Sunday, January 24, 2010

Entrepreneur's Corner: Baked by Melissa, Bite-Size Treats!

Executive Summary: We look at an entrepreneurial venture, Baked by Melissa, and some things that stand out with this cupcake shop- product size, pricing and a range of product flavors.

The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is "Baked by Melissa".

The "Baked by Melissa" store's hole in the wall look belies all the work that seems to have gone on behind it- they already seem to have a following, and also run a catering operation. I discovered in when I saw a long line in SOHO, almost as long as the ones formed by fans outside the Abercrombie store on 5th Ave., leading up to a little window.

The cupcakes are bitesized, for a dollar each, and you pick a minimum of 3 from the shop. I was only too glad to sample 3 different flavors at one go. I can see cupcake fans going in for volume when they visit the store.

How Do You Find It?

Green Shoots?
Melissa Bushell started this venture after moving on from her last job. Talk about green shoots! Here's a candid (third party) interview:

It's a great insight into "Animal Spirits".

The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Baked by Melissa.
* The Product: Interesting mix of standard and innovative cupcakes. Did I say that I see cupcake fans buying cupcakes in "box sizes"? I can also see a bite-size cupcake going up against mini/ regular/ large cupcakes with a message- "lose the calories, but not the taste".
* Product Size and Pricing: Did I mention that the cupcakes are bite-sized, for a dollar each, and you pick a minimum of 3 from the shop? This strategy confers great flexibility on the margins.
* Positioning- While the messaging theme (see website) is simple and correctly centered around taste, it could also subtly play into a health and fitness savvy dessert-fiend profile.
* Merchandising- none noted at the store. A simple, "back to the basics of taste" operation.

Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.

What do you think? Ready, Steady, Cupcake?


Entrepreneur's Corner: Organicoa, for Hot Cocoa!

Executive Summary: We look at an entrepreneurial venture, Organicoa, and some things that stand out with this cocoa shop- product taste and size, and positioning.

The Overview
Walking about in Manhattan, two signs of green shoots caught my attention. Here is Organicoa.

Organicoa is a cocoa shop (currently) at Lafayette St. in SOHO. The makeshift ping pong table instantly caught my attention- just the excuse you need to walk into the shop for some hot cocoa in the colder than usual weather. The leadership team happened to be around, was very warm to talk with, and was enthusiastic about sharing the organic theme behind the products and the merchandise.

The cocoa brought back memories of some great cocoa I enjoyed over a decade ago. One product comes close to the Organicoa taste- Milo. Yes, the Aussie drink.

The shop had small, bite sized cookies to go with the hot cocoa. Also, you don't have to buy hot coca to play ping-pong. :-)

How Do You Find It?
The facebook page:

Green Shoots?
A great product and an enthusiastic team. The team had taken over unused store space while the real estate firm looked to find a leasee for the the space. They aren't waiting around to make their venture happen.

The Deal- The Marketing Strategy
Why would I talk about this startup?
Note: These perspectives are all mine and have not been discussed with Organicoa.
* Great product- It reminded me of some great cocoa I have had previously.
* Bite-size cookies- complement the cocoa. The size also gives you leverage to manage pricing and margins.
* Cup sizes- I saw a single cup size. The current "pilot" (my adjective) location gives them some time to test out price points.
* Store ambience- The large, bare store space still managed to ooze a warm, "lets hang out" ambience.
* Positioning- Yes, Organic is healthy is a core message. However, who would have thought about throwing in a makeshift poing pong table on the large store space? Tied to the ambience, "community" comes to mind.
* Theme is core to merchandising- from the colors to the organic content of the merchandise, the team has closed the loop on the message.

Ahem... Constructive Criticism?
None. The idea here is to understand "green shoots" and "animal spirits". The entrepreneurs ostensibly have the right counsel to survive growth pangs.

What do you think?

Coming Next on Entrepreneurs Corner: Baked by Melissa- mini cupcakes as Bite-size Desserts?:

Aiding Economic Recovery in a Recession- The "I" of the Tiger

Aiding Economic Recovery in a Recession, a.k.a. The "I" of the Tiger, from the desk of Bengal-Tiger-Crackling-With-Ideas.

Executive Summary: There are various ideas and approaches being thrown about to help economic recovery out of this recession. Below is a recently published WSJ article by M. Zuckerman****. He suggests budgetary control, but also spending in "regeneration" programs focused on technology and infrastructure. We look at these through the lens of the GDP. We will expand on this and finally tie this in with Innovation and Animal Spirits.

The Background- Aiding Recovery
There are two broad streams of thought when it comes to aiding recovery. One focuses on cutting all cost and bailout toward balancing a budget, with "let it (a company) fail" as the mantra. The other focuses on providing large doses of temporary stimulus that would be followed by an extended period of belt tightening.

Below is a recently published WSJ article by M. Zuckerman**** that seems to belong to the second stream of thought. He suggests budgetary control, but also spending in "regeneration" programs focused on technology (tied in some way to innovation) and infrastructure.
The Article:

Proposed Solution: The GDP Lens
Looking at it in terms of the GDP, where GDP = C + I + G + (X - M), the article can be summarized as:
 Big C (Consumption) goes down, G (government investment) goes up to assist in increasing I (private investment), and eventually "I" will limp back to normal, finally leading to a ratcheting down of G. Note that I am not talking about X - M right now.

I will admit that investing in infrastructure and technology via government regeneration sounds great. That's supposed to be the "soft", "behind the scenes" aspect of government spending led recovery in this equation. We can also look as some background on debt and economies below:

Proposed Solution: South Korean Precedent?
Now, South Korea seems to have pulled off something similar to become an OECD economy. South Korea racheted up debt to support imports of technology and machinery, which led to an increase in exports, and kickstarted private investment. The Chaebols, in this case, were instrumental in this maneuver.

* However, can this maneuver by South Korea be called a precedent?
* Was it, and is it now, easy to pull off?
* Could you call the Chaebols in South Korea a strong government-industry partnership?
* Is a very tight government- private industry partnership feasible in the US?
* Does the tight partnership help in managing and spurring innovation? If yes, is the spurring of innovation, and eventual reovery, quicker or slower than in other approaches?
* Can an increase in G truly substitute, or directly lead to, for an increase in "I"?
* Does an increase in G, at best, keeps the social fabric together, and provide a base on which "I" can rebuild? If yes, is there a minimum and a maximum turnaround time for "I", coming out of economic shock?

Perspectives on how economic recovery would assets itself globally are linked below:
Now, lets focus on the "I" of the Tiger.

The "I" of the Tiger- Funding the Recovery
How do we bring "I" back into business? The government could directly hand money to individuals and businesses, or it could hand it to banks and cajole the banks to make the right lending decisions. As we know, too much liquidity brought us to the real estate bubble. So, lenders/ investors/ government/ banks- whatsinaname? - must exercise "good judgement" in their practices.

* Do we have enough "good judgement" to go around for the massive influx of funds bottlenecked in the financial system/ sitting with the government?
* How do we prevent another bubble?
* On the flip side, how do we ensure that the distribution system works, makes money and hence leads to economic activity?

I am reminded of a conversation at a solar energy panel in 2008, where some folks were of the opinion that funds for solar energy projects were available, but they were tied up with the government (DoE?). The government had a poor track record of investing and ideas floating around including getting investment bankers to the party.

Since we are thinking about the what and the how of aiding economic activity, lets talk about innovation.

Technology and Innovation
Now, I have previously talked about innovation- an example is the link below.

However, lets get into some detail.
* Do good, fundable ideas arrive in some sort of random manner, or can we increase them by just waving money (and tweaking some more factors, if you like. E.g. increasing unemployment, etc.)?
* The VC industry is currently undergoing some sort of contraction as well.
* Research states that MITIE's (an arm of the Japanese government) investments in the electronics industry did not have a significant impact on it.

Animal Spirits
This is where "Animal Spirits" comes into play. You could call it the natural ability of a people to take risk, to innovate and/ or to build. Naive optimism, if you like. Some previous thought on Animal Spirits can be found here:

Are people taking risks to build something they believe in? I recently stumbled across a little cocoa shop in the city- the team had taken up an empty store for their venture while the real estate company looked to fill the space. Very enterprising, and they had a good product too! I really hope that company does well. More about it here:

The cocoa shop example tells me that the US is still a great place to turn good ideas into great engines for growth. I am keeping my fingers crossed for all the good, bright folks out there who have found/ are about to find a great idea.

What do you think?

Some more thoughts on aiding economic recovery can be found here:

*****Note: The article was posted on a macroeconomics forum by Prof. Rosensweig to kick of a debate on approaches to recovery. The ideas here were posted in a condensed form at the form on January 24, 2010.

Economic Recovery Patterns and Globally Divergent Challenges to Recovery

Executive Summary: Some interesting ideas, including one by Stiglitz (link below) were proposed to manage the global financial crisis. How do those ideas look now? Do we have a path to "full" recovery yet?

Solutions and Paths to Recovery
I had talked about an interesting article by Stiglitz toward a co-ordinated approach to the global financial crisis below:

Globally Divergent Challenges to Recovery
The Economist had two articles, below, on paths to recovery that add more perspective to Stiglitz's article:
The Great Stabilisation
Leaders and laggards

What do you think?


Economies and Unemployment Numbers

Executive Summary: How are different economies handling the levels of unemployment numbers they face due to the economic crisis? One approach is to look at unemployment numbers across economies*** and then look for factors across various economies that would help them manage the rise in unemployment. We wind up by considering education, skills and animal spirits as potential factors for recovery, and identifying questions that will give us more granular understanding of how governments can impact recovery.

Some Country Unemployment Rates
The Economist had a great chart in the fourth quarter of calendar year 2009 that showed pre-financial crisis and post financial crisis unemployment numbers. If you compare post crisis numbers, Spain looked to be in much more pain than the U.S., coming in at 19.3%, with Germany looking to be relatively better off at 8.1%. Despite Spain, the Euro area may have seemed to be handling this pretty well- with the unemployment rate under 10%. Australia seemed to be doing fantastic at 5.7%.

Changes in Country Unemployment Rates
However, when we look at the relative changes from pre to post-crisis numbers, an interesting story emerges.
1. Spain's unemployment rate had changed by a multiple of 1.7 (70% increase).
2. The US rate had changed by a multiple of 2 (100% increase).
3. The British rate had changed 2.5 times. The Japanese rate changed by a little more than that. The rate for France and Netherlands had changed by a multiple of 4.
4. The German unemployment rate had change by more than a multiple of 8!
5. The Australian unemployment rate had changed by a factor of 3.

Finding the Questions in the Numbers- Before Finding the Answers
Interesting numbers? There's more food for thought below.

1. How are specific regions affection these country numbers? E.g. Spain has abysmal numbers- are they tied to a specific region or a sector?
* Geography and sector: In the U.S., California has been among the worst hit economies. A real estate bubble is one cause of the problems.
* Other categorizations: The Indian economy may show a dichotomy with the rural markets being more buffeted from global turbulence than the urban markets.

2. What do these reported numbers mean, on the ground, beyond the reporting methodologies?
* In the US, the "real" unemployment rate is being touted at 16% as people are no longer looking for full time employment.

3. What do the low pre-financial crisis numbers in certain economies mean?
* Global trade: 43% of the Australian economy is driven by trade. Its trade with China and East Asian economies has increased significantly in the past few years.
* Socio-Economic & Political Support Systems: European economies have significant support tools (including labor laws) built into the socio-economic system.

4. What does the wide variance in % change in unemployment rate mean?
* Impact of Global Trade: The German, Australian and Japanese economies have trade as a higher component of their GDP, compared to US which has consumption as a massive component. Does that explain their unemployment rate multiples being higher than those of the US?
* Impact on Recovery: Does a higher mutiple of unemployment rate mean that the economic recovery for these economies would take longer?

5. Does a country's pattern of a country's/ region's economic structure impact the behaviour of the unemployment rate- runaway unemployment, exponential unemployment, high/ low bounded unemployment?
* Trade with (Still) Growing Partners: Consider Australia, which trades with growing economies China and Indonesia. The increase in its unemployment rate was much more than that of the US. Does that mean trade with growing partners is irrelevant to the unemployment rate of a country in a crisis?
* Labor Force Characteristics: Could skills and education create a natural upper bound to an increasing unemployment rate? Or is it something deeper- related to "animal spirits"?
* Recovery: Do certain charts/ patterns of unemployment rate increases lead to quicker recoveries? E.g. Would unemployment rates in a highly skilled sector recover quicker? Could Iceland be an example here? Its unemployment rate changed from an estimated 1% in 2007 to 10% in 2010.

6. How well are country economic systems structured to handle increases unemployment?
* Work Force Finding Work Again: Do economic systems- taxation, socio-economic support features- help the workforce find work again quicker? If so, which economies would recover quickest from the crisis?
* Animal Spirits: What role do "animal spirits" play here? Would "animal spirits" be dulled by excessive state support during a crisis? Would states that provide a clear path for "animal spirits" to run free recover fastest? Does the previous question imply that states can "encourage" animal spirits in a particular direction? Does that hold up against research on state support for "private" innovation? How are the two scenarios different?
* Recovery: What elements of the economic system would lead to the quickest recovery? Would unemployment rate be the only ture indicator of a recovery? Case in point- Japan.

A Country Economic Employment Absorption Index?My first reaction was to consider building an index to compare country economic systems to indicate which ones would recover quickest from the crises.

While reading papers comparing labor markets like the US and France would be the first step, currently, the World Bank has some indices that attempt to characterize the flexibility of economies in labor markets, based on a study of labor market regulation across economies:

Prof. Rosensweig*** suggested looking up "Labor Market Flexibility" and notes from the OECD and the ILO. I have found some interesting perspectives in some Economist articles. You are welcome to challenge the ideas presented below.

Readings from the Economist
European Approaches to Unemployment
European Decline?

Globally Divergent Challenges to Recovery
The Great Stabilisation
Leaders and laggards

Promoting Entrepreneurship

What do you think? Stay tuned!

*** First discussed (including some of the questions raised) at a macroeconomic forum guided by Prof. Rosensweig on Dec. 15, 2009.

Innovation's Impact on the Economy

Executive Summary: We have perspectives on measuring innovation's impact on a company and even on a sector. How do you measure innovation's impact on the economy? Would this information help government/ economic decision-making in any way?

The Background
There is some interesting an exciting work around innovation and organizations- The name Clayton Christensen immediately comes to mind. There also is some insight on innovation an industries- specifically clusters.

At CES, 330 companies joined 2500 existing companies in debuting 20,000 products. Now, given all the hype generated around the iPad and around CES 2010 in these tough times, how would you attempt to measure innovation's impact on the economy?

The Avalanche of Questions
* Does innovation make a significant dent on the economy (especially if the economy is driven by the Big C- Consumption)?
* Does innovation become more, or less, important during tough times for the economy?
* Does innovation help in economic recovery?
* What kind of innovation is best for economic recovery and well being?
* How do we categorize innovation- diruptive, incremental and something-in-between?

One Method to the Madness
Lets indulge in some rogue behavior and dive in approaches. We can then step back and evaluate value and ease of obtaining data elements of each approach. One approach would be to add up all the revenues of "innovative" products et voila! Given a consumption economy, does it really matter?

* You might argue that the revenue from some complex technique- say the legal mechanism that allows sovereign funds to invest in key infrastructure assets- may not easily be classifiable as an "innovative product" or service. Fine. Make an executive decision- in or out, or even halfway in.
* You might also argue that some of these products may have been manufactured elsewhere- well, then that shows up as trade or investments doesn't it?
* Why are we only looking at revenue? What about the rest of the financial statements of the firm in relation to the product?

Another Method to the Madness
Now, do you believe that the way out of a current economic quagmire is to focus on production of goods and services, and start saving?

How about trying to build an optimization function/ index that tries to minimize Big C (consumption) in the GDP?
The Model
Could we start by categorizing innovation with this objective in mind? Yes, it is a different way of thinking, and I am pushing the envelop a little, but I am sure we can come up with some sort of back-of-the-envelope index? It, tongue firmly in cheek, need not even be as rigorous as zero carbon footprint.
The Data
What do we really need for a rigorous approach here? Firm financial statments broken down by products? As easy as ABC (pun intended with Activity Based Costing)? Also, mapping these components to their net effect on the elements of the GDP?
What do you think?
Here's a crazy thought:
Would this sort of granular data help the government make more effective decisions in the interest of the economy?

Tuesday, January 5, 2010

Consumer Electronics Show ( CES 2010 ): The CE Ecosystem and Opportunity I

Executive Summary: A perspective of the ecosystem behind CES 2010, to help you manage the complexity of change it would deliver at your doorstep, and to help YOU find opportunity- for new products, or for expanding the reach of existing products- in this ecosystem.

Introduction: The Who.

Who would be you, a.k.a. the target audience, here?  You are interested in CES 2010 for various reasons. Here a spectrum:
1. The Consumer- "Should I buy that 37 inch 120Mhz 1080p LCD TV in Spring?"
2. The Product Guru- "So what's out there that I should watch out for?"
3. The Marketing Guru- "Mobile ads for my ad dollars?"
4. The Finance Guru- "Productivity for the company dollars?"
5. The IT Guru-"I have cloud on my mind... um... what could this lead to?"

Granted, this is a little bit of overkill for The Consumer, but don't discount the Gadget Gurus among us.

Introduction: The What and The How.

The Consumer Electronics Show / CES 2010 promises to be as exciting as ever.With over 2800 exhibitors and about 20,000 new products, it can be a dizzying experience. You may have a priority list structured by companies, products, target consumers, sectors, etc., to manage the scale, but the complexity can be mind boggling.

Why are we interested in it? In terms of innovation and externalities, the aggregate impact of CES could well be similar to NASA's moon landing effort in the 1960s. (Note to self- research the innovation parallels :-)) Consumer, consumer oriented businesses, and even intra-business and B2B structures may be impacted.

Framework Overview: The How.

Below is an ecosystem view of the players at CES. Industry veterans with broad experience across the consumer and technology space may find this familiar and similar to approaches they have developed over time- for the rest of us, its and interesting tool to snapshot this evolving industry.

The Strata
The picture can be broken down into the following strata:
1. Consumer
2. Applications + Content
3. Platforms
4. Core Infrastructure

So What?
For the snapshot, or even as a first pass, each strata can be structured as a linear ecosystem with its supply chain. The fun begins when you map it out and start seeing the interconnectedness, even a cliched convergence, across the board.
The next "order" of approach would be to note the elements outside the ecosystem. However, that's for later.

Content for an Electric Toothbrush?
Yes. In this case, content is all the MindShareWorks (TM) that goes into getting a consumer to buy and sustain usage of the mighty electric toothbrush.

As Easy As 1-2-3-...?
Yes... and No. You still have to do the hard work to optimize this tool for your objectives. If you are, say, an investment analyst, you still have to put in the hard work to learn and leverage this approach in the sector.

The Strata Attributes
We could use standard market mapping tools like
1. Competitiveness,
2. Number of Market Participants, etc.

The Devil's Advocate
Hello! This reminds me of the Five Forces Framework: Well, hang in there- there is value in getting specific and structuring it this way. The So What? should have sold you on this already.

Stay Tuned! More to come in the mapping.

What do you think... so far?