Archive for March 30th, 2009

“I’ll cut the deficit in half !” … depends where you measure from, I guess.

March 30, 2009

President Obama keeps saying that his 10-year budget will cut the federal deficit in half.

Since that’s counter-intuitive — given the amount of new spending he has planned, I got curious …

Here are they key numbers:

From 1969 to 2008, the Federal deficit was about 3% of GDP.  That’s about $350 billion per year.

The deficit ballooned during the recent spending and bailout spree to about 12% of GDP.  That’s about $1.9 trillion.

The CBO projects that the Obama budget — as proposed — would have a 10 year out deficit (in 2119) that’s roughly  $1.2 trillion — 6% of GDP.  Team O claims that the out year deficit will be “only” $750 billion — about 5.5% of GDP.

Bottom line: Big O is technically correct if he measures from the 2008-2009 multi-billion dollar spending extravaganza and heavy rounds the numbers.   The deficit goes from $1.9 trillion in 2009 to $1.2 trillion (or $750 billion if you buy Team O’s numbers) — as a percentage of GDP, it goes from 12% to 6%.  That’s about halving the deficit between 2009 and 2019.

More important, but omitted in the President’s remarks: Team O’s out year deficit will be roughly twice the 1969-2008 percentage of GDP and his out year deficit will be roughly 3 times the recent average deficit (in dollars)

Maybe not a lie  … but very misleading … don’t you think?

Spend, spend, spend …

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http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/

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CBO Budget Analysis:
http://www.cbo.gov/ftpdocs/100xx/doc10014/03-20-PresidentBudget.pdf

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Posted in Obama Administration, Taxes | 3 Comments »

“Value” is the New “Green”

March 30, 2009

Excerpted from Wall Street Journal, “Value is the New Green”, by Mark Penn, March 13, 2009

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Until recently, being green was the best way for companies to demonstrate a sense of social responsibility, and for consumers to feel good about their purchases. Healthy food, hybrid cars, energy efficiency — these were the attributes that burnished brands.

But now green is taking a back seat to a new core value — value. Green hasn’t gone away, but companies are having to consider their “value” equation to try to serve the millions of consumers who either can’t afford premium experiences, or just don’t want them anymore.

Companies need to evaluate everything they are offering consumers to see how they can infuse the value of good value into their brands.  

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Starbucks is a great example of one of the world’s greatest success stories being upended by the new times.  Its guiding idea was to give consumers not just a cup of coffee but an integrated experience filled with intoxicating aromas that made customers feel great about paying extra for a grande latte.  McDonald’s emerged as a competitor by saying skip the experience and savor just the coffee and save your cash. Two years ago, Starbucks was flying high. Today it is struggling against the value-based competition.

In the airline industry, those who have been able to make money have offered more for less, not the opposite.  Flagship airlines like United went through bankruptcy emerging in 2006, while value carriers like JetBlue and Southwest have been far more successful.  They not only offer the same basic transportation, but actually offer more up-to-date services like satellite TV in every seat, more organized boarding processes and better customer service.

But beware of being regarded as simply cheap.  Target, while holding up well, isn’t reaping the same rewards as Wal-Mart.  The trick in setting a “value” proposition is that brands need to avoid the trap of simply being less expensive without providing the right level of quality.

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This certainly spells trouble for a wide swath of experience and luxury brands for what could be an extended period, unless these brands figure out how to adapt.  History shows these trends go in cycles, and luxury always comes back.  But we are in a new age of continually declining costs of technology and manufacturing, which could mean the price of luxury will keep declining.

Edit by DAF

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Full article:
http://online.wsj.com/article/SB123689912898512981.html?mod=djemMM

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Posted in Environment - Green, Mktg - Pricing | Leave a Comment »

Unilever Sees More Isn’t Always Better With Ideas

March 30, 2009

Excerpted from Harvard Business Review, “Nurturing Good Ideas” by Jan van den Ende and Bob Kijkuit, April 2009

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Managers know that simply generating lots of ideas doesn’t necessarily produce good ones. What companies need are systems that nurture good ideas and cull bad ones—before they ever reach the decision maker’s desk. Our research shows that tapping the input of many people early in the process can help ensure that the best ideas rise to the top.

It’s not uncommon for companies’ idea-generation activities to produce thousands of ideas. Reviewing all of them to find the best is resource intensive and doesn’t guarantee high-quality results …

Some firms, however, are taking steps to systematically improve the quality of ideas before they’re submitted for review. They’re encouraging employees to first discuss ideas with their colleagues to gain insights about their technical and market feasibility or how they fit with company objectives, which will either enhance the ideas’ value or lead to their early and appropriate demise.

Consider how this works at Unilever, where we followed the development of ideas at the company’s food labs in a 14-month study. Employees there usually discussed an idea with colleagues and, based on their feedback, made changes in the idea before submitting it. People who tapped colleagues outside their departments were more successful; discussing an idea with them increased its chances of adoption, whereas discussions with colleagues from the same department didn’t.

Interestingly, communication with friends or trusted colleagues appeared to aid adoption, probably because their input tended to be richer and offered more constructive and critical feedback, leading to more substantial changes to the idea itself. What’s more, the greater the number of perspectives an employee got, the higher his idea’s chances of being adopted were.

Other firms take a similar tack. At the biotechnology research company KeyGene, management advises employees to discuss ideas with others before submitting them to a review committee …

This approach to idea development offers a clear payoff in efficiency and in the quality of ideas. But it has another benefit as well: It enhances motivation by improving the odds of success and reducing the chance that an employee will invest unduly in an idea that’s likely to fail.

Edit by SAC

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Full Article:
http://hbr.harvardbusiness.org/2009/04/nurturing-good-ideas/ar/1

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