You would have to be living under a rock not to have heard about the grass roots effort to capture Joseph Kony of the Lord’s Resistance Army in Uganda.  A video posted on You Tube this week went viral, with over 56 Million hits (as of this writing.) In my case, my 15 year old daughter pleaded with me to turn off 60 Minutes to watch it; providing a stunning commentary on our movement to new forms of media.

The video, shot by a little known videographer is being promoted by the advocacy group “Invisible Children” and tells the story of a Ugandan child and others like him, who have been the victims of horrific crimes against humanity.

While the story and cause is compelling, it is the story telling that should capture our attention.  The 30-minute video is presented like a short, part documentary part sensationalism. The themes of children killing their own parents and mutilating others are shocking and captivating.

All marketers should become aware of this medium. The movie blurs the line between amateur videos on You Tube and professionally produced movies. Companies often attempt to tell their story through static documents that lack color and texture.  Those of us who are on the wrong side of aging must recognize that  those who we market to no longer process information in the form of static text. We have been conditioned to view our news, our sports and our marketing offers in multimedia form.  The marketing of the future will include many dimensions, including video, sound, and info-graphics launched online, rated by others and spread through sites that have not even been built yet.  Media will be in constant flux, with new views, tidbits and vignettes wetting our appetite for real time information.

The other thing unique about the video is its call to action; setting a very clear goal to capture Kony in 2012. If you think that this is just another cause being thumped by a set of leftist activists, think again. The U.S. military has dispatched 100 Special Forces “advisors” to Uganda in an attempt to find Kony, and senior U.S. officials are scrambling to harness the populism of the video.

As the video proclaims “Nothing is more powerful than an idea whose time has come.” View it here

A common theme in recent years is the thirst to diversify. Often organizations wish to minimize customer concentration risk, or seek out new markets with less competition.

Competition is a matter of degrees, and one can predict which markets will attract competitors based on the ease by which they can enter or exit. While there are industry specific hurdles to consider in any business, barriers to entry include:*

Economies of Scale- Companies seek out volume or vertical integration in an effort to control raw materials or create a cost advantage.

Capital Requirements- The need for access to heavy equipment, factories, or labor is so expensive to fund that only large competitors enter the fray.

Switching Costs- The cost for customers to switch suppliers becomes too high.  When one takes on a new cell phone contract, the price penalty to switch is punitive. By the end of the contract, when switching costs are low, providers offer incentives to keep customers in their network.

Access to Distribution- Companies such as Coke, Pepsi, Nabisco and Frito Lay control distribution at retail outlets, keeping competitors off the shelf. Once distribution is established, it is relatively easy to expand into new categories such as bottled water and iced tea.

Cost Advantages- In some instances cost advantages have nothing to do with scale, but are a function of strategic alliances or bets that provide cost savings.  During the last run up of fuel prices, Southwest Airlines’ clever hedge only expanded their cost advantage.

Government Policy- Government is unpredictable and is an X factor in many businesses. Government contracts often exclude suppliers who cannot meet or choose not comply with a myriad of requirements from eco standards, to minimum labor rates.

When analyzing which business you should be “in”, it is not enough to consider the current state of competition. How might competitors behave in the future?  Is the market large enough to attract behemoth companies?  How have such companies reacted to price competition in other markets?

Another consideration is the cost of exit. Companies who provide parts may have legacy costs that may last many years and erode profits. There are many variables to consider in any new endeavor, and diversification offers both opportunities and a myriad of risks.

*Adapted from Competitive Strategy by Michael Porter

The concept of a business cycle is something of a misnomer, as every company operates with an economic cycle, monetary cycle, industry cycle and company life cycle. The trajectory of these cycles, as well external forces and factors combine to provide a unique set of characteristics for every industry at any given time.

The maturity of an industry shapes its acceptance of innovation[i]:

Phase 1 Innovation- occurs when a new entrant exploits a white space.  When Under Armor burst on the scene it focused on a niche market; undergarments for football players. The brand was rugged and authentic.  As Under Armor gained distribution and awareness, it spread to new segments including baseball, tennis and golf and gained distribution in national chains such as Dick’s Sporting Goods.  The incumbent (Nike) ignored Under Armor deeming the niche as too small and the entrant as a non-threat.  Big mistake.

Phase 1 innovation is high risk, high profit

Phase 2 Innovation- occurs when a market is maturing but not saturated, and an incumbent or entrant provides new features or benefits that improve utility.  Frozen yogurt has been popular for a decade, especially in warmer climates such as California where healthier lifestyles are emphasized.

It was not until roughly 2010 that the market moved towards self-serve yogurt shops (fro-yo as the industry is called). Entrants such as Menchies provided a disruption in the form of a better delivery system (consumption is higher, and labor is lower).  The product offering itself hardly changed at all.

Phase 2 innovation tends to be moderate risk, moderate profit

Phase 3 Innovation- occurs when an industry is approaching saturation. Generally, a well funded competitor will invest heavily in supporting the status quo, making subtle changes in terms of efficiencies and distribution. At this stage, the product is commoditized and prices erode sharply.

When McDonalds began offering its McCafe coffee line in an effort to combat Starbucks, it did not offer new varieties of coffees or espresso. McDonalds leveraged its massive scale and distribution to undercut prices.  In this case, sameness plays to their strategic advantage. McDonalds lacked motivation to offer a “leap of innovation” in terms of new products.

Phase 3 Innovation is lower risk and lower profit

As an industry matures, the motivation of its participants varies based on their ambition for growth, profit or strategic position.  Time your innovations wisely.

[i] Adapted from Seeing What’s Next by Christensen, Anthony and Roth Harvard Business School Press 2004

I will ask that you all oblige me this week as I am going a bit off script with a post that is highly personal.

I live in Santa Clarita, a sleepy suburb of Los Angeles. My friends in the city mock our little enclave of 175,000, because it seems so remote, and vanilla. While our little community may be light on clubs and tattoo parlors, it is rich in something else…soul.

Last week we learned we lost one of our own;  U.S. Army Spc. Rudy A. Costa was killed in Afghanistan. He was 19.  He is not the first from our village to give his life to his country. And like the other times, the community celebrated his life. 5,000 lined a packed funeral procession, children adorning hand written signs and holding miniature American flags.  800 packed into a little church with hundreds more watching on televisions outside. Stoic soldiers from past wars openly wept.

I want to live in a place where I know my neighbors, and they know me. The business community here is so tight knit that you can’t go to a restaurant or a business function and not see droves of people you know. That is the way it should be.

There are times that we need to take a minute and remember that our business colleagues and our employees all want to be part of something bigger than they are. Last week I took note that some employers in town sent their employees to honor their lost hero. Those are some business people with perspective.

We are also reminded that there are things we should believe in above and beyond making a profit. We need to send a message to others that we value our community, and we need to make investments within it.

Unknown to most Americans, professional golfer Ryo Ishikawa is also 19, not even old enough to order a cocktail. But this young man of uncommon maturity understands his community.  In an unprecedented gesture, he has pledged his entire earnings for 2011 to the relief effort in his native country, Japan…every nickel!

I am going to be rooting for Ryo this year (I don’t even know how to pronounce that, but I am going to learn). And of course I will be thinking about Rudy Costa and his family. Support your community. You will get your investment back in spades.

The protesters marched on the highway, despondent about rapid inflation.  They shut down the thoroughfare for hours. 1000 miles away, protesters flocked the capital and drove the legislators to safe haven in neighboring territories.

These were fundamentalists in Tunisia or Libya; they were students in California and state workers in Wisconsin.

The impetus for civil unrest in the Middle East is that of the “lost generation” of unemployed misdirected youth.  In some regions of the world, unemployment is 40% or more.  In the U.S. , it is not just the young that face underemployment but generations of workers whose skills have become irrelevant.  The U.S. has the western world’s widest income distribution. The Top 10% make 6 times that of the bottom 10%, compared to 4.2 X for Great Britain and 2.8 X for Sweden[i].  The labor market has hollowed, as wages earned by shop floor workers have actually declined (when adjusted for inflation) over the last two decades.

The labor imbalance in the U.S. has far reaching implications, not only for the unemployed but for our economy as a whole.  The inability of low wage earners to consume is a strain on U.S. growth.

While there is plenty of banter about the need for jobs, there is no systematic solution in place for retraining American workers such as displaced auto and steel workers. President Obama has called on U.S. business leaders to: “generate ideas for creating jobs, sustaining the economic recovery and making America more competitive”[ii].

Of course the notion of “creating jobs” is a little too convenient. Jobs are created when there is a need for them, and Americans get the jobs when they offer the most value. The problem is not that there are not enough jobs; it is that the cost-benefit for the employer often tips towards off-shoring.  If our workers do not offer enough value in the form of specialized knowledge, ability to use technology, etc., jobs will continue to be shipped overseas.

This is not a protectionist rant, and my comments aren’t intended to incite a riot on free trade, or China manipulating currency, etc. I am focused on what we can control.  What our nation needs is a retraining effort. The money we are spending on unemployment and other services would be better spent invested in people so that they can acquire new skill sets that are relevant in an ever changing world.

The question is who will lead, and who will pick up the bill?  To prepare our workers for the future will require collaboration across business and government. Tax and other incentives need to be in place to encourage the retooling of America. So as GE Chairman Jeffery Immelt and the rest of the White House Council of Economic Affairs weighs in on jobs, I hope they emphasize that we need to create opportunities for workers, and provide them will the skill sets required to compete.

Otherwise, the marches may extend to Washington D.C. and a state capital near you.

[ii] Obama wants business world’s best ideas on jobs USA Today

In Intended Consequences, I illustrated how our economy had endured a period of unparalleled turbulence. From Y2K to 9/11, the wars in Iran and Afghanistan, the Asian Financial Crisis, Katrina, Mad Cow and Enron/WorldCom we have experienced a decade of volatility. Recent history has presented the Gulf spill, the Haiti and Chile disasters, and now civil unrest in the Middle East. Volatility has become the norm.

The violence in Egypt is particularly daunting because we don’t have a sense of the extent to which the unrest will spread to other nations in the region. Even the White House seemed surprised as stories spread of the President watching television like the rest of us, trying to make sense of it all.

The passage of time has only magnified the “strategy paradox”. How can an organization plan for a future that is impossible to predict?  I believe that in the face of such uncertainty there is a compelling need for more examination, reflection and planning.  Uncertainty should prompt us to think more provocatively about how changes in our environment will manifest within our businesses and our society (one lesson we learned from protests in Egypt is that social networking is not only a tool, but a potential weapon).

Raw materials continue to be unstable, as prices from oil to cotton have moved sharply higher.  If you were a business dependent on such materials, you may need to rethink your pricing strategy, positioning, marketing, etc. in an effort to weather the storm, or perhaps take advantage of new opportunities (to raise prices for example).

One of the ironies of global events is that we cannot comprehend their severity in midstream. When we initially heard of the first plane striking the World Trade Center, we didn’t understand the implications. It was only after time that the terrorist plot and its affect on the world crystallized for us.

So as the events in the Middle East unfold, we must be more thoughtful about what might change. Will civil unrest further American interests or de-stabilize the region? What will be the affect on the stock market, currency markets, energy prices and raw material costs?  How might the U.S. and its allies react?

Only time will tell.