Inelastic Demand of the NFL

I just watched Steve Young, the hall of fame quarterback of my favorite team, discuss on PTI the bigger picture of how last nights controversial touchdown call affected the NFL. I wanted to chime in because he makes some extremely important points regarding the NFL’s obligation to society. In business school some of this is called “Governance” but it applies to this topic as well.

First, Steve mentions that the NFL has an inelastic demand. I want to help define this for those interested and also explain how it applies in this context. First, the technical definition for inelastic demand is (When a price change has no effect on the supply and demand of a good or service, it is considered perfectly inelastic.) What does this mean? It means that if the NFL were to raise the price of a ticket, or charge networks more for broadcasting its programming, everyone would pay.  Inelastic demand is a consequence of a pure power position in the marketplace.  The NFL is the most powerful entertainment organization in the United States. Ratings are sky high, prices are ridiculous and it just doesn’t matter, because we all revere the NFL. This in and of itself is not the problem. The NFL deserves its place at the head of the throne. Sorry Khaleesi! Up until these last three weeks, the NFL put the most incredible athletes this country has to offer on the field for us to watch at the highest level. The product has been consistently good across he board, with great team parity and a terrific playoff system that builds excitement all the way up until the Super Bowl.

With great power comes great responsibility Spiderman, and this is where the NFL needs to step up in a big way.  Steve Young was right in saying that this country demands wrongs to be righted. We do not like injustices and we demand good Governance of our organizations (See Nike child labor stories).  It is not just that our economic crisis caused by investment banks frustrates Americans because of the irresponsibility and greed of Wall Street, it is that they were “too big to fail” and the country wasn’t able to properly punish those banks for what they did. Every other company in this country would have gone bankrupt for such irresponsibility, but because of the nature of the system, with the amount of money they had control of, OUR money, they could not fail or we all would suffer. That is the injustice.

The NFL faces a similar situation. Will ratings and profits go down as a result of this interception called a touchdown? NO. Should players and owners care financially about a few replacement refs screwing up a bunch of games? No.  Do they care in this country though? Absolutely. The American people for right or wrong play judge and jury with integrity in this country, and if there is one thing we hold dear in this nation it is punishing those who have done wrong.  Even Republicans in this country, though they might not like Obama for any number of reasons, they will not vote with enough conviction for Romney.  Why? Because he is a liar, and his integrity is forever tarnished by his comments about the 47 percent. His integrity is tarnished because there is no trust for a man who lies, or who says horrible things about the people he wants to vote for him. There is no integrity for a man who helps create a great healthcare plan in his state of Mass. but then pretends like he had no part in creating it to get elected President.  Inelastic Demand might seem like an incredible achievement by the NFL.  The CFL, arena league, they will never take viewership away because of these refs. No other sport in America could replace what the NFL has built, but that power is paper-thin when it comes to integrity, and in this country that is not inelastic.

Read more: http://www.investopedia.com/terms/e/inelastic.asp#ixzz27X8D2xKe

Kupid’s Kitchen

I’ve noticed lately the death of “community” all around me, and I wanted to propose a new type of establishment for single people. OK, being single myself this does cross my mind from time to time, but let’s look at the evidence.

1. Movie Theaters:  How many movies are worth spending $12 -$15 bucks a film to see in the theater? Five a year maybe? I never fell for the 3D gimmick. Those glasses have been around since before I was born and often the experience is more disorienting than exhilarating. What was once a communal activity in middle and high school is no longer that type of place as an adult with DVR, Hulu, big flat screens, red box for $2. The movie experience at home is almost as good as in a theater. Why pay?

2. Bookstores:  A formerly common place to meet someone who is curious and somewhat intellectual. Thank you Kindle for ruining this way to leave the house.  I miss the smell of book pages…Just saying.

3. Malls:  I don’t know when this happened, but unless I need to buy shoes or pants which I can’t purchase online, I genuinely don’t like going to the mall.  I will go from time to time, but there is nothing regular about my visits. Malls are not a “community” location that I frequent.

Kupid’s Kitchen

Enough about where I don’t or can’t go anymore, here is my idea for a new establishment.  I think there should be a supermarket designed for single people.  Big families have Costco. I can’t finish anything I buy there in less than three months. Most of it always goes bad. I need things in smaller portions.  I liked the name Kupid’s Kitchen because it is a play off of OK Cupid the popular free dating site.  Trader Joe’s has a similar aesthetic to what I’m after, meaning individually packaged meals, samples for you to try and bump into new people, but it’s missing a few key elements.  First, a coffee shop with comfy seating. (They could sell those $5 dollar cupcakes people line up around the block for).  Before bankruptcy, Borders books had coffee shops in the stores and I think a place to sit down is essential for a hang out. It could even have a bistro with dishes made from food sold in the supermarket.  It would be great internal marketing. Shoppers would understand that the kitchen is primarily targeted to single people so instead of Hawaiian shirts the cashiers could be young and wear something fashion forward. The music could be Indie, and the samples could be themed. “Meals for two.”  “aphrodisiac apps.”  Available cooking classes in the evenings.  MasterChef competitions! You don’t have to be a good cook to participate and what people ended up making would be hilarious. Ice breaker!  Just some ideas.

I haven’t reconciled how everyone’s food wouldn’t get spoiled sitting in the back seat of their car if they decided to grab a bistro bite last minute, but the idea is you could go there whenever you wanted coffee, to do some work, were hungry OR had to grocery shop, something we all do once a week. Even single people.  Three ways to bump into that special someone.

NFL Fantasy Football is Business 101

It has been a bit since I posted last, but with the NFL season kicking off today, I cannot help but notice the similarities between fantasy football and the rules of capitalism reiterated whenever I draft my team.

I feel like an R&D department innovating a new product when I draft a team. There is some experimentation, but also a process I follow based on research and tried and true facts. It helps to be on the cutting edge, knowing the trends and thinking ahead to where fantasy is headed as opposed to where it has been. This year, the future of fantasy appears to be quarterback dominated. Quarterbacks score the majority of your points in any given week, and those that separate themselves from the pack are a premium at the top of the draft. Running backs used to rule the top of fantasy drafts, but with run-by-committee dominating the majority of the league, a first round draft pick on a running back is no longer the norm.

I will run through a few business concepts and show you how they directly apply to Fantasy Football. Sunday afternoon on the couch with your laptop is more educational than you realize!

Margin: The concept of margin is business 101. The cost it takes to produce a product and the price you sell the product are not the same. The difference between the two is your margin, and also the profit you make. Good margins are large margins and there are many reasons and ways to make that number larger.

Fantasy Margin: In fantasy, margin can be applied to drafting strategy. The margin in this case is not dollars, but rather incremental point differences from one player to another. What do I mean? The total points a running back scores in a given fantasy season vs. the next comparable back. In 2011, Ray Rice scored 336 fantasy points in ESPN’s format. The number 10 fantasy running back last season, Reggie Bush, scored 200 points. If looked at in terms of margin, that is a 136 point margin!! Now lets play that game with Quarterbacks. The number one quarterback, Aaron Rodgers scored 438 points in 2011, the number 10 quarterback, Michael Vick, scored 237 fantasy points. That is a 201 point margin! Rodgers is clearly the more important pick. This information could be used to justify selecting Aaron Rodgers near the top of the draft, or more importantly, that Michael Vick is not worth the risk near the top of a draft with that kind of margin loss if he gets injured again.

Supply and Demand: The counter argument to margin with fantasy, is supply and demand. This is why diamonds and gold are still so valuable. Why? There is a limited amount of these precious commodities on the planet, thus their value stays extremely high. Many fight over the few. This is the case with running backs in fantasy football. As running back by committee dominates the league, the few featured backs in the league become the rarest of diamonds. Arian Foster, LeSean McCoy, and Ray Rice have been reliable, talented, featured backs the last few seasons. They represent diamonds. While their total point value isn’t as high as quarterbacks, we can go back to margin to show that with catches and total yards their margins are equally as significant compared to a committee running back who gets half the amount of touches and catches (even more significant in PPR leagues).

Differentiators: In business, a company’s product is only as successful as its differentiators. What makes it better than the competition? What unique feature or benefits does it provide over the others? Sometimes it isn’t tangeable, such as a luxurious image etc… Anyway, in fantasy football there are a few ways to differentiate.
1. Take a spectacular TE early. Jimmy Graham and Gronk score way more points than any TE after them. The margins are significant for those two and the drop off after them is precipitous. It’s weird to think a TE, a glorified pass blocker in a former football era, can win you a matchup in 2012, but if all other players are about the same, that can be the differentiator.
2. An amazing defense. This is unfortunately extremely hard to predict. Like companies that use research to make decisions, particularly statistical correlation numbers, it is very hard from year to year to see a pattern of success from one season’s defense to another. Too many players, coaches, and schemes change to make that a predictable selection. Winning teams? The Patriots and Packers, two of the most winning teams in 2011? Two of the worst defenses in the entire league. Previous year success? The 49ers defense in 2010 was average at best, but in 2011 was clearly the best defense in the NFL. Teams are hoping that the 49ers can repeat last years defensive success, and that could be your differentiator, but good luck rolling the dice on that.

Competition: Competition is and always will constantly change, copy you, make their own moves to differentiate, and any good business is keeping an eye on competition, maneuvering to outsmart it and always be one step ahead. Each week in fantasy the competition changes and you have to adjust your own product (team) to be that much better than your opponent (college buddy). As in real business, decisions have to be made. Do I change my team to match up better with my opponent this week? Do I stay the course, not make irrational weekly decisions to win this week, knowing the season is 14 games long? If you ask public companies who need quarterly results to make stock holders happy (they might make adjustments outside the scope of the long term vision.) As with real business, it isn’t just one competitor, it is the entire industry you are fighting against. The same goes for fantasy. You cannot ignore that juggernaut team because you aren’t playing them that week. They sit their looming in the playoffs, standing in your way to the title.

Disruptive Technologies: This is a small company who nobody saw as a threat early on. They could have been purchased for pennies before they caught the attention of consumers, but because nobody was paying attention they suddenly became a huge threat in the market. This concept happens all the time in fantasy. A backup running back who is extremely talented but sitting behind a starter. The starter gets injured and the backup is suddenly thrust into the limelight and scores 30 points! He isn’t on anyone’s roster, and so everyone rushes to the waiver wire to pick him up. We try and hedge our bets and take a few of these potential stars and keep them on our bench for a rainy day, but as in business, it is impossible to predict all future events and prevent them.

Fantasy Football is a simulation of the business world in many ways and each week we are experiencing a free market at work. Enjoy your seasons!!!

Safeway’s Just for U campaign

I really like what Safeway is doing to target and personalize their promotions. We all know what supermarket promotions are really called. That’s right. Coupons. The Just for U campaign, if we can ignore the lame text varnaculare “U” instead of “you” to be clever aspect, is long overdUe. Safeway has created an app that you can use to take advantage of savings on the particular items that you like to buy while you are shopping. It’s a convenient way to save using your smartphone, and for Safeway to understand buying habits and personalize customer service, making the process of cutting coupons a thing of the past. I like!

On a side note, every so often Safeway just gives you a 10 dollar off coupon on your next trip to the grocery store. It really is nice to get that discount just for being a loyal customer. Great rewards systems really do create customer loyalty.

Home Depot Needs a Consultant

 

I’ve been a property manager for the last several months, and with such a role I am in and out of Home Depot multiple times a week. Apartments get renovated when tenants leave, decks need repairing, pool sprinkler systems need fixing, and so the types of things I buy vary, but often include custom orders, deliveries and third party vendors with whom Home Depot contracts.  All of these tasks require computer work, receipts, sometimes customer service returns, delivery dates etc… In reality it can get complicated, and this is where Home Depot tends to drop the ball.

The majority of the people I deal with for custom orders are the same people that walk the floors to help you with a choice of tile, however they are assigned to also use a computer system that few of them are properly trained on. The ones that do have the training are beyond busy and barely have time to train the new guys. I know this because I sit..and wait…for hours whenever I order anything that requires their computer system. In addition, the system crashes from time to time, or something simple, like printing a receipt or an invoice cannot be done. Then I must walk with them over to customer service where one person is usually tracked down to fix the mistake.  The customer service desk is also understaffed and typically I wait around for one person to show up along with four or five other impatient customers who are wheeling around large pieces of wood or metal, impeding the walkway for other customers. 

I wanted to get that all off my chest but also think strategically about business processes and how things can be done differently. Here are my suggestions:

Training and Development:  All Home Depot employees required to use the computer system should be well trained before they are ever allowed to sit down with a customer.  They don’t need to create “Home Depot University” ala Deloitte but something needs to be standardized.  Make them take a test! I’ve done it at multiple companies. It proves competency.

New Computer System:  They can use Microsoft, Oracle or SAP, I don’t care, but the system as it currently stands is difficult for employees to track order history and your phone number is your account number and your rewards number, which if you change your phone number screws everything up.  Simplify the identification system, give people cards to swipe, let them log in themselves at home.  A good SAP system will allow you to track the customer order throughout the process from the warehouse all the way to delivery. Best practices can give a more accurate timeframe for delivery than “around two weeks,”  which is not sufficient for customers like me who are dealing with contractors and vendors on a tight schedule.

Customer Service needs to be silo-ed and expanded:   Many people return items or need help with custom orders, and “Martha Stewart” discount promotions and a host of other things. The customer service desk is physically set up so that it gets in the way of regular customers who just need a light bulb or Allen wrench.  Move the entire department to a different part of the store, like the tire department at Costco. Get really good people who can handle upset returning customers and staff the department properly, so that people aren’t milling around.  As it is now, the entire C.S. desk is often empty in the mornings and doesn’t get fully staffed until around 11am.  That’s too late. 

Lastly, I want to say that I love Home Depot.  Even if this post doesn’t seem to indicate that, I appreciate the “one stop shop” that Home Depot provides. They have fair prices, good supply and good quality for most things. They let you return broken product no questions asked, which is great customer service.  Every company can improve and I just wanted to share my insights after spending so much time there lately.

 

LOVELY

As if the house above would be for rent! Get real! Who washes their own towel!? The towel washes me! You wash your own towel? This is my dream house.

LOVELY

The link above is to a new and improved version of online apartment hunting! Pack up your boxes and start looking for a new home Craig’s List! I was so impressed with this site that it deserves it’s own blog post.  It takes the Google Maps feature and incorporates rental rates in various regions. Convenient and visually spacial! You can even search by neighborhood, which is really helpful in cities. I like it because every posting has at least one picture and usually multiple in slideshow format. It also offers Google’s “street view” feature so you can see immediately how sketch the neighborhood might be.  I also like that as you zoom out of a particular region it clusters those postings under one dot, and gives the range of rental pricing for that area. That saves time if you are wondering if there is a bargain in that region or if you are barking up the wrong tree.

Improvements:  I would try and make some sort of glassdoor feedback feature that gives people searching for an apartment an idea of what that community is really like. Is it a young complex with dogs and children? Is it a quiet building where everyone strictly adheres to a 9pm noise ordinance? This is important social information.

Lovely really is a “lovely” site (do you not know me by now? Quit rolling your eyes) and offers a much needed improvement to the Craig’s List interface. I also like that the site didn’t bite off more than it can chew, and specialized with rental properties.  I hope this site takes off.

Northwest Soccer Subculture

Watching the Euro Cup this week it is apparent there is still a chasm between US soccer and that of Europe.  Europeans have the footwork and touch on the ball that comes with playing soccer since infancy, and consistently playing “pickup” soccer the way we play basketball in the US. There is an effortlessness that comes across that only about four players in the US demonstrate: Landon Donovan, Michael Bradley, Clint Dempsey and Tim Howard. 4 players does NOT make up a championship team. It realistically takes 12 or 13 to contend with the big boys.

I did not start this post to complain about the inadequacies of American soccer, but rather to offer a spark of hope that I have noticed in the last few years. If that spark is nurtured, it could turn into a flame that can turn US soccer into a contender.

The pacific northwest has a STRONG subculture of soccer unlike anywhere I’ve ever seen. Texas has football, the mid atlantic and northeast has lacrosse and Florida has tennis, but Portland and Seattle? They are soccer crazy. How do I know this? The fans of their MLS teams sell out EVERY game of the Sounders and Timbers. Every game of 25 thousand seat stadiums. The tickets are very difficult to get and their enthusiasm rivals only England in noise. How do I know this? Chelsea players who played in Portland recently have been quoted saying they are really surprised at the energy of the crowds they encountered. That is saying something coming from players who normally play in front of crazed English fans.

This isn’t a useless subculture such as the Jersey Shore guido fad that MTV capitalized on. This is a soccer sports culture that would rather watch a washed up David Beckham come to town than Kevin Durant. (See the loss of the Seattle SuperSonics to OKC)

When guys like Landon Donovan or Clint Dempsey wrap up their careers they really need to create a permanent all-star soccer school in the northwest similar to Nick Boletteri.  Nick has single handedly kept American tennis moderately relevant, and his efforts are slipping. (See my post about US tennis from a year ago). That being said, the enthusiasm for soccer in that region needs to be nurtured to help bridge the gap from the childhood excitement we all had for soccer until middle school and the drop off during high school. The US has no infrastructure for identifying and building the soccer talent that emerges when we are in grade school.  China identifies its athletes early in life and keeps them on a path toward the elite of those sports. An all-star school in the pacific northwest and junior league would garner plenty of fan support and money in that region. There aren’t enough seats for the Sounders and Timbers games but what about amazingly talented 17 year olds from around the country? I’d go see that. The US soccer mecca currently resides hidden below the rain clouds of Portland and Seattle. We can’t let this spark get snuffed by an Oregon storm!

Newsroom Opening Scene

I wanted to post this video on the blog because it was a moving point! Thomas Friedman has been writing for a while about how we are no longer the BEST country in the world. We once were but oh how we have changed! We have long since slipped from that perch in every major category. Our economy is in trouble, as is our education and healthcare structure.

Most importantly this show wants to point out that how we consume media in this country is also broken. We consume the facts that we want to consume on stations like MSNBC and Fox News. We don’t have a media outlet that is impartial and hard hitting regardless of political affiliation, money or ratings. It is a huge problem when a healthcare bill is passed and people hold up signs saying “don’t take away my medicare!” Medicare is run by the government…it is this misinformation that makes it hard for the public to hold our politicians accountable. There are many things that can improve in our country, and this show tackles an important one: news that doesn’t care about ratings and gallup polls but about getting to the TRUTH of the story.

Human Resources at tech start ups: 5 mistakes to avoid

I want to emphasize the importance of HR in the recruiting process, but also in particular, how poorly HR is conducted in the bay area. I say this because many of the tech start-ups I’ve interviewed with have gone about the process particularly unprofessionally and at times illegally. For example, I have been asked whether I’m married before, which is actually not a legal question for an HR professional to ask.   Here are 5 mistakes for tech-start ups to avoid:

1. Have a specific answer to the question, “How can my career grow at this company?”:  In today’s job market, good candidates want a company where they can grow their career, despite the high turnover rate by start-ups. Hiring only for a current need for a particular task is very short sighted. Having an HR person at a start-up can help create career paths for employees, which incorporate new titles, raises and new responsibilities for those who excel. Hiring without any thought about where that position leads is a foregone conclusion that great employees will churn in search of new challenges.

2. If you bring someone in to interview, call them with an answer:  In the “buyers” market that is this economy, it’s easy to forget to call back applicants who you don’t think are a fit for the role. As an interviewee, I completely understand that not every interview will lead to a job and the lack of fit works both ways, but like dating, not letting the other person know where you stand leaves you in state of limbo that makes it harder to move on to the next company. It creates bad will for that company that they didn’t have the courtesy to send an email or make a quick call letting the employee down. You would be surprised how many companies don’t send any type of follow up unless you get the job. All of these candidates you don’t call will eventually get jobs in the area, and they all have extensive networks. It is bad word of mouth public relations for your business to leave interviewees with a bad impression.

3. DON’T make employees wait long for a scheduled interview:  Recently I was made to wait over an hour to meet with the CEO of a company for the final round interview. Once in the interview the CEO had not looked at my resume and didn’t even know what position I was applying for.  You respect us when you respect the time we have all sacrificed to come to your office, leave work, wear a suit and print resumes. It is disrespectful and unprofessional to treat us any differently than a client.

4. DON’T describe the job the candidate will have in the future as the job you are offering in the present:  I learned this one the hard way, but describing a job that the employee could get and glossing over the actual position because you know they won’t like it, serves no purpose. The person will take the job under false pretenses, dislike it, and leave before they ever make it to that dream job.  It is the responsibility of the interviewee to ask the right questions, but it is expensive to put time and money into training someone who is going to churn anyway, so being honest about the job from the get go saves everyone from a mistake.

5. Have a performance review system in place:  Nobody is expecting a comprehensive 360 review at a tiny tech start up, but everyone wants to know how their performance is evaluated so that they can gauge their progress as a professional, and have a justifiable argument for promotion down the line. It also shows investment in its employees and that the company is thinking about the answer to question 1.  I can’t tell you how many times I’ve asked that question and been given a blank stare and then some sort of question back like, “How would you like your manager to review your work?” Bad answer.

Facebook and 3 Steps to Organizational Change

Two things that seem to always been certain. One, we learn from our mistakes. Two, people hate change.  I want to make a quick observation where these two rules have recently applied to Facebook.

First, a quick comment about change in general. We don’t like it. Why? Because we are creatures programmed to desire routine. Take a look at how you sleep. If you get on a sleep schedule where you go to sleep and wake up the same time each day, you can practically turn off your alarm clock. Your body doesn’t just know when to wake up, it WANTS to wake up at that time.  This applies to many things in life, despite the fact that change is a natural and necessary function of life.  That being said, how we go about implementing change can greatly determined how quickly it is adopted.

This now brings me to Facebook and the two most dramatic changes it made to the social media experience. Specifically, the first major change to Facebook was the newsfeed. If you recall, the newsfeed appeared one day out of the blue and suddenly made us all hyper aware of everything our network was up to, fed in real time. The sudden change was jarring, and subsequently many of my friends dropped Facebook for a while, feeling that it was becoming too intrusive about our lives. Huge groups popped up on Facebook protesting the newfeed, and the now more public Mark had to write a letter to everyone on Facebook explaining his actions and apologizing for how he introduced newsfeed.

Fast-foward to the most recent large scale change to Facebook, the new timeline interface. This is a VERY significant change to Facebook’s layout. It visually changes how we chronicle and peruse each others profiles and what is highlighted on the screen. Gone is the simplicity of the old Facebook and here today is a more fluid and filled Facebook page. Now I heard plenty of rumblings about not liking the timeline as soon as it sprouted, for the same reason that people didn’t like newsfeed. CHANGE. The timeline just rearranges the same information that was on Facebook, but makes it more intuitive, though that doesn’t mean people can’t find fault. Of course they will. It is change.

Why then was this change less protested? It certainly was change equal or greater in scale than newsfeed. A more winded explanation would be to read John Kotter’s “Leading Change” which I highly recommend. It was required reading in my organizational change class, but it is useful for anyone in business where a major change internally is becoming necessary. The parts of the philosophy I noticed Facebook using this time around are as follows.

1) Tell your audience long before that change is coming:  Let them absorb that information but not immediately feel its effects.

2) Allow that change to be elective at first:  Timeline was always going to be a mandatory change for Facebook, it was the direction they wanted to go, but early adopters, or “change agents” if you will, would happily adopt this change at first. Others would get accustomed to seeing the new user interface and gradually become comfortable navigating it.

3) Gradually force the interface to become the standard and make people aware each step of the way: Facebook made regular announcements about when it was going to be both available and fully implemented so that they felt in the loop of the development process.

Kotter had 8 steps and I realize I only talk about three, but the proof is in the pudding. Large Facebook protest has not occurred following timeline implementation and it is Facebook learning from its mistakes that keeps it at the top of the social media food chain.