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    Published on: December 3, 2013

    by Michael Sansolo

    There’s a simple reason why we frequently talk about sports (almost as much as we talk about movies) here on MNB, and it goes well beyond the activities Kevin and I enjoy. In many ways, the finite drama of athletic competition provides endless opportunities to distill business lessons on an almost non-stop basis.

    But this past week may have surpassed all of that with one of the most shocking endings ever to a college football game. First my apologies for non-sports fans, but hang with the details because the management lessons in this story are worth knowing.

    And second, my apologies to any University of Alabama fans who knew this was coming; Auburn’s stunning victory over your beloved Crimson Tide deserves to be considered.

    What happened was this: with little time left in the game, Auburn tied the score against an Alabama team that is bordering on historic levels of achievement. Alabama entered the game seemingly on its way to becoming the first team to ever win three consecutive national football championships. There’s little chance that will happen now.

    With one second left in the game, Alabama’s highly successful coach Nick Saban decided to have an untried player attempt a 57-yard field goal—an extremely long distance for a football player at any level. His thinking was probably that there was little risk in the play and the reward would be avoiding the highly entertaining, yet nerve wracking overtime. Not surprisingly, the kick failed.

    Everything after that was surprising, but not unplanned. The Auburn coach positioned a player deep in the end zone on the theory that the long kick would be short. The player caught the kick and proceeded to run untouched for 108 yards, scoring a touchdown and giving Auburn the victory.

    In hindsight it’s easy to see management lessons galore. Saban took a chance. That’s admirable, but he took it knowing his odds of success were incredibly long. His kicker had no history of making such a long field goal and his team is so talented that he had good reason to believe Alabama would prevail in overtime. Chances are always worth taking, but risks and rewards have to be considered. It’s doubtful Saban will ever do this again.

    Worse yet, he seemingly failed to anticipate an alternative outcome. His players were the conventional blockers for the kick, meaning there was no one on the field with the speed to match the kick returner. If you watch the replay you can see how easily the Auburn player sped by the Alabama team. Outcomes, even unpleasant ones, always have to be part of your thinking.

    Auburn’s coach in contrast found a way to turn the odds in his favor, by playing to the likelihood of a short kick. He couldn’t possibly anticipate the stunning run that followed, but he created the potential for that scenario. In truth, even a calculated gamble will fail most of the time, but with creativity and luck the odds can shift. Even an underdog can sense those moments and find a way.

    Certainly there are many more lessons from this one play. Already Saban has been criticized for blaming some of his players, rather than taking the blame himself for a very flawed strategy. Execution always trumps strategy, but when the strategy was so poor it’s hardly time for shifting blame.

    There’s one last lesson that we talk about frequently here on MNB and it ties to Monday’s story on Amazon’s futuristic delivery plans, including the potential use of drones to handle the last mile. Many of you probably read that or saw the 60 Minutes report and dismissed it out of hand.

    Remember again our favorite Star Trek philosophy that “things are impossible until they are not.” It happens in football games, supermarket competition and might one day be the reason there are small drones zipping down your street. Just because something is unlikely doesn’t mean it won’t happen.

    The impossible keeps happening.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: December 3, 2013

    by Kevin Coupe

    On the face of it, this is not a business story.

    Except that it is. This story has enormous implications for business, both in terms of the consumer class that will buy things and the worker class that will provide products and services. And, not to overstate the case, this is clearly a national security issue with implications for each and every one of us as citizens.

    The Wall Street Journal this morning reports that the 2012 Program for International Student Assessment (PISA) shows that teenagers in the US "slipped from 25th to 31st in math since 2009; from 20th to 24th in science; and from 11th to 21st in reading, according to the National Center for Education Statistics, which gathers and analyzes the data in the US."

    As important as this story is - and it would be a critical mistake to ignore assessment results that show a US decline, compared to improvements, often dramatic, in places like Poland, Ireland, Shanghai, Singapore and Japan - it also is important to figure out what the problems are and address them, as opposed to reacting in knee-jerk fashion. To paraphrase the line from Black Rain, we need to fix the problem, not fix the blame. (A reading of relevant stories this morning suggests that everybody is covering their own rear ends in assessing the causes for the new rankings.)

    To begin with, the US is a big and diverse country, with very different regional approaches to education. Even the new ratings demonstrate that - Massachusetts and Connecticut students boast better-than-average rankings, while Florida students do not. And yet, you even have to be careful about this sort of generalization, since there almost certainly are school districts in Florida where students would do better than certain districts in Massachusetts.

    At the same time, it is not like the US has ignored the issue, with programs like "Leave No Child Behind" and "Race to the Top." Of course, some would argue that such programs emphasize "teaching to the test," as opposed to actual education … though these test results would suggest that even these conclusions are faulty.

    You also cannot separate this story, it seems to me, from the other stories currently being written about income disparity in America. The simple fact is that if a family is having a hard time generating enough income to feed and clothe its members, educational expenses may not be a high priority. (On the other hand, for a lot of low income families, education is something to be cherished and embraced, and there is an enormous emphasis placed on the importance of learning, because parents know that being smart is the fastest way out poverty. And there are lots of upper middle class and upper class families where parents think that hockey practice and skiing vacations are more important than going to class.)

    The bottom line is that none of this is simple, and it is all connected … which means that business people have to start considering what their role ought to be in addressing these issues. Because if they are not addressed in a mature, sophisticated and comprehensive fashion, the notion of American exceptionalism may be relegated to history books, under a chapter entitled "Myths."

    Because exceptionalism is not a birthright. It is something to be achieved every day. Right now, the global student rankings suggest that we're moving in the wrong direction.

    It is an Eye-Opener.
    KC's View:

    Published on: December 3, 2013

    USA Today writes that initial reports suggest that Cyber Monday - the online version of Black Friday - was an enormous success: "The numbers are mind-boggling. As of 6 p.m. Eastern time, overall sales were up 17.5% on Cyber Monday compared with last year, says IBM Digital Analytics Benchmark. Another e-commerce research company, Custora Pulse, found online sales up almost 19%. The numbers may shift even higher as people continue to shop through the evening."

    Bloomberg reports that "retailers catering to smartphone and tablet users benefited the most, with mobile traffic accounting for 30 percent of the total site visits, an increase of more than 58 percent from last year, IBM said.

    "The results deliver another blow to physical stores, which just suffered the first spending decline on a Black Friday weekend since 2009. Web sales this holiday season are projected to climb as much as 15 percent to $82 billion, more than three times faster than total retail growth of 3.9 percent to $602.1 billion, the said. Mobile devices drove 16 percent of online purchases, IBM said."

    And, Bloomberg adds: "Retailers like Seattle-based Amazon are chasing e-commerce holiday revenue that Forrester (FORR) Research Inc. projects to rise 15 percent to $78.7 billion. Online spending increased 15 percent to a record $1.2 billion on Black Friday, according to research by ComScore Inc."
    KC's View:
    What's really interesting about this is that Cyber Monday was sort of created for a time when most people only had high-speed internet access at work, so that's why they'd do their online shopping on Monday. These days, almost everybody has access to broadband, which changes everything … and yet the Cyber Monday marketing machine still seems to be working.

    Though it isn;t just Cyber Monday on which people are shopping online … the National Retail federation (NRF) says that 44 percent of Black Friday sales actually took place online.

    Yikes.

    Published on: December 3, 2013

    Less than a day after Amazon CEO Jeff Bezos said that his company is investing in drone technology that would allow it to take to the skies with octocopters that would deliver its packages, the US Supreme Court brought the company back to earth by refusing to hear the company's challenge to a New York State law that would force it to collect sales taxes for online purchases there.

    According to the Los Angeles Times, "New York's 2008 statute requires out-of-state Internet retailers to collect sales taxes if they used affiliates in the state to direct business to their websites, such as a museum website that directed people to Amazon to buy books.

    "The law treated these Web affiliates as though they were a sales force within the state. The U.S. Constitution always has allowed states to collect taxes from out-of-state companies if they have employees or offices — a nexus — physically located within a state.

    "Amazon and Overstock.com Inc. appealed to the Supreme Court, arguing that the New York law was unconstitutional.

    "The companies cited a 1992 Supreme Court decision involving mail-order catalogs. In that case, the court said states could collect sales taxes from retailers only when they have a physical presence in the state."

    However, in refusing to hear the case, the Supreme Court has rejected that reasoning, a move that is likely to increase the introduction of similar legislation by other states, as well as increase the pressure on the US Congress to consider a national solution to the internet sales tax issue.
    KC's View:
    This may be a setback for Amazon, which would prefer a national framework. But in the end, the company probably will be better served by having lots of fulfillment centers that can cut down on shipping times … which will compensate for the sales tax charges.

    Published on: December 3, 2013

    The Business Journal reports that Roundy's will buy 11 of Safeway's Dominick's stores in Chicago, converting them to its Mariano's Fresh Market format. The deal will cost Roundy's $36 million in cash and lease assumptions. Safeway announce earlier this year that it would close and/or sell its Dominick's stores after years of losses.

    Bob Mariano, chairman/president/CEO of Roundy's, said that in addition to the 11 Dominick's stores, his company also will build five new stores in Chicago, which will bring its presence there to 29 stores in total. Mariano has said that he expects to eventually have at least 45-50 stores in Chicago.

    “We are excited about the opportunity to rapidly expand in the Chicago market,” Mariano said, noting that it will take two to three years to remodel the Dominick's units and bring them up to standards.

    The Chicago Tribune writes that "Mariano started behind the deli counter at Dominick's as a high school student in 1968, working his way up to president of the chain. He left after Dominick’s was sold to Safeway in 1998, and started his eponymous chain with Roundy’s more than a decade later."
    KC's View:
    I think it is fair to say that the Dominick's customers who now will have access to Mariano's are getting an upgrade … because the Mariano's stores are some of the nicest stores out there. A lot of folks question whether they can possibly maintain the low price points they currently have, suggesting that it is playing a market share game at the moment. But the fact is, these are very nice stores.

    Published on: December 3, 2013

    The Wall Street Journal reports that Amazon has set up a pop-up physical store in San Francisco's Westfield Centre mall, using the location to sample and sell Kindle tablet computers and e-readers, as well as covers and power adaptors.

    Amazon said that the store is not part of a broader move into bricks-and-mortar retailing, but rather a temporary tactic that is part of a broader marketing campaign.
    KC's View:
    This makes all sorts of sense. Low investment, but potentially a big return. I'd love to go to a pop up store and test a bunch of Kindles.

    Published on: December 3, 2013

    Forbes reports that Eataly Chicago opened yesterday, a 63,000 square foot sequel to the highly successful emporium/restaurant in New York City.

    The story notes that "Eataly’s mission is to provide shoppers with the knowledge and components to recreate Eataly’s restaurant food at home," and Mario Batali, the chef and a partner in Eataly, says, “This is not home meal replacement. We’re trying to remove the obstacles to cooking."
    KC's View:

    Published on: December 3, 2013

    In Massachusetts, the Herald News reports that Portsmouth, RI-based Clements Marketplace, a single-store independent, is doubling its size with the acquisition of Lees Market in Westport, Massachusetts.

    Terms of the deal have not been disclosed. Clements only is buying the supermarket part of the store; Albert E. Lees III said his company will keep the wine and liquor store that is part of the unit.

    The story notes that the two companies have some history together: Don Clement worked at Lees Market as a general manager for a decade, and when Lees decided to sell, it was to another independent as opposed to a chain.
    KC's View:
    At this moment, many of you are wondering why I've chosen to report on what seems like an insignificant transaction involving two relatively unknown companies.

    I have a reason.

    Lees Market was started in 1949 by Lees' father and grandfather. His dad, Al Lees Jr., was a well-known figure within the US independent grocery sector for many years - iconoclastic, smart, and intensely loyal to his community, customers and employees. He also was my friend; I've often written of a dinner that I had once at the Culinary Institute of America (CIA) in Napa, with Lees and his good friend, fellow independent Marv Imus, in which they frankly and funnily addressed the challenges facing the independent sector. (I called it "Dining With Dinosaurs" when I wrote the piece for a magazine. Typically, they loved the characterization. If you're interested, you can read a reprint of the piece here.)

    Here's one of the enduring memories of my career. When Al Lees Jr. died in 2004, I went to his funeral. Afterwards, the procession moved to a cemetery about two miles away. In doing so, it passed the store and out front, dozens of employees stood, holding hands and a banner that said, in essence, Thank You, Mr. Lees. We Love You & Miss You. But You Will Live On Through Us.

    I'm sad that the Lees family is getting out of the supermarket business. But I'm glad I got to know the family, and glad that a like-minded independent is taking over the store.

    Published on: December 3, 2013

    • The Associated Press reports that "fast-food workers in about 100 cities will walk off the job this Thursday, organizers say, which would mark the largest effort yet in a push for higher pay. The actions would build on a campaign that began about a year ago to call attention to the difficulties of living on the federal minimum wage of $7.25 an hour.

    "Protesters are calling for pay of $15 an hour, although many see the figure as a rallying point rather than a near-term possibility."


    • Tops Friendly Markets said yesterday that the previously announced acquisition of Tops Holding II from a private equity group by a group of senior managers of the company led by Tops president/CEO, Frank Curci, closed on December 1st.   Terms of the deal have not been disclosed.
    KC's View:

    Published on: December 3, 2013

    MNB doesn't generally turn over this section to readers, but in this case, I'll make an exception.

    The email came from Laurie Gethin, director of education at the Food Marketing Institute (FMI) and an old friend, who told me that her dad, Bruce Gethin, passed away suddenly over the Thanksgiving weekend. He was 81.

    Laurie wrote:

    Bruce Gethin spent his career in the supermarket industry, first in a series of warehouse positions at The Kroger Co., then for two decades at Red Owl Stores (which was ultimately purchased by Supervalu), culminating in the position of Senior VP of Warehousing and Distribution.  Following that he was a consultant in the industry, working with Gagnon and Associates (a warehouse efficiency firm) and Food Plant Engineering.  He was involved for years in FMI's Distribution Conference, including serving on the committee and chairing the conference.

    He had been retired for almost 20 years, but some old-timers may still remember him. And of course, he was my dad, and is irreplaceable.  I remember how proud and pleased he was 20 years ago when I got the job at FMI - a place I had known about for years but never dreamed of working for.  My dad was a wonderful man and I will miss him terribly.


    I'm glad MNB could serve as a place where he is remembered.
    KC's View:

    Published on: December 3, 2013

    …will return.
    KC's View:

    Published on: December 3, 2013

    In Monday Night Football, the Seattle Seahawks defeated the New Orleans Saints 34-7.
    KC's View: