What Do Amazon and Zipcar Have in Common?

Some of you might respond “The answer is that Amazon is now selling Zipcars!” You’d be wrong. Some of you might respond “What the hell is a Zipcar?” That’s probably where we need to begin. Zipcar is a Cambridge, Massachusetts-based company that allows its members to reserve a car online for rental (no waiting in line, no face-to-face human interaction at all), then go to one of numerous small facilities scattered around city neighborhoods throughout the country, then locate “their” parked car, unlock it by waving their pass card over a sensor on its windshield, grab the key hanging inside, then drive it away for the block of time they’ve reserved (at $6 to $10 an hour), and finally return the car to the same parking facility after filling up the tank. Fast-growing Zipcar boasts 200,000 members in 50 U.S. cities choosing among 5,000 cars. The company is also in Vancouver and London, and is expanding into 15 European cities. Customers tend to live smack in the middle of urban areas where driving and parking cars is a major hassle. My book agent Lynn, for example, lives in Manhattan and likes Zipcar so much that she sold her own car. As a Zipcar member, when she needs a car for a few hours, or for a day over the weekend, she simply signs up for a car and picks it up in a building within a short walk of her townhouse. Unless you’ve been in a deep slumber for the last couple decades, Amazon needs no introduction. But did you know that Amazon’s new, fast-growing business is renting out computer capacity? Amazon has such vast, and now excess, capacity in servers and digital storage that its new category of customers is the nearly 400,000 firms that don’t want to build and maintain data centers and related infrastructure but are perfectly willing to rent it from a reliable brand like Amazon. So what, then, do Amazon and Zipcar have in common? They have both seized a huge opportunity: frequently, customers today prefer to borrow and rent rather than to acquire and own—especially if the rental provider can make their lives easier, happier, more efficient, and more productive. Consider trends like outsourcing, “cloud computing” (computing and storing data on the Web rather than on individual local computers), InnoCentive-type web sites (where companies post thorny scientific and technological problems that their own staffs can’t figure out with the goal of attracting—with appropriate incentives-- imaginative responses from independent minds around the world), and the increased strategic allure of deep collaboration and intimate partnership among companies rather than outright acquisition. These trends are a natural offshoot of something really big: In today’s marketplace, where customers are overwhelmed by information and choices, and where vendors have to maintain lean agility and perpetual innovation—sometimes it makes a lot more financial and strategic sense to rent the best talent and resources rather than to pay big bucks (and make even bigger commitments) to own them outright. From A to Z, Amazon to Zipcar, we’re seeing the emergence of something big. Are the leaders in your company discussing how to capitalize on it?

This Bud's For InBev

Seems like InBev is serious about acquiring Anheuser-Busch (A-B). The Belgian brewer has made an unsolicited offer of $65 a share, or $46 billion, in cash. That’s a significant premium over A-B’s current stock price. The financial and legal shenanigans are already taking place. A-B is looking to cut a side deal, maybe with the Mexican firm Grupo Modelo, to make itself less attractive. That has annoyed InBev CEO Carlos Brito, who warned A-B’s board that “…we believe it is important for you and your Board to understand that our proposal to combine with Anheuser-Busch by means of acquiring all Anheuser-Busch outstanding shares for $65 per share in cash is made on the basis of Anheuser-Busch’s current assets, business and capital structure.” He’ll probably have to up his bid, maybe to $70 a share. At what point does the price become untenable? Further, a number of other strategic issues should be taken into account, and they usually aren’t because the dealmakers usually see only the financial and legal aspects and ignore the so-called “soft” stuff that can easily screw up the rosy post-merger projections. If I was advising Brito, I’d warn him about four things to pay very serious attention to:• Good old fashioned politics. A-B is about as “American” a brand as one can imagine, Budweiser is the "King of (American) Beers", and there might be some stiff political resistance to a “foreigner” coming in—especially in a political climate where free trade and outsourcing are hot button issues. Already, Sen. Claire McCaskill, D-Mo, has formally urged the A-B board to reject the offer. Many local political groups have done the same. Is this just some normal posturing, or is it more than that? If neighbor Barack Obama of Illinois gets into the fray in an election year (remember, the Teamsters, who represent many of the A-B drivers, have endorsed him for President), things could really get interesting. • Good old fashioned unions. Teamsters or otherwise, they don’t like the deal, and unhappy employees are not something an acquiring firm would like to inherit. This is especially salient because InBev has a history of tough approaches with unions. The company has laid off hundreds in five countries in Europe, where it’s pretty hard to lay off anyone. • Good old fashioned differences in business philosophies. This one could be a big wild card. A-B is a marketing machine. Spend those umpteen dollars on a gazillion ads and promotions, no holds barred. Focus on innovation in marketing rather than on product development. That’s how—despite stagnant earnings and an unimpressive stock valuation-- it’s maintained a hefty market share with a pretty mundane lineup of beers. In contrast, InBev grows by acquisitions followed by aggressive cost cutting. You see the potential problem here? • Good old fashioned fantasy thinking. In my books and articles, I’ve pointed out that there are indeed good strategic reasons for acquisitions, like obtaining cutting-edge technologies or gaining a quick entre into a fast-growing market. But InBev’s strategy is different, and far riskier: It wants to buy market share, plain and simple. With one stroke of the pen, its current tiny presence in the U.S.would balloon to a nearly 50% share of the largest beer market in the world. That sounds nice, but consider: The U.S. beer market is now fragmented and hypercompetitive, new micro breweries with tasty products and loyal fan bases are springing up left and right, and most important, the U.S. market as a whole has been growing very slowly for years. On top of that, InBev’s basic premise is that A-B’s customers will cooperate with the deal; that is, they won’t defect. But there’s no guarantee of that, as so many serial acquirers have found. And if InBev’s cost-cutting campaign wipes out A-B's expensive marketing initiatives that have propped up market share for years, the problem could be aggravated further.

How Getting Stuck in an Elevator Can Help Your Business

My wife and I recently had dinner with our friends Jean and Steve, who told us a tale that was not only amusing, but one that will help you make a very important business decision. Seems like earlier this year, Jean and Steve went to Arizona for major league baseball’s spring training. A lot of fans do this. One day, they got tickets to a game featuring their beloved San Francisco Giants playing at Diamondback Stadium in Phoenix. They took the elevator to get to their seating level--and it got stuck. And stayed stuck. After a few minutes of solitary waiting, Jean pressed the emergency button and sure enough, a voice from the outside came through. Muffled and blurred, but at least a voice. So far so good. Then the conversation began in earnest: Jean: “We are stuck in the elevator.” Voice: “Where are you?” Jean: “In the elevator behind home plate.” (Pause). Voice: “Where?” Jean: “In the elevator behind home plate, the one that goes up to the box suites.” (Pause). Voice: “Where are you exactly?” Jean (a little irritated): “We’re in an elevator behind home plate at the stadium.” Voice: “Where?” Jean (a little more irritated): “The baseball stadium. In Phoenix.”Voice: “Uh, where?” Jean: (sharply): “The stadium. In Phoenix, Arizona.” (Pause).Voice: “Hmmm”Jean (exasperated): “Excuse me, where are you?” Voice: “I am in India, madam, and if you give me more specifics, I will be glad to assist you. Where are you?” At this point, Steve muttered a few choice expletives, then took matters into his own hands. He slowly forced the elevator doors open, and both he and Jean were able to lift themselves up the three feet to the next level. Over dinner, the story was funny, but at the time, they felt very frustrated. My wife, who has a slight phobia about elevators to begin with, said she would have panicked. Either way, it wasn’t the greatest moment in outsourcing history. So here’s the lesson for you business leaders. In today’s global economy, you should always be looking for outsourcing opportunities, even offshore. You should do it not merely to lower your upfront costs, but just as important, you should do it to get rid of non-value-adding functions and assets that suck up your resources and distract you from focusing on the innovations in products and customer care that your company needs to thrive. It makes sense for the Diamondback leaders to outsource the telephone response unit in the elevators. They should concentrate on constantly improving amenities like the baseball team, the seat comfort, ticket selection, food, the lawn on the field, fan loyalty programs, and so on. So outsourcing elevator maintenance is a sensible idea, and frankly, with today’s global communication and information technologies, it technically shouldn’t matter that the call center work is done in India. But—and it’s a big but—never let your outsourcing activities adversely impact the quality of your products and customer service. (Actually, an increasing number of imaginative companies are working with their outsourced partners not just to reduce costs, but to create an improved environment for products and service—but that’s another story). In other words, don’t let your quest for short-term cost savings damage your relationship with your customer. Like many companies, Dell found this out when it had to bring back a number of call center functions from India because American customers were complaining that the service reps could not speak clearly or truly understand the subtleties of their (the customers’) problems. Remember, the customer doesn’t differentiate between you the provider and your supply chain partners. If your partner screws up, the customer blames you—in this case, the Diamondbacks organization. So always stay on top of these supplier relationships, especially when they touch the customer. If customers are in any way distressed by the relationship, fix it or cancel it. Yes, capitalize on opportunities to farm out work that’s not your core competency, but remember that customer care must always remain your top priority.

Authenticity Matters

In my book Break From the Pack, I argued that authenticity is essential for customer care. That is, if you want to use customer service as a point of brand differentiation and a path to competitive advantage, I wrote that “…you must genuinely believe in what you’re doing—and show it. You must commit to it with your entire heart, or you shouldn’t try it at all.” I wrote further that as a leader, you must insure that authenticity is not limited to idiosyncratic occasions or demonstrated by just a few fanatics, but rather is institutionalized so it becomes a core part of the way the firm (and all its employees) do business. Sounds reasonable, right? Unfortunately, many customers see true vendor authenticity as a relatively rare phenomenon. Recently, my family and I stayed on a Disney property in Orlando. Our first morning, I called downstairs to try to arrange a schedule for the day. Like most customers who don’t fit into a vendor’s carefully developed standardized “plan”, our wishes (for which we were fully prepared to pay) had some unique twists. Repeatedly, the “cast member” (Disney-speak) at the other end told me, without a drop of empathy and without a single “how about this?” alternative suggestion, that no--she couldn’t do that; no, she couldn’t answer that; no, that wasn’t her office’s responsibility; no, she couldn’t tell me who to talk with; no, no, no, no…. After 15 minutes, I was so frustrated that I finally blurted out: “I’m paying an arm and a leg for a deluxe room on your premium floor, and you’re telling me you can’t do anything for me, can you?” Her response, without a shred of embarrassment, was “That’s right.” My rejoinder was a snappy “I’m really disappointed. Good bye.” And then do you know what she said—mechanically, emotionless-- right before I hung up? I kid you not: “Have a magical day.” I had to laugh. They all say that at Disney. Of course, in this case, it was just words. They were as meaningless as some of those snazzy marketing promotions and noble mission statements and sweet-sounding communications memos to employees that turn out to be just words and no more. For me and my family in Orlando, that experience was more than inauthentic. It was demeaning. We managed to have a good time on our holiday, but we remembered……. In contrast, because it’s relatively rare, customers know when they experience genuine and deep authenticity, and it affects them profoundly. Last month I was called to jury duty. I intellectually understood, and accepted, my responsibilities as a citizen. Nevertheless, I confess that I arrived at the courthouse with a mixed sense of resistance, dread and resignation. As it turns out, I didn’t have to serve. The case was apparently plea bargained, and after several hours of waiting all 70 of us were sent home. Yet I am still blown away when I reflect upon the authenticity in the experience. First, upon arrival at the jury waiting room, I was greeted with a sincere smile by the staffers. I was thanked immediately for coming. Everyone who came was repeatedly and profusely thanked for coming. Based on the results of opinion surveys, the waiting room was Wi Fi’ed for laptops and equipped with four computer terminals for those without laptops. Coffee and tea and cookies were available. The chairs were comfortable, the room light and airy. A judge on another case came in and with warmth and humor explained how our roles fit into the process of justice and why our presence was important even if we didn’t actually serve on a jury—and he thanked us again. Whenever any of us had questions, someone on staff was available for a quick response. Every 20 minutes one of the staffers would go in front of the group and brief us on what was happening downstairs among the lawyers and how it might impact us. After answering any questions, the staffer would (each time) tell us a corny joke, then apologize for keeping us waiting, and once again thank us for being there. Sure, we were all happy to go home after nearly four hours, but I gotta tell you—I feel a lot better about jury duty than I ever have. The experience I had wasn’t full of fancy expensive bells and whistles (like at Disney World, for example). It just had a lot of personalized and institutionalized authenticity. The place reeked of it. And that made all the difference in the world. You know why? Here’s the secret, and whisper it to all your sales and marketing folks, to all your service people, to anyone whose work will somehow touch and impact the customer’s experience: As customers, we are absolute suckers for authenticity.