Recommended: Understanding the Consumer of the Future

Did you survive a recession or are you in the midst of a transition (partly as a result of that recession). Only time will tell. But for the moment read the context, connect and act!.

As chief insights officer for Young & Rubicam,John Gerzema presides over the world’s largest database of information about consumer attitudes. Recently, he has been traveling the country, interviewing marketers and consumers about changing consumer behaviors — insights that are collected in his new book (co-authored with Michael D’Antonio), Spend Shift: How the Post-Crisis
Values Revolution is Changing the Way We Buy, Sell, and Live.  He recently spoke with Inc. editor-at-large Leigh Buchanan.

See also this deck from early 2010.

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Recommending John Caddell’s The Best Business Books of 2009

roberto verganti
Image by zilver pics via Flickr

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The Best Business Books of 2009

by John Caddell on 13 December, 2009 – 20:58

In the wake of the worst US economic catastrophe since the Great Depression, everybody realized this: Making money is harder than we thought. So, this year, books on innovation had special resonance. Luckily, there were some great ones out there. So many, in fact, that this year’s best-of list includes two “companion volumes”–other good books from this year that cover similar material from another perspective.

These are the best books I read this year:

1. Design-Driven Innovation – Roberto Verganti. A fascinating book that looks at companies that don’t merely create new products, but develop products and services that create new meaning for customers. Is that important? Well, companies that do it well avoid commoditization and generate outsized profits for long periods of time. Think Apple.

(companion volume: The Design of Business by Roger Martin)

To be continued at

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Reflecting at Voxeu’s Offshoring and composition of home employment !

This post is included because of the similarities I notice in managing a large sized contact center environment. In which i noticed the same consequences!

Found at

Sascha O. Becker Karolina Ekholm Marc Muendler
9 November 2009
How do offshoring firms reshape their domestic workforce? This column, using evidence from German multinationals, shows a positive correlation between offshoring and the firm’s proportion of highly educated workers. Offshoring firms have relatively more domestic jobs involving non-routine and interactive tasks. But offshoring is far from the only explanation for the shift towards more educated employees carrying out more advanced tasks.


The phenomenon of offshoring has currently moved to the sidelines of public debate – eclipsed by the financial crisis and deep global recession – but may very well soon return to the policy agenda (Blinder 2009). Signs of recovery are presently much stronger in emerging economies in Asia – most notably in China – than in the US and Europe. In a scenario where growth in Asia takes off while growth in the US and Europe remains sluggish, concerns over offshoring of jobs to low-wage countries are likely to regain momentum on both sides of the Atlantic.

Job characteristics and offshoring

When thinking about how offshoring of jobs affects home employment, it is useful to think of workers in terms of their qualifications and professions. It takes highly trained radiologists to interpret computer-tomography images and X-rays; but some of those skill-intensive tasks are performed offshore today, by US- or EU-trained doctors living in South Asia or Australia through a business practice that has become known as tele-radiology. A janitor’s or doorman’s work, on the other hand, need not require an advanced school degree, but their work can typically not relocate offshore simply because proximity to the maintained facility is indispensable.

In short, a worker’s tasks on the job may crucially determine to what extent offshoring puts employment and earnings at risk. The standard view that globalisation mainly shifts labour demand towards skilled workers and contributes to an increased skill premium in developed countries is not necessarily true when producers offshore intermediate services and bring together workers and electronic equipment at a distance.

Trade in task theory

A recent advance in theory by Grossman and Rossi-Hansberg (2008), who treat offshoring explicitly as trade in tasks, offers a unified way to think about offshoring and its effects on employment and earnings. They show that even if low-skilled jobs are easier to offshore than high-skilled jobs, low-skilled workers may still benefit in absolute as well as relative terms. Offshoring may lower production costs in industries using low-skilled workers intensively. This changes relative profitability and induces a reallocation of workers that involves an increase in the relative wage of low-skilled workers. However, there is still a standard Stolper-Samuelson effect that work in the opposite direction; a fall in the relative price of goods intensive in low-skilled labour mitigates the change in relative profitability and thereby the change in relative wages. In order to understand what would be appropriate policy responses to offshoring, it is thus not sufficient to know whether it mainly leaves high-skilled or low-skilled jobs onshore, but it is also requires knowledge about the direction of general equilibrium effects related to a reallocation of workers.1

A number of task characteristics are potentially relevant for the offshorability of a job – the prevalence of codifiable rather than tacit information to perform the job (Leamer and Storper 2001), the prevalence of routine tasks, especially if they can be summarised in deductive rules (Levy and Murnane 2004), and the job’s requirement of physical contact and geographic proximity (Blinder 2006). In a recent study based on survey answers to questions about job characteristics, Blinder and Krueger (2009) conclude that 25% of all US jobs are potentially offshorable. While this seems like a relatively high number, potentially offshorable is not the same as actually offshored, as rightly pointed out by Alan Blinder in his VoxEU column (Blinder 2009).

While the nature of tasks could perfectly coincide with the skill intensity of a job, so that tasks and skills would amount to the same thing for all empirical purposes, there is no reason for this to be the case. In fact, estimates of the relationship between measures of the offshorability of a job and the skills of the worker holding the job suggest that this relationship is rather weak.2

New evidence from German data

In a study based on information about German multinationals and their German employees, we have analysed the relationship between offshoring taking place within firms and the composition of workers and the tasks they carry out in the German parts of the firms (Becker, Ekholm and Muendler 2009). Multinationals carry out a large part of all trade in intermediate inputs and services and therefore are also major players in offshoring activities.

In our study we use plant data linked to information about employees that allow us to discern tasks, occupations, and workforce skills. We combine detailed occupational information in our MNE sample with survey information on the nature of tasks carried out by workers with different occupations. We focus on two aspects of tasks that may be related to their offshorability:

  • Whether they tend to be routine or non-routine.
  • Whether they tend to require personal interaction with co-workers and customers or not.

Based on the survey information, we link occupations to the degree to which they involve non-routine and interactive tasks.3 We also use information on educational attainment of workers to create a measure of workforce skills. Moreover, we use the distinction between white-collar and blue-collar workers – a widely used proxy for skills in the literature – to be able to compare our results with previous studies.

We run relatively standard regressions of the wage-bill share of a particular type of worker or task on a measure of offshoring and a set of controls. In order to account for the fact that market-seeking may be a much more important reason for MNEs’ expansion in high-income countries than in low-income countries, we distinguish between offshoring to high-income and low-income countries.

The regressions are run for the following four “advanced” work types:

  1. non-routine tasks,
  2. interactive tasks,
  3. highly educated workers, and
  4. white-collar workers.

We have a relatively short panel that starts in 1998 and ends in 2001. During this period, overall offshore employment at German multinationals increased by 3.9% in manufacturing and 9.0% in services.

According to our estimates, these changes predict between 2% and 17% of the changes in the wage-bill shares of “advanced” work types at the German plants (Figure 1).

Figure 1. Predicted effects of offshoring at German multinational enterprises

Source: Becker et al. (2009), balanced panel of MNE establishments 1998-2001. Note: Share of observed wage-bill changes predicted by offshore employment at MNEs. Services exclude commerce.

Offshoring thus seems to account for some, but not all, of the changes in the workforce composition at home. We find that offshoring is most strongly associated with a shift towards non-routine tasks in manufacturing (it accounts for 14.1% of the total change) and a shift towards interactive tasks in services (it accounts for 17.1% of the total change).

Offshoring matters for the composition of skills too, but considerably less. It explains about 10% of the increase in the wage-bill share of workers with at least upper-secondary education in manufacturing as well as services and about 11% of the increase in the wage-bill share of white-collar workers in manufacturing. Interestingly, we find no evidence that the relationship between offshoring and the wage-bill share of “advanced” work types differ depending on whether we consider offshoring to low-income or offshoring to high-income countries.

Policy implications

What are the implications of these results for policy? Since our analysis does not capture any general equilibrium effects, we are inclined to say “not many”. However, we do think that there are some important lessons.

  • First, at the level of the individual firm, offshoring seems to be associated with a shift towards more educated workers. We also report a positive correlation between the increase in offshoring and the proportion of highly educated workers in the firm. Both these results suggest that offshoring is associated with an increased relative demand for more educated workers, as traditional theories would predict.
  • Second, our results support the view that the degree to which jobs involve non-routine and interactive tasks is relevant for their propensity to be offshored.

Still, a large part of the variation over time in the task composition – and in the skill composition as well for that matter – cannot be related to variation in offshoring. There is thus still ample scope for other factors to explain the observed trend towards more educated employees carrying out more advanced tasks in German multinationals.

Note: The views expressed in this column are that of the author alone and do not necessarily reflect opinions shared by Sveriges Riksbank.

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Fascinating facts of The Great Depression of 2006: The National Debt an Interest Only Loan

Found at

The good news is that the country can still afford to pay the interest on the national debt. Notice that it is also figured as a percent of Gross Domestic Production [GDP = private consumption +gross investment + government spending + (exports-imports)]. So as a percent of GDP, you have the ratio Debt to GDP. It kind of obfuscates the dollars and cents/sense.


The red check mark at the bottom of the chart points to the sentence; “The United States ranked as the 23rd-largest in the world as a percentage of GDP. It gives the reader the warm and fuzzy idea that 22 other countries are messing up worse than the US.

Here we are with visual aid number two. This shows standings according to public debt as a percentage of annual GDP. Japan is almost at the top, beaten out by the small country of Zimbabwe. Take your pick of whose figures work best for you. No surprise here, the US is way down the list, just like the claim from the chart above.

Look at the next chart below. Here the countries are listed by the dollar amount of external debt. The US is at the top. This is where you ask the waiter for your check and choke. What happened to Zimbabwe? Note that Japan is a special case. They have 7 trillion in debt but most of it is internal.

The last chart is more or less a financial report card for the major world players. Ireland looks like is has run out luck. As long as interest rates remain low, these governments can keep the punch bowl full.

Take away Australia, Hong Kong and the US, and the rest are members of the European Union that is tied to the Euro. Some of these countries have real good health care plans. It looks like it just gets put on a “bar tab” AKA National Debt.

Right now the US government doesn’t even have two pennies to rub together and they are busy printing money to stimulate the economy. By god, everyone will have a home, a car and health care (“A chicken in every pot and a car in every garage” sounds kind of familiar–Hoover comes to mind). Worry about getting a job after the handouts stop. Congress is in too much of a hurry to spend the country out of this “Recession.” It’s a little like dropping a frozen turkey into a hot deep fat fryer. You mise well attach a radio beacon to it, so you can track it, after lift-off.


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Will they ever grown to bits: CRM for Financial Services, Part 1: Unmet Potent

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Financial services firms have spent heavily on customer relationship management in the last 10 years, often adopting it with a defensive attitude: If our firm doesn’t invest in CRM, then we may lose customers to our competitors. Getting customer accounts was the primary goal, and automating marketing through CRM was the means. CRM hasn’t delivered all that the industry expected, however. Why?

The chastening effect of the recession has many financial services firms taking a cautious view of future CRM investments. One reason is that these firms are husbanding their resources. Another is a growing awareness that investments in CRM by the financial sector have not been all that successful — or, at least, the results are a mixed bag.

Financial institutions have invested billions in CRM over the last decade, according to a study released in June by Aite Group. In 2008, financial firms in the U.S. and Canada spent US$414.6 million on CRM.

CRM Quality Questioned

In financial services, the first wave of CRM programs had the positive effect of providing more efficient ways of implementing marketing programs through automation, the Aite Group study indicates. However, the report questions the true effectiveness of CRM programs.

“Sure, there are a lot of banks and financial firms who can point to successful individual marketing campaigns where they have used CRM tools,” Ron Shevlin, a senior market analyst at Aite Group, told CRM Buyer. “But overall, the CRM results have been very disappointing.”

Bank CRM progams have failed to engender customer loyalty, with only 23 percent of customers saying they “somewhat” trusted banks, and just 2 percent expressing a “high” degree of trust in banks, according to the Aite Group study. For investment firms, the results were even worse, with only 7 percent of customers saying they “somewhat” trusted the firms, and just 1 percent showing “high” trust.

Good customer relationships are about “small moments of attachment and intimacy,” the study observes. “CRM hasn’t helped to create these moments. Just 25 percent of consumers are highly engaged with their banks — that is, interact in ways that might create trust and purchase intention.”

Only 11 percent of customers intended to grow their bank relationship for more products over the next two years, based on the Aite findings.

“When you look at customer retention or cross marketing to expand services to existing customers, they just haven’t moved the needle all that much,” Shevlin said.

A somewhat more positive attitude toward CRM — at least in a conceptual way — is reflected in a study Ablebridge conducted in partnership with Microsoft (Nasdaq: MSFT), released in March. However, it also suggests some concerns about investing in CRM.

Eighty-two percent of respondents in the survey of banks, insurance companies and brokerages reported that a “properly administered” CRM system would add value to their operations. Yet financial firms have been cautious in adopting CRM, according to the survey. Just 50 percent of 600 respondents reported that they actually had a CRM system in place. Only 10 percent of 522 respondents said they planned to invest in either new or upgraded CRM systems within the next year.

Customer loyalty is a high priority for financial services firms.

“In managing people’s money, it’s crucial to make sure the customer is well served,” said Ryan Plourde, a principal with AbleBridge.

“The goal is keep those assets under management. It’s just too easy for the customer to go someplace else,” Plourde told CRM Buyer.

Conflicting Goals

CRM’s performance in the financial sector rates a 2 on a 1-5 scale — that is, “fair,” commented Dick Lee, a management and IT consultant and principal of High-Yield Methods, but that’s based more on the attitude of banks than on the capabilities of the software or IT systems.

“To accomplish the true goal of CRM — building stronger relationships with customers — financial institutions have to be willing to step up and add new value to customers,” Lee told CRM Buyer. “Instead, most of these firms are still trying to figure out more ways to stick both hands in customer pockets.”

To build effective customer relations, financial firms need to meet several goals, Lee said. All divisions and functions must collaborate to deliver customer value. That requires data sharing and presenting one face to customers instead of putting commissions first.

“Vendors have succeeded in selling lots of CRM software, but in terms of reaching the goals I consider important, CRM has been a miserable failure — to the point where the primary thrust towards customer- centricity is coming from the outside in [the] process movement, which is mutually exclusive from CRM,” Lee added.

Vendors have benefitted greatly from the investments financial firms have made in CRM programs, but any disappointment as to the result of those investments is not a result of the software or programs, observed Jeff Gilleland, global strategist for the SAS Institute’s customer intelligence unit.

“The technology is agnostic as to outcomes. It depends on how the software customer implements the programs,” he told CRM Buyer.

US Bank, Wachovia and BB&T are among the financial firms that have implemented successful CRM programs from SAS — both profitable and productive in terms of generating long-term customer loyalty, Gilleland pointed out.

“Some banks have learned to use CRM to develop loyalty, but many banks that have implemented CRM haven’t been able to do that — mainly because of their own internal goals and conflicts,” he said.

For example, a branch manger might get a bonus for generating multiple accounts. However, using CRM tools to split one checking account into two accounts by moving some of the checking funds into a CD account may actually reduce the bank’s overall profits. Instead of a single “high margin” account, the the bank would have two accounts, but the profit margin on the new one would be far less. The bonus-friendly move would compromise overall bank profitability.

“We see these kinds of conflicts all the time,” Gilleland said.

Taking a Broader View of CRM

As a result of observing various levels of success in CRM implementation, Gilleland, in conjunction with Pepper & Rogers Group and Jubelirer Research, initiated a major research project to explore why the outcomes were uneven. The research indicated that only 25 percent of respondents had implemented a “mature” program that resolved some of the internal conflicts of CRM users and took a broad, enterprise approach to customer relations.

“The firms that took this broader approach scored well in two important categories,” Gilleland pointed out. “They were more profitable and they developed a significant competitive advantage. They made better use of resources — and instead of treating customers as just sales targets, they cultivated long-term customer loyalty.”

This broader approach is known as “customer experience management,” since it involves the integration of broad corporate objectives with narrow product promotion goals.

The “failure” of CRM may simply be in the eye of the beholder. CRM software and IT products have helped many financial firms achieve efficiencies in marketing and, in many cases, provided more customer volume — at least in the short term. Based on those “metrics,” CRM has succeeded. The failure, it seems, may be more related to the inability of most financial institutions to appreciate and implement the full potential of CRM to develop lasting customer relationships that also produce profits.

Pursuing the full potential of CRM will provide the next challenge to financial firms as they consider IT investments. Financial institutions may have to change their attitude when it comes to developing better — and longer — customer relationships.

No doubt, ROI will be a bigger factor, as will the evolution of IT applied to the CRM function — and vendors will need to upgrade their offerings to address all of these issues.

Stay tuned for Part 2.

Click here to be notified when the next installment in this series is published.

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