It Takes Competition PLUS Innovation

David Brooks of The New York Times recently wrote a fascinating op-ed, “The Creative Monopoly,” in which he contends that U.S. companies are more invested in competition than innovation…to their strategic disadvantage 

“Instead of being slightly better than everybody else in a crowded and established field, it’s often more valuable to create a new market and totally dominate it,” he writes. “The profit margins are much bigger, and the value to society is often bigger, too.”

It’s true:  a competitive mindset can sometimes mean missed opportunities.  There are lots of examples of big, successful companies walking away from a breakthrough new idea.  Think of the telephone.  When William Orton, president of Western Union, the world’s first communications empire, was offered the rights to the telephone in 1877, he declined, describing Alexander Graham Bell’s invention as an “interesting novelty [with] no commercial possibilities.” 

If Orton had been a little more far-sighted, we might now be signing up for cell-phone service with Western Union Telephone & Telegraph (WUT&T), instead of American Telephone & Telegraph (AT&T)!

In the best of all possible worlds, companies should be combining competition with innovation.  One company does it well:  Apple.

Have you ever heard of Audio Highway?  That’s the company that, in 1996, created the first portable MP3 player (called Listen Up) and the system for uploading content to a PC and downloading it into the player.  But in 2001, Apple differentiated what could have been a “me too” product by redefining the consumer’s experience of using a portable audio device, when it launched the iPod.

Today, Apple is coming out with new products and innovations just about every 15 minutes.  Through its brilliant design, branding and marketing initiatives, Apple has created a whole family of products that now includes five or six different varieties of iPods — plus iPhone, iTouch and iPad.  

It’s the prime example of a company that manages to be both competitive and innovative…and, as a result, outperforms itself in almost every measure. 

An Opportunity to Lead on Intangibles

Today’s guest blogger is Bruce Berman, a principal in Brody Berman Associates, and is responsible for four books on IP and business, including From Ideas to Assets. His weekly posts can be found at IPCloseUp.


The recent sale by AOL of 800 patents to Microsoft for $1.1 billion, and patent purchases by Facebook and Google and Apple, are graphic reminders that intellectual property rights, otherwise hidden assets, are keys to unlocking value.

Intangible assets like patents that are not reflected on balance sheets today deserve the same oversight as a business’ other financial assets. They rarely get it.

PwC and other sources attribute 80% or more of the market value of S&P 500 companies to intangible assets, primarily intellectual property rights. Despite this, many companies do not discuss their patents publicly because they fear they are too intricate and that no one is listening. That is no longer the case.

CXOs and board of directors should not be intimidated by the learning curve or financial reporting challenge. Explaining their innovation rights should not be seen as a burden but as an opportunity to provide stakeholders transparency and turn hidden value into market capitalization.

Patents are the product of costly R&D. They can permit innovative companies more market share and higher profit margins, licensing revenues and freedom from disputes.

Businesses that fail to explain the role their IP rights play in financial performance are short-changing themselves and possibly shareholders. The clever ones will disclose more before investors and regulators require them to.

A Great Question

Getting to the crux of the matter with recruits that one interviews is always challenging. You need to find out, as quickly as possible, their talent and character assets and liabilities. And your assessment has got to be right, because it is very costly when you are wrong. (We have all occasionally been wrong.)

Therefore, one looks for questions that are penetrating and motivate candor. To help me along, I often read Adam Bryant’s “Corner Office” in the Business Section of the Sunday edition of The New York Times. In his interviews with business leaders, Bryant almost always asks each one: “What are some of the questions you ask when you are interviewing job candidates?”

There are lots of creative questions that people ask, but one that really stood out was asked by John Donovan (http://www.nytimes.com/2012/01/01/business/john-donovan-of-att-on-seeking-results-instead-of-praise.html), CTO of AT&T: “If your professional colleagues were going to put three words on your tombstone, what would they be?”

The follow-up: “Instead of three, what would the one word be?” I like this particular line of questioning because it really makes people think very hard about what they stand for, what makes them tick, and what they want to be remembered for. The follow-up is even tougher. So I have been asking these questions, and I find them as effective as I anticipated they would be.

The responses have included such words as “loyal,” “resilient,” “hard worker,” “problem solver,” “cares about others,” “loving father” and many more. But what is most wonderful has been the expression that appears on peoples’ faces…one of deep thought, folded arms with one palm on the face, wrinkled foreheads, and long pauses as they think and think and think. And then the words start coming in a very deliberate manner, and you know that this is a considered answer and what they are giving you is the honest-to-goodness truth.

 And that is what you want for a decision that could cost you anything from thousands to millions of dollars.

A Wake-Up Call From Shareholders

Citigroup shareholders’ rebuke of the $15 million pay package for its CEO struck several chords with me. It was a landmark development and possibly ushers in a new era.

Let me note that the authorization for shareholders to take this action came from the “say-on-pay” provision of the Dodd Frank Act; it is an expression of a sentiment, but not binding, unless the board passes it. Nevertheless, it is an invitation for shareholders to express their opinion publicly on an issue that previously had been sacrosanct. A key motivation for the action has been to make sure corporate leadership ties compensation to performance.

First, this was more negative publicity for Citigroup that has had its share of it as a result of the subprime loan crisis and the slow payback on TARP. Such negative publicity will no doubt put pressure on other companies, largely because Citigroup is the highest profile organization to have experienced such a rebuke.

Second, it will probably stir the shareholder rights crowd, and we will see corporations becoming more sensitive to shareholder demands. Greater transparency could result. For example, one friend told me of a bylaw in the proxy he received which asked shareholders to vote on a provision that would limit their ability to challenge certain things. Hopefully, from here on in, the opposite will happen. It has to, as most investors – professional and individual alike – tend to abhor bylaws that abridge their rights.

Third, and finally, it is interesting to note how communications and influence travel. The term “income inequality” has been in the news more times than I can count (e.g. at least thousands). As a result people are becoming conscious of the term. As it gained momentum, the government passes the Dodd Frank Act enabling “say-on-pay.” The communications line zig zags back to the streets via The Occupy Wall Street movement which addresses those victimized by income inequality as “the other 99%” and the popularity spreads further. A mere few Fortune 100 CEOs pay attention to the group and meet with them. Most don’t. The term is now reinforced through shareholders rights groups. Bang! Citigroup happens.

I expect more Citigroup-type situations to follow, more corporate accountability on pay for performance, and more transparency on every aspect of shareholder engagement.

The Relationship Between the CEO and the Chairman

This may sound obvious, but it is not always true: the CEO and Chairman of the board of a major company must have good chemistry with each other…meaning they must connect and communicate well. Further, they also need to be strategically aligned with each other and the entire board of directors. (The assumption here is that the CEO and Chairman are two different people; in some companies they are the same.)

I was involved with a multi-billion dollar company awhile ago where the CEO was recently fired. Yes, there had been moderate strategic and sales issues in the company for quite some time and many in the management team had been dissatisfied with the communications skills of the CEO, despite major training investments to correct the problem. But after the termination, I was very surprised, when talking with the CEO one-on-one, to hear him say: “I never really had a great rapport with the Chairman from the very beginning.” That fact alone had to create significant discomfort at board meetings and even outside such meetings.

One has to wonder, when the stakes are so high, what the selection process was and how carefully the skillsets and personality were examined. The person selected for a CEO position has to be a perfect fit and there has to be the potential for a true partnership.

Last December I attended a CEO Conference, “Challenges to Global Growth,” sponsored by CHIEF EXECUTIVE Magazine. One of the speakers emphasized that too many boards are hooked on PowerPoint presentations and don’t communicate on the issues they need to address face-to-face. I can just imagine the criteria for the CEO being presented to the board that way, with little focus on one-on-one interaction among the CEO-to-be and the board members.

The speaker also noted that boards are often too insular. “PowerPoints should be read in advance,” he said. “Boards are there for discussion and challenging the CEO. It’s all about communications, strategic alignment and understanding the marketplace.” He added, for example, that boards of retail operations should be asked to shop monthly in the stores so they experience the service. I would add that light socializing with the chosen CEO candidate should also be fundamental. Great companies are made from great relationships.

CEO to the Rescue: Turning a Bad Situation Around

Do you recall my blog from Monday: “The Manischewitz Pie Crust Debacle”? It was the story of the “uncuttable” crust, the result of a faulty product distributed to supermarkets by the company…or so we thought. When my wife wrote a letter of complaint to customer service early Sunday, an automated response said all emails would be answered on Monday. Come end of day Monday, we had still not heard. Not what we have come to expect in the 24/7 internet age.

Then lightning struck on Tuesday morning, when no less than the co-president and CEO, Paul Bensabat, sent the following email:

“First let me apologize profusely for your bad experience with one of our products. I feel horrible that you not only were not pleased with this product but also got embarrassed in front of your friends. If you‘ll allow me, I need to understand in greater details what happened because frankly it is the first time that we are hearing this type of complaint and we need to get to the bottom of it to find out what could be the cause. Would you please be kind enough to give me a phone number where I can call you later today or tomorrow to discuss this matter? I would greatly appreciate it.”

We assume that Monday’s blog — plus my wife’s note — inspired a C-suite officer, the co-president himself, to respond. My wife sent him her number and, true to his word, he called later that afternoon. A turnaround was at hand. The co-chief executive explained that this was the second year that the pie shells were on the market and ours was the first complaint about them. Despite the fact that the shells come ready to use and require no baking, his staff had spent the morning freezing, baking and just leaving them in the oven for close to an hour trying to duplicate our experience of having a shell that was harder than cardboard and impossible to cut.

Mr. Bensabat asked if we still had the original packaging (which we did not) or noted the “best by” date on it (which we also did not). My wife explained that she had purchased the crusts in our local supermarket and that they stocked their Passover products at least six weeks in advance. He explained that they have a shelf life of about nine months and that this year’s batch was baked in October. He further explained that macaroon pie crust products, because of the moisture in them, cannot be kept from one year to the next, which can be done with dry matzo products.

The pie shells, he said, would become hard as a rock if they were left over from Passover 2011 and put back on the shelves this year. It is likely, he asserted, that the supermarket did exactly that. Mr. Bensabat said he intended to send one of his employees to the Stop & Shop, where my wife made her purchase, to ensure that the problem would not happen again.

To make up for this unfortunate and embarrassing experience, Mr. Bensabat is also sending us a basket of their new products and said he “hopes that we will continue to use Manischewitz products in the future.”

We will.

It appears that in this situation, the fault was not Manischewitz’s. Were we jumping to conclusions? How else would we know the ostensible truth had we not written a blog, fired an email to customer service and been lucky enough to have a sensitive CEO engage with his customers. The wonder of communications! The wonder of the internet!

The Manischewitz Pie Crust Debacle

We were invited to a Passover Seder last Friday night, and my wife offered to bring dessert. Aware that there are special foods required for Passover, she dutifully went to the supermarket and bought a Manischewitz pie crust.

Manischewitz is the largest manufacturer of processed kosher food products, as well as matzo, or unleavened bread. Obviously, this would be a safe and reliable source that would toe the line. Everyone in the Jewish community knows of the integrity of Manischewitz.

My wife proudly handed to our hostess the pie she had made – a frozen key lime. She asked the hostess to keep the pie in the freezer during the meal and remove it about 15 minutes before dessert would be served.

The big moment came. The pie was brought to the table, and my wife asked if the hostess would permit her to cut and serve each person a piece. And so she began. But the freaking pie would not cut. So we switched to a serrated knife. We were literally sawing the bloody thing. Meanwhile, the frozen key lime filling was starting to melt. Still, no progress. So we tried a much bigger knife, and it still would not cut. Among the guests, there happened to be a 6’5” former football player who had auditioned for the NFL. So… we handed him the knife (at this point the guests were hysterical!), and he finally gained traction. Hooray! By this time, the frozen lime was soupy lime. I tried a piece. The crust was like chewing cardboard. The label said: coconut macaroon.

My wife pondered the possibility that perhaps the problem was due to freezing the crust. But she had made another pie the following night with a chocolate crust, where no freezing was required. The same thing happened. It would not cut. She had to dump the pie.

I suggested she write Manischewitz online to tell them of the experience. She received an automated email response noting that they were closed and would be open on Monday. I can understand Manischewitz being closed for the holy first two days of Passover, as it relates to the integrity of its position within the Jewish community. That said, as the world’s leading manufacturer of unleavened products, and for the holiday that claims a major part of its sales, shouldn’t there be some channel of interaction available to its thousands of customers once the observance is over at sundown on Sunday? Current status at end of day Monday: No response.

Getting Jobs: Are We Talking to Each Other?

For those seeking jobs in this slow economic recovery, there are some hidden jewels — industries where the demand is greater than others!

However, sometimes there are obstacles even where the demand is strong. According to the most recent data from the U.S. Department of Labor, the number of people who are not currently looking for work (because they believe that there are no jobs available for them) rose to 717,000 in the first quarter of 2009, a 70% increase from the year before. The numbers may be a little stale, but they serve as an important indicator. No doubt there are still hordes of discouraged potential workers.

Some people are plainly unaware of where opportunity lies, so jobs go unfilled. Often times, the question is whether the “job-seekers” and the “job-fillers” are communicating with each other.

So first, I checked with our client, Beyond.com, the premier Career Network focused on helping people grow and succeed professionally, to determine which industries offered the most job opportunities. Beyond.com advised that, based on its most recent survey, the two industries that show the most interesting growth signs are: IT and Healthcare. For starters, I thought my blog would be one of the communications channel for this critical information! So here are some “hot stats” from Beyond.com on these two industries:

IT
• The Number of IT jobs posted at the end of 2011 increased by more than 117%.
• The top three technology job titles: JAVA Developers, Software Engineers, and .NET Developers.
• The cities with the most IT candidates currently are New York, Los Angeles and Atlanta.

Healthcare
• The number of Healthcare jobs posted in the second half of 2011 grew significantly when compared to the first half.
• The cities with the most Healthcare opportunities: Houston, Cleveland and Baltimore.
• Top 3 job titles: Medical Assistants, Pharmacy Techs, and Registered Nurses.

Both categories are primarily seeking people with 1-3 years’ experience: early entries in the workforce.

So where should this news be publicized? How can “job-seekers” and “job-fillers” find each other?

In the days when I looked for a job, you used classified ads primarily. Today, in a digital environment, more and more people are turning to technology, such as social networks, e.g. LinkedIn or communities like Beyond.com’s Career Network. For example, both applicants and prospective employers go there to discuss specific needs. Then things start to happen.

It’s now more about engagement than putting your resume in the mail. And engagement, in the traditional sense of the word, is as important as digital.

Challenge your creativity! Traditional ways to engage still produce!

Out of work, I once decided that, instead of sending resumes, I would personally visit companies on my target list — without appointments — asking the receptionist for informational interviews. It resulted in two offers, whereas nothing was happening using the mails.

A Solution From A Discouraged Mets Fan

Despite the recent favorable New York Mets-Madoff victims settlement (and the claim by some that it lifts a dark cloud from the team), the image, in my opinion, of the entire Mets organization is as cloudy as it has ever been.

“Now I guess I can smile, maybe take the day off,” co-owner Fred Wilpon was quoted as saying following the decision. Mr. Wilpon is kidding himself. He will only smile if he also believes he is living in Never-Never land.

Rather than $1 billion, which the trustee originally sued for, Fred Wilpon and Saul Katz, co-owners, came out owing only $162 million to Madoff victims, and because of various clauses, may end up paying much less than that.

There is only one out. The current leadership must sell the team to clean up its image — unless the team goes on a 50-game winning streak, which is about as likely as my flying self-propelled to the top of the Empire State Building. Because of the Wilpon-Katz financial mismanagement, the team has had to let go of several of its major stars, has experienced the biggest drop in payroll from year to year of any team in baseball history, has been dormant in the off-season in any attempt to bring in new talent and last year had the lowest attendance since 2004.

While the Mets have sold 12 shares in the team worth $240 million, which will help pay off debts, it is my observation that cash is tight and it will take years to “right” the situation. In addition, the ownership has just been through a year plus of bad publicity questioning the integrity of Wilpon-Katz. Huge sums were made in recessionary years…which would make any investor raise an eyebrow.

One example was the “exclusive” opportunity that Wilpon-Katz offered only to a select group of friends of theirs who were willing to invest millions, blind. The rule was that invitees could not be told who would manage the money or what instruments the money would be invested in. These guys were “Madoff-Ponzi Scheme” friends if ever there were ones.

The other day I got an offer in the mail saying that if I buy a ticket to the opening game, I will get a free ticket to the following Saturday and Sunday games free. Clearly, desperation is setting in.

How do New Yorkers turn their heads and look the other way? They don’t and they won’t. The Mets are in trouble. No major New York institution (or one in any city) can survive and prosper when there are morality questions at the top.