Satire or Prediction

On February 18th 2004 the Onion a satirical online news source decided to cover a growing battle of Gillette and Schick the two powerhouses in disposable shaving. The premise was Schick had raised the stakes by introducing the Schick Quattro a 4 blade shaving system, and now Gillette with their Mach3 was in a fury to catch up.

For the full story (WARNING STRONG LANGUAGE)

F*** Everything, We’re Doing Five Blades

Gillette Raises the Stakes

Early in 2006 Gillette seemingly took a page out of the Onion and launched the Gillette Fusion 5 blade shaving system. The end product sounds remarkably similar to the joke product outlined in the satirical news article.

By squeezing in two additional blades 30% closer than the previous Mach3 setup Gillette had answered the challenge Schick had laid out, if not quite in the profanity laced way that the Onion had pushed.

Conclusion

It’s interesting at times seeing good satire that’s so chillingly accurate in its depiction of the subject matter. It’s hard to say how much information the writer had, but writing an article 2 years before the product was release is pretty compelling.

In the end with the heated battle between these two companies, as well as the high stakes (the Gillette Fusion went on to sell $1 billion) it’s not hard to imagine how much pressure Gillette was under to answer this challenge.

As always when we enter into these sorts of conversations its important to note I’m not a lawyer. Any expertise you place in me is on you, this information should be used for enlightening purposes only and you all should consult lawyers. Keep in mind outside of costing a ton of money, lawyers are generally quite useful.

So having gone through an Intellectual Property Management certification, and being a zealot for copyright holders I feel quite confident I can give an interesting look into the world of copyrights.

What is a copyright?

According to our friends over at the USPTO (who you may remember from our trademark discussion):

“Copyright is a form of protection provided by U.S. law to the authors of “original works of authorship” fixed in any tangible medium of expression.  The manner and medium of fixation are virtually unlimited.  Creative expression may be captured in words, numbers, notes, sounds, pictures, or any other graphic or symbolic media. The subject matter of copyright is extremely broad, including literary, dramatic, musical, artistic, audiovisual, and architectural works.  Copyright protection is available to both published and unpublished works.”

Wow that’s a lot to take in. The first sentence really is the most important one in that blurb though, as it identifies protected works as being original works, fixed in any tangible medium of expression. So we’ve seen how broad and powerful this protection is but why is it so important?

The Vision Behind Copyrights

This may not come up on a citizenship test, or have been a huge component of your US History class, but copyrights were a Congressional granted power via Article 1 Section 8 of the US Constitution.

“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”

The key our forefathers settled on for how to best further arts and science was by granting property rights to intellectual property. This was a very new concept, and has pretty much been the backbone for much of the innovation found in this country. By securing ownership rights, this enabled authors and inventors to more freely share their collected works without concern of being cheated.

What Are All the Rights granted by Copyright?

Reproduce: This right grants the copyright holder the right to reproduce or authorize another party to reproduce the work.

Adapt:This one is a little more problematic for me (think I need to look it up) basically modify, adjust format etc. Think adapting a book to a movie etc. 

Distribute: Grants the right to distribute the work through some medium. think television, movies, the internet.

Publicly Perform: A Public performance of the work, think a play or a concert.

Publicly Display: This allows a work to be displayed in a public setting. Think art, or a landmark.

Publicly Perform by means of Digital audio transmissions: Think performed via radio. this one is always cracks me up but will make sense later.

When Do 6 Rights Make a Wrong

You may be wondering right now why do we need 6 separate categories for copyrights, why not just group it together throw a heck of a lot of commas at it, have a run-on sentence (like this one), and call it a day? Because the genius of copyrights are that you can pick and choose which rights you want to grant to interested parties. One of the best examples are artists that do public works projects for free, granting the city the right to only publicly display the work; while continuing to assert their rights to the copyrighted image.

Think about this for one second, you go to Seattle and see the Space Needle for example (note I’m not entirely clear on the actual rights ownership, and privalages for this landmark so its being used as an example only). You take a photo of the landmark, and decide to reproduce it on a t-shirt as it looks amazing. If the group behind the Space Needle had only granted certain rights such as public display, and restricted others such as reproduction then you’re now infringing on their rights. 

Conclusion

While this is a massive post, its just touching the surface of copyright law, and how it impacts businesses. The reason for this article was a discussion on the last blog post surrounding Google’s side wiki. Side wiki is interesting in that it does create some tension by undermining the ability of the copyright holders to enforce the rights given under our current copyright laws.

Its going to take a little work to get this firing on all cylinders again.

In the ongoing debate over my commentary on Unions and striking an idea was championed that Unionization in some respects was the reason for GM’s fall from grace as a dominate Auto-Manufacturer. This makes perfect sense; other companies can utilize cheaper labor pools, and the auto industry is remarkably lean thereby not offering a lot of opportunities to create a high margin product to offset higher labor costs.

So why am I going to argue the Union is not to blame?

That’s easy, because monopolies are to blame!As absurd as that sounds, its exactly what I think happened and we have the laws of unintended consequences and short term thinking to blame. This idea actually isn’t mine either, go figure I heard it on a conservative talk radio show (not usually the people who champion unions).

Additionally we’ll look at product mix as a contributing factor as well.

Background on Auto Manufacturing

According to a Michigan in Brief a non-profit group dedicated to Michigan state government and public policy, at its height Michigan produced a full 25% of the entire world’s automobiles (the US was a full 75% of world’s production). My guess is that in addition to the 75% world production figure; domestic sales were probably approaching 90-95% (unfortunately I wasn’t able to dig up the number).

In effect if you bought a car in the US before 1980 most likely you bought “American”

Monopolies vs. Unions

When you have as much market power as Ford and GM did the primary concern motivating almost any decision is how do I keep “printing money”. With unions having shown a track record of striking from the late 30’s, keeping them working was the absolute top priority.

This led to a “give them what they want mentality” including fully paid hospitalization, and sick leave benefits, as well as profit sharing. Which has led to autoworkers being compensated on a level that was substantially better than their counterparts.

Without significant compensation in effect US automakers were only competing against themselves, and keeping the assembly lines rolling was the largest obstacle to profitability. With so much money flowing in both sides (employers and union leaders) acted in their short-term best interests.

Enter the Japanese

By the early 80’s Honda and Toyota were off the ground and becoming a legitimate offering stateside. The Japanese offering was cheaper, smaller, more fuel efficient, and had the perception of being more reliable as it aged. With a new competitor coming in concessions made to workers (unions) now had a substantial impact on GM, and Ford’s ability to compete with this new low cost model.

Compounding union wages was the the Japanese auto manufacturer’s mastery of the “Just in Time” manufacturing approach of stocking inventory which reduced costs by maintaining leaner inventory levels.

It didn’t take long for Japan to supplant the United states as the largest producer of vehicles in the world, a distinction they maintained until 1992.

Product Mix

It also almost seems as if US auto manufacturers have been 1 step behind in every trend in the automotive world outside of SUVs since the 80’s. The fuel efficient car has never been a mainstay focus of the US based product lineup the way it has been with Honda and Toyota.

An indifference to the rising price of gasoline by leveraging a product mix with better feul economy has been a glaring issue. One could even argue it was the product mix, as well as the financial crisis that has put all of these companies on death’s door. At the height of Oil costs in 2007-08 SUVs and small trucks were as close to a toxic asset as you could get.

Lack of fuel economy is also one of the significant reasons Japanese cars were able to splash so largely in the US market in the early 80’s.

Take-Away: Its really easy to get away from fundamentals and deep financial analysis of your business model when you are flying high. The idea of putting the brakes on is almost counter-intuitive to a businessman, but sometimes its exactly what you should be doing. You see examples of people paying too much for a deal/merger (Google and YouTube come to mind), or of employers paying through the nose for a resource they need to  continue hitting a high growth rate.

That being said your job in a company is to ask: What is the outlook for this business? Does it make sense long term to make these concessions? Am I being a good steward for the company. In the end these are really hard questions to answer especially since Wall St. and corporate incentive structures tend to support short term growth as the goal instead of longer term sustainability.

In the case of the US car manufacturers when it came to their product mix, and employment decisions I personally have a hard time thinking someone sat down and thought about what impact these decisions would have down the road.

You know some people have a hard time grasping Supply and Demand theory. Its one of those theoretical concepts that most people have a hard time grasping.

The idea is that consumption/pricing is determined by the intersection of the supply and demand curves. The idea is that there is a fixed point that is supplied at a certain level of consumption desired. Anyone whose reservation price doesn’t align with the intersection doesn’t take the deal.

This is a bit complex. So lets simplify with an example.

Its halftime at a football game, you’ve had 2 beers, and there is a fixed number of toilets. Here’s what supply and demand looks like in that occasion:

Yes that is about 50 people in front of me waiting for the bathroom

While this isn’t a supply and demand curve, it does ground the concept in people’s minds. In this case with a fixed supply, and no real substitute its obvious there is an insatiable demand to use this restroom.

A Blue Ocean Strategy was coined by W. Chan Kim and Renee Mauborgne, I read the book its definitely worth a look.

So how would I describe a Blue Ocean Strategy? Its leaving behind the murky cut throat bloody waters to strike out in an uncharted territory where predators and competition are non-existent.

I was having lunch today and came across one such example of a Blue Ocean Strategy: Burger King

Hail to the King baby!

Got that sinking feeling

A few years ago Subway came out with a rather disruptive premise based on a man Jared Fogle who lost 245lbs. eating at the franchise. The advertising promised a healthier fast-food solution that would help customers lose weight. This in its own right was a pretty great Blue Ocean Strategy, as for years fast-food was known more for the grease than goodness.

In just a few short years traditional fast-food franchises stumbled over each other to make up ground on the health food craze.

Why Health Food?

Fast-food has become a juggernaut especially with the rise of two parents being employed at the same time, and as workers began working additional hours. Unfortunately there was a market that is harder to capture for the traditional fast-food fair…… women, who tend to be more concerned about the healthy aspects of the offering.

As all these restaurants moved to target this space, the offerings became more focused on creating offerings that appealed to women.

The King Strikes Back

With its major competitors going health crazy (which is slightly amusing given most of the offerings still are not very healthy) Burger King decided to embrace their traditional offering. Turning their marketing and branding focus towards capturing the males (the traditional audience that was now being left behind).

Viral advertising by Crispin Porter +Bogusky coupled with product offerings like the Angry Whopper, or Burger Shots completely captivated their core audience. I must say just sitting down today to my Angry Whopper with the Most Valuable Bag gimmick I definitely felt that Burger King had hit their audience.

Take Aways: Blue Ocean Strategies remind me of  a famous quote from a ballplayer from the early 1900s used to give as advice to new players “Hit ‘em where they ain’t”. We’ll see if the bet pays off for Burger King, but its defiantly a solid differentiation strategy.