A&B Sounds the Death Knell

  It looks like the final nail has been hammered into the A&B Sound coffin. As a consumer I'll miss it, but as a business analyst I'm thinking: Let's hope it stays there.

This retail zombie was a classic story of innovation squandered, really bad M&A, and modern management gone mad.

For years, A&B was the king of music retailing, using innovative thinking to create aggressive pricing regimes, marketing coups such as Boxing Day blowout sales, and forceful turning of traditional music industry mass distribution methodology inside out. At its peak, it was producing $300 million in annual sales, which was a ton back in the day.

But innovation is easily copied, and, as it aged, A&B sat pat on its business model. Eventually it was swamped by competitors with more firepower who out-innovated it.

By the new century, the business was sclerotic and dying. And then along came a medicine aimed at revival – a purchase by a large computer maker. These kind of M&A's happen all the time – bigger company hoping for a turnaround swoops in and takes a chance on a fading business..

But turnarounds depend on knowledge as well as a healthy dose of creativity. There didn't appear to be much in A&B's case. The buyer brought in a squad of managers – theory-heavy MBAs without any experience in music retailing – to implement the turnaround.

Presumably, they ignored industry veterans because they believed the oldsters no longer had the chops.

Bad move. To be effective, theoretical smarts require the leavening power of experience, just as experience needs the fresh, and disturbing, thinking supplied by grads schooled in modern methods.

It's a symbiosis that should be clear to everyone, but rarely is. Instead, you often see eternal, egotistical warring between old and new schools over who's “right.”

When camps compete instead of collaborating, bad things happen. And, sadly, A&B Sound appears to be a case study.

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Successful M&A to Turn Sour?

Left: John Schwarz, CEO Business Objects SAP

When SAP AG swallowed Vancouver's Business Objects last year in a wave of consolidations in the business intelligence space, there was some question of whether the move was a good or bad one for the Vancouver based-business intelligence giant.

More specifically, the big question around Business Objects was whether the $US6.78-billion (at the time) takeover would turn the entrepreneurial-thinking shop into a lumbering elephant that would become a loser in the race to dominate its business category.

But just last month, it seemed the opposite had occurred. Instead of a category loser, Business Objects became the category killer.

Although SAP generally left Business Objects alone to run its own business instead of chewing it up like so much sauerkraut, it also began a massive process to integrate Business Objects' business analysis and reporting software into SAP's huge enterprise reporting and management technology.

Normally, these kind of mergers are fraught with problems and missteps, because buyers often try to impose foreign corporate cultures on the company that was bought, stepping all over worker identities and personal views of themselves.

But, if SAP authorities can be believed, the dual strategies worked. Last month, a Bloomberg report quotes John Schwarz, CEO of the SAP AG Business Objects unit, as saying that Business Objects is “dramatically” gaining market share on rivals who were also bought up during the consolidation wave.

According to Schwartz, a management board member with the Germany-based SAP, the merger and acquisitions route hasn't been as smooth for Business Objects' two biggest rivals, Cognos of Ottawa which was bought by IBM, and Hyperion Solutions Corp, which was bought by Oracle Corp. earlier, have stumbled following their mergers. Oracle gutted the Hyperion product line and IBM hasn't been able to “move the needle” at all with Cognos, he said.

Of course that was before the big market crash and global credit squeeze. SAP is now apparently cutting costs like like a madman, so who knows what that successful M&A will look like a year from now?

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Obama's New Democracy

Can't let an opportunity like the astonishing victory of Barack Obama in the US presidential election pass without plucking a lesson or two from it.

The main one is that – to echo the opening line of Obama's brilliant acceptance speech – if there is anyone who still doubts that technology is changing everything, they've now been schooled in the new realities of the 21st Century.

Obama has already been called America's first Internet President, and not without reason. He elevated the use of social networking tools – viral marketing, blogs, Facebook, Twitter, YouTube, the sexy and celebratory music videos of Obama Girl – to not only accumulate the biggest campaign war chest in history, but also to connect and mobilize dozens, if not hundreds of disparate “communities” that were previously ignored or marginalized by the existing power structure.

In a sense, the Obama team reinvented democracy in America, achieving its original purpose. Democracy is supposed to be about governors listening to the many voices of the people. But for a long time those voices were ignored, and only one – largely that of the traditional power structure – was heard.

No longer. Already the Obama transition team – which embraced open source thinking wholeheartedly by employing 95 people on the Internet arm of its campaign – is beefing up the new media component of the White House communications operation. It wants to keep this new form of democracy active by circumventing the traditional media, eg. newspapers and other information gatekeepers and communicating directly with the people who elected him.

So if a president-elect who changed political campaigning forever has wholesale adopted social media in his organization, isn’t it time corporations do the same?

Surely, Obama's drubbing of the Republican forces through the use of new communications should be a lesson to every company today.

As Obama said so often and effectively, it's time for a change.

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Charity as Self-pleasure

We are rapidly approaching the holiday season - you know, the time of year we're supposed to put our greed aside and focus on generosity (which seems drives more furious spending and consumption that greed could ever hope to do).

But I want to target a particular kind of generosity that's special to this time of year: charitable giving. It's still early in the season, but the calls for donations from variously worthy charities are already ramping up. It appears market downturns hit the charitable sector twice: first by convincing donors that they can't spare any of their income and secondly by reducing the value of the charity's own investments.

And so the corporate world come to the rescue - with a bake sale. Yup, muffins in the lunch room, a couple bucks to a good cause. Don't worry about breaking the diet: it's for the needy. And at the end of these tingle-inspiring activities, an organization of, say, 200 professional people sends off a cheque for, let's say, $5,000. Smiles all around.

But before we break into rampant caroling and hand-holding, let's be serious. The charitable events blitz is clearly just as much about our own fulfillment as it is about any real generosity. Because if we really wanted to help the unfortunate, there's better ways of doing it than shipping off a random cheque to a charity. The most effective way to give is to sign yourself up to a plan and give a set amount each and every month, year in and year out. It's simple too: you can get it automatically deducted from your paycheques or charged to your credit card.

So instead of a $5,000 cheque at Christmastime, let's say each of the 200 employees signed up to give $5 every month (certainly much easier than organizing a bake sale). By the end of the year, total donations would be $12,000, all in easy installments. And because the chosen charity knows the money's coming like clockwork throughout the year, they can use it far more effectively than a lump sum in December. Not only that, but think of how much time would be saved in the office by not having everyone reading mass emails about every piddling raffle draw. Efficiencies abound.

But it'll never happen. And why? People just don't get the warm fuzzies from efficiency (unless you're an engineer, of course).

It's the giving part the equation that matters most to us, and if there's no specific giving event, where's the sense of fulfillment? The heartwarming payback? The whole process is less about helping people and more about emotional masturbation.

Let's put this in business terms: If you're a charity, you'd best keep supporting those cake walks, bingo games and marathons; it's what your customer wants. But if you're an effective, results-driven person with a clear interest in supporting a more just and stable society within which to live, sacrifice your yearly emotional reward and sign yourself up to a giving plan.

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The Cheap Guy Rides Again

In another movie, I wrote a newspaper column called The Cheap Guy , which advocated that we all get off the spending merry-go-round and bring simplicity and frugality into our lives.

This frugality movement had an interesting, almost cult-like, run. We lived – some of us still do – by a few simple truths: Live within your means, avoid major debt, always save 15 per cent of your money, and, when you buy anything, look at value and need, not status or convenience.

But compared to the age of iPod, that was pretty boring stuff. And so in the interim many – individuals and businesses alike – forgot or ignored these truths. They (we?) had to have the bigger house, the better car, the classier office address, the home-run sale, the 200 per cent annual growth rate.

Now of course, we’re moaning and weeping because it’s stopped – and it’s all somebody else’s fault. Governments, stock market maniacs, greedy bankers, stupid customers – take your pick.

Apparently, Hard Times are officially here. The weekend papers have just used up 9,785 trees to insist on it. Heck, a TV station actually ran film of Depression-era bread lines.

This kind of gloom will eventually overwhelm even the most optimistic. I expect soup kitchens will open in your neighbourhoods any day (probably right next to those places that sell three-dollar coffee).

People will be very afraid for some time. We may just have to revisit and remember those simple truths I mentioned above.

So I’m thinking it’s time the Cheap Guy returned from exile. That doesn’t mean I’ll be standing on street corners in a hair shirt screaming that the end is nigh. But I believe the words frugal and simple should re-enter the general business lexicon.

If you’ve managed to remain frugal amidst the buy-buy hype, I’d like to hear how you did it.

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