bizzXceleration: Performance, Value and Profit

Well we seem to be running with a theme, the "BAD", in all its' many guises this time around. So we'll continue it as we shift to discussing our first love business performance. Which, at the end of the day, is all about earnings, which in turn is about growth and profitability. Contrary to the headlines even the companies that reported decent earnings this last time around also reduced their outlooks. And it's not just the Finance Industry either, whom we've been beating up right and left along with everybody else, and deservedly so. Or the Auto Industry, whom we'll get in due course. In this post we'd like to concentrate on Consumer and Industrial companies and after the break you'll find Categories on Earnings plus Consumer (TGT, MickeyD's, CostCo, SHLD, and Sony) and Industrial (UPRR, GE, UTX, Boeing, and CAT). None of whom were particularly sanguine though UPRR was perhaps the most optimistic of the lot, with the major rails having re-discovered pricing power. But even CAT flew a few small warning flags.

Profits and Earnings

Just to put it all in perspective let's borrow a couple of charts from Northern Trust's econ team. You need to take a careful think of this chart and maybe even click on thru to the NT review it comes from. What they have to say though is this, "Are we in a recession or are we not? The debate goes on. Take a look at the year-over-year change in operating profits of the S&P 500 corporations (see Chart 1). Profits have declined for three consecutive quarters through the first quarter of this year". Operating earnings back to '90 are about as bad as they've been and it turns out after-tax profits in the Tech Bust and now are the biggest hits going back to '65. Couple that with the last two econ outlook posts and we'd have to say there are still a bunch of wild-eyed optimists on Wall St. Just domestically we expect the pressures to continue to mount but for everybody looking for the foreign uplift - well if the world slows and currency conversions are no longer as favorable, what then ? The word that comes to mind is OUCH !

Elements of Performance: UTX and GE as Exemplars

Last year was the first in history where buybacks exceeded profits for the year and the pressures from the Street to continue that practice are on-going. In fact one story is about Bill Ackman's continuing investment plus pressure on Target to do just that. Judging from these charts and the outlook there couldn't be a worse time - unless of course you're strategic goal is to effectively liquidate the enterprise. Otherwise buybacks make sense only when the stock is significantly under-valued on a long-term strategic basis, instead of buying it in the face of further likely declines. (Market Drivers 3 (Buybacks):Investment, Hiring, Nah...Bonus, Bonus, Bonus !)

One of the companies who turned in an outstanding performance however is United Technologies (UTX) who also had a pretty positive outlook across their divisions and worldwide. Though clearly they're exposed to all the domestic and international pressures we've discussed and may either not be anticipating them, or downplaying them. Aside from good products, insightful marketing and positioning and a significant int'l presence across several different industries at the heart and soul of their performance is "operational excellence". Something we've harped on over and over again. Several years ago UTX found their performance lagging and instituted a major corporate renewal strategy designed to develop, deploy and implement an integrated "operating system". They've been demonstratively successful and, IOHO, could serve as the poster child for the kind of integrated enterprise management system that couples strategy with execution and functions to the overall enterprise. They call their approach ACE for Achieving Competitive Excellence and this composite tells you, reading clockwise from the upper left, what the strategic components are, shows an example of the kind operational detail involved, charts the current deployment status (telling us how far they've got to go and how much sustained effort is required to do this right) and what the impacts have been on measurable performance. A poster child, we're telling you.

On the other hand let's consider GE which continues to get beat up for lackluster stock performance. Largely on the grounds that it's too big, unwieldy and a conglomerate no one understands. One of the reasons we dug into UTX is that it's also a major multi-industry conglomerate who's managed to do pretty well, which should knock most of that particularly argument on it's head. That the analysts can't figure it out is sad given what they're paid to learn it. And we will admit, and have said, that hanging on to NBCU still doesn't make sense within a corporate framework of industrial + finance focus. We'll further admit that GE's failure to look ahead adequately at the economic trends got 'em into serious trouble quarter before last. Nonetheless their challenges have been a couple of orders more daunting than UTX's, and not just because of the size differences. For one thing Immelt inherited much too high a stock price and PE based on the bubble and Welsh effects. For another Jack left a lot of unraveling for Jeff to do in the first several years. Divisions that should have never been acquired or kept needed to be replaced with those more focused on key strategic trends. And GE has done a great job of completely re-vamping and re-positioning itself for those future trends as well as continuing to run tight ship. If you check out the accompanying chart you'll get a sense for what the strategic trends it sees are, how it's re-positioning and how it goes about executing. IOHO Immelt has positioned GE for the way the world's going to look for the next several decades and done so well with speed, force and style. On top of which people also need to understand that much of their financial activities are synergistic complements to the various vertical businesses. By combining a deep understanding of it's customer's business with it's own industry expertise with deep financing pockets it creates a unique competitive advantage. 

So as you skim over the excerpts and contemplate your own situation and investment plans you might keep all these factors in mind. With reference to these models if you like (Performance Assessment Basics: Five Fundamental Factors,Masterclass: Buffett on Investing and Business Analysis).

Continue reading "Bad Times, Bad Earnings, Bad Outlook: Consumer and Industrial Performance" »

Posted by dblwyo at 01:13 PM | Permalink | Comments (0)

Continue reading "AutoFutures: Re-Thinking the Car Business, or NOT ?" »

Posted by dblwyo at 09:28 AM | Permalink | Comments (0)

Taken a flight recently ? Noticed that over-crowding and under-servicing continue to be the order of the day ? That the staff and crews tend to look a little frazzled ? Where it's no big surprise - or shouldn't be. If there's any industry in worse shape than US Auto Manufacturers it's the US Airline Industry. What they do share is some fundamental breakages in strategies, business models and difficulties in facing realities sufficient to change. We've made the comparison before for both industries to the Steel Industry, which is now in the midst of a worldwide revival. And it's not like any of this couldn't have been seen, and probably was, coming. Warren Buffett kids that he's been a member in good standing of AA - Airline Anonymous - for decades. Any time he's tempted to invest he calls them and they talk him out of it. As Warren repeatedly points out the Airlines haven't made their cost-of-capital in decades, even including the days before regulation. Just to put things in perspective here's a little 2+ year industry index chart - notice the ratio between the SPX and XAL - not pretty is it ?

The airlines face some fundamental structural problems which they're still not facing. We think the primary one is the economics of the Hub-n-Spoke route structure. Now we say that, and have been saying it for a while. In fact it's particularly gratifying that in the last few weeks that particularly meme has been picked up by several MSM reporters. Just to give you a mental picture we've put up an abstract graphic of the typical mainstream US carrier route structure. You can, if you like, impose a mental map of the US around the network structure. And it's certainly not all-inclusive but you get the point. What the airlines set out to do was provide coverage and access from any city in the US to any other city and they priced their tickets from end-to-end on the network. Here's the rub - actually here's the two rubs.

First you end up with a lot of excess or under-utilized capacity on many legs of the network but because you price it end-to-end against what you see as the competition you also end up charging just marginal costs on those last branch connections instead of total fully loaded costs. This works as long as the overall network load factors, that is capacity utilization, is high enough and you charge enough to make money on the network as a whole. Second for any given link in the network Total Cost = Fuel + Labor + Aircraft + Overhead. And strangely enough a lot of fuel gets burned in takeoffs, climbouts, taxi and landings. In other words an airline flying a lot of short hops has trouble making money because it's burning fuel prodigiously. Any airline has trouble making money on those legs where the load factors result in fewer passengers at lower prices than the total cost for that leg. Yet finding yourself in that position is almost required by the operating logic of the network.

Here's the final three challenges. 1) In effect the high usage main routes which are the backbone of the system subsidize the rest of the links. 2) The network is vulnerable to cherry-picking by a smaller airline that doesn't build a network but instead comes in with equipment and flight frequencies tailored to the demand on a particular city pair (stop me when the words People Express, Southwest, TransAir or JetBlue occur to you). 3) The industry operates on the romance of its' version of the greater fool theory. There's always some fool that thinks airlines are neat and is willing to put up the capital to start trying to build a new cherry-picker. Who knows what the exact figures are but for the sake of discussion let's say that the Industry is somewhere, despite all the plane retirements, equipment down-sizing, etc. etc., between 10-30% over-capacity.

The fundamental fix - only fly routes where you can make money with the equipment, strategy and business model you've got. Translation - downsize considerably, give up flying all connection and leave it to local/regionals who can implement that strategy, put direct point-to-point connections in yourself where you can and then, and only then, lay a completely re-designed network on top of it. It's no accident that if you look in your seat pocket the route guides for the majors look like our picture and for LUV look like somebody tossed a set if I-Ching sticks on the map.

On the other side of the House are the world's two dominant aircraft manufacturers where the stories, economics, fundamentals and strategies are very different. We won't go into those in detail here as it's another complex story of Darwinian economics. We will say that if the worldwide slowdown continues their orders books will suffer some. But since they're largely selling outside the US anyway and are over-booked, at least BA is, it almost doesn't matter. Airbus though is in terrible trouble having built a vanity aircraft in the AB380 and gotten caught several steps short by BA with it's Dreamliner. Boeing of course is getting hammered thru typical teething problems for a whole new way of doing business. But the B787 is a major innovation on three fronts: 1) Design (major usage of computer-aided design pioneered and proven on the B777), 2) Construction - emphasis on new engines, composities and modular component assemblage which is working but has some teething troubles. And 3) Supply Chain - where they really pulled out all the stops and are having more troubles than ever anticipated. And slowly working their way thru it. Aircraft manufacturing decisions are 30+ year horizon decisions. BA is going to be around a long....long time. As the world economy continues to globalize, as the US carriers rationalize and demand continues strong they're far better positioned than Airbus. We consider them a major buying opportunity eventually. 

Continue reading "Life and Death in the Air: Carriers, Manufacturers, Realities" »

Posted by dblwyo at 06:11 PM | Permalink | Comments (0)

 Here we continue building, categorizing and summarizing the Business Analysis Toolkit/Dashboards by taking a deeper dive on certain key Industries. In our view to understand how a particular enterprise is going to perform one needs to understand its' context - the environment and ecology in which it lives. On the broadest level that is the geo-political environment - think of it as the equivalent of the climate, weather, terrain and so forth.

Then there are the broad Economic trends and condition which define the ecology within which it must function. A set of challenges which are usually shared by all firms within a particular industry.

And there are always many characteristics common to all firms within an industry. For insiders there will be huge differences in individual companies. Yet, in our experience, firms in a particular industry have more in common than their differences; something they are usually often not willing to admit publicly. Yet something they all recognize and deal with - after all, otherwise there wouldn't be industry conferences would there ? Years ago I got involved with the periphery of IBM's efforts to establish a common reference framework for all its' manufacturing operations. This took years of heavy investment in the large teams. And one of the biggest barriers they faced was the argument of every division and every plant that they were different. Yet, despite stubborn opposition, the central team managed to hammer out a common, shared process model of the general manufacturing enterprise. A model which we then proceeded to test across many other manufacturing industries and sectors. We mirrored and replicated that experience across many other industries as well including Retail, Distribution, Transportation, Finance and Healthcare.

What we found was that there was/is/will be a commonality of approximately 80% in processes across an industry. And that the differences usually lay, or should lay, at the detail level. Yet at the same time those processes were vastly different in name, structure, organization, staffing, etc. So one can't blindly impose the common framework on each firm. Rather the common framework provides a template or blueprint to use as a starting point for analysis, customization and configuration.

It also and most importantly provided a blueprint of things that should be being done even when they weren't. And that was the most telling finding of all. In fact what we found was that there were a lot of innovative ideas that carried, at least potentially, across industries. And offered major new sources of innovation and advantage. Just as one example the Airline industry built its' business models around a process called "Yield Management" - getting the last marginal dollar possible for the last marginal seat. Well a manufacturer couldn't implement Yield Management the same way that an airline could because the products were so different. But the underlying enabling processes required of market analysis, demand forecasting, adaptive pricing and customizing product mix and availability to narrower markets did apply. Ditto for retailers.

So when we analyze industries in our posts this is the underlying approach that's built into our discussions.

1) Industries share a common set of problems and challenges.

2) Industries share a common framework or blueprint that defines the collective best practices and "to-be" vision of the things they should be doing.

3) That common baseline can be used to evaluate the industry as a whole and individual players within the industry. Further elements of that baseline are "sharable" across industries; or can at least be used to analyze opportunities and risks.

4) The industry also shares a common ecology in terms of industry structure and dynamics that defines the shared environment different firms must compete in.

5) The ideal enterprise and the industry ecology are dynamic, constantly evolving and are inter-dependent.

6) By understanding the current and evolving status and characteristics of the enterprise and the industry one can anticipate many of the pressures, opportunities and future paths of both an industry and a particular firm.

We'll have to see how that holds up as time goes on but in the tables after the break we've listed and commented on the prior posts on several key industries. Hopefully this serves a couple of purposes. First, if you're interested in tracking down some ways of analyzing a particular industry this should make it easier. Second it's a catalog of industry analysis tools, approaches, readings and other resources. We hope you find it useful and valuable.

Below you'll find the pointers to the prior posts on Airlines, Autos, Retail, Oil/Energy and Finance Industries. We will point out that the headlines this week and last are strangely congruent with the discussions and guesstimations in these prios however. In other words, not to put to fine a point on it, the analysis seems to be holding up reasonably well so far. Which may argue that there's something to the approach, perhaps ?

Continue reading "Key Postings V: Industry Analysis - Enterprise, Industry Ecology, Evolution" »

Posted by dblwyo at 05:49 AM | Permalink | Comments (0)

Well the timing wasn't entirely intentional but putting up an assessment of the Retail Industry when all of yesterday's headlines were about surprising same-store sales upticks might have had a bit of cognitive dissonance. Maybe with today's terrible employment report the barriers will be lower. But our focus is really on longer term structural and secular trends as well as shorter-term cyclical and quarterly performance. As the headline not quite says "the more things change the more they remain the same". Or in American when things are like this bend over and kiss it goodbye.

What do we mean by that ? Well our mantra is context and performance, otherwise put as Economy-Industry-Company. Like a sailor dealing with the climate and the weather a retailer has about as little control over the externals but the same challenges in not just surviving but getting something constructive done. And right now the weather is worsening, rather badly. The chart shows quarterly YoY changes in real and nominal retail sales going back to '92 on top and monthlies going back to Jan01 on bottom. In either notice the winds picking up and the waves starting to build. And we're just started IOHO...which we've gone over before in our economic assessments.

How it's handled depends on how good a boat you've got and how good a sailor you are. In other words what's your strategy and business model, are you executing on that model, do you have the right people and leadership and are the latter taking care of, appropriately, the former. We can illustrate those questions by abusing an earlier graphic on all the things a retailer needs to do make themselves effective and efficient. Here what we're showing are all the functions/processes required to run daily, plan and schedule tactically and make product, market and related decisions strategically. It's intended as a blueprint or checklist for building and running a good retail "boat". As you go over the reading excerpts consider it a litmus filter and ask yourself what you think each says about the model and real-world issues.

The readings talk about long-running evolution in the Strategic context as economic pressures, et.al. cause customers to change and as the bad performers sort themselves out thru Darwinian processes; i.e. they die, get bought or otherwise change. Then there's a collection of stories about key players which highlight these fundamental points. If there's a theme that occurs to us it's that those retailers who's models and execution are suitable for the times are doing o.k. and conversely. And some folks have changed, some really need to and some are going to be roadkill. A really illustrative contrast is between WMT and TGT - actually two of the best-run businesses anywhere. WMT lost sight of its' own nature but has been going to RA - retailers anonymous - successfully. Target has the misfortune that it's model was brilliant in a different context and will be again. Contrast that though on the other side with Sears (SHLD) which was the supposed poster child of the "new" Warren Buffett and has now shown what substituting financial engineering and a supposed book value salvation based on real estate that nobody's going to want can do for you when you completely ignore these principles. Most of the rest of the stories should be read in similar lights.

Bon Appetit' to you et Bonne Chance to the players, eh ? 

Continue reading "Retail Industry: Plus Ca Change...or Bend Over and Kiss..." »

Posted by dblwyo at 09:36 AM | Permalink | Comments (0)

It's time to pick up the thread of our readings on the future of the Oil Industry and extend it to a structural picture of the future. Within our limits of course. The prior post provided a sampling of readings as well as a strategic summary (). Here we'd like to tunnel into the big picture and little bit and take a look at price trends, energy demand patterns and long-term supply-demand balances. Or as the case is...supply-demand imbalances. Let's start with the following chart on long-term prices and S/D trends.

In some ways no big surprises, at least until you look fairly closely. The top sub-chart shows annual growth rates in world supply, demand and the balance along with trends for the former. The bottom sub-chart shows oil prices, real oil prices and YoY% changes in real prices since '64. A couple of "small" surprises. While we did our own calculations of real prices, so they're at odds with the official ones, our guesstimate is that they are as high as they've ever been and climbing. The surplus of S>D has shrunk abruptly but the rate of growth in Demand has now shrunk below that of Supply ! If that were the long-term trend we'd be pretty happy. That reinforces many of the arguments we made.

After the break we look at the bigger picture strategic issues but here's the bottomline, again. Oil is economically and affordably available but is increasingly controlled by non-market decision-making. And we are increasingly hostage to that decision-making almost entirely thru our own choices. Until we have a major national commitment to a national energy policy that is pragmatic, workable and realistic these trends will continue. And will likely accelerate. And you should note that this is NOT something foisted off on us. Who owns an SUV ? What's the H.P. in your car ? We choose to pay bottom-dollar for gas in the last several decades instead of pursuing alternatives. No the vultures are coming home to roost. 

Continue reading "Oil Industry II(Analysis): LT Supply-Demand, Outlook and Disruptions" »

Posted by dblwyo at 10:49 AM | Permalink | Comments (0)

Needless to say oil prices are occupying everybody's mind right now - particularly since you can't go down the street without seeing $4/gal gasoline prices. Congress is holding hearings to chastise the speculative excesses with "inside baseball" players using the correlation is causation argument to prove widespread evil-doing. My favorite bloggers (BigPicture, CalculatedRisk) and financial writers (Jubak, Mauldin) have all put together excellent summaries recently that are worth reviewing. And of course the MSM (WSJ, NYT, et.al.) is covering the issue extensively. So here's our collection which we've been putting together for a couple of weeks now, and for which the time seems ripe.

The basic argument, which we plan in expanding into an analysis in a follow-on Part II, is the fight between fundamentals and speculators. As you skim over the readings below you'll find a wide sampling of sources and informed opinions but here's our take. Of the ~ $150 price/barrel target price the long-term fundamental price is in the $80-100 range. Another big chunk of that target is caught up with geo-political risk factors. And a third with speculative feedback on short-turn prices. Let's say that the proportions are roughly 60% fundamental, 20% risk and 20% speculation.

Except for one thing. The basic structure of the oil industry is that the major cost drivers are exploration and production; then distribution and processing (refining). As oil has gotten more scarce in inexpensive and readily (politically) accessible areas of the world there are non-linear rising costs to the two fundamental drivers. That's lead to a fundamental and long-term supply-demand imbalance as new oil production hasn't been keeping up with new oil demand and consumption. A partial result of that long-term dynamic of skating on the margin is that the system has been and is increasingly vulnerable to shocks as its' fragilities grow.

That's been the basic dynamic for at least three decades only it's gotten much more pronounced in this century. HOWEVER....there is another fundamental shift well underway that is greatly exacerbating all these innate structural characteristics.

Not only are new oil sources in increasingly hard to get to areas but the bulk of the world's known and potential reserves are no longer market priced nor controlled by private companies. Rather they are controlled by national oil companies or other political entities. Who's priorities are NOT long-run profit maximization.

Worse yet for those reserves controlled by political entities they are milking existing reserves to fund socio-political priorities and significantly under-investing in maintaining current flows while not developing new ones.

There are two bottomlines here:

1) oil is likely available but is getting increasingly scarce at prices we're comfortable with; i.e. the $80-100 baseline structural price, which shifted up from $40-50 in the last ten years, is likely go toward $150+. 20% X $150 = $60. 2 X $60 = $120. $150 + $120 ==> ~ $300 oil !

2) because oil is depletable and demand is growing there is a long-term scarcity premium that's being increasingly reflected in the base (cf. Prof. Hamilton's discussions below). In other words there is a rising scarcity rent being built into l.t. prices that's feeding speculation.

So below you'll find readings on the short-term and long-term pricing factors as well as the impacts on gas prices and the survivabilities of the refiners, or refining operations. You'll also find some fundamental re-thinking about the future prospects of Big Oil as we know. Which is pretty good though it generally doesn't reflect these deep structural changes evolving in the fundamentals of the industry....yet....other than by symptom.

The next steps of course are diagnosis and treatment....otherwise known as a National Energy Plan. Yeah, right. 

Continue reading "Oil Industry I (Readings): Prices, Fundamentals, and Big Oil Futures" »

Posted by dblwyo at 10:47 AM | Permalink | Comments (0)

Unless we happen to be involved or know someone we generally take Retail for granted but it's a sector that is at the bleeding edge of the economic pain this cycle, with real retail sales down -2%. Worse there are major structural shifts that have been building for years. In an earlier WReadfest we provided another excerpt collection but also provided our framework for what a high-performance retailer ought to look like. (WRFest 2Mar08(Business): Paper, Auto and Retail News) There are going to be a lot of retailers in serious trouble this downturn even if it's as mild as the optimists think, partly because of those structural changes but also because of major performance problems.

Years ago the Grocery Industry, one of the most challenging retail environments because of the wide mix of products with exacting requirements, was enormously worried about WMT's entry into the business. So they started a massive effort called Efficient Consumer Response (ECR) to re-think how the industry was run. And they delivered one of the biggest multi-company and multi-organization collections of superb advice working the world's best consultants. It's a magnificent encyclopedia of how to run both an individual retailer and a retail value chain covering everything from Product Mangement to Store Operations to Replenishment and Logistics to Sales and Forecasting. [Fair Disclosure: I ran the Replenishment Team].

Well almost none of the reccomendations were put into practice, WMT, Sam's, Costco and Target are now major grocery retailers and the industry saw a huge re-structuring and down-sizing. But if you wonder why the variety, freshness, service and innovation of your local grocery store has gone up a couple of orders of magnitude in the last ten years the survivors did make those changes. At least some of them. Now the entire Retail Sector is facing similar challenges.

Stores have been over-built (Dept. stores in general, HD, WMT, Starbucks), service has deteriorated, supply costs are rising rapidly and general store efficiency and effectiveness leaves a lot to be desired. One chain who did re-think itself from the ground up in the late '90s was Penney's which is now facing a lot of trouble but should be able to deal with, albeit painfully. Another was Target, which was always known as high-service and high-innovation but also re-thought itself to focus on customer value. One of my favorite retailers in the whole world is Tesco's, the British grocery chain, which continues to improve, gain share, go abroad and has introduced a new approach that it's testing in SoCal. For the record I have several favorites but Zara's and Trader Joe's are high on the list. We'll leave it to you to guess why - hint...it has something to do with our model of a well-run enterprise and retailing exemplar. A good really bad example, aside from Circuit City which has blown off both its' own feet at the knee, is Macy's. Which has consolidated a lot of older and famous chains and proceeded to homogenize them into meaninglessness. Now they've suddenly discovered that discombobulated mass ain't the answer and are struggling to create the operational infrastructure to localize their product and services to particular geographies and localities. That kind of operational capability is complex, difficult, requires high skills and good people btw.

That's the same struggle that WMT is facing and not doing well on and Sears, my poster child for how to really screw up a retailer by substituting financial engineering for operational savvy and strategic adaptation. The thing that makes Tesco and Zara's so powerful and profitable is that they've created a flexible operating infrastructure that allows them to have a modular set of processes that are customizable to local conditions. And they run with tight discipline. So as you read over the following stories on Chinese retailing, Penny's, Macy's and Tesco bear all that in mind. And if you're thinking about the industry in any way...well maybe you've got a start on a blueprint for evaluation ? 

UPDATE: Mickey Drexler on retailing, service, corporate culture, accounting over customer focus and other topics. IOHO a must read for anybody interested in what a good retailer ought to be doing. A Charlier Rose interview. 

Continue reading "WRFest 20Apr08(Retail): Shocks, Performance and Localization" »

Posted by dblwyo at 09:18 AM | Permalink | Comments (0)

The alternate title was "Waiting for Armageddon" which happens to be the title of the Economist article looking at what increasing economic pressures will do to corporate performances and bankruptcies. Bear in mind that we're early days yet in the Business Cycle for the downturn and despite all the agita in the credit markets and financials the ripples haven't yet shown up in general business performance. But they will. And given the massive buybacks, re-leveraged balance sheets, and general lack of performance disciplines you can expect, shall we say, some distressed or under-valued buying opportunities. In fact we're not the only ones who see that. The same people who six months ago were sending me invites to new ways to find funny money just sent me their 3rd or 4th on distressed investing:

P.E. Investing in Distressed Companies MasterClass We figure that at any given moment, 5% to 10% of all middle-market companies in North America are either in distress or are significantly underperforming.  Every week we see 5 or 10 of them, and we turn most away.   Over the next 18 months, in this volatile market, we know it’s going to be hard work to make good decisions -- about choosing good companies, recruiting the right management teams, and actually fixing the companies we buy.  Making the right choices will mean the difference between earning just plain decent returns and really great returns.  These observations highlight two thoughts -- first, it’s obvious there are thousands of distressed investment opportunities we do not see.  And even if we saw everything, there just aren’t enough hours in the day, or dollars in our fund, to handle the avalanche of new situations stemming from the current recession and credit crunch. Second, if you have the skills and experience and resources to consider buying distressed private companies, now is the perfect time to jump in. The door is open, but the ride ain’t free (to quote an aging New Jersey rocker). 

Actually they've got a good idea. The trick in sorting the wheat from the chaff is timing, filtering and tools for understanding. So besides the Economist article we added pointers to earlier posts on the subject. In fact we added pointers to relevent posts where we thought they were appropriate. But as you wrestle with the sturn and drang and start looking around check out the readings which cover Materials (Pulp, Coal), Transportation (Trucking, Airlines), Manufacturing (Boeing - a special case we admit, Autos (Ford)) and Retailing (incuding a reprise of our enterprise framework for reference). As you read these don't just read them strictly for the story but also as indicators for their industries and the broader general business climate that's slowly emerging behind the financial rubble.

There will be opportunities here but there's a lot of pain between there and now. 

Continue reading "WRFest 30Mar08(Business): Days of Reckoning at Hand ! Repent Sinners ?" »

Posted by dblwyo at 04:29 PM | Permalink | Comments (0)

Somehow or another all the business news is either finance or technology news these days. I'm sure that's not true but that's the net effect give my readings. The huge wave of finance industry news is, under the circumstances, not a surprise and we covered it yesterday. It's worth bearing in mind that the Industry was a whole appears to a) be as badly broken thru its' own self-inflicted wounds compounding and b) as the credit markets go thru an extensive de-leveraging process that the industry will be badly shaken up and re-structured. And perhaps c) we may have a long way to go.

The first two stories below are on Chrysler and Pfizer - both of which industries have backed themselves into similar corners. The Auto industry by getting stuck in its' own rigidities and denying the need for change for 3+ decades. As we've mentioned the core of the Pharma industry is their R&D activities and, very unfortunately for them, their core business model of chemistry-based drug development is broken by exhaustion. And the nextgen replacement (bio-chemical/biological) is not a near- or intermediate-term potential (though depending your horizon you should be lookin at systems biology and what's going on with "synthetic" life). Whic leaves us a bunch of Tech industry stories. Which in turn are stories about escalating pressures for cost control and change, companies failing to innovate and some succeeding.

In the latter class are Apple and TIVO both of whom have focused on defining and delivering value. Preceeding them is a story about one MS fantasy about Yahoo - that it'll help take them into the on-line software arena by combining Yhoo's on-line DNA and MS's software development DNA. Excuse me - their core strategic value propositions at which they've been failing miserably for years now ? Yahoo obviously but for those of you not enchanted with Longhorn, excuse me Vista the pitiflul remenants of a grand(iose) vision terribly executed and perhaps flawed in conception (btw do a search on Code Red and MS sometime for an understanding of how badly their supposed core competence in programming failed them). The other side of the coin is HPQ which is well on it's way to re-balanced and re-factoring itself, illustrated by a story on Hurd's moving to the next step by starting in on re-directing their R&D labs toward a stronger commercial focus (a step Gerstner took at IBM back around the mid-90s).

The first two tech-related stories are more general interest tech stories which define the ecology of the industry. One counseling IT departments to start putting pricing pressure on their vendors. The other on the topic of business vs technology alignment. We've all heard the stories about businesses able to change an industry thru the strategic use of technology. The problem is that for 20 years it's generally the same small handful of exemplary firms, e.g. WMT, FDX, Schwab, et.al. What you may not be aware of is that there's a huge gap between the MIS department and the operational business which the industry has been struggling with for decades. And despite the bottom of the "stack" becoming a commodity the top part where business solutions live is as much about magic, mis-communication and 70% failure to deliver rates as it ever has been.

As a friend of mine with almost 40 years in the business said:

La plus ca change, la plus ce meme chose.

Continue reading "WRFest 9Mar08(Business):Auto, Pharma & Tech News" »

Posted by dblwyo at 11:54 AM | Permalink | Comments (0)

We're still plowing thru last week's news in digestible chunks having split our weekly reader not only into Economy, Markets and Business but also split Business into this, the 3rd of 4 sections. Given the volume and importance of the various stories it seemed like a good idea and also allows us to wrap a little framing around them as well. A metaphor that captures the approach is that we try to take both an ecological view and a species specific view and look at the interactions. The Economy defines the longer-term geo-climatological context that everybody has to deal with while the markets capture the shorter- and intermediate-term cycles and behaviors. And the Industry/Company studies (Ganesh Filters III: Analyzing Businesses Blueprints) look at the status and outlook for key species. So far this round we've covered the Finance Industry, which at 30% of the market is important in its' own right but also heavily influences the flow of "energy", directly impacts the behavior of the Traditional and Technology businesses. And we specifcally broke out the LBO industry this round because it's on the cusp of what the industry is beginning to view as a major change in its' environment and what it will take to survive. To continue with the biological metaphor/model the LBO industry has contributed perhaps 20% to the rise in stock prices, perhaps more in the '07 over-trend "bubble" but is now facing a huge structural shift where different characteristics will be favored over agility and financial engineering genes. THERE WILL BE A SHIFT in the population as a result. Which will in turn impact all the other players.

Which sort of leads us to the old-line traditional industries in general and the Paper, Auto and Retail industries in particular. In each of these cases we'll return to a constant theme - what does it take to run a good business - in a new perspective. What are the functions, capabilities and processes required to execute a strategy and deliver value. And since several of the most interesting stories are about Retailers we'll frame the discussion using the chart at right (click to enlage) which shows the a complete, architected Retail enterprise. Hopefully you can imagine similar illustrations can be developed for other industries as well. Given a strategy and business model those must be EXECUTED by daily Operating efficiencies, managed by good Tactical planning and, over-time, adopted & adapted by Strategic changes. In the chart what you see is a complete, representative inventory of these capabilites structured to show, to some extent, how these all related to one another. As you evaluate an investment what you're really asking is how are these processes being performed at each of these three timeframes. And unfortunately the answer is all too often not particularly well.

Continue reading "WRFest 2Mar08(Business): Paper, Auto and Retail News" »

Posted by dblwyo at 04:14 PM | Permalink | Comments (0)

The prior post carved out a bunch of interesting international economic stories though linking them to a general US perspective. As part of broadening our perspectives we ought to consider how business in the world is changing. We've been saying for several years that the re-emergence of China and India back onto the stage of the world economy is really the biggest structural change we've seen since the early 19th C. Back around 1820 or so did you know that they were the two largest economies ? And further that various indicators of per capita income and general health and welfare put them ahead, particularly China, who up until ~ 1830 could have made a case for being perhaps the most successful socio-political system for the longest period of time. Or at least had a heck of a good argument.

Well various folks are giving lip service and now more to that. For example both Jim Rogers and James Fallows have moved to China as have a lot of ex-pats but it's not entirely clear to me that people appreciate how we're evovling toward a multi-polar world - their attention is deficient if you will. Not that most don't know and acknowledge that the BRICS are important but they still think of it as a bi-polar link. WRONG ! In a multi-polar world the other nodes can link with each other. So after the break you'll find some fascinating stories about major business news from China and India - some among many we'll point out. For example did you know that a major reason Lucent, Nortel, Ericsson, et.al. are still struggling despite being in the midst of a new internet-driven telcom equipment buildout is that Huawei the Chinese manufacturing has been increasingly competitive with cheaper products with approximate quality. BtW - telecomm tech and gear is rocket science if you don't think these guys are moving up the value-ladder quickly !

But check out the first excerpt which provides a general perspective. 

Continue reading "WRFest 1Mar08(Int' Business): Multi-Polar Problems vs ADD" »

Posted by dblwyo at 10:00 PM | Permalink | Comments (0)

Literally back in the real world. Despite all the on-going storms and thunder there is a real world out there of real companies not involved in financial engineering; though subject to (victimized by ?) it. Again there was a huge amount of relevent news that's going to impact a lot of things. Below you'll find our selected excerpts with stories from the oil, airline, steel, auto, retail and aircraft manufacturing. They're all interesting but a couple or three are harbingers.

Exxon is getting to the point where it's not replacing its' reserves - partly from increased problems with accessing foreign fields but also because of the increased difficulties in finding new, large fields that are economic. Think about that one for a while.

Meanwhile various mearger frenzies continue including the airline industry (which we waxed on at some structural detail) and continued evolution of the worldwide steel industry, Mittal in particular. The Auto industry just moves from one "challenge" to another. A couple/three interesting stories there as well - from Ghosn's naming it recession to an interesting story on Hyundai's Superbowl Ads to Chrysler's increased off-shoring of engineering and R&D. Now those last two we think are particularly important because they not only represent increased globalization but sophistication in both directions. In fact IOHO the Hyundai ads were the best ones on the Superbowl - not for viewer entertainment but from getting bang for the bucks. Everybody laughed or cringed at the others but  Hyundai's a) served notice that they were seriously in the game and were credible and b) got the biggest response that way from viewers. The next time you're in a parking lot test this yourself - see the Mercedes lined up next to a Bimmer next to a Lexus next and so forth down to a Hyundai. That bridges $120K to $20K but we don't see that much difference in fit and finish let alone features and quality. Hmm...indeed. 

Continue reading "WRFest 25Feb08(Old Line Bizz): Back in the Real World" »

Posted by dblwyo at 05:00 AM | Permalink | Comments (0)

We've ended up splitting our regular news summaries into multiple parts because of the number of valuable stories. Not just splitting Econom, Market and Business but in turn we'll end up splitting business itself into four parts, of which this is the the 2nd. The prior post looked at the strategic context and even provided a graphical chart to conceptualize all the multiple factors that any business must face, in general and specifically at these times.

These particular story excerpts focus on the Finance Industry and build on prior posts on the general conditions in the Economy, Market and, most...most especially, the Credit Markets. The bottom line is that a) the credit markets continue to experience a widening crisis whose end is not in sight. In fact whose details and working out are not at all clear. So, b) we think it's fair to consider that the Finance Industry as a whole is in as severe an emerging crisis as the Housing industry. Without the same level of broad understanding or consensus.

One that will, eventually, force serious re-thinking of the strategies, product offerrings, company structures and operating principles. Yet at the same time, given past history, who's corrective measures will be temporary pallative fixes because the Industry, despite it's vaunted "free-market" principles is in fact dominated by near-term and short-sighted thinking. Which tells us that, as investors, we can look forward to continued downtrends in these firms. And recurring cyclic opportunities to ride up and down with these cycles.

None of which is good long-term news. 

UPDATE: for anybody who thinks the bad news is over we suggest listening to this Bloomberg vidclip of Meredith Whitney's outlook for Cit and the Finance Industry. She expects that Citi will have to start selling it's highest quality assets, upto and including Smith-Barney, to raise capital to offset more writedowns. Her slashing of earnings estimates is startling:

Whitney of Oppenheimer Slashes 2008 Citigroup Forecast: Video

If you can't see the video trying searching the Bloomberg site. Meanwhile here is the associated story: Citigroup May Post First-Quarter Loss, Whitney Says

Continue reading "WRFest 24Feb08(Finance Industry): Troubles Continue to Accumulate" »

Posted by dblwyo at 08:23 AM | Permalink | Comments (0)

There have been three interesting (or more) stories on the rapid airline feeding/merger frenzy that's bubbling up before our eyes as the result of intractably higher fuel costs. Like every other strategic initiative since '00 this one too will NOT fix the underlying problems. Which won't stop the mergers nor prevent the financial community from providing the liquidity ammo necessary to bring it about on the theory that it will. Earlier we'd posted a first pass (Airline Merger Frenzies (I): Deep Cost Structure, Restructuring & Outlook) explaining how the hub-n-spoke network route structure was the deepest underlying factor in airline's lack of profitability and failures, since the end of WW2 btw, to earn their cost-of-capital. Excerpts from the three stories are below but here's an excerpt from a strategic assessment we wrote in '04 both predicting the consolidation and its' likely failure.

Continue reading "Airline Merger Frenzies (II): Network Structure, Costs and Strategic Outlook" »

Posted by dblwyo at 08:58 AM | Permalink | Comments (0)

The airlines have managed to occupy a prominant place in the headlines for several years no, starting with the implosion of their traffic demand post-bust, going thru their painful re-structurings, downsizings and cost cutting and now, their merger frenzies. It's not musch discussed but all of these are surface phenomena based on the nature of their deep cost structures. In fact a discussion of that structure has never come to my attention. In the interests of aiding a broader understanding we're reproducing an e-memo we sent out in the Spring of '03, excerpted immediately below and reproduced on the continuation.

"As Warren Buffet pointed out years ago the airlines have never made their cost of capital and always disguised that fact with the next big recovery in a cyclical business (b.t.w. - I recommend Slywotsky's "Art of Profitability" and the chapter on cyclical businesses to understand how cost structures interact with cycles - there's a chapter on that very topic).

Simple reform of the surface of ticketing etc. won't do it. Also b.t.w. - AMR spent at least $150M I know of trying to get to the next level of the end-to-end travel experience but ran a terrible software project trying to clone Sabre in the early to mid-90s. Rumor has it that the real figure was closer to $300M.

Unless the airlines rethink their basic business model in terms of network design, route cost structure, including labor but exclusively, and their pricing and customer service strategies this nonsense will continue until there's major collapses."

 If you'd like to have a framework and toolkit for analyzing the mergers as a traveler, investor or employee this might be quite helpful. It also serves as decent example of a point we emphasize that investing in an industry is, at least to some extent, "Inside Baseball". That is it really helps to understand how it works and what it's capable of. A point the Sage of Omaha makes as well though you have to dig back into his history to see it. (Masterclass: Buffett on Investing and Business Analysis).

A second version of the memor, from a slightly later date, is available as a dloadable PDF. 

Continue reading "Airline Merger Frenzies (I): Deep Cost Structure, Restructuring & Outlook" »

Posted by dblwyo at 06:52 AM | Permalink | Comments (0)

This is the 2nd half our Readfest on Business news. Rather like the B2C/Tech news what we're seeing is major changes on both the secular fronts and deep structural changes. A friend commented on our little exposition of our framework and its' comparison to Buffett's approach by saying you also needed to look at the bigger picture. Exactly - the point our our mantra on Economy-Industry-Business is to combine those factors into an understanding of the context, the particulars and the consequences. Of which there are an enormous lot.

Continue reading "WRFest 10Feb08(Non-Tech Bizz): More Structural Adjustments" »

Posted by dblwyo at 08:18 AM | Permalink | Comments (0)

There was so much news last week we not only split up the normal major sections but split the Business readings into three - Finance Industry, B2C & the Yahoo/MS merger and this one with all the rest. Oddly enough there's quite a bit of serious and interesting "other" business news aside from the continuation of the Finance industry's self-inflicted implosion. Or from the emerging re-structuring of the entire Internet for consumers. And make no mistake - win, loose or draw MS's offer for Yahoo will trigger off a lot of changes. Ones that are going to ripple for a long, long time. Think of this the same way that the maturation of the software industry and the resulting acquisition frenzy set back after the Telecom/Internet bust set in. This is a SEE-change. But not the only one.

Below you'll find another bunch of readings that are equally impactful. An excellent WSJ interview with Carlos Ghosn who says what everybody's thinking about the death of Detroit. He's pretty blunt about it too. Not quite on the same level Eddie Lampert has finally admitted that running a hedge fund doesn't qualify him to re-engineer an old-line retailer and so he's going to flail in another direction. Meanwhile the Tech industries are facing, as we warned, slowing spending and continuing momentus changes of their own. Chipmakers for example are having to deal with a major new chip layout changeover which will take years, cost many $Bs and almost bankrupted the major players last time. MOT, the original icon of mobile communications, is talking about spinning off it's cell phone business - rather sad. The Telecomm wars continue with Comcast facing serious challenges as well (and judging by my weekend experience's with HDTV quality and audio bandwidth they're very serious). Finally there's an article about how good Pharma is likely to have it in '08, because the prior years were so bad so relative performance will be good. Without of course fixing their long-term structural problems we've talked about.

Continue reading "WRFest 3Fest(Business): Something Besides Finance !" »

Posted by dblwyo at 12:21 PM | Permalink | Comments (0)

Now let's take a look at the reading and excerpts for business but, because there was so much, we're going to split it up even finer and up seperate posts on the Finance Industry. Oddly enough last week's rally was built on a major Finance sector spurt. Which given the history seems more than a little odd to us. Please note - having had so much of this sort of news we're just being polite. Also - at this point what else can you really say along the lines of "I can't believe they ate the whole thing".

The bad news continues across a reach and range of issues. From the basics - the economic slowdown is showing up in earnings, increases in bad debt and so forth - to structural issues. The top story was probably - pick your own - the continued drama at Societe' Generale' which continues to try and cope with rogue trader who's rapidly turning into a folk hero. Why escapes me at this time but if some explantion occurs we'll share it.

The other big story is the continued dicing with disaster of the monoline bond insurers who appear to have staved off a major downgrade of their credit only at the last minute but are still facing a real risk of corporate death. Unfortunately if they go they take a lot with them. And as expected and usual the extension of other downgrades continues, big banks are shifting assets from "yes we know what it's worth(Level I)" to "we have no idea but we have a model(Level III)" while skipping the intermediate stage of "yeah, we can trade some of this stuff every once in a while (Level II)".

And as a not in-directly related consequence VC's face increasing challenges IPOing their portfolio companies, the buyout guys are having troubles along with it and the beat goes on.

Continue reading "WRFest 3Feb08(Finance Ind): More Troubles Ahead" »

Posted by dblwyo at 12:43 PM | Permalink | Comments (0)

Chant after me: Economy, Industry, Firm. Economy, Industry, Firm. Economy, Industry Firm. That's your new mantra. Understand what the real trends in the Economy are, understand how industries are facing those trends and reacting to them - in particular whether or not their fundamental business models and strategies are able to cope with the trends and then understand how individual firms are behaving. Running with the herd or different model. In Hinduism, at least according to Joseph Campbell, the purpose of chanting AUM is to serve as a mind-body mantra capturing the sounds of the Alpha to the Omega with a final silence indicating that one really can't. Well the chant of the Finance Industry has been Vaule at Risk (VaR) - otherwise known as we can model this. The originator of regression model was the Prince of Mathematicians, Karl Friendrich Gauss. He came up with the technique to correct survey sampling data when he was in charge of surveying for a small German principality (good maps were important for armies, tax collectors and commerce you see, so the 2nd greatest mathematician in known history put his mind to it). The catch is that he was trying to minimize data errors for a well known model - the Earth.

VaR presumes that the estimated parameters can be derived from past historical experience and that the underlying model is known and constant. Both of which presumptions are proving to be very presumptuous. The emerging narrative in the industry is that the sub-prime mess was a Black Swan event - predictable only in hindsight though naturally occurring. Well actually predictable in foresight, and several did though that's now ignored as this new narrative emerges and takes over the standard thinking. And not at all unusual - in fact the same breakdowns that led to LTCC's breakdowns, part of Enron's problems and in fact, going back to Tulip Bulb mania. Fortunately the new narrative is starting to include the idea of actually going back to good old fashioned due diligence instead of taking abstract and artifical models as gospel. 

This is important because a belief in models has been one of the key underpinnings of some major structural shifts in the Finance Industry over the last three decades and associted shifts in the US economy. As we learn to chant our new mantra and mediate on Due Diligence instead of models you might keep the chart in mind. It shows the shares of Profit by source, both in absolute and % terms, in the US Economy. The top sub-chart shows total profits (stacked btw !) and the bottom share %; don't know about you but our view is that the Finance Industry has moved front-n-center as a major driver. The question is was value created or destroyed ?

The weekly readings excerpts below are focused on business, business practices and individual firms. While there are some very interesting stories on Yahoo and MOT that need to be paid attention to the bulk of the stories have to do with problems in the Finance industry and the consequences thereof. Primarily the re-thinking of the business model, which is just barefly started. But also the consequences as bad judgement and poor modeling result in "unintended" consequences for the rest of the economy, e.g. credit is harder to get, the risk of defaults is rising and all those firms who re-leveraged themselves to buyback their stocks at the highest valuations in several years are now going to be struggling to keep themselves together.

This will sort itself out, and painfually. A lot of the buyout firms who helped us into this mess are already building up the stores of dry powder (new funds) to take advantage, i.e. they're going to be looking for buying distressed companies, distressed debt, etc. for $.50 on the $1 ! As this sorting goes on the real winners will be the firms and industries who have an effective business model or who re-invent one. Finding them will be the interesting challenge. 

Continue reading "WRFest 27Jan08(Business): VaR, AUM, & Black Swans" »

Posted by dblwyo at 07:24 AM | Permalink | Comments (0)

This should be the last post for last week's stories and links. The primary focus is on traditional industries and companies. Continuing our theme of digging into enterprise performance are several key readings. Let's kick it off with a great story that, IMHO, encapsulates a lot of our notion of speak softly, run a good business, execute well now and lay the groundwork for the future at the same time.

Green Bay's Quiet Football Mastermind Before this season, fans were calling for Mr. Thompson's head. While the Packers had won just 12 of their last 32 games, he did not seem to care. No matter how loudly the fans complained, Mr. Thompson, who avoids publicity and rarely explains himself, continued sending away popular veterans and replacing them with untested college players, some of whom weren't highly regarded by other NFL teams. This year, led by a core of players that helped make Mr. Thompson a pariah, the Packers won 13 games and made the playoffs. What's more, the players he's brought into the league during his career are having an exceptional year -- as the playoffs resume Saturday, nearly 10% of the active players on the remaining eight teams were signed out of college by Mr. Thompson. While pro football is the nation's most popular sport, the brutal economic structure of the league -- where all 32 teams are effectively given the same resources -- has made winning and losing largely a function of management. Winning not only requires ruthless cost control, but it also seems to reward people who are able to make decisions in a hermetically sealed chamber without worrying about what the fans, the media or their own players will think. "I try to keep my eye on the ball, so to speak," Mr. Thompson says.

In addition there are some general business readings: one of those "smart" companies that moved ahead of the slowdown and are well positioned to ride it out and take advantage of the recovery if/when it comes. How many can say that ? Not many. A good example is what's going on in Retail specifically and the broader function of Customer Service - a major source of competitive differentiation that's little developed, invested in or exploited. The MSN article points to some earlier customer service stories you ought to backtrack, particularly since they point to Comcast, Sprint, ATT, et.al. as being terrible at it. Both for its' own sake but also because it's exemplary is the story further dissecting the mis-steps at Sears which are based on wrong-headed views of how to run a retailer. 

We also point to our own earlier posts on the SEEchanges coming in the Innovation(Tech) and Finance industries. Complemented by more readings on the Auto industry, Energy,  and Airlines.

Continue reading "WRFest 20Jan08(Business): Principles, Paradigms and Potzers" »

Posted by dblwyo at 01:18 PM | Permalink | Comments (0)

A friend and I were discussing the current situation, or "mess" as he calls it and he asked a very pertinent and simple question. Also a very difficult one yet as crucial as it is hard. While I'm not sure an easy answer will roll forward here there are some approaches. Here's the original question:

"Now, I have an interesting and difficult question for you to work around.  Can you propose what kind of scenarios we might see in the resolution of all the mess?  Who will wind up being the biggest losers? the biggest winners?"

Continue reading "Winners & Loosers: Rubble Sorting" »

Posted by dblwyo at 12:17 PM | Permalink | Comments (0)

Well most of the folks in the Finance Industry must be feeling like they're living in "interesting times" (we'll spare you the old saw which my Chinese friends tell me is Thai in origin). If they don't now they will soon and likely all thru next year. In some ways there aren't many surprises here in either the short-term or the long-term. Lots of stories in the last year or so have had lots of executives and others admitting this was a "dance" built on thin, thin ice. Personally my preference would have been to stop dancing and either get off the water or find some way, better yet, to brace it up or stop melting it.

Well like the Chinese peasants of old who wanted nothing more than to run their farms, grow mulberry and make silk so as to build a prosperous life for themselves and their descendents the worker bees are about to reap the harvest sown by the Power and Thrones. Let's make up a new one - "when Princes dance in the Capital the pipers are paid by the peasants".

Time to pay the pipes and it looks to be expensives.

Continue reading ""Interesting Times" for the Finance Industry: Readings & Resources" »

Posted by dblwyo at 09:43 AM | Permalink | Comments (0)

You've probably all heard the metaphor about boiling frogs - how do you boil a frog ? Slowly - it'll just sit there and not notice that the water temperature is rising until it's soup. Well there's a lot of changes going on in the worldwide economy and business pictures that are the same. But our companies, our industries and related decision makers are so trapped into dealing with the day-to-day crisis that the bears and alligators are winning and the swamp is rising higher and higher.

Some time ago I happened to take a general overview of the situation and pulled together some themes. Having just found and re-read it let me share it. Despite being a couple of years old it holds up pretty well. An assertion that I'm happy to hav