Two Questions About the Copycat Economy

Over the past few weeks I’ve been doing some webcasts, sometimes called audio web seminars. Fascinating concept. I sit in my office or a hotel room in front of my laptop and a phone. My powerpoint slides are beamed to an audience around the U.S. (sometimes abroad too) and while I control the slides I speak my presentation into the phone. Questions from the audience are e-mailed or phoned into the offices of the enterprise that is producing the show (like Soundview or BetterManagement), and then they are relayed to me. Anyway, last week I did a webcast with BetterManagement about some of the concepts of my latest book Break From the Pack. My main thesis in the book is that today’s Copycat Economy is marked by extreme deregulation, globalization, technological advance, and transparency—all of which lead to accelerations in commoditization of current products and imitation of current services. Therefore, the primary strategic challenge (and opportunity) for any leader is to determine ways to continually “de-commoditize” and “un-imitate” in a way that matters to customers and investors. Before I began my talk, Bill Marriott of BetterManagement posed two quick questions to the senior managers that comprised our virtual audience in 70 corporate locations. 1. When are your organization’s primary products or services likely to be duplicated? (Response options ranged from “never” to “already duplicated.”)2. Does your organization clearly differentiate its products and services from competitors? (“Yes” or “no”)The responses—coming from a wide array of industries-- were interesting: To the first question—about duplication of current primary products and services--here was the breakdown of responses: Never - 0.0%Within years - 33.3%Within months - 22.2%Our product or service has already been duplicated - 44.4%There it is: Clear evidence of the Copycat Economy. Remember, the question wasn’t about ancillary or minor products; it was about primary sources of revenue. No organization—regardless of its size, scope, reach or scale, is safe from the attacks of commoditization and imitation. If anything, my research reveals that the velocity of these attacks is accelerating, which means that even the answer “within years” might be wistful thinking. Certainly, it may be prudent to protect the sources of your current cash flows. It may be wise to continually improve your current cash cows. But that’s for surviving. If you’re interested in simultaneously thriving, you must also be thinking about challenging and reinventing your products, your value proposition, and how you approach your business before the market forces you to do it anyway.For the next question—whether the organization can clearly differentiate products and services from competitors—the response was as follows: Yes - 44.4%No - 55.5%Interesting results. Those who answered “no” clearly need to address this issue with high urgency (not panic). To those who answered “yes”, here’s a couple things to think about. First, make sure that customers and investors are the ones who say “yes”; don’t simply take the word of your engineers, marketers, and other insiders. Second, if the answer is really and truly “yes” as defined by customers, congratulations. But in that case, don’t allow yourself to get complacent, arrogant or risk-averse. Use your current market leadership to take the prudent risks to “de-commoditize”, “un-imitate”, and “re-invent” further. The business landscape is riddled with carcasses of companies that were once market leaders but failed to keep up with migrating value in the marketplace. Remember, the Copycat Economy is relentless and takes no prisoners.

Are Teachers Overpaid? What a Stupid Question!

In the February 2 issue of the Wall St. Journal, Jay Greene and Marcus Winters make the argument that teachers are not underpaid because they earn the equivalent of $34.06 per hour. It’s a preposterous argument, and it goes directly to the heart of our competitiveness as a nation over the next decade. I’m a professor at the University of San Francisco. Therefore that makes me—full disclosure—both a teacher and a member of a prominent national teachers union. I’ve occasionally attended faculty “union meetings”, and I receive the union magazine which describes labor and educational activities in schools from kindergarten through college. So I know something about the subject at hand, and you may be surprised at my conclusions: 1. First and foremost, the teachers union is primarily concerned with protecting the welfare of its members. Nothing wrong with that, but you can ignore the union's pap about the kids being the first priority. No, the first priority, by far, is wages and conditions of employment. 2. The union is politically and ideologically liberal-to-left, unabashedly advocating conventional policies and politicians. Seniority and tenure are openly worshipped, performance- and merit-based compensation are openly disdained. All problems will be solved with more taxpayer money poured into the status quo. Vouchers are anathema. 3. Moving away from the union to the teachers themselves, a different picture emerges. Anyone who doubts the sincerity and commitment of most individual teachers is, frankly, an idiot. Forget college professors--that’s a whole separate story about entitlement. In this blog, I’m talking about the majority of real life K-12 teachers who bust their butts trying to educate our kids under some of the most challenging conditions, including overcrowding, violence, multiple languages, and parents who aren’t around. God bless the teachers. 4. I consult with a lot of corporate executives. Almost universally, they agree that the most important competitive need for both their organizations and for this country is an expanding pool of highly talented employees. Without a great educational system, where, pray tell, will these talented people come from? Every successful leader I’ve worked with knows that if they want their own organization to succeed in a global knowledge economy, a failure to invest seriously and heavily in their people is a fool’s gambit. Why can’t we take that perspective with education? I’m not talking about pouring more money into rat holes of education bureaucracies; I’m talking about dramatically boosting teacher pay. If our kids’ minds are our number one resource, shouldn’t those who are entrusted to teach those minds be paid with high prestige dollars?5. Until we as a society are willing to elevate the financial status of good teachers to a high attractive level, we are not serious about innovatively preparing young human resources to compete in a knowledge economy. Let me be more specific: In this country, we assign a monetary value to jobs based on the skills needed to do them and on the value-add that those jobs provide. That’s presumably why doctors and investment bankers make more money than janitors and tow truck drivers. The way we can attract and retain the best and the brightest and most innovative people to the teaching profession is to offer them compensation for excellence that is in the six figure neighborhood. If I was king of the USA, I would begin the painful process of ridding the teacher ranks of that small, nagging pool of incompetents and deadwood (yes, I’d flight the tenure establishment and union protectionism), and then I’d raise base pay and tie mega-bonuses to performance metrics—test scores, for example, or other quantitative assessments of student accomplishment—so that excellent teachers could double their current pay, even to more than $100,000 a year. Boy, would you see some innovative upheaval in education if you did that. And yeah, if I knew that this super-compensation was based on documented super-results, I would gladly allocate more tax monies to education. 6. And that brings me to Greene and Winter’s absurd notion that teachers are now paid generously because they have lots of vacation time. Arguing that teachers work only the number of hours they are actually in the classroom teaching is like saying pro football players work only one hour a week on Sunday when they’re playing the game. Greene and Winter go further, in fact, and argue that the correlation between teacher pay and results is low. Sure, if you’re talking about the marginal difference between $45,000 a year and $48,000 a year, within an employment context based on tenure and seniority. But how about a difference between $45,000 and $85,000 within an employment context based on outcomes and merit? Finally, Greene and Winter insist on comparing teachers to other “workers.” I don’t want teachers considered as “workers”; the stakes are too darned high. I want teachers to be a hard-to-join elite group of high-skilled providers compared to doctors and bankers—and paid accordingly. My approach would vastly elevate the innovation within education by vastly elevating the job of “teacher”, which in turn would serve the needs of this country and its organizations by elevating the skills and competencies of students. Sadly, the loudest and most vehement opposition to this sort of plan would come from the teachers unions.

The Copycat Economy: A Sea of White

The subtitle of my latest book is “How to Compete in a Copycat Economy.” When people ask me to explain the Copycat Economy, I often start talking about why markets have become so fragmented, why so many companies have seen their products become lower-margin commodities and why so many companies are frustrated that their services are being so blatantly imitated by competitors. Lately, I’ve gotten simpler. I talk about the Copycat Economy as a “sea of white.” I got this idea from a comment by Whirlpool’s former CEO David Whitwam. In trying to explain the financial and market stagnation of his company in the ‘90’s, his “aha!” moment came in a retail outlet in 1999. Here’s what he said: “I go into an appliance store. Now, I have pretty good eyes. I stand 40 feet away from a line of washers, and I can’t pick ours out. They all look alike. They all have decent quality. They all have the same price point. It’s a sea of white.” A sea of white. That pretty much describes things nowadays, doesn’t it? Here’s a little sampling of tidbits I’ve picked up in the business press just in the last month: • Starbury (among a growing crop of new competitors) is taking on Nike with a similar-looking fashionized basketball shoe—for $14.98. • New airline carriers like Eos, L’Avion, and Silverjet are offering overseas business-class comforts and amenities at bargain basement prices. • Other than biotech, the fastest growing part of the pharmaceutical industry over the past few years has been the generics business—the ultimate copycats. • Financier George Roberts of KKR says that it used to be tough to find the money to do deals in the past, but no more. Today, “finance is a commodity.” With the explosion of interchangeable hedge funds, private equity firms, international banking and financial institutions, and such, “I have never seen a time like this when money is as available and so global.” • As technologies improve and competitors multiply, the prices of flat-panel, high definition TVs, both plasma and LCD, have declined by 30 to 50 percent from one year ago. • Websites like WebMD and Steve Case’s new venture RevolutionHealth.com, are finding it necessary to offer more and more similar, and free, healthcare information and services in order to attract users.• Did you know it’s getting harder and harder to become a supermodel, or to make serious money as a big-time model? The reason, in designer Nicole Miller’s words, is because “there are so many models now. It used to be the Americans, Europeans and Canadians. Then we got the influx of Brazilians, Russians, and Eastern Europeans.” According to the Wall St. Journal, it’s a “deluge of fresh faces” that have created interchangeable bodies and siphoned off thousands of dollars from individual models’ annual compensationsOnly when Whitwam came to terms with the fact that his company was just another big white player in a sea of white did he begin to move Whirlpool in directions that violated industry convention and Whirlpool’s own culture and history—steps which led to new ventures, new partnerships, new hires, and ultimately, a series of high-tech, high-function, high-design, high-cool, high-unique products that finally gave the company some color. And higher prices. And more sales.