two performers from Buckfield appeared in a three-minute Internet video in which they don goggles and lab coats and show the world how to create the geysers. The resulting 20-foot blasts have captured the imagination of millions.Grobe, a juggler, and Voltz, a trial lawyer, enlisted Mike Miclon, the owner of the theater where they perform, to operate the camera and a friend to create the toe-tapping techno music soundtrack. Miclon said his wife held an umbrella next to the camera just in case.Coke and Mentos have embraced the phenomenon.

Mentos, a subsidiary of Perfetti Van Melle USA, Inc., features the video on its Web site, and a Coca-Cola Co. spokeswoman said the Atlanta company is pleased that people are having fun with it. "You never can tell what's going to capture people's imagination," said Susan McDermott, the spokeswoman. For the record, she noted, people won't suffer harm from chomping Mentos and washing it down with Diet Coke.

The Many Forms of Social Computing

2006-06-22T14:16:00.000-07:00

Published Tuesday, June 20, 2006 by Jeremiah Owyang in his blog about web tools.

Social Computing is Changing the Face of Marketing and Advertising: What the Forrester Research Report Really Tells Us

2006-06-22T08:21:00.000-07:00

By Kellyann Davis
June 2006

Social computing is based on creating or recreating social conventions and social contexts online through the use of software and technology. Social Computing happens because people everywhere have access to other people everywhere online, over the phone, whenever and wherever. Think Wikipedia, think teleconferencing, think satellite phones, IM, and email when you think of the Social Computing phenomena. It means we can interact with all of our personal connections/community pretty much at will, and by all accounts, data indicate that we take advantage of our new connectivity. Forrester Research predicts that this new connectivity between people will lead to consumers learning more from each other rather than through marketing channels. More than a billion people are accessing the web across the globe right now, more than half of all North Americans, a third of all Europeans, half of Australia, and more than ten percent [and growing rapidly] of Asia log on to the Internet.

Remember the dark ages? Some of us like to call them “the 80’s,” the time before we all knew what an operating system was, when cell phones looked like masonry bricks with straps on the back, when the Sony Walkman was high tech., when you had to buy the whole CD, when radio was free but they played the same ten songs over and over [sorry Depeche Mode and U2], and MTV was actually broadcasting music videos? Today, I know people who won’t leave home without their PDA, who can text message and download content while they’re driving [not recommended], who want to see reviews of every restaurant before they decide, who talk about their eBay reputation score. It shouldn’t come as any surprise that we choose our stuff in different ways today and are less vulnerable to the kind of influence corporate marketing and advertising can wield.

To really understand how fast things are changing, consider all the things you can do today that would have been difficult or impossible just a few years ago: you can query Google via text message from your phone, get a map and directions on your mobile phone, download podcasts and listen to them when it’s convenient for you, send your photos to friends and family instantly with your mobile camera/video phone and email, store gigabytes of personal e-mail online, carry your entire CD collection with you in a business card size MP3 player, and “fly” anywhere in the world from your computer on Google Earth. Most of these applications are free—and the ones coming close behind them will be even more powerful. With more and more phones carrying Global Positioning System (GPS) chips, for example, it’s likely that companies will offer a cornucopia of new location-based information services; you’ll soon be able to find an online review instantly as you drive past a restaurant, or visit a landmark and download photos and comments left by others. More than a billion people are connecting to the Internet across the globe tonight, they are talking with each other about everything and their new behavior is changing the face of marketing and advertising forever.

Social computing means that, as consumers, we don’t receive or perceive marketing and advertising like we did in the eighties. Then, we were told by mass media what food, music, cars, sodas, and clothes were the “in thing,” were high quality, solved a problem for us, etc. Now, we ask our community consisting of our friends, colleagues, family, and online acquaintances with similar interests and experience what they like or dislike about particular products or services. We can even see what others have said about something over time, and we can see how the seller responded. How can marketers and advertisers reach an audience in this new paradigm? How can products be targeted to leaders of these networks who can disseminate a positive opinion about your good or service? Does it matter? People still watch TV and listen to the radio don’t they? Why do we need to change just because a bunch of brats bought iPods? How else does social computing impact our world?

Lucky for us, Forrester Research recently published a report on Social Computing and marketing. Forrester's key conclusions in this Report emphasize that companies should:

· Discard top-down management and communication strategies
· Use employees and partners as marketers
· Incorporate communities into products and services

Why is Social Computing significant for marketers? According to Forrester, the three tenets of Social Computing make collaboration relevant to marketers. The three tenets are:

· Communities driving innovation
· Institutions facilitating experiences shaped and owned by communities
· Communities taking power from institutions

According to Forrester Research data, Marketing and Ad persons are paying attention to these changes and creating new paradigms in marketing and advertising. Note that 47 percent of marketers use or plan to use RSS feeds, 51 percent of marketers use or plan to use blogs, and almost 80 percent use or plan to use Search tools in their arsenal of marketing tactics. Even though the number of users of social networking tools is relatively small today, Forrester reports that, "as more sites attract a worldwide audience, global networks will be common." These results suggest that Social Computing is on the verge of completely reshaping the way we communicate socially and professionally. The social computing trend means that we will be communicating with peers about products, services, ideas, and each other more than ever before, and what others say will be more important than ever in these new online communities.
Forrester's findings also indicate that more and more “socially-connected” buyers are less brand-loyal, less trusting, and more independent. The change may be attributed to higher expectations among buyers of a particular brands and also because they prefer to customize products or services for their own use. Forrester also characterizes peer to peer networks as a reason for declining brand loyalty due to the exchange of information between groups of buyers. .Forrester recommends flexibility in marketing and advertising paradigms to maintain relationships with new and existing customers. Businesses and marketers will need to evolve with their changing audience of consumers by translating their current strategies into strategies that embrace Social Computing.

Social Computing requires a new Marketing Tool Kit with New Channels, Technology and Metrics to replace the old Marketing Tool Kit of Channels, Tactics, and Metrics. Figure 9, from the Forrester Report, featured below, illustrates the contrast between the two Marketing Tool Kits: [image]

Forrester suggests that businesses move from the top-down traditional approach to the bottom-up customer-driven innovation approach by ceding control and by offering communities a platform through these strategies:

· Use customers as the source of inspiration
· Observe customer needs in-depth as key drivers
· Encourage spontaneous customer involvement
· Implement a controlled chaos process
· Assess customer's explicit and latent needs

Companies can create this bottom-up approach by inviting the customer to use social computing tools such as communities of practice, intranets, search, email, blogs, and smart point of sale. Forrester says that this will result in customer driven content, sometimes created by the customer at POS and in peer to peer networks where people buzz about products, suggest changes, and truly drive innovation. "Increased adoption of online forums -- such as eService suites and Emotive Networks -- shows that consumers are also eager to share their expertise of products and services with each other," says Forrester. Forrester views Social Computing as a continual learning process where marketers and strategists are advised to talk less and listen more when engaging in the following activities:

· Become part of the community by offering customers the opportunity to express themselves and communicate with peers
· Use peer relations to raise loyalty and stickiness by keeping in constant touch with consumers and immediately responding to changes in their preferences
· Avoid an exploitation-only approach to foster positive consumer opinion
· Focus on Social Computing as a strategic asset of value not on its risks
· Employ flexible corporate oversight and use it as a recruiting differentiator
· Track younger employees and Social Computing needs and tools in the workplace
· Provide the tools to facilitate successful Social Computing

"Marketers have to listen to the buzz online and tap into new distribution channels for their products to track positive and negative feedback about their brands in real time," says Chris Charron, vice president and research director of Forrester Research.
Social Computing impacts business whether companies choose to adopt Social Computing or not because users give communications a new context. Micro Persuasion's Steve Rubel says that, "the change or die mantra is the anthem of the internet age, like it or not."
Marketers, advertisers and strategists need to be prepared for this new paradigm. They should learn as much as they can about available technology, become early adopters and users of that technology, and remain very flexible in this new paradigm. Marketers, advertisers and strategists should prepare to:

· Communicate the impacts of Social Computing to the worldwide audience of users-- buyers and sellers
· Research, monitor, and report findings in Social Computing
· Search for solutions to the risks and problems associated with Social Computing
· Facilitate successful communications and buy/sell interactions within the Social Computing setting
· Act ethically and responsibly within the Social Computing environment

According to Forrester, the industries most affected by Social Computing include media, retail, telecom, high-tech, finance, travel, consumer packaged goods (CPG), healthcare and automotive. "Gradually, Social Computing will impact almost every role, at every kind of company, in all parts of the world," reports Forrester. Bottom line, get ready for the impacts of social computing in all aspects of your daily personal and professional life.

A Few Words about Podcasting; Why It's Time to Consider Getting on board

2006-06-10T08:25:00.001-07:00

By: Kellyann Davis
CEO, BlackSand Research

In case you've been asleep for the past year, or think that this new fangled iPod is a fad, I have two words for you, WAKE UP! Podcasting is about to become a staple marketing tool because it's cheap to do, virtually free to publish, and it's reaching more and more of your target audience every day. To find out just how easy podcasting is, check out my friend Tee Morris' book "Podcasting for Dummies" and learn how to podcast with nothing more than the equipment you already have and a few lines of XML.

Podcasting is really a misnomer, you don't need an iPod to enjoy a podcast. In fact, you don't need anything more than a computer, or any MP3 player. iTunes is free and they carry a good percentage of podcasts currently available. People can download a podcast from iTunes [an application they can download also for free], or directly from your website quickly and easily.

Some of my marketing colleagues argue that it's too soon for podcasting, it's just not something they have ever used, and they think their clients haven't even heard of "podcasting." While it's true those who are podcasting now are at the front off the curve, it's catching on, and many manufacturers are beginning to take advantage of the technology. Specialized Bicycles, Disney, Kellogg's, McDonald's, Reed Business Information Services, and the National Association of Manufacturers are podcasting right now. If you are a little guy, like I am, this presentsd a rare opportunity to be the first off the starting line on this very innovative marketing tool.

Before you say, yes, but it's just too time consuming for me take this into consideration and few members of my target audience listen to podcasts. For today, that's certainly true, despite high interest in podcasts [25 percent of online users] only 1 percent of Americans who are online report downloading a podcast in the past 12 months, but times are changing quickly. The paradigm of radio is changing under your feet. Consider that every new car comes with an MP3 player built into the [satellite] radio and Forrester Research forecasts that 34.5 million people will be consuming podcasts by 2010.

Just like digital video recording, podcasting allows consumers to listen when they have time. I listen to the NAM podcast on my computer at work, and I listen to Bob Roll podcast for specialized bikes while I ride my bike. I can choose when to listen and program my own radio with podcasts from sources like NPR, Reed Business Information, the NAM, and even McDonalds. Right now I find out about specials, events, and deals on my podcasts and I get valuable information when I want it, where I want it. And I don't even have an MP3 enabled car radio, that's next. Excuse me while I go listen to the Toyota podcast to find the best deal on a new FJ with that mp3 enabled radio.

What Does it Mean when Manufacturing Loses jobs while Output Increases?

2006-06-02T08:35:00.000-07:00

By: Kellyann Davis
CEO
BlackSand Research

The Bureau of Labor Statistics reported this morning that the Manufacturing industry lost 14,000 jobs in May after gaining 19,000 in April. Hit hardest among the Manufacturing sectors was motor vehicles, followed closely by transportation equipment, and computers and electronic components. The retail industry was hit even harder losing 27,000 jobs from its' more than 15 million job payroll. The winner...again...was the Health Care industry where 22,000 jobs were created.

The news about manufacturing jobs is bad, but other data such as Industrial Output, Productivity, and Capacity Utilization tells a different story about the Manufacturing industry's performance. Output rose 5.5 percent in the first quarter of 2006 along with the decrease in employment in Manufacturing resulted in a 5 percent increase in productivity and a 2.4 percent increase in capacity utilization.

So what do all these numbers mean? Is it just a terrible time to be a production worker? Think of the situation this way, over the past year, manufacturing output per hour increased by 8 percent while output increased 5 percent. There's your employment loss in the equation, looks like the lucky production workers that kept their jobs really put out in April. And the manufacturing companies did fairly well.

Manufacturing is producing and exporting more goods than ever with fewer employees. Since 2001 more than 3 million manufacturing jobs have been lost to the American economy. Some of that employment loss came from contraction of industries in the U.S. like Steel, Furniture, and Textiles, some came from the redefinition of manufacturing when the Bureau of Labor Statistics transitioned from SIC to NAICS industry designations, some came from increased human productivity, some from better automation, lean manufacturing methods, and IT systems, some came from offshoring jobs, and some came from outsourcing jobs. The point is, it's a multivariate equation that comes with an upside for companies and for consumers albeit a downside for the American manufacturing worker; more and more efficient production for a growing array of markets, lower labor costs per unit, and lower prices. If you are in business, it's time to think about getting into new markets, find new customers, and keep production costs down any way you can.

For manufacturing workers, beware, the global marketplace does put you at a disadvantage due to global competition for your job. That said, American manufacturing jobs will always be around, after all, Americans consume a quarter of all the goods produced on the planet and we only make up 4 percent of the population. That means we have the best market to sell into in the world and it makes sense to produce, or at the very least assemble the big items in the market you are selling into, just ask Toyota. And, despite some protest, Americans like to shop at Walmart where many of the smaller goods produced offshore are sold for the lowest price available. Additionally, high skill manufacturing jobs will materialize [forgive the pun] in sectors like Biotech and Alternative Energy. Much research and development will continue, especially as the government increases funding for basic research, the kind that industry doesn't invest in due to very high risk and typically low ROI. Like the companies they work for, American manufacturing workers need to stay in school for life to compete in the global marketplace.

The American Image and Trends in the Sporting Goods Industry; The Post 9/11 Marlboro Man Is Reborn Hard

2006-05-26T11:12:00.000-07:00

By: Kellyann Davis
CEO, BlackSand Research

According to the National Sporting Goods Association, running, trips to the gym, mountain biking, basketball, recreational boating, hunting, skateboarding, hiking, and weightlifting enjoyed significant increases in participation last year. Other activities including camping, paintball, cheerleading, cross country skiing, scooter riding and baseball lost active participants. It's more than putting down that Razor scooter in favor of a skateboard, even the makers of the Razor saw that coming; we see interesting trends toward activities that we can enjoy closer to home like a day trip to the lake or quick hikes on a local trail rather than a cross country ski trip or a wilderness camping trip. Americans are staying closer to home and their recreation reflects this trend.

Another interesting spike in the numbers lies in a recent increase after a long and hard decline in the number of persons enjoying target shooting, bow hunting, and hunting with firearms. Could this trend, in conjunction with what we see overall in last year's trends reflect America's current mood? Maybe. The data indicate that Americans are making different choices about their recreation that probably reflect our post 9/11 reality. How can sporting goods manufacturers and retailers keep pace with these trends and move with them rather than against the tide? If more people are interested in running this year, and growth was in the ten percent range then how can the industry make sure it reaches those new customers with shoes, apparel, food, and other products related to supporting their new activity. The same is true for target shooters, and bicycle riders both enjoyed more than a million new participants last year. More than 12 million persons decided to start lifting weights last year, the largest increase over all of the measured categories.

So what does this really tell us about trends in the sporting goods industry? Americans adults want to be bigger and stronger, leaner, and better at hitting their targets when they shoot their guns. Oh, and they like to spend a day out on the boat a bit more too. In fact, this trend is reflected in the food industry in the increase in consumption of red meat while consumption of dairy and grains falls. Is this trend a rebirth of the meat and potatoes American man [and woman] with broad shoulders and a steady gun? Looks like the Marlboro Man [and woman] tossed the smokes, road his bike to the gym, and picked up the weights... all so he could look better on his new boat that he plans to protect with a gun that his wife really knows how to shoot. Sounds a lot like the image the Republican party worked with to reach the millions of NASCAR Dads and Soccer Moms during the 2004 Presidential campaign. Okay, maybe they kept the Mom with a gun image in their bag, but not too far in. Yes, this sounds a little bit glib, but gun or no gun, image is key to maximizing sales in this industry. We must pay attention to image that Americans are striving for, it's more important to their purchases then who they actually are in their day to day lives. How American want to see themselves and their children has a huge impact on how they spend in the sporting goods industry.

And speaking of their children, in the past 15 years, "extreme" sports have gained 50 million [mostly young] participants. They spend billions on equipment, food, TV shows, apparel and music successfully targeted directly at them. In fact, this reflects an overall trend among youth away from team sports and headlong into individual sports such as boarding and mountain biking. It isn't just a category of sports either, this is a lifestyle with all of the accessories. And for those of you interested in emerging markets like China, a nice boy named Danny Way recently jumped his skateboard over the Great Wall with an 8 Chinese TV stations and several international stations looking on. Keep in mind that China has 1.3 billion people and birth policies have led to a rather unbalanced ratio of "only child" boys to girls. That sounds like an interesting target market.

In fact, wages in the industry are expected to grow more than 25 perecent by 2014 due to rising demand. That is more than 10 percent faster than the rest of the economy. Where will all of those new customers spend their money? Based on our American image theory, Dad is buying a boat, Mom is headed to the gym, Daughter is running and Son is grinding an edge on his skateboard. And somewhere in China a mother is buying her only son a snowboard.

In the next installment, we'll look at the demographic breakdowns in purchasing patterns of sporting goods. Sneak peak: Surprise, surprise more women than ever are buying guns and women like to practice shooting them at targets. Also, stay tuned to learn about new diet trends that are sure to bleed into the sporting goods industry.

Doing Business in China: Is the Big Mac Index Going Down the Commode?

2006-05-17T21:52:00.000-07:00

By: Ben Vickery
VP Research, Asian Markets
Blacksand Research

Part I: How Many Burgers Can They Buy?

When we consider both the opportunities and challenges of doing business in today’s global economy, it is often useful (and at the very least, interesting!) to employ comparative indices. These range from using comparative wages to get a better understanding of labor as an input for production costs to employing more complex indices that analyze qualitative and quantitative data to rank the best countries to do business in. Based upon my recent visit to China, perhaps I can suggest a new index as well: the Toilet Index.

First, let’s look at comparative wages. Low-cost production is obviously a primary competitive advantage that China and other nations have leveraged over the last decade. However, how much really is the average wage in China these days?

One of the better studies I’ve come across on this topic was published in the Bureau of Labor Statistics’ August, 2005 Monthly Labor Review. Judith Banister’s “Manufacturing Compensation in China” found that, based on 2002 earnings data, China’s 30 million urban manufacturing employees made approximately 95 cents per hour, while the reported 71 million manufacturing employees outside the cities made about 41 cents per hour. Taken together, the average Chinese manufacturing wage came out to 57 cents per hour, which is about 3% that of U.S. manufacturing wages. Additionally, Newly China’s newly industrialized Asian neighbors had labor costs roughly ten times that of China, and Mexico and Brazil’s manufacturing wages were roughly four times that of their Chinese counterparts.

In other words, China indeed enjoys a significant advantage of low-cost labor when it comes to production, not just when it comes to U.S. manufacturing, but also compared to China’s Asian rivals and other nations that have tapped into low-cost labor in the past as a competitive advantage. While manufacturing wages are rising in China urban centers, particularly along the East Coast, the nation’s 1.3 billion-person labor pool, as well as Chinese efforts to plan and grow new manufacturing clusters in the nation’s interior (is, China’s “Go West” program), means that this should be a Chinese strength for at least the short to mid-term future.

There have also been various efforts to compare the cost of living on an international basis. My favorite is the “Big Mac Index,” produced by the Economist. To quote from their online site:

“Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our "basket" is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued."

The most interesting thing about the Big Mac index is that, as noted above, it helps one understand the degree to which a given current maybe under- or overvalued. In the case of China, as of a few months ago, a Big Mac is about $1.30 versus the U.S. price of $3.15. This means that the yuan is 59% undervalued. (As a personal aside, I must report that during my time in China, I never actually dined at McDonald’s among my epicurean ramblings, though I must have spotted literally hundreds of locations in Beijing, Shanghai, and Hong Kong.)

In Part II of this Blog entry, I’ll discuss indices that can be used to consider business strategy, such as Michael Porter’s Business Competitiveness Index. Plus, I have a new index in mind that I’ll “keep the lid on” for now…

BlackSand Blog from the Foreign commercial Service China Business Conference

2006-05-15T14:53:00.000-07:00

BlackSand Research supports the U.S. Foreign Commercial services China Business Conference.

"With China's accession to the WTO in 2001, this fastest growing economy in the world offers abundant opportunities to corporations and businesses of all sizes in the West. China is predicted to become the world's second largest economic power by the year 2030. Education is the crucial first step on your journey toward success in developing business relationships with China."

The thing on everybody's mind centered around how best to produce in China under the circumstances... They asked members of the Executive panel, the session that finished the conference, questions about political and social environments, how to protect intellectual property, and where to go to find contract manufacturers. Members of the panel that included Bill Reinsch from the National Foreign Trade Council discussed risk but stressed reward. Bill quipped that if companies weren't willing to take on a little risk, they wouldn't be at the conference in the first place.

And Bill iwas right, and so was the rest of the panel in discussing first and foremost the risk a company must assume when playing in a market like China where laws and just as importantly local custom plays a role in success. Companies interested in growing into such markets need a guide, not just market reports, but real people on the ground who know the character, the customs, and of course the laws that will come into play there.

Once a company is ready to move into a foreign market, the U.S. Commercial Service can provide people on the ground, market reports, and will even set up meetings with potential clients and/or partners. They know how markets behave, who is there, and how to connect you to resources in that market.

BlackSand Research was proud to be a supporting organization of the U.S. Commercial Services China Business Conference. We look forward to working with our clients and the Commercial Service to maximize returns on export strategies for years to come.

BlackSand

2006-05-13T09:26:00.000-07:00

What about the Creative Class? What Your Business and the American Workforce Need to Know About The Future of Globalization

2006-05-13T07:17:00.000-07:00

By: Kellyann Davis
CEO BlackSand Research

In our thinking about globalization, let's take a moment to consider the works of Richard Florida and Tom Friedman. What they are trying to tell us about the future of globalization. If they [or at least one of them] turn out to be right, how can you exploit that knowledge? What should you be worried about?

Florida's research indicates that creative people tend to cluster in certain places, geographically speaking, that have certain characteristics such as abundant hiking trails and art museums. Great, so now you know where to go to find them, or join them. By the way, Florida seems to insinuate that if you don't join them, you're not creative, or you are but you can't keep up with a whole community of your ilk. Friedman's work [seemingly to the contrary] indicates that the world is getting flatter in the sense that anyone, anywhere can participate in the global economy, from purse makers in the Andes, to product innovators in Bangalore. Notice that both refer to geography when they display their data on how the world is changing and American opportunities shift to other parts of the world.

Richard and Tom seem to be engaging in a little "tough love." Both seem to be telling it like it is, and telling Americans what fate has in store for them and particularly for their children. If you're creative, you'll probably live on one of the coasts in a city like San Diego or Boston. If you don't get an education, a good one that continues throughout your life, you may just end up in a trailer, the American version of a mud hut.

From a business perspective the news about globalization is not bad at all, it means that there are new opportunities out there if you're willing to look for them. The flatter economy means that you can lower production costs by moving those less-efficient operations to low cost countries like China and India. And because creative groups tend to cluster together, it also means that you know where to find innovators regardless of where you're located.

Textile companies and automotive suppliers have moved much of their simple production to low cost countries, they had to in order to remain competitive. So have furniture makers, although many simply succumbed to market pressure and lost to businesses based in low-cost countries. That's the world getting flatter, many countries have low cost labor to offer, and are well on their way to offering high wage, high skill labor as well.

If you're an American worker, don't worry, America is still the most creative place on earth. Creative people and companies in cities like Minneapolis, San Francisco, New York, and Washington, D.C continue to produce ideas that change the world. Now, we have some competition, and that may have the power to drive us even faster toward a better future.

Next time, we'll talk about the future, how things could change drastically by shifting away from a pertroleum based economy to an alternative like hydrogen.