Pfizer mishandles unlikely Viagra recall

Pfizer is providing an excellent example on how not to deal with product problems and recalls. While the drug industry has some unique attributes, there are several learnings that are applicable to other sectors as well.

I have written extensively on Pfizer's mishandling of the recall of Bextra, it seems that Pfizer has another situation to deal with - a somewhat likely recall of another blockbuster drug Viagra. Based on the data presented so far, I think that the number of people affected is still small (unless others have not yet come forward). However, it is interesting to watch since that is how most drug problems come to light. If we go back and look at the recent recalls of other drugs, for instance Tysabri, Adderall XR (in Canada), Vioxx and Bextra, the first reports were generally of isolated cases.

Thus, I do not expect a recall of Viagra right away but this could be the first step in the process.

How has Pfizer responded to Viagra controversy so far?

Let us review the timeline. On March 31, 2005, ophthalmologists at the University of Minnesota said in an article published in the Journal of Neuro-ophthalmology that a condition that causes permanent vision loss has been diagnosed in a small group of men who had taken the Viagra. The condition, nonarteritic ischemic optic neuropathy (NAION), described as “stroke of the eye,” occurs when blood flow is cut off to the optic nerve, which injures the nerve and results in permanent vision loss.

Pfizer did not even issue a press release after the study was published while the news quickly spread (Note: I have argued before that silence on part of a company when a controversial news develops is no longer a viable strategy. The longer the silence, the worse is the damage). Then it was disclosed on May 27th that the FDA was investigating the Viagra and blindness linkage. As I have said before, sometimes even a delay of few hours can make a huge difference and it did for Pfizer. The company did issue a press release later that day but by that time thousands of online publications (particularly blogs) had already done enough damage to Pfizer and Viagra. (Related article: Brand management on the Internet)

So far Pfizer's response has been no different than it was when bad news about Bextra first came out in early December, 2004. This time too, Pfizer does not even acknowledge that there could be a problem with Viagra. "There is no evidence showing that NAION occurred more frequently in men taking Viagra than men of similar age and health who did not take Viagra," the company said in a written statement essentially challenging the researchers who established the linkage.

It could very well be that Pfizer is right and the company and the FDA might agree on label changes, and the matter will come to an end, but in the meantime not many men will be motivated to take the drug.

What does it mean for you?

1. When bad news about a product or a company comes out, do not act like a politician. Do not just defend for the sake of defending. It doesn't work, particularly when scientific data is presented.
2. Always have the PR team ready to respond to external developments. Pfizer was too slow with a media strategy for Viagra.
3. The lesser the controversy, the better it is. Bad news always attracts more publicity than good news. If Pfizer is eventually able to show that Viagra is totally safe, it might be too late already.

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Keywords: Viagra recall - product recalls

Bloggers redefine media consumption trends

You might have heard that The New York Times had to cut back its staff and it is planning to charge for its online content. There is no doubt that it is one of the best English language newspapers in the world that I have read, but I ended my hard-copy subscription more than two years ago. In fact I get most of my mainstream news from Google News, and to read perspectives and other interesting tidbits, I visit blogs.

Blogs are redefining how content is delivered today. Some of my readers read my articles without realizing that they are reading a blog (which is fine by me - that is the way I like it), but an increasingly large number of people are reading blogs the way they should read them. I have also written extensively how my friends in corporate America are still afraid of blogs and have no strategy in place to exploit them for a whole range of value-creating purposes. "Since I don't get it, I will ignore it," is the mantra.

Let me mention some of the blogs that I read and ones that I think are changing the way people receive and read content today.

Robert Scoble works at Microsoft and he is a pioneer when it comes to blogging what is on his mind without an employer breathing down your neck. A lot of the time, he talks about stuff that is too technical for me, but very often he has great insights into business aspects of technology.

Daily Kos is another blog that I read when I need the kind of content that I used to get from the Op-Ed pages of The Times. He is clearly politically biased but what I admire about him as a blogger is how honest he is in sharing what he really thinks. If mainstream media dies, they have only themselves to blame. They were always trying to be politically correct.

Wonkette is a product of Gawker Media - a company that could become a big player in blogosphere if everything goes well. Like Daily Kos, they are brutal in their assessment of political events.

Lawrence Lessig is a professor at Stanford Law School and founder of the Center for Internet and Society. I got to know his writings through his publications in Wired Magazine and since then I admire his work a lot.

Finally, Seth Godin and Tom Peters are other two bloggers that I read.

Technorati tag: Bloggers

Brand management on the Internet

In this article I want to address the importance of mining of blogs and other online content by companies so that they can make sure that they know what is being said about them and accordingly respond to it. Your advertising and public relations efforts will be useless if there is a lot of negative content on the Internet about you.

We live in a world where almost anyone with access to the Internet is now a publisher. You buy something at Wal-Mart, bring it home, you don't like it, and the next thing you do is to post a message on your blog about the product. Even though it may be an isolated incident of a bad product, but that information will remain on the Internet forever and will hurt your brand. People's decisions are influenced by what they read on the Internet.

Let me give you an example. We recently received an unsolicited commercial email (or SPAM) from a Margaret Mayor at Freesites.com, a company that runs a business called AllFeeds that offers a program called "Google Backfill." Since the email did not look like SPAM and since we are a business, I reasoned that they were entitled to send solicitations to us, and I opened it. It looked interesting since we do carry AdSense ads on our portfolio of websites. Ms. Mayor informed us that the program works with an existing AdSense account by replacing Google's public service ads with paying ads from Allfeeds that look and feel exactly the same as the ads Google would normally display.

While public service ads is not a major issue for us, I decided to investigate any way. A quick Google search showed only negative information about the company/service. People had bad comments about the business model, the process being too cumbersome, and how little money people made. When I visited their website, none of these issues were addressed. My final decision - I am very suspicious of the offer and have decided not to display their ads.

Donald Rumsfeld, the Defense Secretary, put it very nicely when he realized that the US Government can take too long to respond to a negative message. He talked about "a global Internet with universal access and no inhibitions, e-mail, cell phones, digital cameras wielded by anyone and everyone" and "a seemingly casual disregard for the protection of classified information, resulting in a near continuous hemorrhage of classified documents, to the detriment of the country."

This is also happening to companies of all sizes. Once you start researching a company or a product, you read more negative information than positive information. The reason is simple. When you are happy with something, you don't bother saying nice things. But if you get mistreated or if you are unhappy, you go online to post a rant. That is why it is critical that companies have a strategy to deal with this. The Bush Administration did not have a strategy to manage the communication process for its social security privatization message and there was just so much negative news without any credible and meaningful response from the White House. No surprise then that the initiative is dead. (Related article: Lessons from failure of the initiative to privatize Social Security)

What can you do to make sure that you control the message about your company and/or products?

1. Whatever you call it (data mining, business intelligence, etc.), you need to keep a close eye in real time on anything that can affect you. As soon as news breaks, the bloggers take over within minutes, and if it takes you even an hour to come up with a response, it may be too late already. So it is important that you make your PR team work 24X7X365 and give them more power so that they can respond with a press release without approvals from two-dozen people. (Related article: Press release strategy)
2. Do not just communicate with mainstream media (MSM) or your preferred journalists. In many cases, a company's PR staff will simply speak to whoever calls or will send an email message to a handful of journalists. That does not work. Most credible bloggers will look at your website to see if you have a press release on the topic. If not, they will simply go ahead and publish whatever they want (without even including your response), and if you publish your press release on your website a few hours later, the damage will already be done.
3. Create a section on your website that addresses issues that are circulating on the Internet about your company/product. You will be hurt if you ignore them. But if you systematically answer each and every question, search engines will eventually show your response in search results too and someone doing the research will get to make a more balanced opinion. Allfeeds.com does not address any of the issues raised by many folks in bulletin boards and forums.

Recommended article: How to maximize exposure of a press release?

Technorati tag: Public relations

How to network at social events?

There is no doubt that you appreciate the power of networking. But networking is not something that happens only at professional events. You can successfully network at even at social gatherings. When I first went through sales training, my coach Chuck Steinke said, “All things being equal, you buy from a friend. All things not being equal, you still buy from a friend.” In other words, the more friends you have, the better off you will be. However, it is not easy to make friends and expand your network. It requires commitment, strategy, and patience.

I have found that it is more difficult to network at business gatherings, well, just because people are more business-like. In other words, if someone does not see immediate benefit of knowing you, they want to meet someone that can be a potential customer or supplier or partner. Howsoever frustrating it may seem at conferences, but if you are not somebody, people do not even bother to say hello.

Social settings, though, are quite different. People want to meet others who are like them and they make an effort to know you as a person rather than try to sell you something. Having said that, when you make a personal friend, you can always find a way to ask for help, when you need it.

Here are a few tips on how to network at social gatherings:

1. Do your research prior to attending the event, even if it is just a party at a friend’s home. If you can find out who the other guests are, you can be better prepared to meet them. Let me give an example. If you are invited to a dinner by someone who is in the biotech industry, you are likely to meet others who are somewhat related to that sector. It is a great idea then to catch up on the latest news in the biotech world - enough to ask intelligent questions and learn more.
2. Dress appropriately for the occasion. Just because you are going to someone’s home for dinner during the weekend, it does not mean that you show up in a T-shirt, jeans, and sneakers. You never know whom you might end up meeting.
3. If you are uncomfortable meeting someone for the first time, she or he is likely to be in the same situation. Except for used-car salesmen, even the smartest networkers struggle with connecting with complete strangers. Use this knowledge to your advantage by making the other person feel comfortable. When you warmly approach such a person, you are bound to establish an immediate connection. Treat this as an opportunity to make the other person comfortable, and you will emerge as a winner.
4. Always try to be a good listener. If the other person is shy and you realize that the conversation is not going any where, it is a good idea to add your thoughts and ideas, but the best strategy still is to let others do the talking. The easiest way to make friends is to listen. We all want to be listened to.
5. Finally, always follow-up. Send a short note to someone you meet. If you liked them and want to take the contact to the next stage, you must try to include them in activities that may be of interest to them. For instance, if you are attending a dinner for business professionals, it is a good idea to invite people that you met at the party organized by your friend from the biotech community. And if nothing else works, remember that we all love to eat. So just host a party at your home. If you follow these tips, you can hope to make about a dozen friends in six months. And then you will see your network grow naturally.

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Technorati tag: Social networking

Medical spa growth opportunities

The spa industry in the United States has steadily grown over the years and has become the fourth largest in the leisure sector. With as many as 15,000 locations in 2004 (iProceed estimate), it has become a leading destination for well-heeled consumers who visit day spas, spa resorts, fitness spas, destination spas, and more recently, the medical spas.

I recently attended the Spa & Resort and Medical Spa Expo in New York City and I was impressed how this industry attracts as much $12 billion from American consumers primarily through small enterprises. While some of the spa services have come under pricing pressure due to higher competition, spas have tried to offer more high-value services. At a time when supermarkets and mass merchandisers are selling spa-quality personal care products, spas are gradually transforming their business model to focus on anti-aging, rejuvenation, and even medical treatment. Hence, the emergence of the medical spa.

A medical spa (or med-spa or medi-spa) has one or more doctors (dermatologist, plastic surgeon, nutritionist, etc.) associated with it. They may work full time or visit on an as-needed basis. With such a portfolio of services, spas are now combining standard skincare treatments with medical procedures. Since healthcare providers are not involved, doctors like them because you get paid right away and there is no paperwork at all.

What does it mean for you?

1. New business opportunities are emerging in providing high-quality, natural (and/or organic) personal care products. At the same time, there is demand for professionals who can provide all the specialized services that spas and medical spas now offer.
2. Spas are no longer seen as luxuries. For an aging and stressed population in the US, spas provide a way to stay young and healthy. Some of the new visitors to spas are teenagers and men. Thus, having a spa attached to hotels, conference centers, golf resorts, office complexes, etc. makes perfect sense from a cross-selling perspective.
3. Spas, that have traditionally operated as small businesses, may be ready for some consolidation. The industry is highly fragmented, and therefore, with consolidation, there is tremendous scope for economies of scale. Already quite profitable, spas can potentially be even more profitable if economies of scale are realized.

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Technorati tag: Spa business

How to leverage public relations for exposure?

Advertisers now know that a lot of traditional advertising is not producing a desirable ROI while the cost of online advertising, while relatively more effective, is going up. For many startups and small businesses, a huge advertising budget is simply not an option. In other words, if they can not get creative, they may never be able to get their message across to the target market. (Related article: New advertising options needed to achieve good ROI)

One simple step that almost anyone can take is to focus on public relations (PR), apart from using advertising, word-of-mouth marketing or even guerilla marketing. The reason most business leaders tend to prefer advertising (over PR) is that it is easy to do. You pick what you want, pay for it, and the ad is there exactly as you wanted. However, with PR, it can take months before you see results, it is not easy to do, and you may not get the kind/type of exposure you would like to have. However, it generally costs far less than advertising. Even a casual mention by Oprah on television or in a magazine like Bazaar or Vogue can do wonders for a consumer products company.

What can a good public relations strategy do for your business?

1. Bring new business and additional business from existing customer base.
2. Lends credibility to your offering. In the current environment, people ignore most advertising messages.
3. Pre-sells your offering to your customers (in other words, customers are ready to close the deal).
4. Shortens the sales cycle.
5. Often leads to word-of-mouth marketing.
6. May even allow you to raise prices.

How to develop a good public relations program?

1. Have a media savvy person do it. If you do not have anyone in-house, it can be easily outsourced. The investment generally pays off if you work with the right person or agency.
2. Treat media people like rock stars. While they may not always be the ones to make the most amount of money, their power is incredible. Anything that they right has enormous power. What they choose to write depends mostly on how they are approached by a company. If a journalist spends a day at a spa and is pampered with all kinds of natural personal care products, she is more likely to mention them than if you sent her a press release talking about how wonderful your product is.
3. Do not ignore the new media - the bloggers. Many bloggers are now almost as powerful as mainstream media (MSM). While some carry advertising on their blogs, others don't. As I have said in the past as well, bloggers are more passionate about what they write and are relatively easy to work with than the MSM journalists, who tend to be more conservative in their approach. Since bloggers are mostly independent, they also appeal to consumers since they perceive them to be more direct, honest, and not influenced by company policies. (Related article: Advertisers do not fully understand blog marketing yet)

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Technorati tag: Public relations

Yahoo business model in serious trouble

Just early last week, I was discussing Google's business model with a client. What we were wondering though was that despite having people like me abandon even our corporate email addresses (I still use my iProceed.com email address on my business card, but forward all my emails to Gmail.com), we still had no choice but to find another website like Yahoo to track my stock portfolio or to read my RSS feeds. I now realize that we were thinking about these issues while Google was putting finishing touches to its latest offering that will literally allow people like me to end our relationship with Yahoo for ever.

Why is Yahoo so bad? (Related article: Yahoo is excellent at nothing but simply executes well)

1. Yahoo mail (that we all used at one time) is simply not good enough any more compared to Gmail.
2. Yahoo search is simply useless since the results are almost always manipulated either by spammers or the so-called Search Engine Optimization (SEO) firms. In fact, MSN, that came to the game much later, now provides excellent search results and we expect that it will soon compete with Google.

In summary, Yahoo that seems to be following the Hyundai business model, is no longer a company that we admire. The way Hyundai is around and doing well, Yahoo will still be around and do reasonably well, but do not expect Yahoo to create a buzz in any more.

Another point to remember is that Google is a company that is always transforming its business model. As search has become a mere utility, Google wants to be part of your lifestyle, both at work and home (check out Google's enterprise offerings on its website).

What does it mean for you?

1. Check out Google offerings. If you have not had a Gmail account yet, let me know. (Related article: Gmail invitations available). Use these and find out how simple and beautiful the offerings are.
2. While being good at nothing and being just moderate at everything may create value in the near term, but is not a sustainable business model.
3. Draw a chart of your own business model and compare it to that of Google. Compare and contrast the differences. And then ask yourself What can I change in my business model?

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Reasons for higher drug prices in America

Drug prices are among the highest in the United States. Of course, we are the richest nation in the world. Plus, due to the high cost of doing business here and the process of getting a drug through the approval can cost between $800 million to a billion dollars. All Americans understand that, but there is one more reason why the drug prices are high - we do not believe in a global market for drugs (or for other non-defense products), whenever it is not convenient for some corporations (who can then influence public policy).

The myth that is disseminated by the drug industry (with the support of some lawmakers) is that the rest of the world has price controls and we don't. So Americans should pay higher prices because we get access to drugs sooner. (Related article: Why are drug prices higher in America?)

All these arguments are totally baseless and don't add up. They also defy all logical arguments based on globalization and free markets. In fact what shocks me the most is that these arguments are often made by folks who talk about free markets, less regulations, and globalization one day and at the same time they are doing everything they can to stop the development of a global market for drugs.

See what Hank McKinnell, CEO of Pfizer, said to Julie Appleby of USA Today. "Drug prices in the U.S. are based on the free market. Outside of the U.S., they're set by the government. (Those countries) are able to free ride on the investments American companies are making in research."

But this is simply not true. I have written another article (Why drug price controls in OECD countries are not responsible for higher drug prices in America?) on this subject using US Government data that "The benefit to U.S. drug purchasers from the new drugs that would be developed and marketed if there were no price controls is in the range of $5 billion to $7 billion per year. In the short term, the deregulation of OECD prices is not likely to have any impact on U.S. drug prices." In other words, price controls overseas are not the reason for higher prices. It is just that our markets are closed. And I know how this works. I have spent many frustrating years in Japan dealing with their closed markets - they seem to be open and the Japanese can often claim that they are open, but just try bringing anything from outside Japan and you are dealing with a nightmare.

In a book that McKinnell is trying to promote, he is arguing that we end the free ride, and use trade agreements to make sure foreign governments pay their fair share. The point here is that if we went the trade agreements route, nothing will ever happen. The only solution to bring drug prices down in America is to open the markets (safety will take care of itself because the market forces will work very effectively). That will force the drugmakers to change their dysfunctional business models.

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Technorati tag: Drug prices

America lags in stem cell research

The Guardian newspaper is reporting that scientists in Newcastle, England have successfully cloned a human embryo, a breakthrough that places them at the cutting edge of stem cell research. The clone was created as part of the group's research into new treatments for diabetes. At the same time, another group, lead by scientists in South Korea under the guidance of Woo Suk Hwang, also announced that it has perfected the technique to clone human embryos. That team went one step further than the Newcastle researchers by creating stem cells tailored to patients with specific medical conditions. All this is happening while we are struggling to even find the raw material to do research.

Now, as one of my friend put it, I am excited about stem cell research because it may allow us to live for 250 years simply by allowing us to replace the organs that go bad. Well, it is my silly fantasy, but you understand what I am getting it. At this time I see two areas of technology that will have the same level of impact on our lives as the Internet had in recent years. Obviously, one of them is stem cell research and the other one is robotics.

That brings me to my real reason for writing this article. Like Thomas Friedman, I am very concerned about American competitiveness going forward. While we drove globalization, now that it is here, we are the ones not ready for it. Indeed, it seems to have caught both American people and policymakers by surprise. I think we are already lagging behind the Japanese in robotics, and my fear is that we may lose the competitive race in stem cell research as well because of American policies that considerably limit the type of research that can be done using federal funds.

Since this is something that keeps me awake at night, I attended a panel discussion last month on "Future of Stem Cell Research" that included Leonard Zon, Chairman of the Harvard Stem Cell Institute; Amy Wagers of Harvard Medical School, and Marc Beer of ViaCell. One of the issues that came up was if the United States had any prospects to be a player in stem cell research now that we have so many restrictions placed on what American scientists can do. All the panelists were of the opinion that denial of federal funding is definitely a setback and that is why it is important that alternate funding sources be found. However, they did not think that any other country in the world could amass the knowledge that American researchers currently have to get ahead of us.

I did leave the presentation last month convinced that we may be able to make it but news like this are making me rethink.

What does it mean for you?

1. As Thomas Friedman argues in his book "The World is Flat," we are not just responding very effectively to globalization. By the time we recognize what it means for us, it may be too late. Our leaders are more concerned about filibusters than about ensuring American competitiveness. In other words, you are on your own. So do your own research to see how you will maintain your individual competitiveness and that of the organization that you belong to.
2. In a sector that is under the direct influence of the government (e.g. healthcare, pharmaceutical, etc.), it is best to have alternate plans in case of a change in government.
3. If you want to maintain your competitiveness and can figure out if a change in public policy could crash your business model, it is best not to set up business in the United States and relocate it to a friendlier nation.

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Technorati tag: Stem cell research

Global research and development for drugs

Now that the talk of the town is globalization, it was no surprise that I got to attend a panel discussion on "Creating a Global R&D Organization." And I must say that the panel members were pretty distinguished, as they like to describe them - Christopher de Souza of Novartis, Robert Gould of Merck, Vicki Sato of Vertex Pharmaceuticals, Phil Vickers of Pfizer, and the moderator was Anil Khurana of Access International Partners, a group of management consultants.

I think we are all convinced that the cost of bringing a pharmaceutical product into the market (currently estimated to be somewhere between $850 million to a billion dollars) is simply not sustainable. As the market for drugs and healthcare globalizes (which I am convinced is going to happen no matter how much the drug firms want to delay it), the cost pressures will simply be too much to do all the drug development work in the developed world. (Related article: Offshore outsourcing of Pharma R&D)

Another major driver of globalization is the fact that it is now possible to actually work more intimately with your colleagues scattered all over the world. In fact, it is now possible to speed up the process by having a 24 hour work day by dispersing your R&D resources. All participants in the panel discussion were active in drug development work in offshore locations, not just because of cost pressures but also to take advantage of rising demand for drugs in developing countries. And unlike software and information technology (IT), not all the work is going to China or India. In fact, there is no one country that is emerging as the preferred choice for pharma R&D at this time. Companies are making strategic decisions that work for them rather than shipping work to an offshore location without thinking about it. (Related article: How to reduce drug development cost in the United States?)

The experiences that were shared were mostly positive. In fact, I learned that Taiwan is an excellent choice to do drug development work because of the availability of excellent researchers - many of whom are US citizens but choose to live in Taiwan or commute.

What does it mean for you?

1. Globalization is not limited to services or call-centers. There are many other industries that can take advantage of global sourcing.
2. Pick your location carefully. Analyze your situation and make sure that it works for you. Just because your competitors are rushing to Taiwan, you don't have to.
3. Start small. Drug development is a very delicate process and meticulous documentation is critical. So make sure that you can walk before you run.

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Technorati tag: Pharmaceutical

The end of B2B marketplaces

Written with Jay Srinivasan, Director at Siemens. Before Siemens, Mr. Srinivasan was the Director of eBusiness Strategy at PricewaterHouse Coopers and Director of eCommerce at Compaq and Digital Equipment Corporation. A modified version of this article has also been published in the Global Finance Magazine.

Recently we volunteered our time to help organize a conference for entrepreneurs. When we needed to print a brochure for the attendees, instead of running around to find if anyone knew a printer, we just went to PrintIndustry.com (operated by Printing Industry Exchange, LLC, Ashburn, VA). In a matter of hours, we had several bids from all over North America, and as we later found out, from printers outside North America, but who were working through their agents here. Similarly, when we needed a new logo design, we posted a bid on Elance.com (Mountain View, CA). Again the bids poured from all over including Romania, Bulgaria, India, and Pakistan.

But what happened to all those e-markets and exchanges that were supposed to become the hub of buying and selling like eBay? They either filed for bankruptcy (e.g. CommerceOne), got acquired (e.g. FreeMarkets), or transformed their business model (e.g. Covisint, VerticalNet, Ariba, Onvia, etc.). Others, like Elemica, are struggling to survive. In summary, no business-to-business (B2B) online marketplace could become the business equivalent of eBay. On the other hand, eBay was able to attract a lot of business customers.

During last few years, though, as we wrote above, a number of bid-based online resources have emerged that provide excellent service to corporate customers of all sizes, and particularly to small business owners. A small business owner that had to literally beg suppliers of many high-value products and services can now watch silently as suppliers fight among themselves virtually driving down prices in real time. That is what happened to us for our logo design project. Even the design firms based in North America had to lower their bids to match with those of the Pakistani firms to get our business.

So what went wrong?

MRO e-procurement is no big deal according to many CIOs or supply-chain executives. Any MRP/ERP system can handle MRO e-procurement as long as a customer creates a part master data for the item, whether it is a paper or a simple coolant. Any MRP/ERP consultant who knows the fundamentals of the system knows this. We are not aware of any companies, which give part numbers for paper and pencil unless they are in the business of manufacturing or selling paper and pencil. Many companies found clever ways of introducing the dummy part numbers and using the existing system to do the MRO e-procurement.

While many companies want to empower their employees to make decisions related to purchase of office supplies, there is also the issue of how to implement control systems. Purchasing managers are generally afraid of losing the so-called perceived sense of control.

Most of these applications (or in reality application tool kits) were priced in the $400,000 to $500,000 range and by the time they added the customization of the application and back office integration, the total bill easily climbed to around $1 Million. This was a sticker shock for most of the CIOs since they just implemented or were in the process of implementing a multi-million dollar ERP system. Imagine a CIO going to the CEO and board and telling them that the 10+ million dollar ERP system they just approved last year will do everything except for buying paper and pencil and they needed additional budget for $1 million plus. This became even trickier when most of them were still implementing and going through the learning/growing pains of ERP systems.

Small and mid-sized companies were not really interested in making commitment to such a large investment in terms of MRO e-procurement since ROI took much longer. In any case, their MRO e-procurement expense was not as significant as bigger companies.

Then there was the issue with system compatibility. As new vendors emerged rapidly, they tried to differentiate themselves by developing their own systems without any industry standards in place. No surprise then that those customers who did sign up with the B2B marketplaces spent months trying to make the disparate systems work with each other, not only adding to the costs but also frustrating the users.

The new paradigm in B2B marketplace

It is fairly obvious that those online marketplaces that did survive learned from the mistakes during the early years. In fact the concept of large companies using online trading hubs for big-ticket products is no longer viable. As Elemica customers have realized, there are more efficient ways to conduct business when you do business with only a handful of companies. However, when the supplier base is fragmented, as in the case of print shops, online marketplaces provide an excellent choice for buyers. That is why apart from PrintIndustry.com and Elance, there are others that do something similar, sometimes specializing in certain product/service categories or industries (e.g. BuyerZone.com, eWork, Guru.com, etc.).

And customers couldn’t be happier since the level of competition is intense. The intermediary, while it might appear as a nuisance, actually creates a lot of value for buyers by standardizing the terms and conditions, providing a system of open feedback, and facilitating disputes, if they do arise. Like eBay, even a single dissatisfied customer can lower your ratings, which can have disastrous effects.

What does it mean for you?

1. A marketplace makes perfect sense only if there are too many sellers. In other words, there should be an opportunity to eliminate inefficiencies from the procurement process. A handful of buyers and sellers can deal directly with each other relatively efficiently.
2. The process of procurement has to be simple. Now that web services are much more developed, it is possible to provide most procurement services without requiring any software purchases and maintenance.
3. The procurement process has to be transparent to make the competitive forces work in a fair manner.

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Tips on marketing to uninsured Americans

The marketing of prescription drugs (almost always to those that have health insurance coverage) is a stupendous task. Just look at the advertising budget of pharmaceutical companies. In fact, the research-driven pharma sector actually spends more on marketing than on R&D. It is not easy to convince an over-medicated nation to buy even more drugs. For the same reason, pharma tries to use the government to let it sell more drugs. According to the Center for Public Integrity, the pharmaceutical and health products industry spent $758 million on lobbying from 1998 through June 30, 2004, including $92 million by PhRMA itself, $54 million by Pfizer, $34 million by Merck and $30.3 million by Schering-Plough. The total is more than any other industry spends on lobbying, according to the center's report.

I have been trying to find growth opportunities in a highly underserved segment - the uninsured. Marketers often wrongly assume that all uninsured Americans (I am using the term "American" here to include all residents of the United States, whatever their legal status) are alike. Not true. In fact, millions of uninsured Americans earn more than some of their insured colleagues.

Let me discuss one specific case example that clearly shows the tremendous opportunity that exists in serving the uninsured. Let us look at dental coverage. Over 108 million children and adults lack dental insurance, which is over 2.5 times the number who lack medical insurance, according to a 2000 report from US Department of Health and Human Services entitled "Oral Health in America: A Report of the Surgeon General."

Consumer packaged goods companies (CPG) like P&G and Colgate Palmolive were among the first ones to recognize that those without dental coverage almost never visit a dentist unless they have no choice. But who does not want whiter teeth? In fact teeth whitening products appeal even to those with dental coverage because teeth whitening is not covered by most insurance plans (though those that visit the dentist regularly may not always need whitening). In other words, the potential market size is in tens of millions just for teeth whitening.

In recent years a range of products has been introduced, and while competition has intensified, the pie keeps growing. A more recent trend is to sell do-it-yourself kits that mimic the treatment in a dentist's office. Some use the same gels that dentists use, while others use laser light as well to make the process even shorter. Our estimate indicates that growth of some of these new products is in the 20-30% range.

Crest Whitestrips Premium teeth whitening strips ranked at #2 among the top new product launches in the US, according to a report by Simon Pitman. An aggressive advertising campaign from Crest also allowed it achieve two other teeth whitening products in the top ten – Crest Whitening Expressions toothpaste and Crest Night Effects teeth whitening strips. The three product launches enabled Crest to corner total sales of $199 million, a significant achievement. Although over the counter teeth whitening products are a relatively new phenomenon, it has risen rapidly to become a $500 million industry in 2004.

What does it mean for you?

1. It will be hard and costly to sell snow to Eskimos. Think of selling it to our good friends on the equator.
2. Never assume anything. Always develop facts through research and validation. Not all uninsured are living in poverty.
3. The best new business opportunities come from fulfilling a need in an underserved segment.

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Technorati tag: Healthcare

Healthcare offshoring expected to grow

The travel firm Thomas Cook, not known much in the US, but a big player in many European and Asian countries, has announced that it will offer "sun and surgery" package deals to India for patients tired of waiting for operations in Britain's National Health System. The firm says that it is using Britain to test the market.

Thomas Cook will offer deals that include flights, operations, accommodation in a private hospital and even recuperation time on the beach. Many clinics in Mexico, Brazil, Thailand, and Europe have already been offering such packages for Americans who want to have plastic surgery overseas, simply because it is so expensive to have surgery in the United States, and if a procedure is not covered by insurance, there is no incentive to stay in the United States. (Related article: India emerges as a healthcare destination for Americans)

In my opinion, the American healthcare system is ready for a big jolt from globalization. It is no secret that or healthcare system is broken. No one is happy. The ones that are insured hate paying the huge premiums (premiums for family coverage in employer-sponsored plans rose 59% between 2001 and 2004, according to the Kaiser Family Foundation, compared with a 9.7% growth in consumer prices) and there are 45 million Americans with no insurance whatsoever. A study by researchers at the University of California, San Diego, published by Health Affairs, predicts that 56 million people in the U.S. - more than one in four American workers - will be uninsured by 2013. Research shows that uninsured people usually put off care for as long as possible, and as a result, it is estimated that nearly 18,000 people in the U.S. probably die each year because they do not have health coverage. High medical bills are the second-leading cause of personal bankruptcy. (Related article: Potential business opportunity in serving the uninsured)

The only reason our inefficient system has survived this long is because of the alliance between everyone in the healthcare value chain and the government. But as globalization makes it possible to serve customers beyond the borders, we will see that there will be a surge in such tours, or even, full-blown healthcare services. While there are horror stories of some patients getting ripped off as part of their lipo-tourism, in general most patients end up saving hundreds to thousands of dollars.

Will this work for healthcare services?

Indeed, that is the big question. For a company based overseas, it is simply impossible to serve Americans with emergency healthcare. They will need to use the existing infrastructure and will need to work in the complex healthcare system that is both inefficient and costly.

However, for elective procedures, regular checkups, and preventive treatments, an overseas health insurance system can work. Alternately, a healthcare company based in the United States could offer some form of emergency coverage in the US, but for everything else, a trip to a cheaper location may be needed. Plus, for minor ailments, some kind of phone based support and tele-medicine may be provided.

What does it mean for you?

1. Healthcare offshoring is going to be much bigger than IT offshoring since it has all the elements of a business opportunity perfect for offshoring.
2. Since the initial target will be those that are uninsured, there should be no political opposition - hardly any jobs will be lost and millions of Americans without health insurance will be able to get some form of health services.
3. The opportunities that are emerging range all the way from those that are ideal for small businesses to those that can only be done by large corporations with tens of millions of dollars in investments. For instance, on a small scale, a company could have an alliance with a hospital overseas (it will require that you verify their credentials and make sure that they can offer high-quality services) and then start to offer packages along the lines of Thomas Cook. For large corporations, the opportunity will come from actually providing health insurance coverage and providing healthcare services.

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Links

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Offshoring

New retail sector strategy

Much is being made of Wal-Mart missing its earnings while Target beating analyst expectations. First, it is important to note that these results are not yet indicative of a long-term trend. Two, Target did extremely well with its credit card operations (which I do not consider core to its business and should not be included in comparing Wal-Mart's performance, which does not issue its own credit cards). The overall retail sales were still good in the United States though Wal-Mart was hurt in its European operations.

Will you shop at Target or Wal-Mart?

A lot of my audience shops at neither store. They are just too rich to bother with prices. For them, the closest they come to value-shopping is the monthly trip to Costco or BJ's or Sam's Club. But as a management consultant, I can ignore neither Wal-Mart (world's largest retailer and an intriguing company for those of us who make a living by analyzing strategy) and Target (the coolest company among discount retailers).

Is low price alone a winning strategy?

At least that is what you would think if you live in America. We love discounts and sales, even if they are not real. But as Professor Paul Bauer says, there is a lower limit to prices. Wal-Mart has done a remarkable job of driving down prices to a point that when I walk down the aisles of the store and look at the prices, my value chain analysis simply does not add up. In other words, Wal-Mart pushes the limit and gets away with it. I often wonder how anyone can make money serving Wal-Mart.

This low-price strategy does appeal to millions of people worldwide but Target is finding a niche. Target is going after that highly profitable segment that defines value more than just low price.

Target's winning strategy

If we look at the stores like Pier 1, Crate & Barrel, Bath & Body Works, Victoria's Secret, Bombay Stores, etc. it is easy to see why these stores are not for everyone. The prices are beyond reach for many consumers and while their "luxury for the masses" approach works quite effectively, a trip to Target creates far more value for them than a trip to the mall.
Target's range of product is so "cool," that you can buy products at incredibly low prices in stores that simply do not have that Wal-Mart or KMart look, and feel good about it.

Transformation of the retail sector

And I believe Target's business model is new business model in the retail sector. Another company that is going to be a serious threat to some of the apparel retailers is Sweden based retailer H&M. From SEK 36 billion in 1999-2000, the sales have skyrocketed to SEK 63 billion last year, mainly as a result of new stores opened worldwide, including the United States.

What does it mean for you?

1. A low price strategy is not a winning long-term strategy if there is no other differentiation and if you lack scale. Wal-Mart can do it simply because of its scale. Don't try this if you are not number one or two in your space.
2. Conduct an assessment of your customer base to find out how they define value. It is not always price. Often it is something like customer service that many companies often ignore altogether.
3. Product attributes and quality are as important as price. That is exactly what Target provides.

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Links mentioned: Wal-Mart Target Pier 1

How to globalize your business?

I want to discuss an innovative company called July Systems (Santa Clara, CA) that enables mobile content retailers such as operators, portals, content providers and brand owners to retail mobile content. The reason I choose to discuss the company is that while I attended a presentation by its founder and CEO Ashok Narasimhan what struck me was the firm's strong focus on globalization.

There is some good news for entrepreneurs here from Narasimhan. Globalizing an existing enterprise is no joke. The larger the organization the more difficult it is to make it global and change the culture. We are already seeing this when we hear that companies have had bad experiences with offshoring (which in some ways is a step towards globalization). But if you have just started or are planning to start a new company, you have to think of globalization from day one. In other words, when you think of strategic sourcing (of people, capital, raw materials, etc.), physical proximity should be only one of the considerations, and not the only consideration.

While July System is still small (less than 100 employees) and has been in business for less than four years, what the company has done is to find the resources wherever they can be most optimally located. It has offices in Germany, UK, Italy, and a product development center in India. I learned that many of their offices are actually virtual since they do not think that they need physical buildings to start a new office. The company is also promoting a culture in which you can work 24X7/365 but pick your own schedule.

July Systems reminds me of another company Semco (Brazil) that lets employees set their own work hours, bring children to their offices and come and go as they please. CEO Ricardo Semler calls this the "Seven-day weekend." He has also written a book on his experiences "The Seven-Day Weekend: Changing the Way Work Works."

What does it mean for you?

1. Globalization can not be an after-thought. If in any way your business can be impacted (even indirectly) by global forces, you have to incorporate that in your business from day one.
2. The older the organization, more painful it will be to globalize it. But when not globalizing means a certain death, the pain might be worth it.
3. Virtual workforce is the new reality. With globalization and availability of technologies, it is indeed possible to work with people you have never met.

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Links mentioned

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How to develop product recall strategy?

I recently attended a conference session with many New England area researchers from the biotech and pharmaceutical industry. The conversation moved to risk management and I ended up talking about drug recalls (particularly Vioxx and Bextra) as being critical issues to consider in developing a risk management framework. (Related article: How to avoid distractions like product recalls?)

What surprised me was the ferocity with which the researchers opposed any drug recalls. Mind you that Vioxx was voluntarily recalled by Merck and Bextra was recalled only after months of foot-dragging by Pfizer. The company essentially left FDA with no choice. The researchers suggested that drugs should simply carry warnings rather than be recalled. (Related article: Bextra recall hurts Pfizer)

All product recalls are extremely painful for everyone in the value chain. The litigation process that sets in almost immediately after a recall can mean bankruptcy for the companies involved. The researchers get hurt the most since they often take pride in their research work (in the case of Merck it appears that the R&D folks were pointing out the risks for a while but the aggressive sales and marketing groups decided to ignore them) and they are among the first one to let go after the drug is no more on the market. (Related article: Lessons from recall of Vioxx)

What does it mean for you?

1. Do no evil. And I am not saying this because I am preaching morality here; this simple principle is fundamental to shareholder value creation.
2. Have a product recall strategy for each product so that once problems arise you do not react to circumstances but respond using a well thought out strategy. Merck and Pfizer are in deep trouble because they are merely reacting to market forces rather than executing a proper product recall strategy.
3. Never ignore the researchers. I have often heard disparaging remarks by senior level managers about their employees in R&D. While they may not have skills in marketing or sales or strategy (they need not have these), they know the products and their risks better than anyone else. Trust their input more than the input of sales people and attorneys.

Recommended article: Lessons from Pfizer's mistake

Curious Britney Spears success story in Australia

It is no secret that selling to young women is far more difficult than any other segment. It is even more difficult to sell them things like apparel, shoes, makeup, and fragrances, simply because it is like selling snow to Eskimos. So how did Curious Britney Spears (a fragrance for women by Britney spears) become a huge success (the largest fragrance launch ever) in Australia?

Case study of launch of Curious Britney Spears by Elizabeth Arden

1. Create a buzz. The company organized focus groups to better understand the demographic trends even before anyone had any idea what the fragrance would be. In other words, it is possible to prepare for a launch even before you have a product. It allows you to develop a better understanding of your target market (e.g. what media channel works best, what price range is acceptable, etc.) while the R&D folks work on the product.
2. Guerilla marketing. Elizabeth Arden, in collaboration with Channel V (equivalent to MTV), organized a dance party for 1,000 women and called it "The Ultimate Girl's Night Out." Women of all ages were welcome but you couldn't buy the tickets. You had to sign up for a competition to win the tickets. This is an excellent strategy since it engages your customers and attracts not just the ultra-rich to these parties. By the way, it is good to have some ultra-rich show up at these events but the real guerilla marketing is done by the masses. When these lucky 1,000 women went back from the party and wrote about it on their blogs or mentioned it to their friends, the marketing was incredible.
3. Online marketing. What could be accomplished these days without leveraging the Internet? Nothing much really. The company had a website where women could register for updates so that when the sample were available, they were shipped to over 25,000 women.

What does it mean for you?

1. Traditional advertising is effective but not always cost-effective. If you can narrow down your target market, guerilla marketing can be extremely cost effective.
2. In consumer products, creating the right kind of buzz can make all the difference. The Japanese do it extremely well by using Japanese schoolgirls.
3. You can sell snow to the Eskimos provided you can create a perception of differentiation.

Recommended link: Marketing strategy

Links mentioned

Curious Britney Spears

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New advertising options needed to achieve good ROI

I was highly encouraged by General Motors' strategy to embrace embedded advertising in September of last year. I have been arguing for a while that traditional advertising is in serious danger but looks as if the message is still not getting through to the advertisers. I often wonder in what world they live! (Related article: Case study of embedded advertising)

What works is online advertising these days but despite the remarkable performance of online advertising, it constitutes just a drop in the bucket. According to Mary Meeker of Morgan Stanley, only 3 percent of the total ad spend is on Internet advertising.

So it was good to hear that General Motors, that is in serious financial trouble, is acting again to do something about its advertising strategy. The company announced today that it will consolidate responsibility for its media assignments in the United States at the Publicis Groupe. In a statement, GM said, "GM put its U.S. media buying assignment up for review this spring in order to create a more streamlined and efficient unit with greater focus on innovative, strategic media buying. We also are responding to changes in the media landscape and the dramatic growth in our dealer (Local Marketing Group) client base." I am interpreting "changes in media landscape" as meaning that it is no longer effective to advertise in conventional channels.

The decision to consolidate, which came after a two-month review, was intended to help "create a more streamlined and efficient unit with greater focus on innovative, strategic media buying," Betsy Lazar, general director for advertising and media operations at GM, said in a statement published by The New York Times. "The consolidation of the buying unit with the Planworks organization will achieve additional operational efficiencies." This is corporate speak for "We are cutting back since it was not working for us."

GM continues to lose market share and S&P has downgraded its investment grade rating into the ranks of junk bonds. While it is unlikely that such a move will have an immediate impact on its sales, I expect that a change in advertising strategy will definitely help it in the long run and give GM a better ROI on its advertising dollars.

What does it mean for you?

1. As GM says, the media landscape is changing. It may be changing for you in ways different that for GM, but there is a lot of turbulence. Do some research to better understand how it is changing and try to come up with accurate ROI for your ad spend.
2. Online advertising will continue to grow as consumers access online content through mobile devices. Rather that being afraid of this new technology, you must explore how you can be creative in exploiting it.
3. Don't keep doing things just because you have always done so. The world of advertising is very dynamic. American Consumers are already quiet sick of advertising. Unless you can find interesting ways to reach them, the message will simply not get through.

Recommended article: Principles of Internet advertising

Yahoo business model is being good at nothing

I am intrigued by the Yahoo business model. Yahoo is a follower in every single area but has still done reasonably well. During most of 2001-2003 period, Yahoo's stock price hovered in single digits and teens at best, it is now trading in the $35-40 range. From less than $1 billion in sales in 2002, the firm had over $3.5 billion in sales last year. So the question is Does it pay to have no competitive advantage but good execution?

So the announcement that Yahoo is launching an online music service to take on iTunes, Rhapsody, and Napster simply shows that a price war will commoditize the music download business within a matter of weeks and the winners will be companies like Yahoo that have the critical mass to market it to a broader base of potential users.

Examples of companies that create value through good execution

There are numerous examples of companies that execute really well and that itself becomes the foundation of competitive advantage. Walmart, Home Depot, Target, Ecolab, EMC, and many others.

Yahoo is doing exactly what these old-economy companies have done, that is, provide what customers need in the best possible manner. Yahoo, which used to be a leader in search, now is the worst search engine among the top three. MSN has much better search than Yahoo but Yahoo still grabs a larger share of the search market because of critical mass. The same applies for email, online entertainment, shopping, etc.

What does it mean for you?

1. Not all business opportunities and value creation require changing the paradigm. If you can execute better than your competitors, you can create tremendous value and even a competitive advantage.
2. Critical mass itself is a value creator. When you have critical mass, you can outsource many business process and acquire competencies that you lack.
3. Business model transformation is possible. Yahoo, that used to be just another dot-com ceased to be that a while ago, and is now a media company.

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Lessons from failure to privatize Social Security

The effort to privatize Social Security did not go anywhere and is on its way to a slow death. In any case, even if something happens, it will be not be at the scale at which the president wanted it. So what went wrong? Let us analyze this failure (from previous successes) since there are so many lessons for business leaders, particularly those that do business with consumers. (Related article: Impact of Social Security privatization on businesses)

Success stories of Bush Administration

From a marketing standpoint, the administration has achieved two remarkable successes since 2001.

• War on terror, particularly Operation Iraqi Freedom. President Bush had solid support from many American people because those that were strong supporters of war did not have to fight it. If you can see all the action from your couch while sipping chilled beer, it is easy to agree with the president.
• Discrimination against gays, and more specifically, denying gays the right to marry. Bush owes his election to those extra votes he received from those Americans who strongly support legalizing discrimination. Again, if you are not gay or do not have gay family members, it is an easy decision to support discrimination against others.

So how do Americans think when major change is about to happen?

"What is in it for me?" Consumers will support any change as long as it does not affect them directly. For instance, credit card companies keep charging more from those who have difficulty paying their bills but those who pay on time never protest because it does not affect them directly.

We continue to shop at Wal-Mart even though it means that our friends and family members lose their jobs. Most Americans do not see the direct correlation between shopping at Wal-Mart and impact on employment in the US.

What does it mean for you?

1. Social Security privatization was about managing change and the Bush Administration did not grasp that simple concept. Change management is a key step every time you are trying to make structural changes that can affect your employees or customers or shareholders. Invest in good change management expertise prior to undertaking major changes.
2. Never present a half-baked idea to your target audience. In a world where communication is almost instantaneous, lack of complete details is a recipe for disaster. The White House never really came up with complete details on what the details of the privatization plan were, leaving everyone to make up their own story. No wonder then that what we don't understand, we rarely support.
3. Be careful in crafting the message when monumental change is planned. Work with everyone you can to make it happen. Bush Administration completely refused to work with any opponents on what amounts to a fundamental change in the way Americans live their lives. No change of this magnitude can succeed unless all parties buy into it and "own" it.

There is another theory that I have developed. President Bush never really wanted to privatize Social Security the way he never really wanted to ban gay marriage. He thinks that both these issues really resonate with his base.

This is all fine in the world of politics but I have seen such things happen in business. My advice: Stay away from playing these games in an enterprise.

Recommended article: Bringing economic prosperity to America

Pfizer repeats Merck's mistakes in drug recalls

After a long and painful wait, the Merck board of directors decided to fire Raymond Gilmartin. I had then commented that the Pfizer board should do the same and replace Hank McKinnell, if for no other reason than for destroying shareholder value by imitating Gilmartin. (Related article: Gilmartin gone; time for McKinnell to go)

It seems, however, that Gilmartin is a McKinnell's hero since he continues to imitate his strategy even after it has been proven that it doesn't work. Now, almost as if he was repeating Gilmartin's words, McKinnell now wants to bring Bextra back on the market. If you recall, Merck wants to bring Vioxx back after it recalled due to as many 140,000 personal injury cases in the United States alone.

What does it mean for you?

1. It is OK to admit mistakes and change your strategy. In a recent study, it was found that companies that did not follow their strategy from their business plans were more successful than the ones that stuck rigidly to it. Strategy is never written in stone. You should be able to change it in real time. (Related article: Change strategy in real time like eBay)
2. Learn from the mistakes of others. Only fools repeat the mistakes that others have committed. The way to find out the mistakes of others is to do research prior to every important decision. Case studies are a great way to learn from other's mistakes.
3. Keep lawyers out of the strategy sessions. In case of both Merck and Pfizer, considering the magnitude of litigation the two firms face, lawyers appear to be in control. Legal advice is necessary, but lawyers should limit themselves to legal strategy, not overall corporate strategy.

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Communication style that charms your audience

As a business executive (and more specifically, as a management consultant) I have to communicate with all sorts of people. Now, unlike politician, if people who listen to me do not do what I tell them, my purpose is defeated. The same is true for most leaders. They have to not only communicate but also motivate the listeners to do something.

As all of you are well aware, people come to meetings, barely listen to what you have to say, and then by the time they arrive back to their desks, they have forgotten 90% of what you told them. And what is forgotten can never be done.

So the key is that not only should people understand what you are telling them, it should be so engaging that they will remember it without even writing it down. Ever wonder why people remember stories and jokes more than their company's mission?

So I attended an excellent conference MiT4: the work of stories, organized by MIT. You might wonder what a business executive is doing at a conference on storytelling where most of the attendees were actually researchers and academicians. But my research has shown that even the dullest presentation if told as a story accomplishes both the goals described above - people remember the story and then they also act on it.

In particular, I want to mention a presentation "Visualization and Storytelling in Management Consulting" by Mats Bjorkin, who is an associate professor in film studies and head of the Department of Culture, Aesthetics and Media at Goteborg University in Sweden. His research shows that management consultants are only now starting to appreciate the role of storytelling in communicating with their clients.

How to tell a story in a business setting?

Whether we have doctorate degrees or we have no education, we all love stories. Here are a few tips on how to convert almost any thing that you want to communicate in a story form:

1. Bring real people, places in your speech by "humanizing" the presentation. Even a story on sales performance during a quarter can be humanized by talking about the type of customer that embraced the new product.
2. Start with background and context. And to do that, include a short story of a supplier or a customer or a competitor.
3. Let each point lead to another as would a story. It should flow like a continuous stream. If you have to talk about two unrelated topics, don't just jump and change the story; connect the two unconnected stories by another story.

And finally, test your presentation on a six-year old. If you cannot amuse that kid, chances are you will not be able to keep your audience of business executives interested.

Gilmartin gone; time for McKinnell to go

Companies often talk about improving their gene pool and fire employees each year supposedly with that goal in mind. However, not all companies do a great job at that and it often is an exercise by managers to get rid of employees that they do not like. But why should this goal apply only to junior and middle-level employees. Why is this so rarely applied to top level executives.

Let us take the example of Merck. Raymond Gilmartin completely screwed up how he handled the recall of its blockbuster drug Vioxx. Not only has he destroyed over $25 billion in shareholder value, he might very well be responsible for laying the foundation of an eventual bankruptcy. But it took the Merck's board of directors over seven months to recognize that a change in the external environment required a change in management.

Merck's board has failed again by appointing a Merck insider as the new CEO. Improving the gene pool generally means bringing some fresh blood. If Gilmartin will continue to be an advisor and the board will be involved more actively in management, can we expect any change in Merck's strategy? Probably little. Plus, the new CEO is neither a strategy guru nor someone who is known for implementing strategy. What Merck needs is a business model transformation but what it gets is someone who can only streamline its operations.

What about Pfizer?

Hank McKinnell, the current CEO of Pfizer, might very well be a clone of Gilmartin. He has repeated and continues to repeat each and every mistake committed by Gilmartin. Pfizer is going through the same drama that Merck is going through except for the six-month time lag due to the difference in the timing of the recall of Bextra.

This may be a wakeup call for Pfizer's board as well to ask McKinnell to let someone else set the strategy for the company. Enough shareholder value has already been destroyed at Pfizer.

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Lessons for business leaders from recall of Vioxx

Strategic lessons from Vioxx recall

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