@LinkedIn & @Google AdWords - Quick UX Idea from...a User!

Here it is, a nice, quick UX thought I'd like to address to LinkedIn and Google.

LinkedIn Ads (a proprietary platform I hear) and Google AdWords (also proprietary :-) should allow users to "close" the ad in hopes to see the next one that might fit their needs better.

I enjoy how I can do this on Facebook - while I view the "People I May Know" widget on the right of the page, I can close the people I don't want to "friend" and upon clicking the "close" button, the next friend recommendation comes to life.

So, LinkedIn and Google - it'd be nice if you started doing this with your ads.  I might click fewer organic results and more sponsored ads if this change occurs.

Sincerely,

Zack Parnell
@zackparnell

P.S. Any other companies that earn revenue with PPC platforms, please also make this change and make it a web-standard.

Thanks for the Endorsement on @LinkedIn, do I know you?

Now I know that I shouldn't technically be connected on LinkedIn with people I don't "know".  I would argue that I do know all of my connections to some degree, business acquaintances, clients, or colleagues of clients, etc.  But, should all of these people have the ability to "endorse" my professional qualities or "Skills" on LinkedIn? (the newest way to enhance our connectivity)

Today, one of those "colleagues of a client" endorsed one of my skills on LinkedIn - Contract Negotiation.  A skill that I am really not even that great at, though I have worn the corporate buyer hat at my organization for quite a while - but, does he know that?  Does he know how many deals I have struck or struck out this month, or that I am too nice in negotiations and sometimes leave money on the table?

Of course he doesn't.  And I don't blame him for not knowing that nor for endorsing me.  He is likely an introductory LinkedIn user and following the directions he was prompted with to "Endorse Zack" when it popped up above my picture on my profile page.

The result of this entire exchange? I feel guilt over my fake endorsement.

The game is rigged for users to screw it up:

• Users self-elect their Skills
• Other Users without "authority" can endorse without justification*
• The endorsement ability is overtaking the true Recommendation tool that has existed on LinkedIn for a long time.  A "Recommendation" maintains strict protocols a User must comply with that justify why they have the authority to make the recommendation (i.e. worked together, service provider, etc.).

In short, I'm not a fan of Skills & Endorsements on LinkedIn in its current state - there should be a reason why a user can give a one-click endorsement.  What do you think?


Sincerely,

Zack Parnell
@zack_parnell

*Though, there is a minor bit of accountability with their image appearing next to the endorsement in the Skills section of the endorsee's Profile Page.

“The Five Competitive Forces That Shape Strategy” Summary and Application

SUMMARY

Narrow-minded business strategists may focus solely on existing competitors when complaining about decreasing returns in their industry but in “The Five Competitive Forces That Shape Strategy”, Michael E. Porter explains that there are several other forces in the competition for profits that the strategist should be aware of.  These five forces are explained in an “industry structure” model where the most successful businesses find the niche in the market where the forces are the weakest.  The industry structure is made of New Entrants, Suppliers, Buyers, Substitutes, and Existing Competitors.

Porter explains that all industries have gross differences in profitability regarding return on invested capital (14% median in USA, 1992-2006).  These returns, for instance 6% in Airlines versus 38% in Soft Drinks, have the five forces to thank. Porter does note that several combinations of forces can create a low or high return industry – a low return industry does not mandate that all five forces be powerful, but one force can disturb the profits in an entire industry.  Here we analyze the factors that make up the five forces.

The threat of entry depends on the height of entry barriers including economies/benefits of scale (supply/demand), switching costs, capital requirements, and access to distribution channels.  The threat of suppliers are powerful when there are few suppliers and a multitude of buyers, or when the supplier is also diversified into other industries, when switching costs are high, and there is no substitute.  The threat of buyers is high when there are few buyers as in offshore drilling, when industry products are standardized so there are many choices of manufacturer, when switching costs are low, or when buyers can even integrate backwards – creating the product themselves.  Porter also discusses when buyers are price sensitive: purchase represents large portion of overall cost structure and buyer is strapped for cash (group earns low profits). The threat of substitutes is high if cost of switching to the substitute is low for buyers, and the substitute offers an attractive price-performance tradeoff to the alternative.  Lastly, the rivalry of existing competitors depends on 1) intensity of competition, and 2) Basis on which competitors compete.  Intensity is greatest when there are many competitors with relatively equal size and power, when there is slow industry growth, high exit barriers, highly committed rivals despite performance, and when firms cannot read each other’s signals due to unfamiliarity.

APPLY

Applying Porter’s Five Forces to my company, Industrial Training International (ITI.com), and our industry, corporate crane, rigging, and heavy equipment training, I have uncovered a few new realities.  The industrial training industry serves customers from oil/gas and mining, to construction and power generation – though it is a very niche market, $40 million in the US.  What is surprising is that according to a quick (2-day) analysis, we are not really threatened very heavily at the moment, although it doesn’t necessarily feel that way.

Recently a new law was established by Federal OSHA (Occupational Safety and Health Administration) requiring crane operators on construction sites to have a nationally-accredited operator certification.  Prior to reading about Porter’s Forces I understood our industry was very easy to enter – this rule from OSHA exemplified that with dozens of new entrants in the past year.  Like many consulting industries there are low capital requirements and customer switching costs are jointly very low. When working with a large organization’s training budget, demand-side benefits of scale are in favor of incumbents, although the bubble we are currently experiencing did not stop many from entering the industry.  When it comes to suppliers and substitutes, there is little application to ITI as a service-based company.

An initial learning outcome is that buyers hold a great deal of power in this industry and to ITI.  Our company’s fees are sometimes double that of the nearest competitor due to the high-quality of personnel and curriculum we benefit our customers with. However, because switching costs are very low and buyers can integrate backwards by creating their own internal training programs, they indeed hold a great deal of power that keeps us in check.

The rivalry among existing competitors is not a major threat.  Although there are numerous competitors, industry growth is rather large due to the recent government mandate.  Despite the fact that there are few leaving the industry now, exit barriers are fairly low for the majority of competitors – most competitors do not invest heavily in things like heavy machinery, IT, data management, logistics systems.  They simply have 1-2 trainers conduct training at customer locations, on customer equipment.

Despite the rise of market entrants, price competition is very low thanks to ITI’s quality – customers agree that no other vendor of theirs offers the same quality of training.  This means that ITI’s product is not identical to competitors.  Interestingly, there is fierce price competition for low-quality, easy-to-conduct training programs like “Signal Person Training” (which was also mandated by the same OSHA law mentioned above).  Also restraining price competition are low fixed costs and large capacity expansions not being required in the industry.  So, despite what it feels like – numerous new entrants jumping in the industry – ITI is comfortable as the leading, high-quality provider in a growing industry.  The pie is growing and ITI is increasing its portion as it competes for the low-hanging fruit like Signal Person Training with e-learning and other high-investment advances other competitors cannot afford.

“What is Strategy?” Summary and Integration

SUMMARY: “What is Strategy?” – Michael E. Porter

Michael E. Porter utilizes many engineered terms and principles to formulate his view of strategy in “What is Strategy?”.  He illustrates how the last quarter-century saw managers believing corporate strategy is the nature of a firm’s operational effectiveness – or business activity efficiencies.  However, he immediately offers that effectiveness and activities can easily be emulated and are thus, not sound strategy. The actual product of effectiveness with strategy is that activities are emulated causing the industry’s productivity frontier to expand – lowering costs and increasing value – causing competitive convergence where competitors become indistinguishable.

Porter demonstrates that true strategy has a few chief merits. Summing up strategy in Porter’s terms: Strategy is the creation of a unique position characterized by a distinct set of unique activities that fit driving competitive advantage and sustainability.  A terrific example of complete strategy Porter offers is that of Southwest Airlines.  The airline industry, systematic and bland, is characterized by big carriers relenting to get any and all passengers (no uniqueness) from any airport to any other airport (serving broad market) with long flights, short flights, and connections.  SA decided to focus their efforts through many activities: only offering “short-haul, low-cost, point-to-point service between midsize cities”, one-size of airplane throughout entire fleet, no food service, and no assigned seats. These truly unique activities fit its strategy of low-cost carrier.  Like many strategic firms, SA decided to trade-off long-trips, first-class, and the other activities undertaken by the entire industry to position itself in a profitable, sustainable position.

Tools like Activity System Maps and definitions of Types of Fit from Porter allow leaders to better define the activities that will lead their firm to building a sustainable strategy.  Porter emphasizes the need to develop a true strategy and impede external and internal forces from altering it into a blur.

INTEGRATE:  New Entrants, Existing Competitors and Strategy

It is obvious that Porter’s business publications would align, however, “The Five Competitive Forces that Shape Strategy” resonates very well with several themes of “What is Strategy?” especially well.  One of the Five Forces, New Entrants to the Industry, often join an industry while barriers are low. It is rare, but promising for new entrants when they can create a fresh, unique position that is sustainable.  However, more often than not, new entrants copy existing players by positioning the firm to match the superior performer or multiple performers – much like Porter’s “repositioning” or “straddling” theories of position copying.

If a new entrant successfully matches those activities of the superior player, Porter might argue that the superior player did not have a unique strategy at all, but more so, only retained operational effectiveness unmatched by other competitors.  For an existing competitor – one of the other Five Forces – to do this successfully, it would require the trading off of an old reputation as well as old activities.  However, a threatening characteristic of new entrants to all industry players is that, by nature, they are not comprised of existing activities that would prohibit or interfere with their newly-developed position – unlike their counterparts (existing competitors) who have established activities. 

Straddling, on the other hand, requires both new entrants and existing competitors to successfully marry both sets of activities that derive the desired outcome and strategy of, for instance, the two superior performers in the industry.  Again, this strategy may be more promising for new entrants than existing competitors as there are no previous activities to deal with.  Starting from scratch, new entrants have the opportunity to grow a formidable position, though risky, by either method. Concluding, for Porter, his outlook on straddling appears much less promising than repositioning.

Brazil vs. Chile: Where to Open up Shop?

Introduction

After preliminary analysis it has been discerned that Brazil and Chile are the two, most appropriate countries for K-Fit to hold its first manufacturing plant and retail stores in Latin America.  This determination was based on two main factors: a) Brazil makes up half of the economy (GDP) of South America, and one-third of all Latin American countries; and b) Chile has proven to be an excellent “test” market as it is relatively small in size (population) and has a high ease of doing business.  The K-Fit Strategic Planning Committee has evaluated these two countries so that corporate officers and the Board of Directors may decide which strategy to deploy in Latin America.  Areas under evaluation include political, economic, and cultural environments, as well as bargaining relevancy, prospects for financial crisis, demographic issues, free trade agreements, and geographic location of the plant and stores.

Brazil

Political Assessment

In 2010, Dilma Rouseff won Brazil’s presidency handily over her conservative-party opponent Jose Serra (47 to 33% in the first round, and 56 to 44% in the final round). Rouseff was the “anointed” successor of former president, Luiz Inacio “Lula” da Silva, who left office with unprecedented popularity.  Although Lula and Rouseff come from the Partido dos Trabalhadores (PT), the Workers Party, they have learned from their predecessors that a market-oriented economy has greatly benefited Brazil.  Utilizing the Packenham Model for Assessing Prospects for Economic Reform several aspects of Brazil’s political-economic future can be forecasted (Appendix A:A1).                                                                              

            Under the Packenham Model it is easy to determine that Brazil’s political party system is incredibly fragmented.  In the 2010 election, the PT won only 23% of the seats in the Senate while the seats were divided between 15 parties (Appendix A:A2). A fragmented political party system makes radical economic reforms nearly impossible without part coalitions.  Although Rouseff has a semi-coalition in government, radical, market-reforms are unlikely leading Rouseff to avoid very “ambitious pro-business measures, such as labour market flexibilisation.  Instead she aims to simplify the tax system…Minor incremental reforms will continue to improve the business environment” (EIU Forecast: Brazil, 1). This facet of Brazil’s political system is not necessarily unfortunate.  Brazil is maturing as a market-oriented economy, of which its global partners also deal slowly with radical economic reforms; the benefit of a fragmented system is that the country will not easily backtrack into populist ideals and reforms.  Furthermore, although the power is fragmented, Lula, and now Rouseff will enjoy a ten-party ruling coalition that holds over 60% of the seats needed to enact the minor reforms her office intends to undertake.

            As for Rouseff’s Political Credentials and Leadership Skills, they are quite close to her successful predecessor Lula.  Although the incredible charisma Brazilians witnessed under Lula has yet to be seen from Rouseff, she comes from the workersbackground and was even involved with rebel forces during the military governments of the 1970s and 80s (Nelson, Thunderbird RBE).  Like Lula, her left-of-center background gives her outstanding credentials to push for market-oriented reforms; no one will accuse her of leaving her roots and doing favors for “big-business”.  As well, she represents the third consecutive term for the PT.  Lastly, with Lula in her corner (who has remained closely associated with the party and executive office) Rouseff’s popularity should remain high granting her the ability to lead Brazil with the specific reforms she is planning.

            Finally, under Packenham’s Model, due to the fragmented political party system, Rouseff does not enjoy a sound political consensus on major reform issues due to the ideological differences between the ten-party alliance.  However, depending on Rouseff’s leadership capabilities, this coalition should be able to continue Lula’s minor, market reforms.  All in all, Brazil does not have a tremendously long way to go to make business easier – but there are plenty of areas that require minor tweaks.

Economic Assessment

            After witnessing the economic rollercoaster Brazil rode around the turn of the 21^st century it is hard to believe the economically stable ground the country now rests.  Cardoso’s Challenge was to turn Brazil from an economy of populist ideals to one of a free market and growth.  Brazil had faced huge budget deficits due to these populist reforms which is the chronic disease that infected most Latin American countries, and still do.  Today however, Brazil has gone through reforms including privatizations, budget cuts, civil service reform, state/federal debt reform, and more. However, although Brazil had been included in the BRIC acronym highlighting the four predicted emerging markets of the 21^st century (others include Russia, India, and China), and has been growing at a healthy rate, several bureaucratic bottlenecks are forcing the country to under-perform.

            A few key issues make up the biggest areas of reform Brazil requires.  These include complete social security reform, labor reform, tax reform, as well as infrastructure and education upgrades.  For starters Brazil allows federal and state workers to full retirement after very few years in service and disallows government workers to be fired after only five years of employment creating massive inefficiency, requiring more workers to be hired and attend to issues, causing more inefficiency – a vicious cycle.  It is also very difficult to fire people in the private sector as well as labor laws are still very populist in ideal.  Although this has not kept investors and businesses out of Brazil, it is a major cause of complaint.  Likewise, payroll taxes in Brazil make business very difficult to conduct “legally”.  Most firms choose to “employ” workers as “shareholders” or contractors to avoid the 70-85% payroll taxes (Mazzini, Interview).  Lastly, the country could expand in great lengths with better roads and infrastructure allowing citizens and corporations to more efficiently travel and conduct business throughout the entire country. Currently, a great majority of Brazil’s GDP is produced in the states of Sao Paulo, Rio de Janeiro, and Minas Gerais.  Despite these issues, Brazil is a great business destination due to many positive situations the economic environment offers.

            The past ten years Brazil has developed sound fiscal policies including high interest rates, a simplification of its tax system, and balancing its budget.  These policies lead most economists to believe that Brazil is a stable country that will continue to rise on to the world stage.  There is very little concern for Brazil to have a major economic crisis and currency devaluation (See Appendix A:A3) as the country maintains a flexible exchange rate, a current account surplus, and a budget surplus. Investors are finding the real and Brazil, more and more, a safe investment and a promising economy to invest in.

            Investors should be surprised that Brazil accounts for half of South America’s GDP – over $2 trillion.  However, the bottlenecks mentioned above are proving stifling as the economy is expected to grow between four and five percent the next five years (EIU Forecast: Brazil, 4). Some economists have even recommended removing the B from BRICs due to Brazil’s slowing.

Bargaining in Brazil

            Compared to other Latin American countries, Brazil is a very developed business environment.  Most companies around the world would find that their industry is already represented in Brazil due to the highly skilled workforce, vast natural resources, economic stability and size.  However, this does not negate the fact that a company could not earn favorable treatment in Brazil.

            Thanks to the federal system Brazil employs, 27 states have been known to vie for investment in their municipality as opposed to another.  Many states have their own foreign investment promotion agencies that will negotiate with investors and corporate strategic planners.  However, history has proven that many manufacturers who intend to sell to the Brazilian market may want to focus on the major economic players.  This is due to poor infrastructure in many of the outlying states and the fact that over half of Brazil’s GDP is generated from its three major states in the southeast – Sao Paulo, Rio de Janeiro, and Minas Gerais (Nelson, Thunderbird).

            In these well established state economies there is little bargaining power in the hands of manufacturers.  However, as Brazil continues to develop its outlying states, many opportunities may present themselves for investors, introducing more competition and bargaining.

Chile

Political Assessment

            Maturing as a brilliant economy in South America, Chile has traveled a long road to economic freedom and prosperity.  Under a military dictatorship until the early 1990s, Chile has been democratically electing leaders who have continued the “Chilean Model”, economic liberalizations started under the rule of Augusto Pinochet – dictator from 1973 through 1998 (although presidents were democratically-elected, Pinochet was Commander in Chief through 1998).  In 2009 Chile elected Sebastian Pinera, a conservative businessman who narrowly defeated his left-wing opponent.

            Like many other Latin American countries left-center leaders are well fit to make free-market, pro-business reforms due to their political credentials.  Pinera does not enjoy these credentials.  Besides this fact, there are still good prospects for pro-market economic reform, although Chile does not have a long way to go in the grand scheme of things.  Chile, much like the US, is represented in government by two leading coalitions – a center-left and center-right group – making for a consolidated political party system in Latin American terms.  Although Pinera’s political credentials are not favorable – he is a conservative who will try to reform the country with conservative initiatives – he has tremendous leadership skills and a high political consensus behind him (formerly, Pinera owned Chilevision and 27% of LAN Airlines). (For details about Chile and the Packenham Model see Appendix A – A3).

            Chile is considered a very stable democracy and economy.  It is expected to continue the “Chilean Model” with a general consensus on economic policies. Furthermore, Chile is much like the economy of an island.  It currently has over 50 free trade agreements with countries around the world; it is an APEC member and Mercosur “associate” member (Nelson, Thunderbird).  Chile is expected to continue its market-oriented reforms and become the first “developed” country of South America.

Economic Assessment

            It is nice that this paper intends to identify the economies of Chile and Brazil because Chile is becoming Brazil’s competitor when it comes to GDP growth and the overall economy.  Although Chile is a fraction of the population and size of Brazil (population: 17 million to Brazil’s 200 million; total area: 292,000 to Brazil’s 3.2 million) it is operating a much more efficient economy and workforce.  Chile is expected to grow between five and six percent in the next five years where Brazil is expected to be between four and five percent.  Chile also maintains very low inflation and has an overall freer economy than any other South American nation. 

            Its Fiscal Rule restricts the government from running budget deficits – the government must actually maintain at least a 0.5% surplus.  Chile also operates an independent Central Bank and maintains a flexible exchange rate.  Chileans enjoy the largest GDP per capita in South America - $14,385 (EIU Forecast: Chile).

            Looking ahead, there is slight chance of currency devaluation in Chile (Hispkind Model – Appendix A:A3).  Both the current account deficit and budget deficit is very small (EIU Forecast: Chile) while Chile holds large surpluses in both foreign reserves and foreign debt – more money is owed to Chile than vice versa (Banco Central de Chile).  Also in the works are free trade agreements with India, New Zealand, and Vietnam among others.  One of the only drawbacks in Chile is the need for labor reform, like most all previously-populist economies in South America.  It is generally easy to hire employees, and very difficult to fire them leading to major inefficiencies in business.

Bargaining in Chile

            Bargaining in Chile is much more of an option than in Brazil due to the stage Chile is in its growth.  Chile’s economic development agency, CORFO (Corporacion de Fomento de la Produccion), is in the business of landing investment in Chile.  Chile was mentally crushed after losing a major investment from Intel Corporation to Costa Rica and now is more active in promoting investment within its borders.  Roy C. Nelson explains in Harnessing Globalization that Chilean government officials were anxious to move its economy into other sectors “given Chile’s emphasis on commodity exports” (Nelson, Harnessing Globalization, 121).  Today, Chile and CORFO are still actively looking for investment and investors do hold some bargaining power.

            However, bargaining power would hold true more so for high technology firms compared to manufacturing or extractive-industries.  Although K-Fit does manufacture some value-added products, apparel products do not rely on high value adding labor or technology.  Nevertheless, Chile is the economy where K-Fit would more likely have a chance to earn to favorable incentives to opening its manufacturing and retail stores there. 

Conclusion

            The two economies discussed are two very different creatures.  Brazil is an enormous economy and would easily support K-Fit’s business model by manufacturing and selling in Sao Paulo, Rio de Janeiro, or Minas Gerais.  Chile is richer per capita, more developed through the entire country, and a freer market, however, it is a fraction of the size of Brazil – much more like a test market than a large market.

            K-Fit should decide whether it wants to dive into South America, and sell “in-country” and abroad from Brazil or if it would like to test the brand in South America by setting up in Chile.  Prior to making this decision K-Fit should contact CORFO of Chile and the state investment agencies of Sao Paulo, Rio de Janeiro, and Minas Gerais to inquire about incentives.  There are many factors to consider, this report was intended to give an overview of the top two markets K-Fit should inspect prior to entering South America.

Works Cited

Banco Central de Chile - http://www.bcentral.cl/eng/economic-statistics/series-indicators/index_fs.htm.  Retrieved on March 10, 2011.

EIU Forecast – Brazil. The Economist Intelligence Unit.  January 2011: London, UK.

EIU Forecast – Chile.  The Economist Intelligence Unit.  January 2011: London, UK.

IMF – Chile International Reserves and Foreign Currency Liquidity. http://www.imf.org/external/np/sta/ir/IRProcessWeb/data/chl/eng/curchl.htm. Retrieved on March 8, 2011.

Mazzini, Milena. Personal business interview on conducting business in Brazil. Madrona, Hong, Mazzuco - Sociedade de Advogados.  March 4, 2011.

Nelson, Roy C.  “Harnessing Globalization”.  2009:  The Pennsylvania State University Press.

Nelson, Roy C.  Santiago, Chile Regional Business Environment Lectures. Thunderbird School of Global Management.  February 21 – 27, 2011.

Appendix A

A1 – Brazil: Packenham Model Assessing Prospects for Economic Reform

Characteristic

Unhealthy

Healthy

Political Party Systems

Fragmented

Consolidated

Political Credentials of President

Good

Good

Leadership Skills of President

Good

Good

Political Consensus

Low

High

A2 – Brazilian National Congress: Senate Election Results (October 3, 2010)

A3 – Brazil:  Hipskind Model Assessing Prospects for Currency Devaluation

Characteristic

Unhealthy

Healthy

Flexibility of Exchange Rate

Fixed

Flexible

Size of Current Account Deficit

Large

Small (<5%)

Size of Budget Deficit

Large

Small (actual surplus)

Amount of Foreign Reserves

Small

Large ($270b)

Amount of Foreign Debt

Large ($310b)

Small

Political Risk

High

Low

Contagion Effect

Large

Small

A4 – Chile: Packenham Model Assessing Prospects for Economic Reform

Characteristic

Unhealthy

Healthy

Political Party Systems

Fragmented

Consolidated

Political Credentials of President

Poor

Good

Leadership Skills of President

Poor

Good

Political Consensus

Low

High

A5 – Chile: Hipskind Model Assessing Prospects for Currency Devaluation

Characteristic

Unhealthy

Healthy

Flexibility of Exchange Rate

Fixed

Flexible

Size of Current Account Deficit

Large

Small (<5%)

Size of Budget Deficit

Large

Small (<5%)

Amount of Foreign Reserves

Small

Large ($26b)

Amount of Foreign Debt

Large

Small ($2b surplus)*

Political Risk

High

Low

Contagion Effect

Large

Small

*Banco Central de Chile