Category Archives: Management

An Internet Bestseller

Given the dot.com boom and bust, the long-term impact of the Internet on business largely remains to be seen, but there’s at least one industry where its effect is a huge improvement: the sale of antiquarian books.

Believe it or not, but the impact of the Internet on the sales of used books was far from certain. Would the improved ability to find specific books increase demand and sales sufficiently to offset any decline in prices that might occur if customers could easily shop around? That’s the question Björn Frank and Guntram Hepperle asked at the University of Hohenheim in Germany at the end of 2000. In the abstract to their paper entitled The Internet’s Impact on the Market for Antiquarian Books: Some Unexpected Empirical Results (click here for the whole paper in PDF format)
they concluded:

Though there is a considerable variance in most books’ prices, we do not observe the expected negative correlation between price and share of internet sales (in relation to a seller’s total sales). We find other factors which have a systematic impact on prices, but with respect to the Internet, our main result is that e-business currently contributes little or nothing to driving prices downwards.

Memoirs of Mrs. Rebecca WakefieldI have to say that I’m not surprised. Yesterday a biography of one of my distant cousins arrived in the post from Hoffman’s Bookshop in Columbus, Ohio. The third edition of Memoirs of Mrs. Rebecca Wakefield: Missionary in East Africa was published in 1888 and written by the subject’s brother, Robert Brewin. I only discovered this book two weeks ago in the course of doing some family history research, and yet thanks to the information superhighway I already have my own copy and Hoffman’s Bookshop has another satisfied customer.

Although I purchased the book from Hoffman’s, the transaction was brokered by abebooks.com, which “connects those who buy books with those who sell them, providing abundant selection at affordable prices”. The Memoirs of Mrs. Rebecca Wakefield was only the second book I have purchased in this way, but I’m in the market for a third, and thanks to abebooks.com’s “want list” feature there’s every chance that I’ll find it eventually.

Last week when I was searching for the Memoirs of Mrs. Rebecca Wakefield there was only one copy to be found, so comparing prices was impossible; but in my limited experience prices on the Internet for books in a similar condition are also similar. So the real benefit the Internet brings is the ability to track the books down in the first place. There’s no way I would have found copies of my books without the Internet.

Of course, there’s another benefit. I have yet to set foot within 250 miles of Columbus. In fact, I’ve never been to Ohio at all; and now, fortunately, I don’t have to — at least not to spend time in its bookshops.

Update: For more on the Canadian success story abebooks.com see Giants and behemoths in The Globe and Mail.

Why do you work?

Stephen Overall has written an interesting article in the Financial Times on the motivation of workers, titled On the scent of the light reward (subscription required), in which he gets straight to the point:

Why does the worker work? Friedrich Engels asked the question in 1844. “For love of work? From a natural impulse? Not at all! He works for money, for a thing which has nothing to do with the work itself.”

Few have ever thought otherwise. In the Affluent Worker studies of the 1960s, sociologists investigated car workers in Luton and confirmed that work was a means to an end, a temporary surrender of liberty for the sake of material reward. This remains true today.

According to the article more recent research suggests that the keys to motivation lie in five different “dimensions”. Apparently, motivation flows from:

  • building an “internal brand” with which employees can identify.
  • communicating the organisation’s values.
  • demonstrating better leadership.
  • offering a challenging and interesting work environment
  • good performance management and continuous improvement.

According to one academic working on this topic, any serious attempt to investigate the nature of motivation “…needs to begin from an examination of policies and practices that operate in an organisation. Unfairness is the greatest demotivator.”

That’s all interesting food for thought; particularly the comment about unfairness. Who decides what’s fair and what’s not? Since we’re talking about the employee’s motivation, it would seem to me that the employee’s perception of fairness is of paramount importance. However, I wonder how often employees and management would share the same definition? Not often, I’d bet.

Too much stuff

Last week’s edition of In Business was entitled “Too much stuff”. As the programme’s web site explained:

The old assumptions just aren't working. It's a deflationary age…prices of goods are falling. Profits are tough to make. There is, quite simply, too much stuff in the world. Too many burgers, too many personal computers, too many cars. Peter Day asks whether today’s manufacturers are making Too Much Stuff?

It reminded me of growing up in Canada, when every commercial break on television seemed full of advertisements for cars and trucks. I remember thinking that based on the proportion of ads devoted to automobiles, aliens from another planet would think that everyone in Canada was in the market for a new car every day. What did the car manufacturers think was going on? What would they do when everyone already owned three? I never did work out what they were thinking, and thirty years later expectations of continuous growth still don’t seem sensible to me.

However, the title “Too much stuff” also reminded me of a lecture I once heard by a photographer named Dewitt Jones. He tells an amusing anecdote about “too much stuff”. It seems he was once out taking photographs when a four year old boy once came up to him, and using a colourful, plastic juice container in the shape of a 35mm camera, started to imitate Jones’ every shot. The boy was fascinated by Jones’ extensive supply of photographic equipment, but as Jones was returning to his car for yet another lens the boy eventually said “You mean you need more stuff!?”

Late last year The Economist discussed the subject of changes in supply and demand in an article titled When growth is not an option. It concluded that businesses should go back to basics, back to the nineteenth century in fact, to learn how to cope with falling prices. Apparently the Victorians managed it all long ago.

It’s all about the food

On the day when Tesco refuted claims that it was supplying spiders along with its grapes, comes news of a new on-line grocery business serving New York City (well, the Upper East Side at any rate).

According to the BBC (BBC News | UK | Tesco denies using deadly spiders):

Tesco has admitted that a drive to use less pesticides in its food could mean more spiders turning up in bags of fruit. But the supermarket denied that food producers are using black widow spiders, after three customers found them in bags of grapes. In separate incidents, the three women discovered the deadly spider among American-grown grapes bought from Tesco stores. Two of the spiders were alive. The company says producers do use natural predators to protect fruit, as an alternative to chemicals. But it strongly denies that the distinctive spider, whose venom is 15 times more potent than a rattlesnake, is deliberately used on suppliers’ crops in the US.

If that sounds like a scary disincentive, consider FreshDirect, a new on-line grocery delivery business based in Queens and currently serving the East Side of Manhattan.

According to Fortune magazine (The Online Grocer Version 2.0):

Their cargo–meat, fish, cheese, fresh-baked breads, produce, and other foods–sells at prices about 25% below what most New York grocers charge.

FreshDirect does deliver specialty-store-quality fresh food and prepared food at strikingly low prices.

It’s a measure of the times that Fedele and Ackerman [the company’s founders] refuse to call FreshDirect a dot-com. And while they admit that the company could not exist without the web (orders are placed on freshdirect.com for delivery the following day), they insist that efficiency, not technology, is the point. “Our idea was to build the ultimate food company that could scale,” says Ackerman. “The only reason we chose the Internet was that it helped us reach people at a lower transaction cost. It allows us to do for food what Michael Dell did for computers.” One of the great unfulfilled promises of the Internet has been that it would enable manufacturers to sell directly to consumers. But few companies other than Dell have actually done it.

And of course Webvan failed spectacularly. That first great Internet grocery scheme spent more than $1 billion on huge distribution facilities in seven cities before closing shop in July 2001.

Why should these guys do any better? It’s a question they are asked constantly. Fedele and Ackerman insist Webvan was merely a distribution company that missed the point. Says Fedele: “This is a company based on food people, not dot-com people.” FreshDirect’s motto: “It’s all about the food.”

Hmmm…this is interesting. Up to now I had rather assumed that the attraction of on-line home delivery services was the convenience of the service rather than the quality of the food, which I have always assumed would be identical to that purchased in person at any given store. Certainly, here in the UK the food delivered by Tesco, Sainsbury’s, et al., is identical to that found in their stores. In most cases, the food actually comes from your local shop, so it is literally the same food that you would buy if you went shopping in person.

The interesting aspect of FreshDirect’s strategy is that it is offering better food at lower prices, as well as the convenience of on-line ordering and home delivery, which quite frankly sounds too good to be true. I find myself wondering what exactly "specialty-store-quality" really means and how it compares to the quality offered by the average grocery store in the UK. I also wonder if this approach would work outside of Manhattan, or more specifically in places where food is less expensive. Presumably shoppers in Queens already pay less for their food than residents of Manhattan. Will FreshDirect be as appealing to them?

Of course, Ocado (about which I have written previously, and on which the Economist reported just last week, see Off Their Trolleys) claims to be offering similar benefits here by supplying only food from Waitrose, which is generally considered to be the UK’s highest quality grocer; but Ocado is definitely not cheaper than food sold in Waitrose’s stores, in fact the delivery charge makes them more expensive still.

So perhaps FreshDirect’s approach will be limited to places with unusually high food costs. Of course it’s early days, and it remains to be seen if they can even make it work in Manhattan.

Failures to face reality

This week’s Economist contains a review of a new book that sounds interesting: What Management Is: How it Works and Why it’s Everyone’s Business by Joan Magretta and Nan Stone (Economist.com | Management | The wood as well as the trees). The line that caught my eye was:

Management is about understanding people and all the heartache that flesh is heir to. "Failures of strategy", she [Magretta] says, "are often failures to face reality." This echoes some of the most original current writing about management, where the findings of psychology and sociology are applied to the building of organisations.

Caveat Emptor

Dorothea Salo struck a nerve a few days ago with this post to her weblog (it’s been quoted several times) Caveat Lector: Speaking the Self:

I am touched by the Cluetrainers' belief that real people always speak in real voices. It isn't so, though I wish it were and I envy the Cluetrainers their belief. Some people speak about themselves and their families in clichés and polite fictions for many of the same reasons corporations speak in empty, sonorous PR, not least among them desperate fear of the truth. Some people, submerged in the family fictions, lose their real voices in part or wholly. (I never lost quite all of mine, but I have been searching for some departed pieces a long time. I may never find them.)

Blogging threatens such families for the same reasons it threatens PR-dependent corporations. It threatens the fiction, the public façade of perfection, the private walls around anger and pain and disagreement and error.

Although DS was responding to the risks associated with personal expression, her comments about businesses and the truth are relevant to a new essay I have written and fortuitously entitled Caveat Emptor, Art Collector. Her sentiments serve as an eloquent introduction.

Careless Harm

Norman Jensen (onegoodmove) has found a great quote that he attributes to T. S. Eliot:

“Half of the harm that is done in this world is due to people who want to feel important. They don’t mean to do harm but the harm does not interest them.”

In my experience, this aphorism is particularly prevalent in business.

On the Ropes

I think I’ve become a fan of Alan Leighton, currently Chairman of Consignia (aka the Post Office), after hearing him interviewed by John Humphrys on BBC Radio 4 (On the Ropes). On the Ropes usually features people who have gone from riches to rags, or experienced some other personal failure in their life. In this case, it was argued that the Post Office is on the ropes and Leighton is the man responsible for turning the organisation around. Humphrys stressed Leighton’s reputation as a ruthless businessman, but most of what Leighton said seemed like common sense to me. Here are a few highlights:

“I believe fundamentally you shouldn’t pay people for failure.”

“All organisations I know, particularly those that are performing badly, have what I call layers of treacle or permafrost in them which basically stops stuff happening. You know, there are business prevention squads in most businesses. They go out of their way to stop things happening, and one of the things you’ve got to do is get around that.”

“In businesses, generally, the Chairman and Chief Executive create the context. They can’t do anything else. They don’t actually go and do very much. In retailing all the money is taken in the shops. It’s not taken in the head offices. So you have to get that piece of thinking around your head. Where does the money get taken? Who takes the money? Who does the execution? Well the front line, so this whole thing about people are business’ most important assets. It’s a sort of trite saying that everyone trundles out now and then, but actually it’s true. And if you actually understand it’s true and you get after it, it’s the only the way you turn businesses around.”

“…the execution has to take place at the front end and you’ve got to have the management who believe that too. You know lots of managers don’t believe that. Lots of managers think they’ve got a job by right. Their job is to bark out commands. Their job is to get people to do as they’re told. Their job is not to listen to what people say. Their job is they know best. Well in my experience the operators know best, and if you can get them to be involved in things then you get a better result.”

“The most bizarre thing about [the Post Office] is, this business is a monopoly. It’s got £8 billion of sales, it’s a monopoly and it loses £300 to £400 million pounds at the operating level. It’s happened over a period of time….[the Post Office] is so inwardly focussed it doesn’t think about the two things that count. If you don’t look after your customers and you don’t look after your people, you can be a monopoly and have £8 billion of sales and still lose a lot of money!”

“The most important thing is, do the right thing. If we do things wrong, we’re not going to sit on them forever, which is what’s happened in the past. We do things wrong, we get up, we say we did things wrong. We take the hit. We take the embarrassment, but we’re not going to continue to do something that is wrong.”

“In business turnarounds particularly, and in good businesses, most of the turnaround isn’t in huge, big programmes. It’s all about doing things better that you do everyday, and I’m sure there’s a lot we can do on the back of that.”

Although his comments make a lot of sense, these goals are very difficult to achieve in a large organisation, and I imagine the UK Post Office will be a challenge, even for an experienced businessman like Alan Leighton.

More Civil Service Stupidity

“The reform [of the civil service] should be thorough, radical, and complete.”
Rutherford Birchard Hayes (1822-1893), U.S. president

Here’s another example of stupidity in the public sector: E-mail ban for council staff. Members of staff at Liverpool City Council are not allowed to send internal e-mail messages on Wednesdays. Can you believe it? The suggestion is that they talk to one another instead.

Chief Executive David Henshaw “wants staff to solve problems more efficiently, rather than passing them on to a colleague via e-mail”, and of course everyone knows that the way to get things done in an organization is to hold lots of face to face meetings, right? This is another example of retarding technological progress because of human incompetence. Discipline the people, don’t take away their tools!

Civil Service Luddites

Here’s a story that reveals how backward the civil service can be: Inland Revenue abandons ‘insecure’ e-mail facility. I’m not surprised the staff feel humiliated and embarrassed. I thought my previous employer was risk averse, but this situation takes it to a new level. Next they will want to abandon the fax machine, telephone and post because they might all be used by criminals impersonating tax payers. This is just self-interest and incompetence masquerading as customer/citizen care.