Friday, November 30, 2012

Orenchi Ramen is Broken

The subtitle of this post should probably be, How Come I Can't Eat at My Favorite Ramen Restaurant Whenever I Want. In my opinion, Orenchi Ramen is the best ramen restaurant in the area. But the problem with Orenchi is that it's become such a desirable destination, it's difficult to eat there.

At lunch, they open at 11:30 and it's not uncommon for a line to have already formed. They used to stay open until 2:00pm, but they often ran out of food and had to close down early. Once, I was there at 12:50 and they quit serving because they had run out of soup. And, as crowded as the lunch service is, dinner is worse. Additionally, when you finally sit, you feel obligated to rush through your meal without ordering side dishes or relaxing, simply to help turn the table for some other poor soul that's been waiting outside for 30 minutes or more.

This kind of crowd means that, during the work week, my colleagues and I no longer consider Orenchi in our lunch options. These days, it never comes up as a dinner either. What was once my go to ramen shop has become my never go.

All of this left me thinking, given that business situation, how do you fix Orenchi? Here are some thoughts on possible solutions, each with it's associated comments:
  • Raise prices. As some point, the cost of an expensive bowl of ramen becomes too high for people to justify. This might weed out some percentage of their customer base, but at the same time, I don't think that their customer base is waiting in line because they believe that Orenchi Ramen is a value purchase. They aren't turning over customers on their giant bowls of ramen. So, ultimately, I don't think that raising prices would significantly impact the crowd issue.
  • Reservations. The waiting list for The French Laundry is epic, but how far in advance would people book a meal at a ramen restaurant? 
  • Expand operations. Clearly, capacity is a problem for Orenchi. Between not enough seats and running out of product, they're struggling to meet the market demands. At one point in time, the laundry mat next door to Orenchi shut down and I thought that they would expand. And yet, Orenchi seems happy to operate within their existing space and size. While scaling production, either through expansion or opening a new location, has the potential to change the recipe, you would expect that with careful management, this could be controlled.
  • Tiered service. This is the kind of thing that would align with an expanded operation. On one side of the restaurant, they operate a sit-down, more relaxed dining experience. On the other side, they have a 'ramen-fast-food' style of shop -- perhaps all counter -- that's geared to turning tables of soup only eaters. Of course, without some adjustment to their manufacturing capacity, this still doesn't address their bigger issue.
So what do you think? What's your strategy for fixing Orenchi?

Wednesday, November 28, 2012

The Economics of Austerity, Silicon Valley Style

The election is over and, for those of us that haven't been making mad money on all of the campaign advertising, we're back to the realities of our current economic situation. And while many now associate Silicon Valley with software companies like Google, Facebook and Twitter, there are still some of those old school businesses that design and produce actual silicon. Unfortunately, the economy is not really smiling on the semiconductor industry these days.

Semi is notoriously cyclical, but what we're seeing now is in many ways part of a larger evolution that is reshaping the industry. Over the past year and a half, there's been some consolidation among the larger manufacturing equipment players -- the merger of Lam Research and Novellus, the acquisition of Varian by Applied Materials -- that speaks to the dwindling opportunities at the root of the ecosystem.

There are fewer fabs. CapEx news releases are sporadic. There are still a lot of questions about when, if, and how much these manufacturing facilities will invest in next generation process technologies. Further upstream, you don't have the pull of a Moore's Law fueled PC industry driving waves of new system purchases each year. Sure, there are ICs being designed, chips being sold and devices being built, but there isn't the same momentum.

But the biggest boon to the industry in the past five years has been things associated with green technology. While the technology for photovoltaics and LEDs have been around for a long time, the push for innovation and broad scale implementation spurred a host of new businesses, new equipment and industry transformation. All of those things meant investment, spending, and new opportunities.

So here's a quick history refresher. In 2008, we had the collapse of the economy courtesy of the financial markets, the sub-prime and all of that. Then 2009 was a bleak year -- everything was down. That was also the year when the government pushed through the stimulus with a push towards green tech. But things started to come back in 2010 and by midway through the year, the Semi industry motor (and emerging green tech) was going. In 2011, you started to see some shake-out, consolidation and the collapse of Solyndra, price wars happening in solar panels, and the market starting to pucker. And now 2012 has been another year of poor performance.

So what happened? Well, on the one hand, if we look at things from the not-a-big-enough-stimulus perspective, it looks like we poured gasoline in the carburetor for a few minutes of action, but we didn't getting the car running. Add to that the Congressional Republican's efforts to bring government to a halt and make Obama a one-term president, and you basically have limited government incentives to drive the market for green tech. Instead, you had conservative media pushing climate change as a hoax and Solyndra being pumped as a scandal. Green tech became a political liability.

However you want to frame it, the simple reality is that the economics of austerity -- the cut, cut, cut, and cut that we've been subjected to since 2010 -- has choked the life out of our economy. Instead of investing in growth and a strategic future, we've been railroaded down a path of zero investment wrapped in 'thrifty, debt-conscious' packaging.

Governments have unique powers to influence markets. By defining incentives for strategic goals, they drive fuel from the investment tank into the engine of the economy. By establishing incentives like mandating that all buildings meet certain levels of green compliance or all residences add solar panels, governments establish a pull that draws energy and investment into the market. In the same way, if the government codified a mandated goal of having 1 Gbps universal broadband, it would spawn a surge in many tech markets.

Keep in mind that this is not like the government saying, "we need a million Justin Bieber dolls". Nobody is pushing for frivolous investments. Things like green technology, broadband, and transportation infrastructure are CapEx investments in the future of the country and in the future of the economy.

Tuesday, November 27, 2012

Post-election Marketing: Why Politics and Business Don't Mix

In the days following the election, there have been a number of anti-Obama business owners that have been in the press for essentially thrown miniature temper tantrums over the results of the election. A collection of these guys, including the CEO of Papa John's Pizza, a guy that owns a bunch of Applebee's franchises in the New York area and another guy that runs a bunch of Denny's franchises in Florida, have come used the election results as a justification for 'applying a surcharge for Obama-care' to 'cutting employee hours so that they aren't eligible for health care'. There are also reports of some businesses firing employees.

If we were doing a new round of high school yearbooks right now, it's not hard to imagine these guys as being candidates for the 'most likely to through their golf clubs in the lake after a bad shot'.

If there is one lesson to take away from stories like the recent Chick-fil-A meets gay marriage blow-up, it's that bringing your politics to work has the potential to cause a PR storm. It probably goes without saying, but customers are partners in your business. While we might want to believe that everyone thinks like we do or that we are enlightened by some higher truth, they don't. Evangelism can be divisive. Divisive statements and practices will alienate parts of your base and potentially drive them to action.

The potential negative energy is even worse when you operate a consumer-facing business. When consumers participate in your business, they have a much more significant vote. So while Robert Murray, the CEO for Murray Energy, can throw his post-election tantrum by holding a prayer meeting with his employees and then firing 156 of them, consumers don't really have an outlet for outrage. But when businesses like Papa Johns, Applebee's and Denny's are involved, they make their voices heard. The result is the PR walk-of-shame.
In some ways, rules of business are simple. It's kind of like a holiday dinner -- there are certain conversation topics that you try to avoid. Politics, sex and religion are all likely to get you into hot water. But in some ways, it's broader than that. Advocacy and evangelism have the potential to create backlash, particularly in our modern media environment that finds energy (links, clicks, and views) from conflict and controversy.

Disconnected Arrogance and the Moral Imperative
It's one thing to operate a business based on moral principles, but when your business takes a public stand, you need to consider it's relationship to your brand and the impact on your broader business. For example, when Patagonia aligns with environmental projects, that's also aligned with their brand. Gay marriage probably has little to do with chicken sandwiches.

Some people might claim that Chick-fil-A found it's way into a controversy as a backlash to the CEO was simply following his moral priniciples, but if Chick-fil-A had just operated quietly on it's principles, it probably wouldn't have found itself in the firestorm. Contrast Chick-fil-A with In-N-Out. In-N-Out prints Bible verses on their cups and wrappers, but just the number notations, not even the text. Controversy score: Chick-fil-A=1, In-N-Out=0.

The reality is that these controversies don't typically result from businesses operating on principles, they tend to be sparked by the arrogant behavior of an individual. Principled businesses express their principles through their operation and their brand. They communicate their values through their ongoing operations. In that same way, successful principled businesses harmonize with their customers and their partner community. During ongoing operations, the business connects with some constituents and they alienate others. These controversies tend to be sharp turns or tangents.

Is there a take-away here? The only suggestion that I have is a repetition of something that I've said a number of times in the past.
The man with the microphone must maintain a modicum of taste at all times.
When you have the microphone, you need to be conscientious of the potential impact of every sound you make. 

Monday, November 26, 2012

Internet Moneyball: Why Android, Facebook and Twitter are Overrated

Over the Thanksgiving break, I finally got around to watching the Moneyball movie. I enjoyed the movie and was also amused by this transformation of a business book into a good entertainment piece. It's also a great reminder about how statistics and data can be a far more powerful measure of reality than conventional wisdom.

Which brings me to these interesting posts from Business Insider that capture some great analytics data from the black Friday weekend world of online shopping:

Is It Time To Conclude That Android Gadgets Are Bought By People Who Don't Actually Do Anything With Them? This post is an interesting look at online traffic and, more specifically, the difference in the number of Android devices in the world versus the percentage of web traffic. Consider these numbers from the article:
Android phones now account for nearly 75% of the global smartphone market. The next closest competitor is iPhones, which have about 15% of the market.
In the U.S., Android is clubbing iPhone 53% to 34%.
Contrasted against these traffic stats:
A recent survey of mobile web usage found that a staggering 60% of mobile web visits came from iOS devices, while only 20% came from Android.

A study IBM did of Black Friday online sales showed much the same thing--except that it was even more skewed.

iOS (iPads and iPhones) accounted for nearly 20% of Black Friday sales.
Android devices, meanwhile, accounted for only 5.5%.
Of course, this traffic disparity is no surprise to anyone looking at their analytics traffic. In the back of my mind, I used to chalk this up to the newness of Android or the lack of market penetration. Most of the people that I know use iPhones or iPads, so there's also a first-person perceptual sense of the market. But the reality of these stats seems to point to something more significant. Like Moneyball, the analytics stats reflect a different reality than conventional wisdom might suggest, one that underscores a measurable difference between iOS and Android. In this case, unit volume isn't much of a measure of the demographic and, unless you make components that go in these handsets, the number of Android devices doesn't really matter. There is a disconnect between devices and 'users'.
Guess What Percent Of Black Friday Online Sales Came From Twitter Referrals? There are a lot of interesting online sales stats in this post. But for me, there are another two highlights from this post that are worth noting:
Only 0.68% of Black Friday online sales came from Facebook referrals--two-thirds of one percent. That was a decline of 1% from last year.
Commerce site traffic from Twitter accounted for exactly 0.00% of Black Friday traffic. That was down from 0.02% last year.
Again, these are just data points, but they point to a disconnect between how these platforms are being pitched and how they are being used.

There's more good stuff in each post, so take a minute and dive into each one -- it makes for some interesting holiday leftovers.

Monday, November 12, 2012

Weekend Leftovers: Politics, Surveys, and Interpreted Data

Just a quick post with some reading that caught my eye and rattled around in my brain for more that a few seconds over the weekend. Admittedly, it was politics, but with a dash of survey interpretation and analysis that stuck with me.

First, this piece by Maurene Dowd for the New York Times, Romney is President. Simply, it's an amusing read.

Next, this post by Greg Dworkin for Daily Kos, From debates to Sandy: Things "everyone knows" aren't always true. This is a nice dive into exit poll analysis and the contrast between the 'conventional wisdom' stories told by the web contrasted against the data.

One aspect of this post that I found amusing -- if you look at how most people had decided how they were going to vote much earlier in the process, think about how much hype and money was devoted to the idea of trying to influence the final moments of the game. Often, the media portrayed the campaign and the election as a game that was coming down to the wire as though one desperate fling of the ball would decide it in the end. And who benefits from this narrative? The political media industry.

On a related note, another thing I was thinking about over the weekend. With how much some of those wealthy Republican donors gave to Superpacs -- essentially with the idea of buying the election -- do you think that their ultimate takeaway is that spending big money in elections like that is a waste? If so, what next?

Friday, November 9, 2012

Republicans, Differentiation and the Branding Pivot

So we wake up after the 2012 election with the reality that, after four years of attempting to make Obama a one-term president, all of the Republican efforts to create insurmountable partisan gridlock essentially failed. Their focused efforts to make things 'not work' did not yield results for them. What's more, in the races that featured their strongest 'essence of the brand' products, those ultra-conservative tea-party candidates, they lost -- lost in districts that were generally considered favorable to their product.

Many of the news programs are talking about demographic trends among voters and how the Republican base is shrinking. Now in many of the interviews with Republican representatives, fundamentally the question that they are asking is, "was this loss a problem with our ability to communicate our message to these segments or is there a problem with our product?"

The risks are high. Here in California, Republicans have positioned themselves into irrelevancy. Having spent the past 15 years digging themselves deeper and deeper into an ideological trench, resisting most efforts to work with consensus solutions for state issues and wielding the super-majority requirement to strong-arm the budget process, state Republicans now find themselves dealing with a Democratic super-majority. Their ability to hold the process hostage has been taken away.

Of course, in the past some have claimed that the reason some of these issues struggled with partisan gridlock was a result of incumbency and ideological voter district mapping. This was the solution to the 'unskewing' of California voters. If they could change the way voting districts were defined, the theory went, they would find themselves with a chance to compete and the end of the Democratic majority.

In the business world, if our product or our business continued to face those kinds of losses, we would probably start looking for a pivot or an exit path. But in the world of politics, we aren't just talking about product utility or adoption, we're really talking about ideology and beliefs. Some California Republicans may have wanted to be more cooperative on budgeting only to find themselves pushed into more ideological polarization. Similarly, over the past two national elections, Republicans have launched primary assaults against moderates.

In terms of differentiation, it's not like Republicans can suddenly now pivot to a position of 'oh hey, we like you moderate types.' While 'Moderate Mitt' helped Romney climb back up in national polling, the ideological purists are not going to tolerate a moderate approach because their ideology doesn't tolerate 'moderate'. It's very much a fundamentalist brand.

In that same way, while a practical approach might consider positions like a polarized immigration stance or the statements from candidates Akin and Mourdock as alienating a market segment, ideological fundamentalists look at these core principles. We're not talking about a product feature -- do I really need an optical drive or not. The only true path to consensus is conversion. Practically speaking, without some sort of act of god or a divisive, polarizing issue to drive conversions from within a demographic segment, there is little opportunity for this branch of the brand to siphon off market share from the Democratic base.

And that puts the voices for a moderate pivot in the Republican brand in difficult position. On the one hand, they are towing an ideologically rigid, alienating anchor. And it has become so ingrained within their brand that they can't escape it. But with it their, they will continue to struggle to find segments increase their market share.

Tuesday, November 6, 2012

Election Day: We Could Be Heroes

And the shame, was on the other side
Oh, we can beat them, forever and ever
Then we could be heroes 

just for one day

It's election day here in the States. With it comes this wonderful notion of an opportunity for change, a chance to reset the table, or a national pivot. And now, as we have arrived at the day when we're supposed to count up everyone's vote, we are under assault from interests that want to manipulate our system. From the interests that bankroll self-serving initiatives and twist the legal language in order to hide their real intent to the 'dark money' being spent to influence the outcome, there are forces out there that have no interest beyond their own. From the voter fraud initiatives and voter purgers to the voter intimidation and 'dirty tricks' perpetrators, there are people who have no ethical dilemma with disenfranchising others, be they individuals, races or classes.

Maybe you think your vote doesn't matter, that because we aren't in a battleground state, that we have no influence in the broader issues at stake. And it's true that, however much we may wish to change the partisan gridlock, we can't change the demographics of the places that elect opposition voices.

But, with every election where people try to use twisted and corrupt practices to tilt the table in their favor, who try to buy power and influence, who cast shame upon the principles and values of democracy -- in these moments and these elections, there is an opportunity. We can stand up to this kind of behavior.

When we vote, they lose.
When we are not tricked by their manipulation, they lose.
We can beat them, forever and ever.
We could be heroes just for one day.

Friday, November 2, 2012

The Cost of a Seat on Facebook

Just a quick thought to reflect on this morning. I was thinking about the nuances of customer portal pricing and page view limitations when I started thinking...

How much does a seat on Facebook cost?

There are a lot of aspects here -- server time, bandwidth, power, storage, engineering and development, marketing, etc.. You could break it down in a number of different ways, but here's how I was thinking about it.

First, there are the those front end development costs to build the system. In one respect, you might think of that as fixed. Sure, there is ongoing research and innovation and the expenses associated, but in some respects, once you've crafted the platform, it exists.

Then you have your operational costs: power, bandwidth, servers, storage, everything needed to run your network. Some of these costs may vary, depending upon the user, how active they are, how engaged they are with the platform, that sort of stuff. Still, if you think about the model for that, there are some basic cost predictions that you could develop.

All of that being said, think about how much it costs to add a user, essentially one more entry into a database table. Again, the simple cost of that line would be minimal. The only real substantive costs come through increase in resources required based on things like how active the user is, how much simultaneous activity that you need to support, etc.

This is what makes some of these customer portal pricing models that you see in the market seem so ridiculous. Many of the businesses selling cloud-based customer support portals want you to pay up front for something that most of us look at as simply adding lines in a database. It would be as if wanted to bill you for each contact that you stored. In the modern world of the Internet, Facebook is happy to add users. Google is happy to give you Yet Another Email Address, and they don't mind if you use their platform for one more search. In a market where pricing like this exists, the prospect of pay-per-record (more or less) invariably seems mind-boggling.

A Salesforce Seat versus a Facebook Seat
This same issue really defines many of the current battles that I face related to Within most organizations, there is little resistance to paying for a tool that the business is using; however, the inevitable question is, "are we using it." If adoption is defined by a percentage of utilization, justifying the expense is more difficult when you have some users with very low utilization -- particularly when they 'cost' as much as someone who uses it a lot. You wind up with a conflict between the benefits of ubiquity versus the cost of paying for everyone to live on an all-you-can-eat platform. And if, in terms of code, a user isn't really any different than a contact, there's that inevitable question that eats away at the justification -- why does this cost so much?

When you contrast what Salesforce offers to the traditional pricing approach for enterprise software like Oracle, it's easy to see a benefit to the "that's not a module, it's included" approach. At that point, it's easy to find yourself in a position to use more that you might have envisioned in your initial look. This can also wind up with Salesforce eating larger portions of your software infrastructure.

All of that being said, the time when seemed like an unbelievable value have passed. While I am often impressed with the utility, value isn't really a word that I would apply.