QuickREAD

February 14, 2007

It's the Real Thing: Coke, Pepsi Are Big in Iran Soft Drinks Market
Lunchtime in Tehran's tony northern suburbs, and around the crowded tables at Nayeb restaurant, elegant Iranian women in Jackie O sunglasses and designer jeans pick at grilled Alborz trout and salad, their table chatter gliding effortlessly between French, English and their native Farsi.
The only visual clues that these lunching ladies aren't dining at some smart New York City eatery but in the heart of Washington's Axis of Evil are the expensive Hermès scarves covering their blond-tipped hair in deference to the mullahs. And the drink of choice? This being revolutionary Iran, where alcohol is banned, the women are making do with Coca-Cola.
Coca-Cola? Isn't corporate America prohibited by Washington's sanctions from doing business in Iran? Yes, for the most part, says U.S. Treasury spokeswoman Molly Millerwise. But Treasury has bent the rules for foodstuffs, a loophole through which American drinks giants Coca-Cola and PepsiCo have been able to pour thousands of gallons of concentrate into Iran via Irish subsidiaries.
And that has allowed these brands, so much a symbol of America--and so much an affront to Iran's conservative clerics--to open another front in their global cola war. After just a few years back in Iran, Coke and Pepsi have grabbed about half the national soft drink sales in what is one of the Middle East's biggest drinks market.
Source: Fortune,http://money.cnn.com

That Useless Inventory Is Bad. Oh, Wait, Maybe It's Good.
Company C is in the clothing business. Although proud of their new product development efforts and how well this function is coordinated with marketing to develop and market products that are customer driven, an analysis of Company C's inventory revealed that $19m in inventory -- half the overall value of inventory Company C carried -- was obsolete. Storage had to be provided for $19m worth of clothes that the company knew no one was going to ever buy.
When you consider the cost of money tied up in this obsolete inventory, the cost of storage (i.e., providing a warehouse to hold the inventory), and the cost of risk (after all, there is an annual premium to be paid on the insurance policy that protects this inventory from damage or theft), you have to ask yourself, "Why would Company C keep this inventory around?"
The answer is Company C executives were paid to do the wrong thing. Upper management compensation (bonus) was partially based upon the end result of the income statement -- i.e., earnings. Thus, this part of compensation should have motivated Company C management to get rid of the inactive inventory -- selling the same amount of products (the sales, or top line, of the income statement) without the cost of carrying the inactive inventory (which would substantially reduce the general selling and administrative lines on the income statement) would significantly increase earnings.
However, the other part of the compensation plan for upper management was the impact of their decisions on the retained earnings line on the balance sheet -- generally a good idea since increasing retained earnings is increasing shareholder value, which is one of the primary jobs of upper management.
Since inventory shows up on the balance sheet as an asset, a $19m decrease in inventory has to balance somewhere on the balance sheet. Since this was obsolete inventory, management estimated Company C would only receive $1m in proceeds from "selling off" the obsolete inventory -- proceeds that would be placed in cash. The impact of this decision is an $18m decrease in assets, which has to be balanced by an $18m decrease in retained earnings -- a drop from $21m to $3m, or a drop of 86 percent!
Source: Industry Week, http://industryweek.com

Micromanagement Unnecessarily Boosts Costs of Sarbanes Compliance
An ERP consultant estimates that on his last two projects--major implementation programs in two different huge corporations--one-third of the costs of the project were wasted in the name of Sarbanes-Oxley (SOX) compliance.
That's a 50 percent increase in project costs over what they otherwise would have been! Sure, there are costs of compliance with all regulations. But "wasted"? Corporate accountability isn't a waste.
No, he protests. He isn't talking about the costs of complying with SOX. Rather, he says that these companies could have complied to the same degree for far less money. It turns out that the real issue isn't SOX but micromanagement.
Source: CIO, http://cio.com

LTL Operators Are in Air Cargo Business for Keeps
The competition for expedited shipper customers has increasingly blurred the lines between the air and the road. For shippers and air forwarders--and perhaps most important, the airlines--the new question in domestic expedited services will be how far truckers are willing to go to claim more air cargo business. Anxious for the premium prices of airfreight, a long lineup of less-than-truckload carriers is expanding next-day service lanes and revamping route networks to get more overnight and second-day industrial shipping business.
"Our business under 800 miles is growing faster than our business over 800 miles and we expect that to continue," Bob Davidson, president and chief executive officer of Arkansas Best, parent of Arkansas-based LTL carrier ABF Freight System, says.
The Colography Group, a Georgia-based research and consulting firm, says in 2005 more than 56 percent of all overnight air shipments and 66 percent of second-day air shipments moved less than 350 miles. That is well within the range of less-than-truckload operators, of course, and major LTL carriers covet that shorter-haul market.
Source: Air Cargo World, http://aircargoworld.com

Whoa! Maybe Innovation Isn't All It's Cracked Up to Be.
In late January, Harvard Business School Press published Payback, by the Boston Consulting Group's James Andrew and Harold Sirkin. The authors emphasize what should be, but isn't, obvious: that the "only worthwhile innovation is profitable innovation." Among its many lessons, the book advises ditching unprofitable ideas early even if they are brilliant and revolutionary--think Motorola's Iridium satellite phone initiative--and moving on to the next big and profitable thing.
"Companies use a lot of innovation platitudes. The question is, how do they overcome the platitudes?" says Sirkin, who with Andrews has studied corporate innovation for 20 years. "Payback was born from frustration. Companies get [innovation] wrong, and so many people misunderstand the topic."
Sirkin urges companies to focus on the return on their innovation investments, rather than on innovation itself. "There's a belief that innovation is about great ideas," Sirkin says. "But in the business context, it's also about bringing a great idea to market, and how to maximize the payback on the investment made in the idea."
Source: Business Week, http://www.businessweek.com

Company Computers Are Secure, But Your Mobile Devices Aren't. Why Not?
With the number of employees using smart phones and other mobile devices, corporations must start to focus their security on more than just their network perimeter, according to security analysts.
Research done by the Business Forum Management Program in 2006 found that roughly 49 percent of the 680 executives surveyed are "mobile" or "very mobile," and about 80 percent plan to increase the number of mobile devices used in the next few years.
And even though a quarter of the respondents reported having critical data stored on mobile devices, 40 percent said they have no security and compliance measures in place to protect data on those devices. In addition, just 17.2 percent said they are very concerned about a breach in their company's mobile communications--almost the same amount that reported being unconcerned.
Source: Baseline, http://www.baselinemag.com

Web Analytics Evolves, and So Does Its Market Growth
More than one third of the web analytics market will be upgrading, replacing or deploying systems in the next 12 months, which will create new opportunities for application vendors, according to a recent report by Jupiter Research.
The survey of executives found that 12 percent of respondents said they plan to upgrade or replace their web analytics applications in the next 12 months, while 22 percent said they planned to deploy new systems.
As an application category, web analytics is evolving beyond data collection and reporting, according to Jason Palmer, vice president for products at WebTrends. "Traditionally, web analytics has been about performance management, tracking web site behavior and usage," he said. "Four or five years ago, it began evolving into campaign reporting and most recently, campaign management and optimization."
Source: CRM Buyer, http://crmbuyer.com

Manufacturer Hopes Its Investment Will Stimulate Retailers' Interest in BI
Retail companies could improve financial and supply chain planning, and thus increase profits, by using business intelligence systems. At least that's what vendors are telling retailers, and some are giving it a try. IT officials from other retailers, however, feel that BI systems remain too expensive and too hard to implement for their operations.
For its part, Keen Footwear hopes that its investment in supply chain software will help its retailer partners. Keen plans to roll out ERP software and a BI application and dashboard. The $1m project is designed to help Keen better collaborate with retailers that sell its products to ensure that their stores have the right mix of footwear, said Joe Zitomer, Keen's director of operations.
Source: BPM Today, http://www.bpm-today.com

Business Intelligence Can Be As Easy as a Google Search?
Often, a company's most valuable information is squirreled away in various departmental silos, and it takes an IT or statistics guru to coax it out. But what if workers could get that information -- whether it's in the form of data tables or text -- using an interface that's as easy to use as a Google search box?
That's the thinking behind the marriage of business intelligence (BI) software and enterprise search technology. It's an especially powerful concept for a decentralized organization such as the National Education Association (NEA), a teachers union with 3.2 million members and 14,000 state and local affiliates. "We wanted software that allowed people, particularly at the state-level organization, to create and edit their own reports," says Bill Thompson, the NEA's director of financial and membership services.
Source: Computerworld, http://www.computerworld.com

Business Intelligence Is About to Get a Whole Lot Smarter
Despite its overly complicated nature and other drawbacks, business intelligence is not a failure. In most ways, the facility for getting information to people where and when they need it is dramatically better than it was more than a decade ago, when reports were usually paper-based and required months of development to line up the data. But if you boil BI down to its basics, it is derived from only two things: data and reports. Most of the effort in BI in the last decade has been focused on the data issue: data integration, data quality, data cleansing, data warehouse, data mart, data modeling, data governance, data stewardship. BI tools are dependent on these efforts.
Rest assured, the current era of BI is coming to an end and will be succeeded by a BI 2.0 era that promises simplicity, universal access, real-time insight, collaboration, operational intelligence, connected services and a level of information abstraction that supports far greater agility and speed of analysis. The motivation for this "version upgrade" for BI is the need to move analytical intelligence into operations and to shrink the gap between analysis and action.
Source: Intelligent Enterprise, http://www.intelligententerprise.com

How Can You Share Your Rich Media with Others if You Can't Search It?
For years, directors at the Dallas Museum of Art faced a daunting problem that threatened to stifle the growth of the century-old organization. The prolific use of computer-generated content was requiring them to store ever more videos, audio clips, and digital images relating to the museum's vast collection of works to assist in research, accounting, outreach, and other day-to-day operations.
As the number of digital assets grew, they were scattered across a handful of machines that were maintained by different departments.
Meanwhile, IT workers were still relying on DVDs to back up all the various content, thereby relegating it to a non-searchable format. Employees who wanted to track audio narratives, video documentaries, or digital images involving a particular collection frequently had to hold lengthy meetings just to get a thorough tally. "Everybody in the museum sort of worked in little silos," says Homer Gutierrez, the foundation's director of IT. "Whenever they wanted to find something, it was a nightmare."
So three years ago managers at the museum -- which houses rare works by Van Gogh, Picasso, and Matisse among its 26,000-strong collection -- embarked on an ambitious plan to digitally reproduce nearly all its works in the form of high-resolution images and place those images where anyone with a Web browser and the proper credentials could quickly find, edit, and access them. To bring order and accessibility to the vast library of rich media, IT sat down with librarians, marketing personnel, and other business stakeholders to lay the groundwork for creating a single repository where multimedia content could be indexed, stored, and retrieved more efficiently.
Museum directors now employ a software solution that allows employees to enter and index newly created high-resolution images, for example, as soon as they become available. So far, the museum has checked in only a fraction of its digital images, but already Gutierrez is seeing a benefit."It has broken down a lot of barriers as far as information was concerned within the organization," Gutierrez says. "The ultimate goal for us is to share our media with other museums and have a standard for all the museums."
Source: CRM Daily, http://www.crm-daily.com

Sales, Operations Planning Grows in Acceptance, But You Must Understand the Basics
The traditional planning process of hopeful guesses and unexpected constraints is now giving way at most manufacturing firms to a more regimented effort to measure demand and adjust supply. But, while the basic concept behind sales and operations (S&OP) is fairly straightforward, implementing an effective sales and operations planning process can be tricky. Manufacturers must first understand the five basic steps of an S&OP process, experts say. And they must find a way to get different functional groups -- like production and sales -- to work together smoothly. Finally, they must decide where and how technology fits into the S&OP picture.
Source: Managing Automation, http://www.managingautomation.com

Should You Do Business with a Country Like Today's Russia?
The close of 2006 had a strangely familiar feel to it. The energy pipeline running through a former Soviet republic was cut off as Russia unilaterally increased prices, causing oil to rise on world markets. In 2005/6, the crisis over energy supplies to the Ukraine--culminating in supplies being cut off--led to global shortages, and natural gas prices rocketed across the world. The heady days of the 1990s, with deals very favorable to the West and the promise of boundless energy supplies to replace the West's declining sources, seem a long time ago.
The years since Ronald Reagan admonished Soviet President Mikhail Gorbachev to "tear down this wall" have been downright demeaning for Russia, a proud country with a proud history. The 1992 "100-day transformation" from state centralism to capitalism did not get anywhere near delivering the liberated economy promised. The "redistribution" of national assets quickly became looting, with political and business cronies enriched at the expense of the state and its people. Gangsters and "biznyesmen" sorted out their differences with gunfire and assassination: it was more Deadwood than Dallas, as the Great Bear tumbled toward becoming a gangster state.
Hedge fund and investor Hermitage Capital Management estimates that between 1997 and 2001, Gazprom, Russia's state-controlled gas monopoly, lost 10 percent of its gas reserves (equivalent to Exxon's entire reserves at the time) through share dilution to partners in various joint ventures. Over seven years from 1996, it estimates that Gazprom gave distribution company Itera half the earnings from gas markets in Turkmenistan, Ukraine, and other former Soviet states. A country that was a superpower less than 20 years ago today has an economy not much bigger than Denmark's, but that state of affairs is being reversed. Russian President Vladimir Putin wants both to secure the country's borders and to rebuild its global standing. He's using Gazprom as a means to do it.
"The primary question is: how far do Putin's ambitions go?" asks Jan Randolph, an economist specializing in Russia with Global Insight, which supplies economic and political intelligence and analysis to a client list that includes governments and global corporations like Shell.
Source: The Manufacturer, http://www.themanufacturer.com

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