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    Published on: June 24, 2014

    by Michael Sansolo

    Imagine you had an acclaimed business with a solidly protected competitive advantage. What are the chances you’d give it all away?

    The answer is “not very likely,” but that’s what makes the news from Tesla Motors so compelling. No matter what business you are in you need consider this news because Tesla has done something so counter-intuitive to accepted business thinking that it may be beyond brilliant.

    As reported last week in the San Jose Mercury-News, Tesla unilaterally surrendered all of its electric car patents. And let’s be clear: these were valuable patents. Tesla, if you haven’t noticed has drawn raves throughout the automotive world up to and including Consumer Reports and Motor Trend.

    So the patents for Tesla’s technology clearly have some great value and now you can find them on the Internet because Elon Musk, Tesla’s CEO, sees the picture differently. Rather than thinking outside the box, he’s eliminating the box.

    As Musk explained in a blog on Tesla’s site, the release of the patents could change the way cars are made. Essentially Musk is giving up an advantage in the small market of electric powered cars in hopes that Tesla’s patents will (pardon the puns) fuel a surge in electric car manufacturing.

    In his blog Musk wrote, "If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property land mines behind us to inhibit others, we are acting in a manner contrary to that goal."

    Of course, as a number of Silicon Valley experts explained to the Mercury-News, Tesla’s radical move could prove very profitable especially if electric cars start seizing a larger share of the world’s two-billion-strong automotive fleet. The benefits could range from a stunning jump in the number of electric charging stations to opening up a huge market for Tesla’s battery production.

    It’s not like there aren’t precedents, especially in Silicon Valley where Tesla is based. Think about the growth of the Android phone operating system, which Google allowed to be openly sourced.

    There’s no way of knowing in 2014 how this move might play out in 10 or 20 years. It could be a disaster for Tesla or it might change the very cars we all buy. Yet it still raises issues and ideas for any industry and any business on how to change the very rules of business.

    It calls into question a topic that was long discussed inside the food industry for 20 years by leaders like Danny Wegman and Bill Grize (then CEO of Ahold US). That is the recognition that just as there are places where businesses compete, there are many others where cooperation is far better.

    That thinking has fueled constant improvements in the industry from scanning to more standardized coupon designs. Could it possibly extend to changing shoppers’ attitudes on preparing meals and certainly on better understanding of food safety?

    In other words, at times we really are all bigger together than we are on our own. Tesla’s big idea is about to provide an incredible case study. Don’t ignore it.

    Michael Sansolo can be reached via email at . 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: June 24, 2014

    by Kevin Coupe

    Last week, the issue of nutritional supplements and the degree to which they are not regulated by the US government got a lot of attention when a Senate subcommittee called Dr. Mehmet C. Oz - known to TV viewers of his daytime talk show simply as 'Dr. Oz' - to testify about weight loss products he had promoted on his show.

    Weight loss products, it should be noted, that did not work and had no basis in science.

    The ultimate question was whether Oz - who is a cardiac surgeon, a professor of surgery at Columbia University, and who holds varying degrees from Harvard, the Wharton School, and the University of Pennsylvania School of Medicine - had fallen into a kind of quackery, using his celebrity to sell "magic beans" to an unsuspecting and gullible audience.

    Well, John Oliver, host of HBO's "Last Week Tonight," had an answer to that question. It is both highly perceptive and enormously funny … and you can watch it at left.

    Warning. The language in this video is, to say the least, occasionally adult, explicit and vivid. If you are watching it in an office setting, you may want to use headphones. If you are watching it at home, you don't want little kids to be anywhere nearby. You have been warned.

    It is typical of Oliver's approach when he says, "Name me one case where a man named Oz claimed mystical powers and led people astray."


    KC's View:

    Published on: June 24, 2014

    The Market Basket board of directors yesterday voted to fire CEO Arthur T. Demoulas, as well as director of operations Bill Marsden and vice president of grocery sales and merchandising Joe Rockwell, effective immediately. The move prompted a neat-instant call by employees to rally at one of the company's stores in support of their deposed leader.

    In a statement, the board said, "“Arthur T. Demoulas, who was not re-elected president and will not retain any management responsibilities moving forward, remains a shareholder of the company … The board believes this new management team will enable Market Basket to maximize its potential and pave the way for continued success in the future."

    The Boston Globewrites that "the leadership of Arthur T. Demoulas has been at the center of a simmering family rivalry that has boiled over in recent years. Having gained control of the company’s board, Demoulas’s similarly-named cousin Arthur S. Demoulas has led a fight to oust the CEO due to a conflict over the company’s finances."

    The fight over finances is characterized differently by the two sides. The Arthur S. Demoulas faction argues that Arthur T. Demoulas spends money irresponsibly and refuses to take direction from the board. The Arthur T. Demoulas side maintains that his cousin is fueled by greed, only interested in raising prices, cutting employee compensation, and threatening the formula that has built the company.

    According to the Boston Herald, "The firings brought the long-running family feud to another head between two factions of the Demoulas family — owners of the 72-store Tewksbury-based chain — after a contentious year. Lawsuits, protests, petitions, stalled store openings and back-and-forth allegations between rival board members and management have marked the transition since the board had a shift in control last June in favor of the CEO’s rival cousin, Arthur S. Demoulas."'

    The board named Felicia Thornton and James Gooch to be Market Basket’s chief operating officer and chief administrative officer, respectively, and co-CEOs. The Herald notes that both had been serving as consultants to the company, and that "Thornton most recently served as CEO of Knowledge Universe U.S., a Portland, Ore., early childhood education provider. Her supermarket experience includes prior posts at Albertsons and Kroger. Gooch abruptly stepped down as CEO of the struggling RadioShack Corp. in 2012. He also held financial positions at Kmart Corp. and Sears Holdings."
    KC's View:
    While it is hard, from the outside, to really know what goes on inside a family, not to mention appreciate the political dynamics of a company's board of directors, I do think it is fair to say that this is one hell of a freakin' mess.

    It is hard to know if the two arguments are being accurately characterized, but I do know this - that Market Basket is considered in the Boston market to be an effective, even dangerous competitor, and that if this is the result of a management philosophy that spends too much on labor and keeps margins low, then that ought to be good enough for anyone. Market Basket is said to be a profitable company, and it sounds to me like whatever else may be going on, there is some level of greed at work here.

    They could easily kill the golden goose if they lose the support of shoppers and employees, which it sounds like they could easily do. And once that goes, it'll be near impossible to get it back.

    Published on: June 24, 2014

    Delhaize Group yesterday named Kevin Holt, former president of retail operations at Supervalu, to be its new CEO for Delhaize America.

    Holt succeeds Roland Smith, who left the company last September after just a year as the US CEO, reportedly because he did not get the top job when Muller was named to replace the retiring Pierre-Olivier Beckers.

    According to the announcement, Holt comes to Delhaize "with more than 20 years of retail leadership experience in operations, strategy and information technology. Prior to Supervalu, he served for three years with Sears Holding Company and 14 years with Meijer, working in various leadership positions including Executive Vice President of Retail Operations and
    Senior Vice President of Information Technology/Services and Strategic Planning."

    "I am very pleased to have Kevin join our team", said Frans Muller, president/CEO of Delhaize Group. "Kevin brings both deep industry experience as well as a comprehensive customer orientation that will help our U.S. operations to continue to implement our existing strategy and build on the strong momentum of recent quarters."
    KC's View:
    Don't know Holt personally, but I hope he helps to provide Delhaize America with the stability that it needs to make progress on the sales and profit sides. I know a lot of really good people who work there, and work very hard, and they deserve to have things go well for them.

    Published on: June 24, 2014

    The Wall Street Journal reports that Smart & Final Stores Inc. has filed for an initial public offering (IPO) that it hopes will raise $100 million that it can use to repay debt and fund future growth.

    The company, which "has 195 Smart & Final stores in California, Arizona and Nevada, targeting both consumers and business customers, and 52 Cash & Carry locations in Western states focused on businesses," sells groceries, cooking equipment and janitorial products, often in warehouse sizes. It does not, however, require shoppers to be members.

    Smart & FInal says that growth will focus on its larger Smart Final Extra format, which it says generates "significant increases in comparable-store sales and gross margin."
    KC's View:
    I've always believed that Smart & Final is an intriguing format, and it'll be interesting to see if the money generated by an IPO goes to help the company move beyond the western territories it has generally kept to.

    Published on: June 24, 2014

    The Associated Press reports that Staples, conscious of the degree to which it is doing battle for its very existence with online alternatives, plans to build on its current price-matching policy by giving shoppers "10 percent off the difference between its price and the competitor's price for an identical product. The offer starts on June 29 and will end the first week of September."

    That's in addition to a series of weekly deals what what it calls "everyday low prices" throughout the store.

    According to the AP, "The moves by Staples, slated to be announced Tuesday, underscore how the office supplies retailer needs to step up the price game for what's expected to be a fiercely competitive back-to-school season, the second most important sales period behind the winter holidays. Late last year, Staples said it would match prices of for purchases made both online and in store. Prior to last year's steps, Staples honored prices with items sold on"

    Beyond that, the story notes, Staples is feeling pressure to compete with Walmart's new Savings Catcher program, which allows customers to go to Walmart's website and compare prices on some 80,000 products with those of competitors. If Savings Catcher finds lower prices at a competitor, the shopper gets the difference in the form of money placed on a Walmart gift card.
    KC's View:
    This just shows the degree to which retailers have to go to retain business that used to flow quite naturally through their doors. I can remember how for years the first stop we'd make when school began was to the local Staples for all the various school supplies the kids needed. It was just natural. But not so much anymore … and Staples now has to work hard just to not lose business, much less gain any sort of momentum.

    Published on: June 24, 2014

    The Chicago Tribune reports that Roundy's Supermarkets CEO Robert Mariano is considering expanding his upmarket, fresh food-driven Mariano's format beyond Chicago, where there currently are 24 locations and 10 more planned by the end of next year.

    "Other markets are on the horizon, yes," Mariano said in a speech at the City Club of Chicago. “Where, we haven’t said."

    The story notes that "in Chicago’s packed supermarket scene, Mariano’s seeks to distinguish itself with upscale offerings like oyster bars, vegan grills, gelato and patios where shoppers can dine on dishes cooked in the store. Bob Mariano has said that his strategy is to use these amenities to draw customers into the store, where they will buy the rest of their groceries even though other stores might have cheaper prices.

    "In late 2013, the chain boosted its expansion plans when it bought 11 former Dominick’s locations. Last month, the chain said it had hired 8,500 people this year and was on its way to hiring 10,000 people by the end of the year."
    KC's View:
    I've been impressed with every Mariano's I've visited … in many ways, it seems like the Wegmans or the Price Chopper of the midwest. No reason to think that the format can't spread its wings and fly to other appropriate markets.

    Except…I think it is fair to say that both Wegmans and Price Chopper have been judicious about growth. Mariano's management has to be careful not to breathe their own exhaust, lest they grow too fast to deliver on the promises it is making.

    Published on: June 24, 2014

    The Wall Street Journal reports that Amazon appears to be close to resolving its pricing dispute with Warner Bros., and has begun once again accepting preorders for DVDs soon to be released by the company, including "The Lego Movie," "300: Rise of an Empire," "Winter's Tale" and "Transcendence."

    Neither side has commented on an impending resolution of the dispute, in which Amazon has been accused of being heavy-handed in wielding its power.

    Meanwhile, in a similar dispute with publisher Hachette, there seems to be no agreement on the horizon.

    The Bookseller reports that "Amazon is demanding Hachette Book Group pay for services including pre-order buttons, personalised recommendations and a dedicated employee at the retailer for Hachette books, it has been reported. The two companies are currently negotiating new terms, and their stand off, which first emerged nearly two months ago, has resulted in delayed delivery of some HBG titles, while the pre-order button was removed from others."
    KC's View:

    Published on: June 24, 2014

    Bloomberg Businessweek reports that Walmart "named 13 executives to its U.S. merchandising operations, marking the latest shake-up since Chief Executive Officer Doug McMillon took the reins in February." Seven of the 13 execs are women.

    According to the story, "As part of the changes, Scott Huff will be promoted to executive vice president overseeing merchandising operations for the U.S., according to a company memo sent by U.S. Chief Merchandising Officer Duncan Mac Naughton. Huff has been at Wal-Mart since 1994, when he started as an intern … In the merchandising changes, Michelle Gloeckler will become executive vice president of consumables and U.S. manufacturing. She has worked at Wal-Mart for five years, following more than two decades at Hershey Co. John Aden, who had run merchandise services, was named executive vice president of sales innovation for the U.S."
    KC's View:

    Published on: June 24, 2014

    In the UK, the Independent reports that former Tesco CEO Lord Ian MacLaurin is urging company shareholders to give current CEO Philip Clarke more time to turn around the troubled retailer's fortunes.

    The comments come about a year after MacLaurin blasted his immediate successor Sir Terry Leahy, accusing him of leaving a "sad legacy" that has hurt the company's sales and profitability. MacLaurin singled out the Leahy-led Fresh & Easy Neighborhood Markets adventure in the US as "disastrous." At the company's annual shareholders meeting, MacLaurin said: "I think you would probably agree with me that when you judge the performance of a chief executive, you not only judge the performance of his day-to-day operation, but you also have to judge his legacy and I think we're all very sad to see the legacy Sir Terry Leahy has left."

    In his new comments, coming just before another shareholders meeting at which Clarke is expected to be severely roasted by stockholders, MacLaurin urged patience … and took another shot at Leahy.

    MacLaurin said, "I think Philip is under more pressure this year but it will take at least three years to turn Tesco around. The City is very short term and he needs some time to do it. I stand by what I said last year: the judgment of a good chief executive, and I’m not just talking about Terry, is how he leaves it for his successor. If you’re a good chief executive, you have to leave it in good shape, otherwise the incumbent has an uphill task.

    “When Terry left Tesco he had left a US business that was wasting huge amounts of money and an underinvested UK business. Of course, it is going to be tough for Philip. I know from experience how long it takes to turn the business around.”

    The irony, of course, is that the Fresh & Easy debacle was run by Tim Mason, MacLaurin's son-in-law.
    KC's View:

    Published on: June 24, 2014

    • Starbucks has announced that it plans to begin selling a line of handcrafted sodas - dubbed Fizzio, coming in three flavors (spiced root beer, ginger ale and lemon ale) and made without artificial flavors, preservatives or high-fructose corn syrup. The rollout will begin with 3,500 Starbucks stores in the southern U.S. and Hawaii, and is designed, along with a new line of sandwiches, to help make Starbucks a stronger lunchtime option for consumers.

    Bloomberg reports that "Nestle’s Institute of Health Sciences, a research arm of the world’s largest food company, is developing tools to analyze and measure people’s levels of dozens of essential nutrients. The goal is to offer supplements tailored to an individual’s needs, possibly through a device not unlike its Nespresso machine -- though that could take many years to develop.

    "The program, code-named 'Iron Man,' is part of the Swiss company’s efforts to treat metabolic, brain and gastrointestinal disorders with new foods and beverages. At Nestle’s health institute, called NIHS, over 110 scientists are working on projects from molecular biomarkers of obesity to discovering links between vitamin and mineral deficiencies and illnesses such as diabetes, cancer and cardiovascular disease."

    Nestle’s research on personalized nutrition could lead to “business propositions that today we cannot imagine,” says Luis Cantarell, who runs the Iron Man initiative.
    KC's View:

    Published on: June 24, 2014

    …will return.
    KC's View: