Executive Times

Volume 5, Issue 8

August, 2003


ã 2003 Hopkins and Company, LLC

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Top of Mind and Tip of Tongue

Most Americans, when speaking about cleaning a carpet, will say “vacuum.” Many Brits will say they “hoovered the floor.” We’ve heard that the word for cell phone in some parts of China is “Motorola.” While some companies work hard on the one hand to protect the value of their name and brands through copyright protection, most are pleased to have consumers achieve “top of mind awareness” about products. The critical choice in Brooklyn forty years ago about beer was Reingold or Schaefer. The slogan, “My beer is Reingold, the dry beer,” may have influenced some; the ability to vote for Miss Reingold swayed others. Having selected Reingold, we can’t remember what made Schaefer appealing to beer drinkers. From time to time, business writers have forecast the death of brands, especially following price drops by leading product companies. We’ve noted in recent weeks that with increased price consciousness by consumers, instead of forecasting the death of brands, companies are responding with private brands, quick shifts in brand management tactics, and new types of affinity marketing relationships. As you read this issue, think about the degree of top of mind awareness your constituents have about your organization. Is your organization always on the tip of the tongue of everyone you are looking to serve? To what degree would your customers want to buy even more products from your organization if you affiliated with other organizations?


Fifteen new books are rated in this issue, beginning on page 5. We read three Clinton books in the same month, awarding one, two and three star ratings. A memoir received four stars, as did a book about science. Jump ahead to see what books we mean. You can also visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html and see the rating table explained as well as explore links to all 2003 book reviews.

Independent Personality
Can you remember when grocery store generic products had those ugly stenciled labels? Store brands and private label products have become more appealing, according to Fortune (8/11/03) (http://www.fortune.com/fortune/subs/print/0,15935,465867,00.html), and represent a real threat to established product brands. In this article titled, “Brand Killers,” Fortune describes the efforts of Costco, Wal-Mart, Albertson’s, Federated, Rite-Aid, Target, Barnes & Noble and others in presenting their own branded product alternatives. Consumers like what’s being offered. One out of five items sold in the United States is a store brand. In Europe, store brands account for 40% of sales. Whereas in the past, the store brand alternative was chosen by a price conscious shopper, today’s store brands may be of superior quality to the traditionally branded alternative, and are marketed based on image, innovation and quality, not just price.  Brand loyalty may be moving from the traditional brand to the store brand. Fortune quotes Merrill Lynch analyst Mark Husson, “Get rid of the term ‘private label.’ They possess an independent personality. They are brands.” Companies that fail to pay attention to this trend may be trampled, and strategies are varied. Some branded manufacturers are the suppliers of the store brand offerings. Campbell’s provides soup for retailers in Europe. Some manufactures have cut back on their brands. Unilever has gone from 1,600 to 200 brands, following the advice that if you’re not one of the top three brands, you should exit. Exiting can backfire. We read, “Occasionally a castoff can return to haunt its parent. In the late 1990s, P&G dropped its White Cloud toilet paper label to focus on the stronger Charmin. It made good sense—until an entrepreneur named Tony Gelbart noticed that thanks to the use-it-or-lose-it policy that governs trademarks, P&G's claim to the White Cloud label had lapsed. Gelbart snapped it up for a song before offering Wal-Mart the rights to the White Cloud label. Today Wal-Mart's aisles are filled with White Cloud toilet tissue and even diapers—it's an "undead" brand, as one observer puts it, that gives P&G the unenviable distinction of having to compete against a label it created.” The mass marketing advantage of manufacturers has eroded, especially since the shift in television viewing from three networks to 500 channels. The big box retailers have the on-site marketing advantage, and manufacturers are finding themselves held hostage by retailers. Believe it or not, the current store brand trend can be traced to a former McKinsey consultant, Dave Nichol, who developed the President’s Choice brand when he headed Loblaw’s in Canada, and helped Wal-Mart with its store brand strategy. Now you know who to thank or blame.

How secure is your position in the current distribution channel for the products and services you offer to the markets you serve? Can certain participants change their roles and make life harder for your organization? Can you change your own role to generate increased earnings? Are your customers loyal to you or to your distributor? Is it your products or services that encourage buying, or is it the presentation of those products and services by others? 


Disney Wireless
Affinity credit cards are so yesterday. What’s tomorrow? How about getting your wireless telephone service from Disney instead of Verizon or Sprint? While we’ve been bombarded for years with affinity credit card offers, we paid no attention to the emerging opportunities for affinity phone services. We read in The Wall Street Journal (7/28) (http://online.wsj.com/article/0,,SB105914875491582800,00.html) that Sprint and Virgin Group put together a joint venture last year called Virgin Mobile USA which targeted the youth market, and has acquired 500,000 customers. Virgin did a deal in Europe with T-Mobile in 1999 and now has 3 million customers. According to the Journal, Disney is talking to telecommunications companies about delivering complete wireless services under different brand names it owns, including ESPN. Sprint and Qwest are considering an arrangement where Qwest would deliver wireless services using the Sprint network. “A Qwest-Sprint accord could prompt other players to make similar resale deals. Robert Gensler, portfolio manager of T. Rowe Price Media & Telecommunications Fund, which has been reducing its position in Qwest, said the deal would highlight a worry for the industry: As it becomes increasingly cheap for carriers to operate their networks, it could become more and more attractive for them to resell some of their capacity. ‘If it was a really tight market, maybe no one would cut the deal. “Why would I help a competitor?” But because there are six players, it's “Why not load my network? If I don't do it, someone else will.”’”


Is your brand name more or less valuable than competitors? Is your capacity greater or lesser than your current or potential competitors? Will your customers buy a non-traditional product from you?


The office where we publish Executive Times is located at a point equidistant from two Dunkin Donuts locations. Within five minutes, we could get to either location. We’ve never been inside the location to the southwest of us. The last time we entered the one to the northeast was around 1982. On an occasional Saturday morning during the summer, we’ll sample a few cinnamon donuts made fresh at the local Farmers’ Market. Our fat-free future is now threatened by the emergence of a new purveyor, located four minutes away: Krispy Kreme. While those glazed delights have been available at the grocery store for the past year or so, we’ve indulged only once or twice. But now: our very own store. We thought about this when we ready Andy Serwer’s article, “The Hole Story,” in Fortune’s July 7 issue (http://www.fortune.com/fortune/investing/articles/0,15114,460119,00.html), which begins, “They begin lining up in the cold darkness, hours before the store opens. Some come wearing pajamas, some lug couches and TVs, others bring beer. And when dawn finally creaks and the ribbon is cut, the rabid customers bolt through the doors. Many of them, in what must be an anticipatory sugar rush, scream at the top of their lungs: ‘Krispy Kreme doughnuts, youweee!’ Last year it happened in Fargo and Philadelphia and Amarillo and dozens of other cities in North America. This year it will happen in Boston, Sydney, and elsewhere. All for a simple doughnut. Consider that for a moment: With so many companies today desperate for customers, here is a business – remember, we’re talking doughnuts – that has shrieking fanatics lining up around the block in the middle of the night to buy its product.” Perhaps with good reason, Fortune called Krispy Kreme “America’s Hottest Brand.” We won’t be lined up the night before the opening. We have willpower. Yes we do. We do.

How excited do your customers get about your organization’s products and services? Does your organization have fans? Why do customers select your offerings over those of your competitors? Do you think of your products as commodities? What differentiates your offerings?


Tidal Change
”P&G should do only what it does best, nothing more.” That’s the key business strategy of Proctor & Gamble’s CEO, A. G. Lafley, according to the cover story of Business Week’s July 7 issue (http://www.businessweek.com:/print/magazine/content/03_27/b3840001_mz001.htm?mz), titled, “The P&G Revolution.” That strategy explains why P&G outsourced soap manufacturing to a Canadian company and information technology to Hewlett-Packard. “When Lafley describes the P&G of the future, he says: ‘We’re in the business of creating and building brands.’ Notice, as P&Gers certainly have, that he makes no mention of manufacturing. While Lafley shies away from saying just how much of the company’s factory and back-office operations he may hand over to someone else, he does admit that facing up to the realities of the marketplace ‘won’t always be fun.’ Of P&G’s 102,000 employees, nearly one-half work in its plants.” Within the core business of creating and building brands, Lafley is also making major changes. For example, a cheaper version of Crest was created for the China market, while at the same time Crest moved into electric toothbrushes. Lafley has broken other corporate taboos. The company worked with competitor Clorox on a food-wrap technology, something that would have been unheard of in the recent past. Lafley faces significant challenges, starting with earnings growth. There’s also the problem of reliance on retailers. Wal-Mart might account for one-third of P&G’s global sales by the end of this decade. How Lafley handles these challenges will determine whether he remains CEO, and whether his changes represent a revolution, or if the strong P&G culture revolts against him.

How do you go about deciding what your organization should not do? What are you doing now that someone else does better? Why are you still doing it? Are there changes that your organization needs to make that could revolutionize what you do and how you do it? What’s preventing you from making those changes? How can you make those changes effectively?



Here are selected updates on stories covered in prior issues of Executive Times:


Ø      In the August 1999 issue of Executive Times, we noted that cycling team sponsor Cofidis dropped Lance Armstrong from its team roster when he was diagnosed with cancer. Five years later, Armstrong has won the fifth consecutive Tour de France for the United States Postal Service team, which took a chance on the cancer survivor. Who was the top rider for team Cofidis this year? Fewer than 1% of Executive Times would recognize the name of 15th place rider Massimiliano Lelli. For USPS, while there are some critics of the money-losing enterprise spending $40 million a year to sponsor a cycling team, its confidence in Armstrong has reaped the tangible reward of significant free advertising.

Ø      When we commented in the May 2003 issue of Executive Times that Marriott was being sued by some New Orleans hotel owners over conflict of interest, we overlooked another lawsuit that was settled recently. We read in all the business press in late July that a West Virginia hotel owner sued Marriott claiming that the company was overcharging it for its management services. Just prior to trial, Marriott settled, agreeing to fund hotel renovations and invest in another deal with the owner. Other suits involving self-dealing and lack of transparency are still pending. Executives providing services may pay attention to these cases to ensure that conflicts of interest and potential self dealing in agreements are either disclosed or avoided.



Planting Seeds
Many talented executives succeed because they observe something others fail to see, and then gather facts to do something that will produce results. We thought about that skill when we read a page one feature in The Wall Street Journal on July 17 (http://online.wsj.com/article/0,,SB105839298579720900,00.html) about Gary Comer, who sold the company he founded, Lands’ End, to Sears last year, netting himself about $1 billion. Comer founded the mail order company following his personal observation as a sailor that the market lacked a reliable supplier of quality sails and clothing. Within a short time, the company moved away from the narrow competitive sailing niche into middle market clothing, where Comer produced amazing success. According to the Journal, when Comer sailed his yacht into the Artic as just the 94th ship to cross the Northwest Passage from the Atlantic to the Pacific, the ice conditions were so mild, the passage was much easier than expected. Comer wondered why. He began to investigate and found the scientific community divided on whether there is more or less ice than in the past, and whether global warming is leading to cataclysm, or if normal weather cycles are occurring. The whole field of abrupt climate change needed more research, especially to determine if human activity is creating a climate problem. Comer has spurred research with research grants of almost $7 million to 23 entities to try to gather facts. Comer recognizes that government support will also be needed, and his role is to seed the research, not “carrying it across the finish line.” Comer’s observation and curiosity may lead to greater understanding of abrupt climate change. For all executives, the same skills that brought success in business can be used in philanthropy and in public policy development.


Latest Books Read and Reviewed:

 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html).


Title (Link to Review)



Review Summary


Best Friends

Berger, Thomas

Ambiguous. Psychological novel of two long-time friends reaching middle age, feeling different about themselves and each other. Finely written.

The Clinton Wars

Blumenthal, SIdney

Soldier. Recent history written by Clinton top aide who weaves his personal story into the context of events. Well written by talented journalist, the 800 pages may be more than some readers want to absorb.

Drop City

Boyle, T.C.

Acidic. If you can dig a return to the 1960s and can dig a communal, rural back-to basics-life, you’ll find this book totally cool. Boyle writes masterfully and captures dialogue, drugs, and places with precision.

A Short History of Nearly Everything

Bryson, Bill

Connections. Bryson’s wit and basic questions grab our attention and hold it as the answers lead to more questions about astronomy, geology, chemistry, biology, and physics.

Living History

Clinton, Hillary Rodham

Lifeless. Political junkies may enjoy this 534 page memoir, but most readers will find the writing detached and revealing little about the author. Sometimes it reads like a travelogue; other times like a policy essay.

Swimming Across: A Memoir

Grove, Andrew S.

Immigration and Naturalization. The charming story of the early life of Intel CEO Andy Grove with life lessons for all readers. From his birth through his arrival in America following the Hungarian Revolution.

Invented Eden: The Elusive, Disputed History of the Tasaday

Hemley, Robin

Exploitation. Were the Tasaday fakes, or really a primitive, unspoiled tribe at the time news stories about them were spread worldwide? Were those who called this a scam the real liars? If you care about these questions, this is the book for you.

The Power of Full Engagement: Managing Energy, Not Time Is the Key to High Performance and Personal Renewal

Loehr, Jim and Tony Schwartz

Energizing. Most executives have managed the stress part of personal energy management, but often falter in finding the right methods for recovery to regain energy. This book tells stories about what has worked for clients, including athletes.

Hallowed Ground: A Walk at Gettysburg

McPherson, James M.

Pulitzer Docent. A well-informed compact guide to what happened and where during the battle of Gettysburg. Ideal for pleasure readers.

Leap of Faith: Memoirs of an Unexpected Life

Noor, Queen

Personal. If there’s only one memoir you read this year, make it this one. Noor describes her relationship with King Hussein, family life, and politics with an articulate voice helping you learn more than you may expect about the Middle East and about personal, loving relationships.

The Majesty of the Law: Reflections of a Supreme Court Justice

O’Connor, Sandra Day

Pedagogic. O’Connor shares her love of the law but reveals little about the inner workings of the court, and tells nothing that would reveal her approach to issues coming before the court. 

Dereliction of Duty: The Eyewitness Account of How Bill Clinton Compromised America’s National Security

Patterson, Robert

Punt. Air Force officer who carried nuclear “football” for two years in Clinton White House delivers poorly written screed based on personal observations, especially one incident on a golf course in September 1996.

Harry Potter and the Order of the Phoenix

Rowling, J.K.

Growing Up. Finest installment in the series so far. Adolescent Harry behaves erratically, and even Dumbledore appears vulnerable. The new Defense Against the Dark Arts teacher brings bureaucracy to Hogwarts.

The Older the Fiddle, the Better the Tune: The Joys of Reaching a Certain Age

Scott, Willard

Yada. Occasionally pithy, sometimes inspirational, but usually vapid and monotonous comments from old people, some famous, some not. Read it and come away older, not necessarily wiser.

Bronzeville: Black Chicago in Pictures, 1941-1943

Stange, Maven

Compelling. Rarely seen photos document the impact of rural migration to Chicago, and the creation of “the black capital of America” on the South Side. 


ã 2003 Hopkins and Company, LLC.  Executive Times is published monthly by Hopkins and Company, LLC at the company’s office at 723 North Kenilworth Avenue, Oak Park, Illinois 60302. Subscription rate for first class mail delivery of the print version is $60.00 per year (12 issues). Web version subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 web. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to executivetimes@hopkinsandcompany.com, call (708) 466-4650, or fax to (708) 386-8687. For permission to photocopy or e-mail Executive Times, call (708) 466-4650 or e-mail to reprints@hopkinsandcompany.com. We will send sample copies if requested. The company’s website at http://www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date. 

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