Clash Of The Titans: The Battle Over Skydrive On iOS

by BruceB.

 

skydrive

Microsoft Battles Apple’s IOS

Microsoft is embroiled in a conflict with Apple that is part of a bigger story. Today I’ll tell you about the details of the standoff over whether Microsoft will be allowed to keep giving away a Skydrive app for iPhones and iPads. In the next article, I’ll give you the bigger picture, which will help you understand some of the battles to come – and perhaps help you make decisions about what devices you buy.

Today’s flap is about whether Microsoft will be able to update an app for iPhones and iPads that provides access to files and pictures stored in Skydrive.

BACKGROUND

Skydrive is Microsoft’s cloud service for storing files and pictures online and syncing them to your computers and other devices. If you’re not familiar with Skydrive, take a look at this article for some background.

Signing up for Skydrive is free – 2Gb of space is available to anyone with a free Microsoft account. If you want more space, you can sign up for additional space for a modest subscription fee.

Most people will use Skydrive by installing a small program on a computer or phone or tablet. On computers, it creates a special Skydrive folder that is synced with the online storage and any other computers connected to the same account.

On a phone or tablet, a Skydrive app displays everything in the Skydrive folders and allows them to be reviewed or downloaded. I have access to all my client files on my Windows Phone 8 device and my Microsoft Surface tablet, in addition to my laptop and desktop computer.

The Skydrive apps for phones and tablets have other features unique to those devices. For example, you can have your phone automatically upload all the pictures you take to your Skydrive folders, where they can immediately be viewed on your computer or tablet.

Microsoft has been continuously improving Skydrive for the last few months. It is built deeply into Windows 8 (all sizes – computer, tablet, phone) and it will take center stage in January when Office 2013 is released and Skydrive becomes the default location for saving files. Developers have been given tools to create programs that integrate with Skydrive in interesting ways. Skydrive fits the new age of mobile devices, meeting your expectation that you will be connected to your stuff everywhere – every computer, every device.

There are competitors to Skydrive which have their own strong points. Dropbox continues to be a compelling, secure service for file syncing and sharing, with good cross-platform support, for example. But Microsoft’s plans to integrate Skydrive with everything are well under way. If you’re a Windows user and you’re not already committed to Dropbox or SugarSync or one of the others, you should be using Skydrive.

THE DISPUTE WITH APPLE

There is a Skydrive app for iPhones and iPads in the iOS App Store. Microsoft has an update ready that will fix bugs and add some new features. Apple won’t approve the update.

Apple wants money.

See that reference above to a subscription fee? A few months ago, Microsoft gave users the ability to buy more online storage space for an annual fee. You can sign up from the Skydrive web site.

Apple’s position is that it must be paid 30% of all money collected from a user who signs up for extra space, if they have the Skydrive app installed on an iOS device.

Forever.

Even if the purchase is not done through the iOS app. Microsoft offered to take out every vestige of a purchase mechanism from the app. Apple said it didn’t make any difference.

Even if the app is immediately uninstalled. Apple says it has a right to 30% of the revenue from that user’s subscription forever.

Even if the user stops using an iPhone and switches to an Android phone or Windows phone. Apple wants its cut forever.

What’s more, at the moment, Apple is blocking apps from third-party developers who integrate with Skydrive in any way, because Apple must get a cut from anything that touches money even indirectly. You can’t get an iOS app to play music stored in your Skydrive folders because Apple isn’t getting a cut of Microsoft’s Skydrive revenue.

Apple’s position is that it must be given 30% of the revenue from a product which roams across multiple platforms – lifetime fees for a subscription which was not purchased through the Apple store and which is not directly related to use of the service on an Apple device and indeed which might never be used on an Apple device.

The story was broken by The Next Web a few days ago, and has been confirmed by Microsoft.

It is extortion by Apple, driven by greed and its desire to keep Microsoft away from iOS devices – a bit ironic, since Microsoft has arguably done as much as any third party to keep Apple’s computer business alive. Microsoft Office has long been one of the most popular third-party programs for Macs. Microsoft even invested $150 million in Apple when the company needed a boost to survive at the end of the nineties.

That’s old history, though. Apple is ascendant today in phones and tablets and aims to stay that way.

The companies will negotiate and eventually it will be resolved. We may never know what they decide. When the giants fight, the little people don’t always get to know the details. You can and should use Skydrive while they work it out.

There is a bigger issue behind this fight, though – specifically for Microsoft and Apple, as well as many more fights to come as Apple, Google, Microsoft and Amazon jockey for position in the new world of mobile technology. I’ll step back and give you a broader view in the next article.

The Costs of “Free” Social Media to SMBs

Summary: About one-third of SMBs are spending an average of $845 per month to manage their social media messages, according to new research from cloud marketing company Vocus.

Heather Clancy

By for Small Business Matters | September 25, 2012 — 22:55 GMT (15:55 PDT)

Social media marketing is referenced often as an especially cost-effective tool for small businesses.

Even so, 36 percent of small and midsize businesses (SMBs) spend an average of $845 per month on tools or cloud services for managing their social media accounts, according to a new survey sponsored by Vocus.

Another 32 percent of those surveyed on behalf of Vocus said they spend $1,000 or more on social media management, while 22 percent are outsourcing these functions to someone else (the amount of that investment wasn’t given in the materials I reviewed for this post).

The average number of tools used by the SMBs to deal with social media accounts is three, while social media activities represent about 25 percent of the respondents’ overall marketing mix, the data show.

The research conducted by Duct Tape Marketing has an error ratio of +/- 4.9 percent.

“What I’ve been noticing more and more is there’s finally this acceptance that social media not only isn’t going away, it’s an essential element of the marketing mix and the real challenge now is to figure out how to integrate it into the total online and offline marketing presence,” said John Jantsch, marketing consultant and creator of Duct Tape Marketing.

Here are some other findings of the research:

- 76 percent of the respondents use referral traffic to their Web site or e-commerce platform as the primary means of measuring social media’s effectiveness

- 87 percent believe social media has been “somewhat helpful” or “helped a great deal”

- 40 percent are focusing on a small but highly engaged audience

- For 91 percent of the respondents, the most common use of social media is information sharing

Personally, $845 per month seems like a lot to spend for an especially small business or sole proprietor. But if you consider where else that money might go — newspaper advertisements, flyers and such — as well as the high potential impact of social media engagement, the investment makes more sense.

Central Banks of the World Flying By the Seat of Their Pants

Mohamed A. El-Erian

CEO and co-CIO, PIMCO

Central Banks’ “Responsible Irresponsibility”?

Many monetary policy purists will not recognize what central banks in Europe and the United States are up to these days. And those that do are likely to express outrage at how far these traditional guardians of monetary stability have ventured into unfamiliar territory — a situation they undoubtedly regard as inadvisable, if not dangerous.

Such reactions are understandable. Yet confusion and outrage are not the right responses for the rest of us. Whether you are a government, an investor or a concerned citizen — and whether you live in the west or in an emerging economy such as Brazil — it is important to understand why both the European Central Bank and the US Federal Reserve are so far adrift from conventional central banking; and what this means for the global economy as a whole, and for individual countries.

Like fiscal agencies, central bankers responded aggressively to the calamity of the 2008 global financial crisis. Eager to avoid an economic depression, they slashed interest rates, opened all sorts of emergency financing windows to keep banks alive, and also injected liquidity into the economy through whatever avenue they could think of.

From the very beginning, the intention was for this unusual policy activism to be both temporary and reversible. Indeed, much time and effort were devoted to designing “exit strategies” that allow central banks to return to “normalcy” in an orderly and timely fashion.

Yet there has been no exiting. Instead, central bankers have found themselves drawn deeper — much deeper — into experimental mode.

With ultra-low interest rates proving insufficient to deal with the economic malaise, the Federal Reserve has felt compelled to provide unprecedented “forward policy guidance.” It signaled its strong expectation that rates would remain floored at zero until at least the end of 2014. And by claiming that it could see that far into the future, it essentially challenged the time-tested view that monetary policy acts with “long and variable lags.”

This was not the only unthinkable. The Federal Reserve has aggressively bought US government and mortgage securities. On the other side of the Atlantic ocean, the ECB has acquired trillions of bonds issued by struggling members of the Eurozone; and it has even found a back door to get money to the Greek government in order for it to meet its debt obligations to the ECB.

The numbers are getting very large; especially as both central banks have signaled their intention to do more (including last Thursday’s ECB announcement). Already, the ECB has ballooned its balance sheet to over 30 percent of GDP and the Federal Reserve to 20 percent of GDP. (Note that the Bank of England and the bank of Japan are in the same ballpark).

Through their ever-larger presence in markets, central banks have inevitably influenced liquidity, price signals and information content. In some cases, even the provision of financial services to the public has been impacted (including money market saving instruments, pensions and life insurance).

Imagine if this were attempted by central banks elsewhere. It would be met in the west by cries of irresponsibility. Yet, ironically — and using a formulation adopted by economists such as Paul Krugman and Paul McCulley — central bankers in Europe and the U.S. have felt that it is in fact responsible for them to be irresponsible.

Central bankers will tell you that they have had no choice but to operate increasingly in unfamiliar and unconventional policy territory. After all, despite massive monetary (and fiscal) stimulus, the US economy has remained sluggish and unemployment is still way too high. Meanwhile, Europe continues to struggle with a debt crisis that started in Greece in 2009 and has spread wide and far. Even Germany, the continent’s powerhouse and the country that has undertaken the deepest structural reforms, is now slowing markedly.

Due to political paralysis and polarization, central bankers seem to be the only policymakers both willing and able to respond to these unusual challenges. Yes they are using imperfect tools. Yes the outcomes of their actions involve collateral damage and unintended consequences. But they see all this as preferable to the alternative of doing nothing.

I suspect that central bankers, whether in Europe or the U.S., realize that — acting by themselves — they cannot deliver the much-needed outcomes of growth, jobs and financial stability. Rather than guarantee the destination, they are helping to define the journey. They are building bridges, hoping to buy time for politicians and other policymaking entities to overcome their bickering and dithering.

Time will tell whether this strategy will work. In the meantime, the rest of the world has no choice but to adapt to this “responsible irresponsibility.”

The more western central banks inject liquidity into their economies, the greater the splash for other countries. The result is something that has been experienced by countries such as Brazil: significantly greater exchange rate volatility, disruptive flows of capital, and higher tensions between domestic and external realities.

Brazil and other responsive emerging countries have responded by re-caliberating their macroeconomic policy mix. They have aggressively cut interest rates while tightening fiscal policy; and they are looking to revamp structural reforms.

It is still early days though. Further policy adjustments will be required in the months and years ahead as western central banks implement additional unconventional policies, and as the longer-term effects become more visible. And it will not be easy. Policy responses will be analytically hard to calibrate precisely, especially as all this is happening with virtually no global policy coordination to speak of.

Have no doubt. While most countries would prefer to be just observers, they are in fact reluctant participants in one of the biggest monetary policy experiments of all time. The entire world shares an interest in the success of this unprecedented endeavor — after all Europe and the United States anchor today’s international monetary system and will do so for quite awhile. Yet in hoping for success, we are all well advised to also think of the range of contingency steps to deal with the collateral damage and the unintended consequences.

This article was originally published in Portuguese in Brazil’s Estado de Sao Paulo.

Day of Reckoning? Influential Insider Now Supports Break Up of Big Banks

In Defining Hypocrisy, Weill, Who Led Repeal Of Glass Steagall, Now Says Big Banks Should Be Broken Up

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Who is Sandy Weill? He is none other than a retired Citigroup Chairman, a former NY Fed Director, and a “philanthropist.” He is also the man who lobbied for overturning of Glass Steagall in the last years of the 20th century, whose repeal permitted the merger of Travelers of Citibank, in the process creating Citigroup, the largest of the TBTF banks eventually bailed out by taxpayers. In his memoir Weill brags that he and Republican Senator Phil Gramm joked that it should have been called the Weill-Gramm-Leach-Bliley Act. Informally, some dubbed it “the Citigroup Authorization Act.” As The Nation explains, “Weill was instrumental in getting then-President BillClinton to sign off on the Republican-sponsored legislation that upended the sensible restraints on financecapital that had worked splendidly since the Great Depression.” Of course, by overturning Glass Steagall the last hindrance to ushering in the TBTF juggernaut and the Greenspan Put, followed by the global Bernanke put, was removed, in the process making the terminal collapse of the US financial system inevitable. Why is Weill relevant? Because in a statement that simply redefines hypocrisy, the same individual had the temerity to appear on selloutvision, and tell his fawning CNBC hosts that it is “time to break up the big banks.” That’s right:the person who benefited the most of all from the repeal of Glass Steagall is now calling for its return.

Hypocrisy defined 5:20 into the interview below:

I am suggesting that [big banks] be broken up so that the taxpayer will never be at risk, the depositors won’t be at risk, the leverage of the banks will be something reasonable… I want us to be a leader… I think the world changes and the world we live in now is different from the world we lived in ten years ago.

How ironic is it then that at the signing ceremony of the Gramm-Leach-Bliley, aka the Glass Steagall repeal act, Clinton presented Weill with one of the pens he used to “fine-tune” Glass-Steagall out of existence, proclaiming, “Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority.”

How ironic indeed. And how hypocritical for this person to have the temerity to show himself in public, let alone demand the law he ushered in, be undone.

Weill discussing all of the above and more with a straight face here:

For those curious to learn a bit more about Weill, here is some good reading:

Weill is the Wall Street hustler who led the successful lobbying to reverse the Glass-Steagall law, which long had been a barrier between investment and commercial banks. That 1999 reversal permitted the merger of Travelers and Citibank, thereby creating Citigroup as the largest of the “too big to fail” banks eventually bailed out by taxpayers. Weill was instrumental in getting then-President Bill Clinton to sign off on the Republican-sponsored legislation that upended the sensible restraints on finance capital that had worked splendidly since the Great Depression.

Those restrictions were initially flouted when Weill, then CEO of Travelers, which contained a major investment banking division, decided to merge the company with Citibank, a commercial bank headed by John S. Reed. The merger had actually been arranged before the enabling legislation became law, and it was granted a temporary waiver by Alan Greenspan’s Federal Reserve. The night before the announcement of the merger, as Wall Street Journal reporter Monica Langley writes in her book “Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World… and Then Nearly Lost It All,” a buoyant Weill suggested to Reed, “We should call Clinton.” On a Sunday night Weill had no trouble getting through to the president and informed him of the merger, which violated existing law. After hanging up, Weill boasted to Reed, “We just made the president of the United States an insider.”

The fix was in to repeal Glass-Steagall, as The New York Times celebrated in a 1998 article: “…the announcement on Monday of a giant merger of Citicorp and Travelers Group not only altered the financial landscape of banking, it also changed the political landscape in Washington…. Indeed, within 24 hours of the deal’s announcement, lobbyists for insurers, banks and Wall Street firms were huddling with Congressional banking committee staff members to fine-tune a measure that would update the 1933 Glass-Steagall Act separating commercial banking from Wall Street and insurance, to make it more politically acceptable to more members of Congress.”

At the signing ceremony Clinton presented Weill with one of the pens he used to “fine-tune” Glass-Steagall out of existence, proclaiming, “Today what we are doing is modernizing the financial services industry, tearing down those antiquated laws and granting banks significant new authority.” What a jerk.

Although Weill has shown not the slightest remorse, Reed has had the honesty to acknowledge that the elimination of Glass-Steagall was a disaster: “I would compartmentalize the industry for the same reason you compartmentalize ships,” he told Bloomberg News. “If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking, you’d have consumer banking separate from trading bonds and equity.”

Instead, all such compartmentalization was ended when Clinton signed the Gramm-Leach-Bliley Act in late 1999. In his memoir Weill brags that he and Republican Senator Phil Gramm joked that it should have been called the Weill-Gramm-Leach-Bliley Act. Informally, some dubbed it “the Citigroup Authorization Act.”

Gramm left the Senate to become a top executive at the Swiss-based UBS bank, which like Citigroup ran into deep trouble. Leach—former Republican Representative James Leach—was appointed by President Barack Obama in 2009 to head the National Endowment for the Humanities, where his banking skills could serve the needs of intellectuals. Robert Rubin, the Clinton administration treasury secretary who helped push through the Citigroup Authorization Act, was the most blatant double dealer of all: He accepted a $15-million-a-year offer from Weill to join Citigroup, where he eventually helped run the corporation into the ground.

Citigroup went on to be a major purveyor of toxic mortgage–based securities that required $45 billion in direct government investment and a $300 billion guarantee of its bad assets in order to avoid bankruptcy.

Weill himself bailed out shortly before the crash. His retirement from what was then the world’s largest financial conglomerate was chronicled in the New York Times under the headline “Laughing All the Way From the Bank.” The article told of “an enormous wooden plaque” in the bank’s headquarters that featured a likeness of Weill with the inscription “The Man Who Shattered Glass-Steagall.”

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I See Black People…

salon tv show rectangle graphic

Photo Montage from Salon.com

Today we celebrate a major milestone here at SMBMatters.com.  We recently got our first official flame post!  I guess we’re coming of age.  The comment didn’t just take a jab at the substance of our article, it also lobbed a provocative little bomb.  Someone thought our post on Chicago’s Bucket Boys was “racist”.

This is both racist and a load of crap…” it opened.   After the initial shock at the critique we sparked, it was a quick decision for us to approve the comment for publication completely unfiltered and just as it had been submitted.  The comment’s tone was actually hard to read.  It seemed to be animated, offended, joking and chiding all at the same time, and ultimately closed with a rhetorical question and a smiley-face.  Maybe it was a good-natured challenge.  Anyways, we don’t take it personally.  We can take the critique.

chicago bucket boys michigan avenue

Photo: LensImpressions.net

The blog post was legitimately about recognizing valuable business lessons from unexpected sources.  In this case it was a lesson on having and executing an exit plan for your business. (See the original article for the full story.)  Just because the teacher in the story happened to be a teen less than half my age should in no way diminish my real appreciation for the lesson, or be seen as some patronizing back-handed compliment.  The reader’s comment took issue with the fact that I called the Bucket Boys “savvy”, and laid into me personally, suggesting that I wouldn’t have had a problem with the Bucket Boys if they were suburban white kids drumming in public, or alternatively that I probably wouldn’t want them banging away in front of my place of work or home.

I stand by my article 100%, and I stand by the unexpected lesson I tried to convey in the post, which is the very same concept I’ve heard in some form or another from knowledgeable people, ranging from entrepreneurs to hedge fund managers.  Yes, the kid I described in the post was, in fact, savvy.  His race was irrelevant to the story, and I never mentioned that he (or anyone else) was African-American until this post.

Now I don’t want to be disingenuous.  I recognize that everyone has mental associations that can be immediate or creeping, positive or negative, conscious or subconscious, and it’s not unexpected for people to think that the article is about black kids when they hear the term “Bucket Boys” or see the picture included in the article.  That’s fair.   So I’m going to cop to a few things that honest self-awareness compels me to note, but maybe not what you’d expect.

Some of my best friends are black.  I grew up around black people.  I’ve lived in diverse communities, and had co-workers and business partners who are minorities.  I’ve got black people in my family, and I’d like to think that I treat black people the way I would want to be treated.  Some people even call me black (which I take as a compliment).  I love black people, and not in the sarcastic way that comic Don Rickles would say while rolling his eyes.

I know that everyone projects things upon other people, not just people different than us, but also people who are like us.  Sometimes it stems from our perceptions of people’s personalities, sometimes it’s how they look, sometimes it’s an extension of our own self-image.  So I’ll take this opportunity to take one for the team and own up to the fact that I (like everyone) engage in some kind of bias towards other people.  Perhaps the best reference I can offer here to an insightful discussion of the psychological roots of humans’ bias and powers of projection comes from a recent article on racial images in modern media from Salon.com (Linked Article).

The article’s title is too clever and loaded for me to put prominently here without setting off more alarms that could offend some people’s sensibilities, but I didn’t write it.  One excerpt gives a hint of the article’s core topic, “Colorblindness doesn’t work because we never stop spotting differences in our environment.”   A second excerpt seems to capture a valuable lesson from the discussion, “The good news is that our brains get used to difference; in most situations, exposure to people of different races reduces prejudice. “   My own takeaway and personal thoughts…we all have subconscious and involuntary associations with people of all types, but biases and preconceptions don’t necessarily make us racist.  The article is really worth a full read in my opinion, so please don’t accuse me of paraphrasing or taking liberties with the article’s content.

I don’t have to defend myself against the charge of being biased or prejudiced against African-Americans, or somehow try to prove that I’m not racist in this post.  You see, I’ve been a black person since about as long as I can remember.  While my racial identity is not the equivalent of a racism “get out of jail free” card that some comedians would joke grants me total immunity from racism, I like to think that my experiences and my self-reflection help me to see the biases (both positive and negative) that I have, and recognize when I might be prone to making improper judgments or projections towards others based upon those biases.

“Racist”? That claim doesn’t really hurt me.  “Crap”?  Now that’s offensive.

Paul Wright is a contributor and editor (by default) at SMBMatters.com, and has been proudly black since 1969.

Let’s Get Phygital!!! Phygital…

As a 2 year old outsourcing startup that services SMB back office operations for the likes of established firms and new economy businesses, PARR is often faced with difficult decisions about how to find and use facilities to better serve clients.  For all of the firm’s collective experience in complex transactions and professional service delivery, finding the right facility and long-term office arrangements has proven to be one of the company’s hardest challenges.

Given the emergence of the digital economy, real estate choices have grown for all firms.  But the volume of options can predictably lead to some paralysis.  Throughout the search for the ideal facility, Parr faced the constant dilemma of finding the right balance of a functional and attractive physical space with the needs of a flexible, modern and scalable technological infrastructure.

Maybe the whole episode would have been easier if the company learned early on that there was a name for this trend – “Phygital”.   Where have we heard that word before?

One Chicago firm describes the development as applied to commercial real estate:

The “phygital” trend – the blending of physical and digital commerce – continues to redefine the commercial real estate industry. Retailers such as Home Depot and Paypal, Foursquare and Walgreens, and Amazon are exploring ways to bridge the phygital divide. Tools and apps like QR codes and Belly bring the mobile world into the physical consumer experience. The use of social media among landlords is increasing, while traditional office spaces redefine their use as incubators for the next generation of internet giants.

We’ve known about the ongoing convergence (or collision, if you will) of the bricks and mortar world with the digital world for some time, but it was never so clear that the phygital trend has application to the process of site selection that small- and mid-sized businesses (SMBs) struggle with today.

Site selection is a well-established field (actually it’s a conglomeration of many disciplines) that engages some real-estate professionals full-time, and is important enough globally to draw the devoted attention of multinational firms that track the industry on a much larger international scale.  Real estate expertise is so valuable that you can find experts to guide your company’s site selection process within a 5 block radius or a 5 continent radius.  Don’t expect a glossy insert or double-sided brochure to convey the importance of these issues.  This stuff is the subject of white papers, full-blown analytics platforms, and dedicated site selection specialists, all of which cater to both supplier and buyer segments.  Global consulting giant KPMG has a whole vertical devoted to this area with its own brand identity under the Competitive Alternatives moniker.

In some ways the intertwined macro/micro views are like the yin and yang of the commercial real estate market – each exists in its own space, but is integrally bound with the forces of the other.  Despite having a principal with significant experience as a development specialist, Parr experienced first-hand the difficulty of applying that specialized academic and professional knowledge to its own operations, particularly in a quickly evolving local urban realty market like Chicago.

As they do for many SMB firms, the significant capital costs and onerous restrictions of long-term commitments common to commercial leases have proven to be a barrier to setting up shop in a permanent home for Parr.  Some professionals remind us that office costs are probably the second largest expense for most companies behind personnel and labor expenses, and other forms of human capital.  No wonder that it’s tough to pull the trigger on such a significant capital investment when firms are trying their best to remain capital lean. 

Can companies ever commit to a home when they covet their mobility?  This fear of commitment sounds a lot like a bachelor’s restlessness to maintain freedom at all costs.  I guess corporations really are people too, right?

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Hold That Position: Can Lululemon Extend Without Breaking?

The yoga craze is getting everyone’s attention in today’s health & wellness-oriented culture – spawning yoga brands, if you can believe it.    Devotees to the yoga lifestyle know familiar names like Gaiam, Lucy, Prana, Shakti and Lotuswear, but the most recognizable phenomenon in yoga has to be Lululemon Athletica.  We’re not just talking about yoga pants and leotards.  Lululemon accessories are ubiquitous around Chicago.  On the local El train you’re more likely see  their purses among female commuters than brands you’d expect, like Coach or Kate Spade. 

After going public in 2007, Lululemon has rolled into the enviable position of media darling, with a market valuation above $10 Billion to the fascination of the Wall Street crowd…and it’s kinda popular with its customers as well.  The attention is great, but can it stand the scrutiny?

While some leading firms started with deep roots in yoga’s core philosophies and culture (Gaiam, for example, was founded in 1988 with a focus on teaching media and materials before evolving into a full-blown lifestyle company), Lululemon is one a number of industry leaders created by yoga newbies and converts.  Snowboard and surfing entrepreneur Dennis “Chip” Wilson founded the company in 1998 after his very first yoga class.  Ironically, the level of buzz and brand loyalty Lululemon has generated seems to be something that perhaps only could have been achieved by a “cool” outsider.  For all of its well-earned credibility as one of the first recognizable yoga brands, Gaiam’s image is often mired in the “new age” haze, and it’s easy to see why the company can’t connect with consumers as readily as Lululemon when you endure Gaiam’s prominently placed 3 minute informational video.  After watching it, I asked myself whether there is a word that means the opposite of “buzz”?  Gaiam’s website tries to educate you, while Lululemon gets right to the point with a website that pushes its exclusive wares the instant you arrive.

According to a recent Wall Street Journal feature, exclusivity is one of the key drivers that Lululemon has used to effectively reach sales figures that help it outpace established firms like JCPenney, as well as high-end juggernauts like Nieman Marcus in key metrics such as valuation and sales margins.  Lululemon accomplishes all this in part by going against modern conventions, including a very intentional orientation away from technical analytics and data mining of its customer activity, according to its Chief Executive, Christine Day.  Beyond its focus on offering quality products, the company does not just rely upon the illusion of exclusivity, it actually creates it by stocking limited quantities of popular items.

While a large part of Lulu’s strategy is getting the product right, an equally important part is keeping it scarce. The goal is to sell gear at full price and to condition customers to buy when they see an item rather than wait. “Our guest knows that there’s a limited supply, and it creates these fanatical shoppers,” says Ms. Day.  New colors and seasonal items get three, six or 12-week life cycles so stores feel fresher. Sheree Waterson, Lulu’s chief product officer, says a hot-pink color named “Paris Pink” that launched in December was supposed to have a two-month life cycle but sold out its first week.

This whole discussion sends my mind back to one of my favorite economics jokes, surprisingly enough courtesy of Jim Henson’s famed Muppets.  In the opening scenes Muppet Christmas Carol, Gonzo (in the role of the earnest Bob Cratchet) chides Rizzo the Rat for eating the wares for sale in his apple cart.  Rizzo’s classic response, “I’m creating scarcity…Drives the price up.”  (If you’re too impatient, just skip to the 3:30 mark.)  I guess what was true in this Victorian-era flashback remains true today.

Who’s to say whether yoga devotees will start feeling sore after being manipulated in that way?  Analysts and investors won’t be the only ones asking whether Lululemon’s “cultivated scarcity” can last now that it’s competitors and its customers are waking up to the secrets at Lululemon’s core.

Lululemon – WSJ Analyst Discussion

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LEXECON 1 – Invest in Plastics: Chicago’s Bucket Boys

Photo: LensImpressions.net

From an early age I was always interested in business, and was the only kid in my grade school who regularly read the “Business” Section of the local paper, and who considered it normal to read publications like “Business Week” and “Forbes” from cover to cover.  Growing up in a family of teachers, it’s no surprise that I’ve always been an avid student of many things.  Though I’ve studied business for most of my life in some form or another (including college and graduate work), it didn’t come naturally to me.  Passing the two decade mark since my first formal education as a B-School undergrad, it’s intriguing to learn valuable lessons in business practically every day, whether they come from high-minded academic sources or even from simple observations on the street.

Invest in Plastics – Chicago’s Bucket Boys

Spring announced its arrival this week in Chicago with unseasonably warm weather, but one of the most familiar signs to locals of the change of seasons is the clatter of complex beats tapped out on plastic utility buckets cutting through the urban noise and congestion of city traffic and pedestrian mobs.  After your ears adjust to the high-pitched rattle and you get over the impulse to ask whether these drumming youngsters should be in school or somewhere other than Chicago’s famous boulevards (maybe like here), you begin to appreciate that there’s more to your typical bucket drummer corps than raw rhythmic talent – these kids can be pretty savvy.   Don’t be fooled into lumping them in with the average panhandler (a topic for another day).  The “Bucket Boys”, as they are known to some Chicagoans, are smart, and they’re about business.  The once underground phenomenon has become so prevalent in some areas that many cities are trying to bring these performers out of the shadow economy with licenses and permits.

At the end of one of last year’s Taste of Chicago events, I walked out of Grant Park with thousands of others right back past the spot where one group of bucket drummers had been performing earlier near Michigan Avenue.  I could tell from before that they could play and knew how to work the crowd to earn a fair amount of tip money.  Their chants and songs were cheeky, yet effective, but they knew their performance cues as well as the most polished professional musicians.  As they were breaking down, I stopped in my tracks shocked at what I saw.  One kid, who I’d recognized earlier as a skilled drummer and a leader of sorts, had begun counting the day’s take and handing out shares.  He broke up the money for distribution.  I could see there was some hierarchy in effect, which meant the shares weren’t completely equal, but no one in his crew questioned their take or his authority.

What impressed me more was the fact that he when he couldn’t get them to lug away their buckets and sticks after finishing, he struck up a conversation with some other kids, and just a few moments later…he had sold all of their equipment to some complete strangers, who were determined to have their own try at earning a few dollars from the departing crowds.

As the new entrants to street entertainment began to take up their places for the evening set, the head of the original group laughed aloud as he counted his money.   I couldn’t tell if he had improvised it, or if that was part of his usual business model (“get in, get paid, get out”), but I’d never seen such a clean business operation and well-executed exit strategy as these.   I didn’t bother to hang around for amateur hour, I had already seen the pro at work.

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