Inspiration Sunday

The Great Contraction

Ambrose Evans-Pritchard, the International Business Editor for the Telegraph out of London has come up with a great name for our current financial malaise: The Great Contraction.

He also notes:

There is something wrong with the entire recovery tale, which ignores the fact that excess plant is still at the highest level since the Great Depression (capacity use is 70pc in Europe, 68pc in the US, 65pc in Japan, and as low as 50pc in some countries, according to the World Bank’s Justin Lin). Companies will have to cut jobs and investment.

and

But I am absolutely convinced that those who think we can return to the status quo ante of the credit bubble as if nothing has happened are delusional. As almost every central banker in Jackson Hole reminded us over the weekend, it is going to be a very long hard slog.

So what's with all of the discussion about the economy on an Innovation blog? Can't we focus on product design?

The answer is no.

Innovation is not about product design, it's about coming up with novel solutions to problems. The first step in solving a problem is recognizing that you have one.

The economy is a big problem. We are not in Kansas anymore.

The innovative companies that survive are going to be the first to recognize that things are forever different and are able to change in response.

(Image source: photobucket)

What Sarah Horne Can Teach Business

Sarah Horne is a first time triathlete who published a video about her race. It's her swim that's particularly instructive.

Watch her swim from about 45s to 1min 35s. Notice how smooth her stroke is, how effortless the swimming is. Surely she could go faster if she dropped the hammer and put more effort into it.

At 1min 35s watch the 3 swim lanes at the top of the screen. Sarah passes 4 men who are bigger and stronger than her. Sarah is flying through the water!



Pushing forward harder, dropping the hammer, or grinding it out is not the sure-fire recipe for success. Doing the right things, with proper technique and discipline, efficiently and consistently will yield much better results that brute force.

Inspiration Sunday

Innovative WorkOut Routine

What's interesting is that the routine is also known as working on the farm.

Whale Facts

Things that quite possibly only interest me....

Live by The Sword...
Now, comparatively few Vermonters are losing their homes. In July, the state had one home in some stage of foreclosure per 28,300 housing units, according to research firm RealtyTrac Inc., the lowest among the 50 states. The No. 1 state, Nevada, had one home out of 56 in the process.1

Yeah, But the Fun They Had In Between
In fact, 60% of retired basketball players go broke in 5 [years], and 78% of football players in 2[years]! 2

And...
Between 60-80% of professional athlete marriages end in divorce.

Boomers Can Party Too
A new study shows a shows a significant, worrisome level of binge drinking among those age 50 to 64 as well. 3

Notes:
1. http://online.wsj.com/article/SB125054188939938015.html
2. http://www.cosmoloan.com/money-management/the-6-main-reasons-why-most-pro-athletes-go-broke.html
3. http://www.usatoday.com/news/nation/2009-08-17-newbingedrinking_N.htm?loc=interstitialskip

Neat Idea

Actual milk truck!

Yuck: The Economy, Part 3

The US economy runs on consumer credit.

Credit is the driver, the speculative bubbles in housing which exposed the deficiencies of credit default swaps were the derailers. Housing and default swaps were merely the acute triggers for the chronic problem of debt. (see chart)



Americans were spending above their means and companies were more than willing to fulfill that demand. Consider this from the Wall Street Journal:

According to the Federal Reserve, total household indebtedness peaked at the end of 2007 at 132% of disposable income. That was by far the highest level since at least the end of World War II, nearly quadruple the 36% of 1952. By the end of March, with families boosting savings, repaying debt and defaulting, the ratio had fallen to 124%, a tad lower but still miles from the level of, say, 69% in the middle of 1985.1

And now consumers are having a hard time accessing the very credit that drove everyone's prosperity. According to the New York Times the a Federal Reserve survey shows that a majority of banks have tightened lending standards.2

So what does this all mean? It means we are not going back to the way that things used to be. The economy was sized to support an unsustainable level of spending.

That spending has gone away and will not come back anytime soon.

The way things used to be was driven by credit. Credit has gone away.

The new economy is cash only.

The Innovative are among the first in their environment to realize that the game has changed and quickly adapt to the new rules.


Notes:
1. http://online.wsj.com/article/SB124985909381317991.html
2. http://www.nytimes.com/2009/02/03/business/economy/03loans.html

You Cannot Outsource Responsibility

Period.

If you don't believe me ask Mattel who in 2007 had to recall nearly 1,000,000 toys made by contract manuafacturers because they contained lead paint.

If your name is on the product, you are responsible for that product. The customer is not going to remember the name of the subcontractor. They're going to remember your name and they're going to remember not to buy your product.

This seems to be self-evident but it seems that the airline industry still doesn't get it. When a 2.5hr flight turned into a 9hr flight in which passengers were not allowed to disembark, "Continental referred all questions on Continental Flight 2816 to ExpressJet, which operated the flight as a regional flight under the Continental logo."

When the flight is named Continental Flight 2816 you cannot blame ExpressJet.

(Image source: The Online Citizen)

Neat Idea

Well, I wouldn't exactly call it "exciting", but the snap capp is a neat idea nonetheless. Why haven't we seen this before?

Faster Product Development Means Reducing Friction

In mechanical engineering school you are taught that energy is conserved. That means that every mechanical transaction has a cost; the difference between the input and output is friction. The theory can be expanded to apply to any transactional system, for example product development.

If we know that all transactions have a cost then we know the hidden secret of product development. Great product development companies reduce the amount of friction required to develop the product. This saves time and money

Terry Laughlin, winner of four National Masters Championships has applied successfully applied this theory to swimming where he argues that speed is a function of reduction friction rather than applying more force.

A great illustration of the principle can be seen at 5:29 into the video where you see the difference between the two techniques.

100 Movie Lines In 200 Seconds

This is a clever put-together of some of the more famous movie quotes.

Adam Hartung Gets It

Cutting costs is easy(er), the hard part is growing. (Link)