Category: Big Business

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Tesco Genocide

Neil Davenport’s take over at Spiked! on why British liberals hate Tesco seems markedly similar to why American liberals hate Wal-Mart:

Tesco does not impose a blue-and-red homogeneity (blimey, it’s only a shop, not a police state). Instead it sells a fairly staggering array of quality goods at very reasonable prices. By expanding on the ‘one stop shop’ ethos, it actually helps people save on a very precious commodity: time. Would Tesco’s critics prefer us to go back to the days when we had to trudge around different shops for hours on end? It’s hard to see how being chained to the shopping-basket could enable anybody’s individuality to flourish.

Many critics appear aghast at Tesco’s motivation to be the biggest and best. It is interesting to see how the company turned around its ailing fortunes and shook up the retail trade in the process. There was nothing sinister or malign about this development. In fact, you could argue that in an age where know-your-limits modesty and demands to rein in our potential are all-pervasive, Tesco’s ‘bigger, better, stronger’ drive makes a refreshing change. Far from shouting this down, we could do with a lot more of this guile and gumption across society as a whole – including in areas that have a greater capacity to revolutionise our lives than shops which sell food, clothes and cheap televisions.

Okay, I posted this mainly because I wanted to use that Sneaker Pimps reference in the title. Sue me.

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Decade dance

This morning’s dumb lede comes to us from the New York Times. Reporting on Chrysler’s announcement of 13,000 job cuts, Micheline Maynard writes:

Every decade provides a new lesson for the American automobile industry.

In the 1980s, automakers underestimated their Japanese competitors, thinking they would never build anything but small cars. In the 1990s, the Americans focused too heavily on sport utility vehicles, only to see profits wiped out when buyers’ tastes shifted back to cars.

Now, this implies that SUV sales collapsed at the end of the 1990s, forcing domestic car companies to retrench going into the new decade. However, the SUV market collapsed around 2004-2005.

It’s a minor point, but when it’s the peg of the article you’re writing, maybe you should be a little more accurate.

(Note: now that Chrysler has helped drag down the Germany company that bought it, I have fewer issues about buying one.)

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Bizspeak

I read a lot of financial earnings statements at my job. I learned early on that “pro forma” and “adjusted” numbers, intended to give a true reflection of a company’s performance, are usually crap, and that when a company takes a different “extraordinary charge” each quarter, then they’re not so extraordinary, and the company is just fudging its accounting.

So it’s in that vein that I present to you this morning’s earnings statement by Sanofi-Aventis, “In a Difficult Environment, Another Year of Growth in Adjusted EPS Excluding Selected Items”

In order to give a better representation of its underlying economic performance, the group has decided to present and explain an adjusted consolidated income statement for 2006 and the fourth quarter of 2006, and to compare them with an adjusted consolidated income statement for 2005 and the fourth quarter of 2005 respectively.

Which is a bit like saying, “Excluding sectarian violence, our nation-building mission in Iraq is doing well.”

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Quitters Never Win

Last week, I received the dissolution papers for my old publishing company. I waited quite a while before filing to dissolve it. While some of you might suspect it was because I harbored a romantic desire to get back into publishing, it was actually because I was scared that I would file something wrong. Essentially, it was like that dream where you’re taking the SATs but you haven’t prepared, and you’re naked, and you’re talking to a snake who’s wearing a vest, and —

But I’ve said too much.

Anyway, the company is officially dissolved, which leaves me very relieved. There were a variety of reasons I failed (or, “was not capable of succeeding”) in the literary publishing business, some of which I beat myself up over, and others of which were utterly beyond my control.

Which brings me to Dave Eggers. Last I week, I found a neat article in Forbes about Eggers’ work as a publisher. Now I didn’t get far when I tried reading Eggers’ blockbuster book, A Heartbreaking Work of Staggering Genius, and I made some pretty savage remarks about the book to various friends and acquaintances, but maybe I’ve just got an aesthetic blind spot.

Or maybe not. It’s not germane to this rant. Regardless of the book’s merits, it sold a bazillion copies and made a bunch of money for the author. Admirably, he put some of it into worthwhile causes, including learning centers for kids. He’s also continued his quirky literary mag, McSweeney’s, and built up an independent publishing company.

Since it’s in Forbes, the article discusses some of the business practices of Eggers as a publisher. In particular, it explores how his early failure with Might led to a different business model with McSweeney’s:

When he began, Eggers was no stranger to traditional publishing. He’d co-founded the influential but short-lived Gen-X magazine Might in the mid-1990s, which taught him that dependence on advertising is a road to frustration. With Might, he says, it “seemed crazy that an advertiser–or a 22-year-old media planner–could determine whether or not your magazine had merit, how many pages you could print or whether (in the end) you existed at all.”

Might folded in 1997, and Eggers embarked on a different path a year later. With McSweeney’s, Eggers chose to start a much smaller publication, with a modest distribution and a very high cover price (between $22 and $24 per issue). He managed to win a readership without having to play the advertising game.

“We were determined to rely only on the support of readers. We grew only in relation to what readers would support,” Eggers says.

We learn that McSweeney’s grew among independent bookstores before reaching major distribution:

McSweeney’s Quarterly–which now prints 20,000 copies an issue and remains the flagship money-maker for the company–is now distributed by San Francisco-based Publishers Group West, which puts McSweeney’s products on the shelves of online and chain retailers as well as independents.

And this is where I pulled up short. I scrolled back to the top of the article and checked the dateline: Dec. 1, 2006. Unfortunately, this article about the growth of McSweeney’s Publishing came out four weeks before its distributor, Publishers Group West, went bankrupt.

According to this article in the San Francisco Chronicle, McSweeney’s was left $600,000 in the hole by this turn of events, most of that cash intended for a Sudanese refugee charity (Eggers pledged the proceeds of his new book to that cause: like I said, he seems like a good guy).

There are bailout plans from at least two other distributors, promising between 70% and 85% of the money owed to the publishers who choose to participate. But the very fact that this occurred, and was so unforeseen, makes a major point about independent publishing.

See, the article was structured such that Eggers learns from the pitfalls of his first publishing venture, and decides to follow a different path. He gets away from the advertiser-supported world in favor of reader-supported projects. Eventually, this model is so successful that the company seeks larger distribution to reach more readers. Then there are years of success, followed by the cataclysm of PGW’s collapse.

The worst part about this is, McSweeney’s Publishing did nothing wrong. It was a success story, financially and artistically/aesthetically (so I’m told), but the very framework of the business meant that it had to trust a distributor to help promote books to buyers, physically get them to stores, collect payments, handle returns, and a million other things. There’s no way that a publisher can do all that on the scale that Eggers’ company had grown.

Now, please don’t read this as sour grapes on my part. I’m not happy about PGW’s collapse, nor about the hit that McSweeney’s took. I’m hoping that the company bounces back, finds a new, stable distributor, and continues fighting the good fight.

What you should read this as is a lament for how difficult it is to successfully publish books, especially for an independent company. On the tiny scale I operated on, it was silly to keep going (and thanks for never bothering to pay me, Small Press Distributors, you lousy sonsabitches), but it’s a shame when the publishers with a real presence can get struck down by circumstances so utterly out of their control.

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Say hello to Hollywood

Derek Lowe writes about a great article in the February issue of The Scientist. The anonymous author discusses the flaws in the R&D model among major pharma companies and develops an interesting method of fixing them: Go Hollywood!

Big Pharma continues to follow the old studio model, though there are signs that this may be changing. A similar and necessary evolution to what Hollywood underwent in the 1950s may be beginning, with increasingly more drugs being discovered outside Big Pharma, presumably because the R&D process elsewhere is more conducive to creativity. Biotechs or small pharma settings tend to be flexible and nonhierarchical, with a tolerance for mistakes and constructive dissent — all characteristics of environments that nurture creativity and innovation. Consequently, the trend towards more drugs being discovered outside Big Pharma is likely to accelerate.

There is a precedent for pharma emulating Hollywood: Pharma’s main preoccupation, the creation of blockbusters, was directly copied from Hollywood. The blockbuster model is really defined by broad and aggressive marketing, though the term is less accurately, if more commonly, used to define revenue thresholds. Hollywood’s blockbuster model was created in 1951, when the term was first applied to the movie Quo Vadis because of its then-huge budget of $7 million and the unprecedented zeal of its promotion.

I know it sounds bizarre, and it may be dry subject matter, but this is a really compelling opinion piece, and I think laymen (like myself) can gain a lot of perspective from it on some of the problems with developing new drugs.

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I’m the agent orange of change agents

This article on BizWeek about the downfall of Wal-Mart ad exec Julie Roehm makes for entertaining reading. And it’s worthwhile to note that advertising people really do talk like this:

Wal-Mart, she says “would rather have had a painkiller [than] taken the vitamin of change.” What has she learned? “The importance of culture. It can’t be underestimated.”

. . .

“We’re probably the edgiest automaker in terms of the things we try. And the times Julie went over the edge have been well documented,” says Jason Vines, [Chrylser’s] chief spokesman. “But we realized you don’t know where the edge is unless you are willing to go over it once in a while.”