Even the Turnaround Guys are in a Recession

We are in the business of turning around companies, and yet we are not seeing many solid turnaround opportunities. Rather surprising given the state of the economy and a trend that has been puzzling us for quite some time as we figured we would be overwhelmed with turnaround work. Turns out, we are not the only one's noticing the lack of turnarounds. Yesterday's Washington Post has an article about the disturbing trend of many businesses, both big and small to just shut off the lights. Just look at the plight of Franklin Equipment, which was mentioned in the story:

The owners of Franklin Equipment Co., a manufacturer of logging tractors in the western Tidewater area of Virginia, said earlier this month that they would file for Chapter 7 and sell off their assets after 46 years in business, putting about 70 employees out of work. Clyde Parker, Franklin's personnel director, said the company was done in by a drop in demand for lumber and paper products, financing issues and a dearth of interested buyers."We've been through a lot of downturns over the years . . . but none near as severe as the one we're in now," Parker said.

We are agree with you Clyde. If this keeps up, an increase in turnaround situations might actually indicate that the economy is improving!

The Demise of Circuit City

When Jim Collins published "Good to Great" in 2001, he identified only 11 companies as being great. Circuit City was one of these companies. Eight years later, Circuit City announced that it was entering Chapter 7 and closing all 567 stores.

So what happened? The Corner Office, highlights some of its thoughts on what led to its demise in this post. Reasons they identified included bad real estate deals, lack of focus on being the low cost seller, mistakes with its sales force and straying from its core. All of these no doubt played a role in its demise, but I think there are a couple of other points to consider as well.

Collins largely attributes Circuit City's greatness from its ability to create a great operating system and then having store managers with a wide range of accountability in that system. As Collins noted in the book: "In a sense, Circuit City became to consumer electronics retailers what McDonald's became to restaurants - not the most exquisite experience, but an enormously consistent one." To me, that quote speaks volumes about why Circuit City will become a historical footnote.

Circuit City and McDonald's both lost track of the consumer as they were more focused on what had made them great (the system) than what was going to extend that greatness. Circuit City's model were designed for a time when competition wasn't everywhere and scale was hard to achieve. It was also a time when the product wasn't a commodity (which electronics are today). Competition today for electronics is far different. I can find the same gear at any store that sells electronics and I can likely buy it at the same or nearly same price everywhere. To compete, companies need to differentiate themselves in the eye/mind of the consumer. Circuit City failed to do that.

As an example, Holyoke (WMass's shopping mecca) has both a Best Buy and a Circuit City. In the past five years, I have spent thousands at Best Buy and probably not a $100 at Circuit City. Until recently I never thought about why I shopped at Best Buy instead of Circuit City but it does make sense as I look at it.

• The asthetics of the stores. The Best Buy has these bold blues with a very open feel. While there is plenty of merchandise, its not cramped and its easy to find. Circuit City has these dull red/grey color scheme and the store always feels claustrophobic.
• Brand Recognition. I can't think of a single Circuit City commercial and while I hate most of the Best Buy commericals, you at least remember a bad commercial. Basically, Circuit City did nothing memorable to create a brand.
• Wow Factor. When you walk into a Best Buy, you get to see the technology at work. The entire back of the store is dedicated to big screen tv's and if you walk down the video game aisle, you'll have the opportunity to play Rock Star on the Wii or some other system. Circuit City never put its products in the position to sell themselves - Best Buy does.
• Complimentary Services. Best Buy has the rewards points so you can get coupons for purchases. I'm not aware of a Circuit City plan. Best Buy rolled out Geek Squad to help people install/service these incredibly complicated electronic gadgets. Circuit City never countered. A critical point when you consider the buying power of all those boomers who still can't figure out how to set up a VCR.
  
• Location. It always seems that Best Buy got the better location as they always seem to be in the mall. Circuit City always seems to be just outside the mall, so its not as convenient.

So there you have it, my quick take on Circuit City. Let me know your thoughts on why Circuit City is no longer a shopping alternative for you and also what you think its demise means in the long-term on consumer electronics.

The Power of Facebook

I originally signed up for Facebook because Amanda had a page and I wanted to see it. Then, friend requests started rolling in and I kept accepting even though to be honest I don't know who they all are. I've since got into the mix myself, inviting people to be my friends, posting pictures, becoming fans of bars, beers and businesses and every now and then posting an update to my status. After all, everyone should want to know that I had just finished changing a dirty diaper.

All in all, its kind of a fun way to kill time and a great way to connect, however marginally with old friends, acquitances and people I don't remember. Beyond that, I really couldn't find any other substantive value in it, nor do I yet see how this will leverage the 150 million people on Facebook and make some money. With that being said, as I spend more time on it, I am beginning to see the power of Facebook for knoweldge transfer and communication and it is very powerful.

Two cases in point. A friend's father recently died and I learned about it via Facebook - not a phone call from another friend, or the obituary, but from a news feed on Facebook. Rather amazing about it when you consider that it took about 3 seconds for someone who knew this person to get the word out to literally hundreds/thousands of people. The other example relates to Thursday's plane crash in the Hudson. Several friends/acquiantances were on the plane and the word got out that: 1) they were on the plane; and 2) that they were safe. before it was reported on the news. Very powerful tool for communicating.

As to the business side of this, I can't say that I understand it all completely, but I am in the process of immersing myself into understanding Social Media. I am currently reading Groundswell and following various blogs on the topic. A couple that I like are Global Social Media, Groundswell, which is by the authors of the book and perhaps the best resource is the social media channel on Alltop.

Over the coming months, I will share with all of you my findings and the results of my expirimentations with various forms of Social Media. At the very least, I think you'll see a Vann Group Fan Page on Facebook, posting of video on YouTube and some greater usage of LinkedIn and other resources that I hope will expand the reach and readership of my blog. In the meantime, if you have any experiences with social media networks like Facebook, YouTube, Twitter, Ning, LinkedIn, I would love to hear about them.

Wanna Be Hank Paulson?

Just a couple of quick hits from other blogs this morning:

The Bailout Sleuth has a link to the Bailout Game, which was created by Minnesota based Blue Earth Interactive. I haven't played it yet but apparently, you get to be Secretary Paulson and Fed Chairman Bernanke, guiding them down Wall St. giving away money. I haven't played yet but apparently the goal is to get across the board without running out of money. Sounds better than the Wii I've been jonesing for! The game can be found at http://www.thebailoutgame.us

Over at Small Business Trends, they have a post this morning on the Top 10 Trends in Managing a Small Business. A couple of interesting ones. You'll note I mentioned Fresh Books in a previous post. I've been using this more and more as its a pretty good tool for time tracking and invoicing. Also includes an interesting insight into the increased use of bartering for small businesses. As an FYI, my services can be bought in exchange for fine wines!

For those of you interested in a change of life style, Business Pundit has a link to what is being called the best job in the world. Apparently, Australia needs someone to manage an island; yes the pay and benefits beat working at the Vann Group!

Lastly, its January, so that means American Idol is back. MSNBC has a hit list of Simon Cowell's best one liners in a previous post.

You Don't Mess Around with Jim

Congratulations to Jim Ed Rice, Red Sox slugger extraordinaire on his election to the Baseball Hall of Fame yesterday on the 15th and final try. If you told my 10 year old self that Jim Rice wouldn't have been in the HOF long before now, I likely would have had some relatively derogatory comments about your intelligence lined up for you. While he wasn't my favorite player on the Sox (that was Yaz & the Spaceman), there was no question that Jim was a the bad man. Not knowing any better, I always assumed that Jim Croce wrote the song "You Don't Mess Around with Jim" about Jim Rice. As any fan of baseball knew during that era:

"You don't tug on Superman's Cape, you don't spit into the wind, you don't pull the mask of the old ranger, and you don't mess around with Jim Rice."

Rice was recognized as baseball's strongest man and he used that to his advantage. His power and his surly demeanor were both legendary for their ability to strike fear into opposing teams, media members and those that happened to be in the wrong place at the wrong time. Therefore, Rice was widely regarding (and many cases not highly regarded) as the biggest, baddest, MF in the game.

This brings us to wome interesting insight about the power of a brand. The Jim Rice brand (BMF) likely contributed to some of his on field success. Clearly performance drives reputation, but also knowing that if you throw inside you might make Mr. Rice unhappy would probably lead to pitchers pitching to him differently, thereby making more mistakes. This would enhance his performance and further build upon his legend, as would dust ups with members of the media who would then write articles that were less than complimentary about Rice the man. Therefore, having a reputation/brand as a BMF, likely helped Rice during his playing days.

Conversely, did that reputation as a BMF negatively impact his path to the Hall? In theory, the numbers alone are supposed to speak to Hall worthiness, but we all know numbers can lie. Sportswriters, have a particular way of making numbers lie by injecting emotion into the debate because that is what they do. As any baseball and Red Sox fan knows, the media did not like Jim Rice. Therefore, did the Rice brand which led to on-field success lead to a 15 year wait to make the Hall?

In considering the case of Jim Rice and the Hall, there are a couple of key insights we can gleam about the importance of brand strategy. First, recognize the impact of your actions on both the short-term and the long-term. Rice's surliness helped his career, but negatively impacted his ascension to the Hall. Secondly, its important to recognize that actions may have unintended consequences on the long-term value of the brand. Not giving interviews to the press helped Jim indirectly build his brand on the field, but it certainly provided a negative view of that brand with the writers, particularly when it came time to vote. Lastly, recognize that in as much as well all spend money trying to build and manage our brands, ultimately, its the public that determines what the value of the brand is.

Stimulus Question

While the details of President-Elect Obama's proposed stimulus plan have not been released, tidbits s are trickling out, along with the expected and all too familiar criticisms. In what should be no surprise, Republicans are against increased spending while the Democrats are opposed to tax cuts. That is the beauty of politics - some things never change.

From a business perspective, I found the criticisms rather intriguing. Within this article from the Huffington Post, there is an interesting quote from Senator Kent Conrad (D-ND) regarding a proposed $3,000 tax credit for companies that hire or retrain employees. As the Senator noted:

"If I'm a business person, it's unlikely if you give me a several-thousand-dollar credit that I'm going to hire people if I can't sell the products they're producing," said Sen. Kent Conrad, D-N.D., a member of the committee. "That to me is just misdirected," Conrad said. Apparently, the Senator doesn't quite grasp the reason people aren't buying products - they don't have jobs!

Not to be outdone, our own Senator Kerry stated "I'd rather spend the money on the infrastructure, on direct investment, on energy conversion, on other kinds of things that much more directly, much more rapidly and much more certainly create a real job." Not to criticize the need for long-term invesntment, but it would seem to me that getting people hired is a "direct investment" and that helping existing companies hire will certainly create a real job faster than a long-term investment in infrastructure or "energy conversion".

With that being said, Senator Conrad, who has no experience as a "business person" poses an interesting question for all of us who happen to be a business person. Here it is: "as a business owner, would you take advantage of a tax credit that allows you to hire or retrain an employee?" What do you think?

New Years Resolution

Over the past several months, I have been the worst kind of blogger. I have a blog and it has been completely inactive, which in all reality is a bigger sin than not having a blog at all. So, as part of my New Year's resolutions, I have resolved to take my blogger responsibilities seriously and blog much more frequently than I have this past year. Given that its January 8th, you can see that I am slightly behind on my resolutions - but I'm getting there.

One of the challenges I have had with this blog is my own stubbornness regarding the medium. Blogging requires short and frequent posts whereas I think I'm writing for the Wall St. Journal. This is because I like to provide thoughtful insight into topics which requires both time and a passion. Lately, both have been in short supply. After all, who wants to hear anymore about the recession/depression, bailouts, job losses, etc. Also, there has already been enough written about surviving the market and positioning your company to survive the recession. Lately I have zero interest in putting time and energy into providing the world with yet another opinion on these topics (I'll save that or the newsletter). Therefore, another resolution is to not only blog more but to attempt to stay away from many of these depressing topics that are consuming the media and the blogosphere.

The third resolution I made regarding my blogging activity is to ensure that I am providing value to those of you who decide to read my meanderings. So, I promise that I will provide insight and links that will either enhance your business and/or your personal knowledge. Starting that today, I want to provide you with a link to a great study that was just released by Vell & Associates entitled "Characteristics of Successful Technology CEO's". While the report is geared towards technology companies and those with revenue exceeding $100 million, there are some great insights that small business owners can take from it. Items that I found interesting:

• MBA degrees didn't correlate to better performance in companies with revenues exceeding $1 billion. As the report notes "An MBA is a useful early indicator of business savvy – and perhaps drive, but as executives build their experience, results should be a larger factor in selecting candidates than whether they have an MBA or not"
• An Ivy league degree does correlate to better performance, so perhaps there is something to be said for spending $50,000 a year to send junior to Harvard.
• Only 29% of companies had a CEO who had prior CEO experience. An interesting response and one growing entrepreneur companies should consider when they think they need a seasoned CEO to get the company to the next level.
• Companies who had founders at the helm were top performers.

There are lots of other interesting pieces in the study, so I would recommend giving it a good review.