Saturday, April 23, 2011

Kismet Konnected Bashir Ahmed

That cloudy day of June-1961 gave a weary look due to a mild heat spell which was telling on the faces of the scores of Government officials and diplomats lined up along side President of Pakistan General Mohammad Ayub Khan at Karachi International Airport.

All these people were there to receive Lyndon Baines Johnson, Vice President of the United States Of America who was due to land any moment in Pakistan. LBJ was on a good will tour and his itinerary included a tour of our then capital city, Karachi followed by Lahore and Peshawar.

The Pan American Clipper Jet Boeing 707 landed smoothly and the well decorated tarmac of Karachi Airport saw VP LBJ and MAK take slaute as National Anthems of both countries were played by a band of Pakistan Navy. There were 12 cars in the motorcade that left the airport later. There was a black cadillac driven by Presidential driver Ishaq. It had LBJ and MAK in it with front seat next to the driver occupied by Brig. Nawazish Ali Khan, the Millitary Secreatry to MAK and the American Ambassador in Pakistan followed by a convertible Chevrolet Impala-1959 with DIG-Police Mian Bashir Ahmed. This was followed by an Austin-of-England re-shaped into a Rolls Royce car in which my father Jamiluddin Aali, the then Personal Staff Officer to Ayub Khan and Shaikh Habibur Rahman the Protocol Officer were sitting.

Then of course there were cars like Dodge Dart and Chevy Bel-Air carrying Govt and U.S.Embassy officials. The whole motorcade took route of main Drigh Road (now Shahrah-e-Faisal) for the President's House (now Sindh Governor House — we lived in the President's Estate adjacent to the President's House and Shaikh Habibur Rahman Uncle was our wall-to-wall neighbor in that 1912 one story buyilding which now houses Surveyor General of Pakistan's Office).

With Police Motorbikes speeding in line and blowing whistles and siren occassionally ahead of the motorcade…the journey progressed smoothly till something happened !!! Driver Ishaq applied brakes smoothly–good enough not to make the car behind hit the Presidential Car. All the followers literally ran towards the Presidential Cadillac fearing that something awful has happened to either of the two VVVIPs in that car when out came Vice President Johnson with President Ayub. They slowly walked towards the site left of Drigh Road at the exact spot where currently stands the Finance and Trade Centre (FTC). On that day however, a 38 year old camel cart owner (Sar'eban) Bashir Ahmed was standing there. He was cladfed in shalwar kameez full of dust and stood shivering next to his camel cart with DIG police Mian Bashir Ahmed (he had the same name as the camel man Bashir Ahmed) consoling him to remain calm.

Vice President of the United States Of America Lyndon Baines Johnson alongside his host President Ayub and many others–including my father—-casually walked towards Camel Cart owner Bashir—shook hands with him and said:

"Hello, I am LBJ from USA and I wanna be your friend!"

to which Bashir was translated the address–and he replied as:

"Salam Sahab, khosee huee aap se mil ke!"

Then 6 and a half minutes of invigilated exchange took place between Bashir and VP USA LBJ. The conversation ended with LBJ taking out a PARKER'61 fountain pen from his shirt pocket—handing it to Bashir saying:

"We are friends now and friends must meet again—so I am inviting you to USA as my guest–please accept?".

Ten days later, two officials from the U.S.Embassy and two officials from the President of Pakistan's Secretariat visited Bashir Ahmed at his residence in Lyari (Bashir was a Makrani) for arranging his passport and U.S.Visa. Government of Pakistan got him three sets of sherwanis, a white shalwar-kameez and Jinnah caps from Jalal Din & Sons in Saddar and Rahman Hat Villa near Paradise Cinema with some Onyx products as gift from Bashir to LBJ. Within a week this Pakistani Camel Cart owner from Lyari, Karachi flew to New York by Pan American Clipper Jet Boeing 707 where he was received by LBJ aide. The next 12 days of Bashir were spent in New York, Washington DC and Dallas at the personal ranch of LBJ where his daughter Tricia and Ladybird Johnson held Bar-B-Q party, luncheon and breakfast gathering in honor of Vice President of United States of America Lyndon Baines Johnson's Pakistani friend Camel Cart owner (Sar'eban) Bashir Ahmed. Later Bashir returned home blessed with some worthwhile gifts which included a Mack Truck and a American bicycle for his son and some financial package to start a more elevated business.

From that day and date of June-1961 till late 60′s the Bashir Magic was the talk of the country and of the State of Texas in USA.

Kismet Konnected Bashir Ahmed became a businessmen over weeks and stayed indebted to LBJ by continuing his correspondence through some Govt Officials assistance via U.S Embassy which ended with the advent of Vietnam War close by to JFK's assasination in 1963.


In 1972-73 when Zia Moheyuddin started his famous Zia Show by recording it before a live audience at the Fleet Club-Karachi auditorium near Lucky Star-Saddar, I was attached with Zia Bhai as his unaccredited Manager. I was then a young banker at HBL Nursery Branch, PECHS and I took pride in marketing the prize account of Zia Moheyuddin and provided home-service for his banking transactions like picking up his PTV cheques and arranging statements etc. At time I also acted as a chapperone to him at several shows he recorded there.

In one of his shows Zia Bhai invited Sar'eban Bashir Ahmed and after a good inter-action Zia Bhai, mildly pulling Bashir's leg posed a question on him;


and i remember it as clear as a day that Bashir sort of went quiet and suddenly with a spark in his eyes came back sharply saying;


Bashir Ahmed died sometimes in the late 70′s and the news of his death was widely covered by almost all the Pakistani Newspapers of that time.

If I look at this whole episode closely I think this strange friendship could be the ONLY one of its kind in the World! unless we also name KISMET KONNECTED to the interesting incidence with that lady in Memphis who was staring at a car in showroom when Elvis Presley walked by and asked her if she likes the car and on her shy and smiling reply as "who doesn't" Elvis gifted that car to her!! I dont know how far this is true but I do remember having read about it somewhere!)

The story told above comes from a key person who has, long time back, told me all of what I have fine tuned above—and he is none other than my father Jamiluddin Aali who is 85 now and Masha'Allah, good on his past days memory but quiet weak on the current. I was discussing this with him just yesterday—and he was quite surprised that I remembered the entire incidence. I was a school student and this incidence or happening—was too exciting and spell binding for us then).

Thanks to Raju Jamil / Pakistaniat

24 Signs Of Economic Decline In America

The United States is in the middle of a devastating long-term economic decline and it is getting really hard to deny it.  Over the past year I have included literally thousands of depressing statistics in my articles about the U.S. economy.  I have done this in order to make an overwhelming case that the U.S. economy is in deep decline and is dying a little bit more every single day.  Until we understand exactly how bad our problems are we will never be willing to accept the solutions.  The truth is that our leaders have absolutely wrecked the greatest economic machine that the world has ever seen.  Most Americans just assume that we will always experience overwhelming prosperity, but that is not anywhere close to the truth.  We are not guaranteed anything.  Our manufacturing base has been gutted, the number of jobs is declining, more Americans are dependent on government handouts than ever before, our dollar is dying and as a nation we are absolutely drowning in debt.  The economists that are trumpeting an "economic recovery" and that are declaring that the U.S. economy will soon be "better than ever" are delusional.  We really are steamrolling toward a complete and total economic collapse and our leaders are doing nothing to stop it.

The following are 24 more signs of economic decline in America.  Hopefully you will not get too depressed as you read them….

#1 On Monday, Standard & Poor's altered its outlook on U.S. government debt from "stable" to "negative" and warned the U.S. that it could soon lose its AAA rating.  This is yet another sign that the rest of the world is losing faith in the U.S. dollar and in U.S. Treasuries.

#2 China has announced that they are going to be reducing their holdings of U.S. dollars.  In fact, there are persistent rumors that this has already been happening.

#3 Hedge fund manager Dennis Gartman says that "panic dollar selling is setting in" and that the U.S. dollar could be in for a huge decline.

#4 The biggest bond fund in the world, PIMCO, is now shorting U.S. government bonds.

#5 This cruel economy is causing "ghost towns" to appear all across the United States.  There are quite a few counties across the nation that now have home vacancy rates of over 50%.

#6 There are now about 7.25 million less jobs in America than when the recession began back in 2007.

#7 The average American family is having a really tough time right now.  Only 45.4% of Americans had a job during 2010.  The last time the employment level was that low was back in 1983.

#8 Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in all of U.S. history.

#9 According to a new report from the AFL-CIO, the average CEO made 343 times more money than the average American did last year.

#10 Gas prices reached five dollars per gallon at a gas station in Washington, DC on April 19th, 2011.  Could we see $6 gas soon?

#11 Over the past 12 months the average price of gasoline in the United States has gone up by about 30%.

#12 Due to rising fuel prices, American Airlines lost a staggering $436 million during the first quarter of 2011.

#13 U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes.

#14 Approximately one out of every four dollars that the U.S. government borrows goes to pay the interest on the national debt.

#15 Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.

#16 Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.

#17 Average household debt in the United States has now reached a level of 136% of average household income.  In China, average household debt is only 17% of average household income.

#18 The average American now spends approximately 23 percent of his or her income on food and gas.

#19 In a recent survey conducted by Deloitte Consulting, 74 percent of Americans said that they planned to slow down their spending in coming months due to rising prices.

#20 59 percent of all Americans now receive money from the federal government in one form or another.

#21 According to the U.S. Bureau of Labor Statistics, the average length of unemployment in the U.S. is now an all-time record 39 weeks.

#22 As the economy continues to collapse, frustration among young people will continue to grow and we will see more seemingly "random acts of violence".  One shocking example of this happened in the Atlanta area recently.  The following is how a local Atlanta newspaper described the attack….

Roughly two dozen teens, chanting the name of a well-known Atlanta gang, brought mob rule to MARTA early Sunday morning, overwhelming nervous passengers and assaulting two Delta flight attendants.

#23 Some Americans have become so desperate for cash that they are literally popping the gold teeth right out of their mouths and selling them to pawn shops.

#24 As the economy has declined, the American people have been gobbling up larger and larger amounts of antidepressants and other prescription drugs.  In fact, the American people spent 60 billion dollars more on prescription drugs in 2010 than they did in 2005.

Thanks to TheTradingReport


What Gut Type Are You?

Would it surprise you to find out that you are a part of a group you probably didn't even know existed? Astounding new research, published in the journal Nature, shows that humans have three distinct gut types. Specifically, we each have one of three distinct varieties of bacterial ecosystems living inside our gastrointestinal tract. According to lead researcher Peer Bork of the European Molecular Biology Laboratory, "We found that the combination of microbes in the human intestine isn't random, our gut flora can settle into three different types of community — three different ecosystems, if you like." The gut types are named after the predominant bacteria in each type: Bacteroides, Prevotella and Ruminococcus. According to New Scientist, "People with a bacteriode ecosystem have a bias towards bacteria that get most of their energy from carbohydrates and proteins. Prevotellas specialise in digesting sugar-covered proteins in mucin, the mixture of viscous proteins in the gut – an ability shared by people with a ruminococcus ecosystem." To our further surprise one's ecosystem type isn't dependent on your location, age, diet, or genetic makeup. Scientists aren't exactly sure how it is that we come to have only three gut profiles. And the exact implications of this is as yet unclear. What we do know is that people with Bacteriodes-predominant gut make high amounts of vitamins C, B2, B5 and H, and prevotellan-predominant guts make more vitamin B1 and folic acid. This research certainly suggests that the relationship we have with our gut is much more complex then previously thought. [via Science Daily]
Thanks to Kosmix Corporation / RightHealth

Reduce, Reuse, Recycle … Or Rethink

For consumer durables, environmental sustainability starts with discarding conventional wisdom.

Since Earth Day in 1970, schoolchildren have heard the mantra "reduce, reuse, recycle" as the solution for the growing problem of consumer waste. One could argue that the slogan has worked remarkably well. In the U.S., according to the Environmental Protection Agency, the average consumer generated 2.7 pounds of trash each day in 1960 — and 2.5 pounds of that went straight to the landfill. Over the next 20 years, per capita waste generation grew 37 percent, to 3.7 pounds per person, but thanks to increased recycling and energy recovery techniques, discards to landfills increased only 29 percent, to 3.2 pounds, and, more importantly, hit a peak. From 1980 to 2000, U.S. landfill discards actually decreased by 19 percent, even though waste generation continued to grow, to 4.7 pounds per person per day. Over the last decade, the reduce and reuse parts of the slogan have shown signs of catching on, as per capita waste generation has declined to 4.5 pounds per day, and the volume going into U.S. landfills is now less on a per capita basis than it was 50 years ago. Europe has, if anything, made even more progress.

Some forms of recycling have become the dominant mode for consumers. For example, 88 percent of newspapers and 77 percent of corrugated boxes are now recycled. Even though 38 percent of paper bags are recycled, consumers are now attacking the source by shifting to reusable shopping bags.

But consumer durable products — including televisions, refrigerators and other appliances, cell phones, and automobiles — offer a more intractable problem that requires deeper thought for consumers and — especially — for the businesses producing them. Overall, a third of municipal waste is now recycled, but the percentage for durable goods stands at only 17 percent. Worse yet, durables often contain hazardous materials not found in consumables and packaging. Unlike consumables, durable products face an "end of life" problem that requires more options than simply reducing, reusing, and recycling. For this set of products, the new mantra for producers increasingly includes a fourth "R": rethink. Rethinking the environmental challenges posed by durable-goods waste also provides interesting opportunities for businesses. The challenges presented by discarded and unused cell phones, which we have studied closely, are a particularly good example.

Flaws of the "Three Rs"

1. Reduce. Decreasing the generation of waste makes sense, and has proven highly effective for consumer goods. For example, new concentrated products such as laundry and dishwashing detergent offer benefits by reducing packaging and transportation requirements.

Some consumer durables offer a similar opportunity to reduce size. The Commodore PET, the first personal computer, weighed 44 pounds, whereas the new Apple iPad weighs a little over 1.5 pounds. Reducing the size and weight does not work for many categories of durable goods, however. Consider the original Ford Mustang, introduced in 1964. It was 182 inches long and weighed 2,930 pounds. The latest Ford Mustang GT is only six inches longer but weighs 500 pounds more, despite an increased use of plastic and aluminum. (From a positive environmental standpoint, the Mustang's fuel efficiency has improved from 18 miles per gallon (mpg) on the highway to 24 mpg — and more than 30 mpg for less-souped-up versions.)

Moreover, reducing product dimensions may have unintended negative consequences. Consider the fate of the largest carpet recycling facility ever built. The state-of-the-art Polyamid 2000 recycling facility in Premnitz, Germany, which cost US$200 million to build in 1999, closed after only three years. It turned out that a "reduce" strategy by European carpet manufacturers had shortened carpet pile and reduced the nylon content to a level that made recycling uneconomical.

2. Reuse. Shifting a culture from the disposable to the reusable has also worked well in general. The cycle experienced by the bottled water industry offers a great case in point. At the beginning of the new millennium, consumption of bottled water grew at double-digit rates to the point where water became the second-largest beverage category, behind only carbonated soft drinks. After peaking around 2007, however, the industry contracted by 1 percent in 2008 and 2.5 percent in 2009. Environmentally conscious (as well as cash-strapped) consumers had turned to tap water and refillable bottles. Reusable plastic, stainless steel, or aluminum bottles are now common on college campuses and in health clubs across the country, offering an option that is far superior to trying to increase the 27 percent recycling rate for disposable plastic bottles.

In the case of durable goods, the issue of reuse proves a bit more complex. In fact, academics in the field use the terms refurbishment and remanufacturing to clarify the extent of work needed to make a used product serviceable again. Consumer electronics are often refurbished simply by having their software tested and upgraded. But the reuse of products such as automotive parts and toner cartridges requires extensive remanufacturing labor, including such tasks as disassembly, cleaning, and parts replacement.

Reusing durable products can offer substantial economic and environmental improvements. Currently, remanufactured cartridges make up 6 percent of toner sales, and can be produced at 20 percent of the cost of a new cartridge. Lexmark and Hewlett-Packard consider this market such a strategic opportunity that they build microchips into the cartridges to prevent unauthorized remanufacturing, which can degrade print quality (not to mention their profits).

But reuse can also have drawbacks. From a broad environmental perspective it is better, for example, to recycle than to reuse energy-inefficient cars. The recent "cash for clunkers" programs in the U.S. and Europe were designed to stimulate the economy while helping the environment by retiring cars with low fuel efficiency. Other energy-intensive products — such as home appliances and even high-power computer chips — often offer similar benefits if they receive "early retirement" ahead of their functional life expectancy.

3. Recycle. Recycling comes last in the hierarchy of waste management techniques for decreasing landfill disposals, but has generally had the greatest environmental impact to date. Lead acid batteries provide the best case study of recycling of consumer durable products, with a 99 percent recycling rate. At the other extreme, consumer electronics offer one of the biggest areas of opportunity. Americans own an estimated 3 billion consumer electronic devices, about 10 per person. Because product life cycles for electronic gadgets are growing ever shorter, electronics represent a growing component of the waste stream, but currently attain only a 15 percent recycling rate. (Also of note: A substantial portion of electronic waste is exported to developing countries for reuse; instead, however, these devices and parts end up being discarded in countries with minimal environmental oversight.)

Rethinking Durables

Sustainability for consumer durables demands deeper thinking than the simple "reduce, reuse, recycle" framework. And unlike consumables, where the responsibility for rethinking falls on consumers, for durables, the primary rethinking job belongs to business executives and environmental regulators.

A rethinking of the problem should start with an examination of the ecological impact and economics across the full product life cycle — from manufacture through use, reuse, recycling, and disposal. The economic incentives for the various industry players must also be considered, including original equipment manufacturers (OEMs), retailers, service providers, remanufacturers, recyclers, and waste management companies. Every industry has a unique set of players; for each of them, the costs and benefits vary considerably, and are sometimes at odds. This insight provides a starting point for thinking strategically about reshaping the industry value chain in ways that increase profits while reducing environmental impact. Such rethinking can be employed by business executives to seek out new profit pools — or, alternatively, by regulators to alter the profit pools and enhance overall societal benefits.

Consider the case of cell phones. Motorola introduced the first cell phone in 1983. Though it was expensive ($4,000), heavy (more than a pound), and awkward (a foot long), it tapped an unmet need for wealthy people on the move. Today, prices have plummeted, a typical cell phone weighs between 3 and 5 ounces, and cell phones are seen as essential for nearly everyone. Annual sales of new phones worldwide exceeded 1.2 billion units in 2009. In the United States, entry-level designs are priced at less than $40 and high-end smartphones like the iPhone or Android are still less than $700 at full retail and less than $200 when combined with a two-year service contract. Some 285 million people in the U.S. have cell phones; that is, the penetration rate stands at 91 percent.

Cell phones, however, quickly become obsolete, creating a glut of older, unused phones with waste and environmental implications. In the U.S., for example, the high rate of market penetration has led to intense battling among phone service providers to entice customers away from the competition — and with ever-decreasing costs, it's profitable for them to offer ever-lower phone prices. Meanwhile, manufacturers have made continued improvements in handset designs — some of them significant, such as Apple's introduction of the iPhone, which gained a 40 percent market share in its first three years. As a result, the initial lifespan of a phone has fallen to between 18 and 24 months. In other words, roughly half of the phones in use one year are retired the next year. An estimated 10 to 15 percent of these are simply discarded and merged invisibly into the municipal waste stream. A much larger percentage of those retired are "stockpiled." Because of their small size but high perceived value, roughly 65 to 70 percent of the old phones end up in a drawer as a rarely used backup.

That leaves less than 20 percent of retired phones in the U.S. to be collected for reuse or recycling. Of those, about 65 percent are reused, mostly in emerging markets in Africa and Latin America. Prices for reused phones range from around 10 to 50 percent of the price of the new version as fresh designs with better technology continuously displace — and devalue by 30 to 80 percent — functional older models. This being the case, used phones quickly become obsolete and unwanted even in the secondary market.

Ultimately, only 6 or 7 percent of cell phones are recycled for scrap metal. The typical recycled phone generates less than a dollar of revenue from the recovery of about an ounce of copper and trace levels of the more expensive precious metals such as gold, palladium, and silver. Frustratingly, the typical recycled phone easily could have remained operational for four or five more years from a functional point of view.

Electronic waste, which includes cell phones, makes up less than 2 percent of the mass disposed of in landfills, but it accounts for 70 percent of the hazardous waste. Since most old handsets remain stockpiled in a drawer, cell phones have had little impact on landfills to date. But with the retirement of 130 million handsets per year, there may well be more than a billion stashed handsets that could eventually end up as toxic waste.

Rethinking the Cell Phone Cycle

Our research into the cell phone value chain, in collaboration with Vered Doctori Blass of Tel Aviv University, offers two examples of how industry players at different points along the value chain could potentially increase profits while reducing the environmental impact.

The first opportunity is in phone design. Design decisions can affect the economic and environmental performance in different stages of the phone's life cycle by affecting the manufacturer's costs and consumer demand (in turn, affecting profitability), as well as the environmental impact at different stages. For example, cell phone manufacturers employ "design for assembly" techniques such as modular designs and snap-together fasteners to simplify the assembly process. Using common "platforms" for a range of models allows manufacturers to deal with unpredictable mix issues by delaying customization to the final steps, which reduces the need for expensive inventories. But cell phone manufacturers have been less aggressive in implementing "design for disassembly." By focusing explicitly on the end-of-life stage in addition to the initial production stage, cell phone companies can design the product to automate the disassembly process and lower the cost of refurbishment and component reclamation. A clear technology road map for such modular designs would increase the odds that components can be reused rather than merely recycled. And components that are not likely to be reused can be designed for easier recovery of valuable raw materials.

Additionally, innovative design can reduce the energy consumption of the phone, therefore reducing the cost to the consumer and increasing demand. In some cases, new technology can save up to 90 percent of the energy consumption in the usage phase. Changes in design that reduce the quantity of precious metals in cell phones can also be critical. For example, from 1999 to 2003 the amount of gold in phones was reduced by an estimated 25 percent; however, the tiny gold concentration in cell phones (0.03 percent) accounts for up to 80 percent of the recycling revenue. The downside is that if cell phone manufacturers keep decreasing the amount of gold, recycling will become unprofitable (unless gold prices continue to increase or government regulation provides incentives or makes recycling mandatory).

These trade-offs illustrate that cell phone companies need to rethink their design efforts. Although process innovation has the potential to affect costs, and product innovation can increase the demand for the product, the short-term benefits of innovation for recovery are less apparent. Cell phone manufacturers may invest in design that affects the end-of-life stage only if they are required to take back their own products (not just subcontract collection and disposal via a third party, as they do today) or if they incorporate refurbishing and recycling activities as part of their business strategy. Because innovation can be applied to different aspects of design, manufacturers need to rethink where changes in design can be most effective economically and environmentally.

The second opportunity is in refurbishing older phones. Our research into smartphone pricing in a monopoly environment — such as the U.S. partnership between Apple and AT&T for the iPhone or Sprint and HTC for the Android-based Evo 4G — indicates that a service provider could significantly increase profits by offering refurbished models along with new ones. Careful pricing of refurbished phones can entice traditional handset users to upgrade from voice-only to data plans — while minimizing the cannibalization of new product sales. Our research shows that sales of smartphones could go up if the introduction of a remanufactured version induced the service provider to lower the price of new models. Such a price reduction would prove optimal because the manufacturer would sell more new units at a lower price. This in turn would encourage a second tier of consumers to upgrade to the data plans. In short, a service provider such as AT&T or Sprint could use refurbishing to expand its market by actively creating a secondary market to serve a more cost-conscious set of consumers.

The environmental and societal impacts of such a refurbishing strategy, however, would require further assessment. On the one hand, refurbishing a used smartphone consumes less energy than manufacturing a new one. For that reason, a refurbished phone — which requires about 7 megajoules (MJ) of energy for collection and refurbishment — places far less demand on the environment than a new phone, which consumes about 200 MJ. On the other hand, in this example, refurbishment does not displace production but instead is used to expand the market.

Some of this negative impact could be offset by expanding processes to collect the phones after the second use. ReCellular Inc., founded in 1991 in Dexter, Mich., dominates the market for reclaiming cell phones in the U.S. after their first use, with a market share exceeding 50 percent, thanks in part to its in-store take-back partnerships with Verizon, Motorola, Walmart, and others. But ReCellular captures less than 5 percent of retired phones. With a sufficiently scaled "closed loop" supply chain, service providers and OEMs might be able to dramatically increase the collection rate at the end of both first and second lives, thereby reducing the longer-term environmental threat from millions of stockpiled smartphones. Ultimately, a service provider like AT&T might find it necessary and lucrative to expand geographically to developing regions to control both the demand for the refurbished products and their eventual collection and disposal.

Independent of whether better collection and recycling offsets the environmental impact of more smartphones, industry leaders must make sure that government regulators understand the societal benefits of such a strategy. Expanding the reach of smartphones to more of the world's population offers a low-cost way to reduce the digital divide between people in developed versus developing nations, with perhaps even less environmental impact than the much-lauded $100 laptop. Regulations must avoid discouraging such innovation.

As these examples suggest, creating a more sustainable solution to managing consumer durables' end of life requires significant rethinking. By taking a strategic perspective that embraces a wide range of levers, from design to pricing to vertical integration, companies could avoid the win–lose mind-set so often imposed on them through government regulation. Given the current unsustainable approach to consumer durables life-cycle management, the creative capitalist can easily find opportunities to increase profits while reducing environmental impact.

Author Profiles:

  • Tim Laseter holds teaching appointments at the London Business School, the Darden School at the University of Virginia, and the Tuck School at Dartmouth College. He is the coauthor of Strategic Product Creation (McGraw-Hill, 2007) and the newest edition of The Portable MBA (Wiley, 2010). Formerly a partner with Booz & Company, he has more than 20 years of experience in operations.
  • Anton Ovchinnikov is an assistant professor of business administration at the Darden School of Business at the University of Virginia. His research addresses theoretical and application issues, including behavioral operations and environmental sustainability in the business, government, and nonprofit sectors.
  • Gal Raz is an associate professor of business administration at the Darden School of Business at the University of Virginia. His research focuses on supply chain pricing and contracts and the public policy implications of supply chain management. Previously, he was on the faculty of the Australian Graduate School of Management in Sydney.
  • Also contributing to this article was Vered Doctori Blass, who holds a teaching and research appointment at the Leon Recanati Graduate School of Business Administration, Tel Aviv University.
    • Thanks to Strategy+Business

      How To Innovate!

      This step-by-step method helps you invent new products or services using templates. Templates channel your creative thinking so you can innovate in a completely new way. It is not brainstorming. It is a structured process to focus your creative output.

      The way it works is by creating a hypothetical solution first, and then imagining a problem that it solves. This is exactly opposite of the traditional way people invent. Usually, we start with a problem, then we try to invent solutions to it. That is not always effective because many times we do not know all the problems consumers have when using a product or service. When reverse the direction (SOLUTION-TO-PROBLEM), we uncover many new useful problems worth solving, and we have an innovative solution to apply to it. It's cool! And it works!Follow these steps:

      1. Select a product or service to innovate.

      2. Create a list of its components.

      3. Apply a TEMPLATE to each component. This creates a VIRTUAL PRODUCT. It is virtual because it does not exist. It should not seem to make any sense to you at first. That is okay...that is how the method works.

      4. Take the VIRTUAL PRODUCT and think of all the ways it could be useful. What problems does it solve? What benefits does it offer? Who would use it?

      5. Repeat the process using a different component.

      6. Repeat the entire process using a different TEMPLATE.

      Here are the TEMPLATES:

      • SUBTRACTION: removing an essential component and keeping only what is left
      • MULTIPLICATION: making a copy of a component but changing it in some way
      • DIVISION: dividing a component out of the product and putting it back somewhere else, OR taking the component and physically dividing it
      • TASK UNIFICATION: assigning an additional task to an existing component - giving it a new job in addition to its existing job

      Lg-mobile-VX11000-lean-large EXAMPLE: The Cell Phone

      List the components:

      1. Earpiece (making sound)
      2. Microphone (picking up sound)
      3. Keyboard
      4. On/Off Switch
      5. Battery
      6. Volume Control
      7. Antenna
      8. SMS texting
      9. Address Book
      10. Menu
      11. Voice mail
      12. Casing
      13. Display Screen
      14. Camera
      15. Carrying Clip

      Apply a TEMPLATE: (example)

      • SUBTRACTION: Imagine a cell phone without the earpiece (so the cell phone cannot make any sound). This is our VIRTUAL PRODUCT. Now imagine what it would be good for. Ask yourself these questions:
        • Who would use a cell phone that did not have sound?
        • What usage situations or social situations would this be particularly useful for?
        • What would be the benefit?
        • How would it work?

      THE IDEA: It is a new kind of cell phone that is only for SMS texting and Twittering. It has a different rate plan than regular cell phones. It has a keyboard that is optimized for fast inputing. It has an excellent address book and screen display so that you can send texts and tweets very fast. The screen is large so you can share it with other people.

      • Now repeat this process for each component and each TEMPLATE. Keep good notes of your new ideas. Combine ideas together to create completely new-to-the-world concepts for a cell phone!
      Thanks to Innovation In Practice

      The Power Of The Post-Recession Consumer

      An analysis of attitudes and spending reveals a return to traditional values, driven by consumers searching for quality, affordability, and connection.

      The wave of hyper-consumerism that propelled the U.S. economy through the last decades of the 20th century and into the first years of the 21st century has passed. Say good-bye to all the signs of easy wealth we knew from the recent past: McMansions, SUVs, and recreational shopping. Consumer spending patterns are changing as part of a trend that has been quietly gathering strength over the past 10 years. Say hello to a lifestyle more focused on community, connection, quality, and creativity. People are returning to old-fashioned values to build new lives of purpose and connection. They also realize that how they spend their money is a form of power, and are moving from mindless consumption to mindful consumption, increasingly taking care to purchase goods and services from sellers that meet their standards and reflect their values.

      This change in consumer attitudes — visible not only in the United States but also in other countries affected by the Great Recession — is not a fad or whim. It is, in part, a reaction to economic hard times. But it is also closely related to the civic dissatisfaction that is rocking the political establishment, and additionally has some roots in environmental awareness and changing aspirations. That is why this Spend Shift movement, as we call it, is here to stay. It will create opportunities for businesses that heed its message, and penalize those that do not. (For another perspective, see "Values vs. Value," by Timothy Devinney, Pat Auger, and Giana M. Eckhardt, s+b, Spring 2011.)

      Our view of the Spend Shift is based on two years of gathering and analyzing data, and traveling around the U.S. to discover how the recession has affected people's lives. We started with Young & Rubicam's BrandAsset Valuator (BAV), which is a poll of consumer values, attitudes, and shopping behaviors that goes back nearly 20 years. (Although the data sample we focus on in this article is from the U.S., we found that there are similar dynamics in Europe and other industrialized countries.) The BAV holds data on more than 40,000 brands in more than 50 countries, and every quarter it is supplemented with new results — on purchasing and social attitudes — from 16,000 respondents in the U.S. alone. In all, we have queried more than a million consumers in 50 countries on some 70 brand metrics, which include the general awareness consumers have of a brand, the particular ways it makes them feel, and many others. (See "The Trouble with Brands," by John Gerzema and Ed Lebar, s+b, Summer 2009.)

      The BAV data revealed that even before the recession took hold in mid-2008, there were dramatic shifts in what people expected in the consumer marketplace and how they defined and pursued what they considered the good life. As a factor in decision making, sheer desire for the goods themselves has been declining sharply for the past decade. More recently, the BAV surveys show sharp increases in the number of consumers who want positive relationships with marketplace vendors and who focus more on corporate behavior. Between 2005 and 2009, a growing number of people rejected status-driven values such as snobbishness and exclusivity, and embraced attributes related to bringing people closer together or making the world a better place. Among the once-prized brand attributes that declined in this period were: "exclusive" (down 60 percent), "arrogant" (down 41 percent), "sensuous" (down 30 percent), and "daring" (down 20 percent). On the opposite side of the scale, the brand attributes Americans found more important as they began to sense the impending recession and then suffered through the crisis were: "kindness and empathy" (up 391 percent), "friendly" (up 148 percent), "high quality" (up 124 percent), and "socially responsible" (up 63 percent).

      The reference to "kindness" is not a typo. Between 2005 and 2009, U.S. consumers expressed a nearly fourfold increase in their preference for companies, brands, and products that show kindness in both their operations and their encounters with customers. This desire for companies to be more empathetic toward consumers is the biggest shift in any attitude that we have ever seen during the BAV survey's two-decade history.

      The BAV data told us that at the grass roots, people were well ahead of the pundits, corporations, and political leaders. Some of the most important economic statistics supporting this trend come from the U.S. Bureau of Economic Analysis reports on personal savings. The reports show that ordinary Americans began raising their deposits in savings accounts and other secure investments a full two years before the start of the recession. Even as unemployment surged past 10 percent, U.S. consumers socked away more money every month. By the middle of 2009, people were saving about 7 percent of their disposable income — a figure that hadn't been seen since 1995. We also know that people cut back on spending many months before the recession began. In fact, Americans reduced consumption so sharply that in the middle of 2008, it dropped below their disposable income and just kept falling. This reversal of earlier trends in saving and spending continued throughout all of 2009. Without being scolded, lectured, or led from above, U.S. consumers had quietly changed their behavior.

      Regardless of companies' size or their target market, they must understand the significance of the Spend Shift to compete in the post-recession economy. From the scores of interviews we conducted and thousands of data points we accumulated, we can identify a wide array of ways that the shift in attitudes, values, expectations, and behaviors will change the way we buy, sell, and live. We have distilled our findings into four defining principles that together offer a comprehensive look at the origins and impacts of the Spend Shift.

      1. United by Change

      The Spend Shift is a far-reaching and inclusive phenomenon that can't be defined by any particular demographic. According to our data, 55 percent of all Americans are part of this movement; in addition, about one-quarter of the U.S. adult population embraces many of the Spend Shift attitudes and characteristics (we call them Fast Followers). Although the word values tends to polarize U.S. citizens, the Spend Shift is blind to geography, education, age, and income.

      Spend Shifters can be found across the nation: 17 percent are in the Northeast, 23 percent are in the Midwest, 36 percent are in the South, and 24 percent are in the West. Although we'll limit our discussion to what's happening in the U.S., it is worth noting that the BAV data shows that the Spend Shift is a global trend. For example, we found that 53 percent of French consumers are Spend Shifters, as are 45 percent of German and Italian consumers.

      Members of the movement have varying education backgrounds: 23 percent have a high school diploma, 21 percent have a college degree, and 11 percent have completed postgraduate studies. Spend Shifters also represent diverse income brackets; for example, 28 percent earn less than US$40,000 a year, but 18 percent earn between $75,000 and $100,000. They represent Republicans, Democrats, and Independents (28, 31, and 41 percent, respectively). Millennials (the generation born between 1980 and 1995) lead the movement, with 58 percent of 22- to 28-year-olds participating, yet nearly half of all seniors belong, too (including 55 percent of adults age 68 and above).

      What unites all these Spend Shifters is a common sense of optimism and newfound purpose. As the shock of economic loss wears off for many people, they are redefining what it means to be successful and happy. They are living with less and yet feeling greater satisfaction. Seventy-eight percent of those surveyed reported they are happier with a more back-to-basics lifestyle. Eighty-eight percent reported they buy less-expensive brands than they used to.

      2. The New Thrift

      Prior to the Great Recession, the American dream was defined by largeness and acquisition. Yet as a result of the crisis and its lingering presence in the economy, more than two-thirds of U.S. respondents to our survey now prefer a pared-down lifestyle with fewer possessions and less emphasis on displays of wealth. (The figure rises to 77 percent among millennials.)

      Consumer spending will no longer be able to grow faster than personal income, as it did during the 30 years leading up to the crisis. Greater savings coupled with less borrowing is not a value that is foreign to Americans. We would argue this is not a "new normal," but an old one: If you look at historical savings rates in the U.S., people have on average saved 10 percent of their income going back as far as six decades. It was only in the mid-1980s that availability and promotion of consumer credit, as well as sustained economic growth, first encouraged ordinary people to get out over their skis. In only 20 years, average American households swung from being net savers to being net borrowers. Now, however, consumers are returning to traditional values that have long defined the U.S. ideal.

      In the same vein, people want to do more on their own. In the post-recession economy, resourcefulness and self-sufficiency are viewed as virtues, and excessive consumption as a sign of weakness. In our surveys, 84 percent agreed with the following statement: "These days I feel more in control when I do things myself instead of relying on others to do them for me." We examined the 2009 performance of a basket of "retooling" companies — those that are in the top 10 percent of our data on being "helpful," "reliable," "educational," and "durable," such as LeapFrog, Weight Watchers, Craftsman, and DeWalt, because they help people help themselves. The performance of these companies against all others is notable: They performed 249 percent better than other companies when respondents were asked whether they would recommend these brands to a friend, 234 percent better when respondents were asked if they used the products regularly, and 210 percent better on whether the products were worth a premium price.

      Instead of seeking status through acquisition, many people, we discovered, are seeking ways to experience a sense of competence, self-sufficiency, and accomplishment. Look, for example, at, a craft and vintage item website that serves as a retail and trading marketplace for millions. Beginning in 2005, Etsy founder Rob Kalin and his partners began developing an online place where any artisan could display work and sell to any buyer in the world. Within five years, Etsy had 300,000 vendors — the majority were women in their 20s and 30s — the site was visited by millions of shoppers every month, and the company grew to be worth an estimated $300 million in 2010. Etsy's mission resonates in today's marketplace: "to enable people to make a living making things." If you have an idea for helping people learn new skills and connect with others, your business has a good chance of success.

      3. Transparency Breeds Trust

      Today the buying public is savvy about marketing, search, and social media. Companies serving these customers, who know more and expect more, will need to continuously listen, respond, and innovate. They are in for a challenge: Our data shows that confidence in all types of big organizations, including big government and big business, has declined by nearly 50 percent in the past two years. Consumer confidence has dropped especially in the financial and automotive sectors, but also in retail, packaged goods, consumer electronics, and 20 other product and service categories.

      Wary consumers are going beyond just reading labels to get the best products and the best deals. The most tech-savvy are using online services as they stand in the supermarket aisle to get instant access to information on prices and on a company's social or environmental record. GoodGuide, for example, a California company that tracks, tests, and publishes research on the basic "goodness" of products people buy, has reviewed more than 65,000 products and posted findings online for consumers since 1997. Shoppers are also relying on one another for information, via Facebook, Twitter, and online rankings.

      Twentieth-century companies were in the information arbitrage business. They knew more about their product than customers did, and they used that information advantage to create profits. Today, however, customers have equal (and sometimes superior) access to data. As a result, transparency becomes all the more crucial. Today's stakeholders can see through a glossy cover-up. They crave a true, authentic story. They will be interested in how a company thinks and how it makes decisions.

      One company that has recognized this is Patagonia Inc., evident by its launch of the Footprint Chronicles in late 2007. This online feature reveals how the manufacturing and delivery of Patagonia's products affect the environment. A visitor to the site can click on any product and track its environmental and social impact along its path to the store. As a product crisscrosses the globe, pop-up videos explain each stage of production, from design creation to sewing to distribution, giving statistics for each item's energy consumption, distance traveled, carbon emissions, and waste generated. Although the Footprint Chronicles have demonstrated that some Patagonia products have negative environmental impacts that are nearly impossible to upend, the company's presentation of fact rather than message has helped establish it as an honest, trustworthy company. In today's marketplace, successful companies will practice complete transparency, letting customers see their supply chains, management strategies, and values.

      4. Companies That Care

      As we noted earlier, our data suggests that kindness and empathy are now dominant discriminators in commerce, and are valuable attributes of the best companies. The ability of a company to identify with its customers is now a prerequisite for any brand in the post-crisis age. Today, openness, humility, and understanding are critical. Generosity binds a company to its community and its stakeholders.

      The rising importance of generosity reflects the fact that the post-crisis era will be defined by inclusion rather than exclusion. The emphasis is on being more human and humane in transactions with others, and people will set these same standards for the businesses with which they deal. Spend Shifters are buying artisanal food because they trust companies that reveal how their food is produced and handled. They patronize cooperative small businesses because such businesses use their profits to build up their local regions. Passionate customer groups will also band together to fund niche offerings that speak directly to the areas about which they feel most strongly. Because 71 percent of U.S. consumers are now aligning their spending with their values, businesses that practice in a new way will find a vibrant marketplace. Instead of selling shoes, such businesses sell empathy and respect. For each pair of Toms Shoes that a customer buys, for example, the company sends a pair to a child in the developing world. Instead of serving food, companies create communities of hope. Instead of making cars, they promise fairness, openness, and shared discourse.

      Consumers will be looking for signs that companies care about their impact on communities and are investing in making things better. Selling to your customers will require investing in your customers. Generosity opens up networks, provides access to talent pools, and creates future customers. The vanguard companies understand that showing kindness and humanity is now a competitive advantage.

      Microsoft is a telling example. Although Apple's ads make it seem as though all the cool kids hate Microsoft and favor Apple, the two companies aren't even close when it comes to the sentiments of the public at large. In our BAV survey, Microsoft always scores high on measures of its reputation, exceeding Apple by a wide margin. How does Microsoft do it? Despite its massive size, Microsoft is still widely associated with the single personality of its founder, Bill Gates. He gives Microsoft a human face and, more important, his philanthropy gives the company a heart. In February 2009, Microsoft launched a program called Elevate America to provide 2 million people with free training in information technology to help them find jobs in the postindustrial economy. By August 2010, Elevate America was running in more than 30 states and serving 900,000 people.

      When we talked to Akhtar Badshah, Microsoft's senior director of global community affairs, he told us that in its response to the recession, Microsoft pursued three main areas of focus: education, innovation, and jobs and economic opportunity. Those choices are good for Microsoft, because they create an opportunity for the company to demonstrate its strengths to current and future customers. The key point is that Microsoft uses both its money and its true areas of expertise to maximize the good it can do as a citizen corporation, showing how a company can be charitable by redeploying its existing assets and infrastructure as tools for social and economic development.

      The Consumer Connection

      The Conference Board's Consumer Confidence Index was at 50.2 in October 2010, up from an all-time low of 25.3 in February 2009, but still far from 90, the indicator of a stable economy. (In May 2000, it reached a high of 144.7.) Although the growth of consumer spending appears to be slowing, we believe that people are simply reallocating the way they spend — looking for a connection to the creator of the product; banding together to get better deals; and pushing service and product creators to do more, price better, and connect more deeply to their wants and needs.

      Even as people find themselves less rich, they are deploying their dollars in a more calculated and strategic way to influence institutions such as corporations and government. This desire to use money to express values stands out in our BAV data, and was expressed by many of the people with whom we spoke. Nearly two-thirds of all the people who responded to the BAV felt they could affect corporate behavior through their purchasing habits, and the same proportion avoided companies whose values contradicted their own.

      The most successful companies will respond to this shift by adopting a business model in which all three parties — the business, the customer, and the community — win in every transaction. Although the Spend Shift will dampen domestic demand for some products, the market for values-oriented goods and services offers opportunities for growth in what might otherwise be considered mature categories. We examined the performance of a group of companies and brands that scored in the top 20 percent in the BAV survey on the values we had noted were becoming increasingly important — self-reliance, adaptability, honesty, quality, and community. And we found that in aggregate they enjoyed nearly three times as much usage and preference as brands that did not represent these values.

      We believe that the future face of capitalism will be defined by delivering value and values. Those that embrace this reality and adapt will find extraordinary opportunities. Those that ignore it will do so at their peril.

      Author Profile:

    • John Gerzema is president of Brand Asset Consulting, a Young & Rubicam Brands company. He is a pioneer in the use of data to identify social change and to help companies both anticipate and adapt to new consumer interests and demands. Gerzema oversees the BrandAsset Valuator, the world's largest database of consumer insights.
    • Michael D'Antonio is a Pulitzer Prize–winning journalist based in New York. He is the author of more than a dozen books, including Forever Blue: The True Story of Walter O'Malley, Baseball's Most Controversial Owner, and the Dodgers of Brooklyn and Los Angeles (Riverhead Books, 2009).
      Thanks to Strategy+Business

      A Better Choosing Experience

      When consumers are overwhelmed with options, marketers should give them what they really want: ways of shopping that lower the cognitive stress.

      When Baskin-Robbins, now the world's largest ice cream chain, opened in 1953, its line of 31 flavors — one for every day of the month — was a novelty. At the time, such variety was unheard of, and Baskin-Robbins used it to stand out from other chains. Cofounder Irvine Robbins said, "We sell fun, not just ice cream," and part of the fun for customers was the experience of seeing and tasting so many new flavors. The company continues to emphasize variety; it has developed more than 1,000 flavors of ice cream to date, 100 of which are rotated through its stores in a typical year.

      Today it seems obvious to offer consumers more choice — but the experience is no longer a novelty, or nearly as much fun. Whereas in 1949 the average grocery store stocked 3,700 products, the average supermarket today has 45,000 products, and the typical Walmart has 100,000 products. There are even more options online, including 27 million books on Amazon and 15 million date possibilities on Heinz was long famous for its "57 Varieties," and Burger King for letting you "Have It Your Way," but newer businesses have upped the ante. Starbucks, already known for its 87,000 drink combinations, recently launched the However-You-Want-It Frappuccino, with "thousands of ways to customize your blended beverage." Cold Stone Creamery claims that its menu of mix-ins provides more than 11.5 million ways to "customize your ice cream treat." Long gone are the days when an array of 31 flavors knocked our socks off.

      Consumers have grown accustomed to having a lot of choice, and many people still express a strong desire for having more options. But that doesn't make it a good idea. There are neurological limits on humans' ability to process information, and the task of having to choose is often experienced as suffering, not pleasure.

      That is why, rather than helping consumers better satisfy their preferences, the explosion of choice has made it more difficult overall for people to identify what they want and how to get it. Thus, if the market for your product is saturated with choice, you can't gain a competitive edge by dumping more choices into the mix. Instead, you can outthink and outperform your competitors by turning the process of choosing into an experience that is more positive and less mind-numbing for your customers. You can design a more helpful form of choice.

      The goal of a new approach to choice should not be to manipulate consumers into making choices that aren't right for them, but rather to collaborate in a way that benefits both the consumer and the marketer. Although people tend to be skeptical of any attempts a business makes to "guide" them, when it comes to choosing, you truly can help consumers help themselves. To accomplish this, here are four actions you can take:

    • Cut the number of options.
    • Create confidence with expert or personalized recommendations.
    • Categorize your offerings so that consumers better understand their options.
    • Condition consumers by gradually introducing them to more-complex choices.

      Offered together, these actions can distinguish your company. Rather than trapping people in a morass of alternatives, you'll be one of those rare companies whose offerings rise to the top by raising customer spirits.

      The Multiple-choice Problem

      The peculiarities of consumer choice have been evident for some time. For example, in the mid-1990s, one of us (Sheena Iyengar) conducted a well-known study of shopper selection at the Menlo Park, Calif., location of Draeger's — a specialty grocery store renowned for its huge selection of produce, packaged foods, and wine. Iyengar initiated the experiment after she realized that although she greatly enjoyed visiting the store, she often walked out empty-handed, unable to settle on just one bottle of mustard or olive oil when she had hundreds of options. Might other shoppers be experiencing the same problem, she wondered?

      To find out, Iyengar and her collaborator, Mark Lepper, set up a jam-tasting booth near the entrance of the store. Every few hours, the booth switched between offering an assortment of 24 jams and offering an assortment of six. The researchers wanted to know which assortment would attract more people and which one would lead to higher sales. They observed the shoppers as they moved from the booth to the jam aisle, which boasted 348 varieties.

      As might be expected, 60 percent of the incoming shoppers stopped when 24 jams were displayed, but only 40 percent stopped when six jams were displayed. Clearly, people found the larger assortment more attractive. However, when these same shoppers went to the jam aisle to pick up a jar, the shoppers who had seen only six jams had a much easier time deciding what to purchase.

      By observing the shoppers and eavesdropping on their conversations, the researchers discovered that the small assortment helped narrow down choices, whereas the large assortment left people confused and unsure of their own preferences. Of those who stopped by the large assortment, only 3 percent ended up buying a jar of jam — far fewer than the 30 percent who bought jam after stopping by the small assortment. Taking into account the fact that the larger display was more popular, Iyengar and Lepper calculated that people were more than six times as likely to buy jam if they saw the smaller display.

      These observations may seem to contradict what you already know about consumers. People like the idea of choice. It's exciting to hear a list of exotic flavors and to see a wide wall of colorful jars, any of which can be yours. Having a larger number of choices makes people feel that they can exercise more control over what they buy. And consumers like the promise of choice: the greater the number of options, the greater the likelihood of finding something that's perfect for them. In short, they believe that having more choice gives them more power and satisfaction.

      But they overestimate their own capacity for managing these choices. Psychological studies have consistently shown that it's very difficult to compare and contrast the attributes of more than about seven different things. When faced with the cognitive demands of choosing, people often become overwhelmed and frustrated. As a result, they may forgo the choice altogether, reach for the most familiar option, or make a decision that ultimately leaves them far less satisfied than they had expected to be.

      We see this frustrated response to "choice overload" even when the decision has serious consequences. For example, in 2001, at the request of Steve Utkus, the director of the Center for Retirement Research at the Vanguard Group, Iyengar and her collaborators, Wei Jiang and Gur Huberman, tried to determine why so few of the 900,000 employees covered by Vanguard were participating in their defined-contribution retirement savings plans — also known as 401(k) plans. Analysis of the data revealed that participation fell significantly as the average number of funds in a plan rose. By controlling for individual-level variables such as age and income, as well as plan-level variables such as the size of the company and the extent of employer matching contributions, Iyengar and her collaborators showed that the decline in average participation rates was due to an increase in choice. When plans offered only two funds, 75 percent of the relevant employees participated; when plans offered 59 funds, the percentage of participants fell to 61 percent.

      These findings are particularly significant when you consider the benefits of defined-contribution plans: compound interest, tax-exempt contributions, and employer matching in many cases. Even randomly picking funds is still a better financial move than not participating at all. At the time of the study, a 25-year-old median salary earner who chose to postpone participating in his or her 401(k) plan for just one year would have ended up with US$18,540 less in his or her retirement savings account at age 60 than an identical peer who chose to participate immediately and save 5 percent of his or her income (assuming a 9 percent total annual return on a mix of stocks and bonds). And yet many of the employees, overcome by too much choice, kept putting off the decision or just skipped it.

      In another study, Iyengar and Emir Kamenica discovered that the employees who participated made worse investment decisions, on average, when they chose from plans with more options. For every 10 additional funds offered in a plan, employees allocated 3.28 percent less of their contributions to equity funds (as opposed to bond or money market funds), and they were also more likely to avoid allocating any of their contributions to equities at all. Unfortunately for them, equities are virtually guaranteed to outperform bonds and money markets in long-term investments. Even employees in their 20s, who should have been allocating 80 to 90 percent of their contributions to equities (based on the accepted wisdom of financial advisors), became more likely to entirely avoid equities as the number of options rose, undermining their long-term financial well-being.

      The deleterious effects of too much choice have been observed in situations as varied as buying chocolate, applying for jobs, and making healthcare decisions. This presents a considerable opportunity for marketers, but it requires looking in a different way at one of the essential contradictions of consumer choice: People keep expressing a desire for more choices, and businesses keep expanding product and service options in order to fulfill this desire — but it often does more harm than good.

      Confidence, Trust, and Fun

      Don't marketers have to give consumers what they want? Yes and no. We should give them what they really want, not what they say they want. When consumers say they want more choice, more often than not, they actually want a better choosing experience. They want to feel confident of their preferences and competent during the choosing process; they want to trust and enjoy their choices, not question them. As Irvine Robbins of Baskin-Robbins might have said, "They want fun." And it's your challenge to give it to them. The following four approaches will help you meet that challenge.

      1. Cut their alternatives. You've heard it said that "less is more," but rarely in the context of consumer choice. Most companies avoid reducing the number of products they offer because they're afraid of losing shelf space to their competitors. But careful trimming can lower costs, increase sales, and improve the choosing experience for consumers. In the mid-1990s, when Procter & Gamble Company winnowed its 26 varieties of Head & Shoulders anti-dandruff shampoo down to 15, eliminating the least popular, sales jumped by 10 percent. In a similar case, the Golden Cat Corporation got rid of its 10 worst-selling offerings in the small-bag cat litter category. This led to a 12 percent increase in sales and slashed distribution costs by half; the end result was an 87 percent profit hike. Another example comes from a 2001 study that tracked an online grocer that had made substantial cuts in the number of products it offered, across 94 percent of all the product categories. Not only did sales rise an average of 11 percent across 42 categories, but 75 percent of its customer households increased their overall expenditures.

      If you're working hard to explain to your customers — and perhaps even to your employees — the differences among the variations you offer, then it's time to think about making a few cuts. If the poor performers aren't evident from sales figures, focus groups and online networks can help you separate the wheat from the chaff. Potential consumers should be able to zero in on a product's defining characteristics and explain why it is (or is not) appealing to them. If people respond vaguely or inattentively, that's a signal that the choices you offer are not distinct enough and should be consolidated.

      2. Create confidence through recommendations. Reducing options works well when the variations among products are relatively small. But for highly differentiated goods — books, prerecorded music and video, clothes, and many housewares — you can't get away with offering a small selection. (Even if you could, you probably wouldn't want to, because niche purchases can cumulatively contribute heavily to sales.) Instead, you have to offer a wide variety while helping consumers navigate the complexity so they still have a positive choosing experience. How do you give consumers enough confidence to overcome the complexity of a large choice set? By turning to the people who already have that confidence: experts.

      Through study and practice, experts in any field learn to simplify, categorize, and prioritize information, and to recognize patterns. This allows them to create order out of seeming chaos. For example, a chess player thinking eight moves ahead is presented with as many possible games as there are stars in the galaxy. He or she can't possibly consider every option. The critical difference between novice and master is the ability to quickly eliminate the vast majority of moves and concentrate only on the most promising ones. The novice suffers under the pressure of choice, but the master knows how to relieve that pressure.

      In high-choice conditions, the ideal consumer is the most expert consumer. That doesn't mean someone with in-depth expertise in any one type of product. Most people don't need to become specialists in jam or mutual funds to make decisions expertly. In fact, even if they did become experts, their knowledge would be limited to a specific domain and would not allow them to make better overall choices. However, novice consumers can become expert general consumers by learning to rank and structure their choice sets the way that experts do.

      Marketers can thus help novices make more educated guesses and create confidence in their choices by giving them easy access to expert reviews and recommendations. In other words, you can attract consumers by allowing them to skip over much of the information-processing component of choosing, thereby minimizing their cognitive stress and enabling them to make good choices. Even non-expert advice can prove useful when there is consensus among a large number of reviewers or when the consumer trusts the source. This is one reason for the popularity of shopping websites with user reviews (such as Amazon), and also for the growing popularity of retailers that post recommendations for some of the products they carry (such as Whole Foods or New York's Fairway grocery chain).

      Another way to give consumers access to recommendations, especially when tastes vary or ratings aren't easily available, is to set up automated systems that generate suggestions based on consumers' expressed preferences. These systems, also known as "electronic agents," are software programs that guide people by analyzing their prior purchases or their answers to survey questions. If consumers are willing to invest a little time teaching a well-designed system about their preferences, then the system can serve as a personalized expert for them. People don't usually trust programs as much as they trust other people, but trust in well-performing electronic agents tends to develop over time.

      For example, the Internet radio service Pandora has acquired 50 million users who tune in for an average of 12 hours a month, even though (or perhaps because) they cannot directly choose what they'll hear. Pandora's "mission" is to "play only music you'll love," and it accomplishes this by combining human expertise with an automated system. First, trained analysts determine the musical attributes of every song in the database. (Pandora calls this the Music Genome Project.) Then, when users tell the system what music they like, it searches for other music with similar attributes. As they listen to their personalized music streams, users can let the system know how well it matched their preferences. Eventually, the system comes to "know" the users so well that they no longer have to provide feedback. They can just sit back and enjoy.

      3. Categorize their options. You can also help novices by teaching them to emulate expert judgment. For an expert, there is no completely unique product or service; rather, each offering is a distinctive combination of attributes that the expert has seen before. Thus, where the novice sees 100 different items, the expert sees maybe seven or eight relevant qualities interacting in novel ways, with one or two important features that immediately stand out. The trick is to get the novice to see things as the expert sees them.

      The easiest way to do this is to categorize. For example, Best Cellars, Wine Enthusiast's Retailer of the Year in 2009, makes the choosing process a breeze for its customers by consulting with oenophiles in advance. It draws on their advice to limit its variety to 100 high-quality, reasonably priced wines. Since 100 wines could still be an overwhelming number for novices, Best Cellars divides the wines into eight simple categories, such as "fizzy," "juicy," and "sweet." The novice has to deal with only eight units of information now, which can be managed fairly easily. Once the novice has chosen a category, he or she can choose a wine within that category by reading the detailed labels that accompany all the bottles.

      To be sure, wine experts may not use the same categories that Best Cellars uses, but they apply the same principle when they make their choices. By pre-sorting the wines into categories, the retailer helps novices look at the world through expert lenses. Best Cellars cofounder Joshua Wesson says, "We all want simplicity when it comes to these types of decisions…. We try to make wine shopping as much fun as wine drinking." Note that this is the flip side of what Baskin-Robbins did in its heyday. Both retailers thrived by creating a better choosing experience. Back then, this meant giving customers more choice; now, it means giving them less.

      To simplify the choice process, limit your categories to no more than 20, with 10 or fewer options in each. When you hold to these limits, consumers are likely to feel empowered by the number of choices, and are unlikely to miss any offerings that weren't included. Iyengar and her collaborators, Cassie Mogilner and Tamar Rudnick, discovered this when studying the magazine aisles in several Wegmans supermarkets. The number of magazines available at various branches ranged from 331 to 664, but this number had no effect on buyer satisfaction. What mattered was the number of categories, such as "Health & Fitness" and "Home & Garden," that each display provided. Arranging the magazines under a wider range of subheadings created the perception that the store offered more choice, even when the number of magazine titles was comparatively small. Customers in these stores also reported greater enjoyment of their overall shopping experience.

      For novices, who may not be able to create categories on their own, the categories established by a marketer or retailer provide a framework for making sense of a large assortment, thus keeping consumers from being discouraged by the daunting task of choosing. Because these categories often make the same distinctions between products that experts make, they also provide a general overview of the field, which catalyzes consumers' understanding of it and the development of their preferences within it.

      4. Condition them for complexity. For certain kinds of decisions, you can set consumers up for success by encouraging them to learn from, and build upon, their own previous choices. This is especially valuable if your product is customizable.

      For example, Iyengar and her collaborators, Jonathan Levav, Mark Heitmann, and Andreas Herrmann, conducted a study with a major German car manufacturer. This automaker allows its customers to design their new cars from a long list of options, choosing everything from the engine to the rearview mirror. In the study, researchers presented the first eight design choices in different sequences to different groups of car buyers. One group had to first choose interior and exterior color, with 56 and 26 options, respectively. From there, they chose features in descending order by number of options, ending with interior decor style and gearshift style (which were each limited to four options). A second group of buyers encountered the same choices in reverse order, starting with the design elements that offered the fewest options and ending with the ones that offered the most. Although both groups eventually saw 144 total options across eight categories, the buyers who moved from high choice to low choice had a much harder time. They began by carefully considering every option, but they soon grew tired and settled for the default. In the end, they wound up less satisfied with their cars than the buyers who had progressed from low choice to high choice.

      This research shows that consumers can handle a large number of options, if they start off in the shallows and then slowly move toward the deep, all the while building skill and nerve. Beginning with fewer options not only warms consumers up, it helps them better figure out their own preferences, which in turn enhances their choosing experience. Over time, practicing this choosing technique will condition consumers to cope with increasing complexity.

      An Open Invitation

      Each of these forms of customer engagement can be technologically enabled, for example, through online networks or social media. But the heart of this method lies in better design of the shopping experience, fueled by better awareness of human capabilities. When you take this approach, the goal of your marketing is no longer to give people what they say they want. Instead, your goal is to invite consumers to enter into a collaborative, mutually beneficial relationship with you.

      From the outset, your design shows them that you understand how they think and respect their desire for both control and simplicity. The message is clear: In the short run, you are helping them navigate a bewildering and even debilitating world of options. In the long run, you are inviting them to choose you.

      Author Profiles:

    • Sheena Iyengar is the S.T. Lee Professor of Business at Columbia University and a recipient of the Presidential Early Career Award. She is the author of The Art of Choosing (Twelve, 2010), from which this article is adapted.
    • Kanika Agrawal is a research assistant at the Columbia Business School and a graduate of Columbia's MFA program in writing.
      Thanks to Strategy+Business

      Brand Building, Beyond Marketing

      Consumers are becoming more suspicious of traditional branding. Here are five steps to regain their trust.

      Not so long ago, brands were in the limelight. They were seemingly powerful, and virtuous. Any inconvenient truths were hidden by glossy packaging and one-way, big-bang marketing campaigns. Now, as organizations become ever more transparent, people can see behind the marketing facade and are questioning what they are told. Trust in brands has diminished and consumers are more likely to view brands cynically, and to feel uncomfortable with brands' desire to control. This has created a challenge for many brand owners, because they are ill equipped to cope with greater openness. But the most innovative companies are recognizing the way perceptions are changing, and are adapting their branding strategies accordingly — in some cases, reinventing them entirely.

      In the past, it was marketing departments that burnished the products the company produced and made them appealing to customers. But marketers are increasingly turning away from traditional advertising and focusing on direct communications with consumers. (See "The Promise of Private-label Media," by Matthew Egol, Leslie H. Moeller, and Christopher Vollmer, s+b, Summer 2009.) More broadly, many enlightened organizations are moving branding entirely away from communications and toward connecting strategy, culture, and a wider stakeholder involvement. They recognize that branding is a process that is too important to be left just to the marketing or communications department. These organizations have understood that brand building (even if the terminology of branding is not used) is a participative process involving the whole organization and is the responsibility of all employees. The Netherlands-based finance group Rabobank, for example, which operates in 48 countries and has nearly 60,000 people servicing 9.5 million customers, communicates through traditional media, but it also recognizes that its strength is rooted in its closeness to customers, that its brand is built primarily in the everyday contacts that people inside the bank have with members. It is in this continuous dialogue between customers and employees — both online and offline — that the company's brand is always evolving. Even the company's visitor policy for its new headquarters reflects this ideal: Anyone who is accredited by the bank is allowed to wander freely throughout the building.

      Similarly, the Danish toy company Lego Group, which we have spent many years researching, has recognized that its brand is not created by the marketing department, but instead by the larger organization in its interactions with customers and other stakeholders who have become part of its community. Like many other organizations, Lego built its business through a controlled approach to intellectual property. It conducted market research to understand how its customers thought about it, developed innovative products based on the information it derived, and created marketing communications campaigns to build the brand. However, as computer games grew in popularity, the company feverishly tried to adapt to new trends and opportunities in the marketplace. The result was that the brand became increasingly irrelevant, as people lost track of what it stood for and confused employees struggled to deliver a trusted Lego experience.

      The revitalization of the Lego brand was not a master stroke by the marketing department, but the result of a close dialogue with key stakeholders spearheaded by a new CEO, Jørgen Vig Knudstorp, who took office in 2004. He realized that customers, who were using and adapting — and in some cases infringing upon — the Lego Group's intellectual property, were not threatening the brand, but were actually redefining it. (See "The Promise (and Perils) of Open Collaboration," by Andrea Gabor, s+b, Autumn 2009.) One of the secrets of Lego's ability to engage its stakeholders with the brand is that it took advantage of the small opportunities that emerged along the way: from giving consumers the "right to hack," to inviting small groups of passionate consumers to headquarters to work with the designers on new ideas, to the new CEO accepting the invitation to talk to the brand community on their turf. Many of these small openings have later had significant implications. By opening itself up to an active involvement with these enthusiasts, the company has been able to tap into a rich vein of innovative thinking and has been able to once again make the brand relevant.

      A New Role for Branding

      The Lego Group is an interesting example of open innovation, but it is more than that. It indicates a significant shift in the way we think about brands and points to a future that will be radically different — one in which brand building will involve all stakeholders, and where managers will have to give up the idea of control over a brand and accept instead a fluid, uncertain world where a brand evolves in dialogue with others. This in turn will require both openness and trust.

      Although we might argue that the very essence of brands is about trust — in the sense that consumers should be able to trust the promise that a brand name makes — in reality trust has often been missing. Organizations have trusted neither their customers nor their employees. As Francis Fukuyama notes in his book Trust: The Social Virtues and the Creation of Prosperity (Free Press, 1995), the "assumption that trust does not exist in the system" contributes significantly to the high cost of doing business in certain business sectors and societies. When there is a want of trust, organizations spend much time and effort watching and monitoring what people do. Brand delivery is jeopardized by the constraints placed on employees, who respond to the lack of trust either by finding ways around rules and procedures or by telling managers what they want to hear.

      A similar situation exists with regard to consumers. Rather than being open and participative with consumers, many organizations assume that the people buying their products and services can't be trusted. Not surprisingly, this is reciprocated. The market research firm Young & Rubicam found that the percentage of brands that consumers consider trustworthy plunged from 52 percent in 1997 to 22 percent in 2008. (See "The Trouble with Brands," by John Gerzema and Ed Lebar, s+b, Summer 2009.)

      How, then, can trust be engendered? Trust has to be earned over time through the experience of promises delivered, which means less of a focus on telling people about how great your brand is and more on building relevant content. This requires openness. Some businesses already do this. Patagonia Inc., the outdoor sportswear brand, trusts its employees and its customers, because it understands that all stakeholders are wedded to the vision of the brand, and it encourages them to take part in an open dialogue about the organization. Rob BonDurant, Patagonia's VP of marketing and communications, says that honesty is what built the Patagonia brand both with employees and customers. He argues that the culture of honesty helps to tear down silos internally and to connect the brand with its customers. Another example is the Dutch insurance company Interpolis, which decided that instead of asking customers to provide receipts and questioning their claims, it would trust them. Former Interpolis executive board chairman Piet van Schijndel (now a member of the board of directors of Rabobank) said in a speech that the company "had to let go of the old-fashioned concept of an organization built on mistrust and rules. Instead, we started focusing on trust between people; between ourselves and our customers and between the management and the staff." The result was not only greater operational efficiency, but also a decline in the number of claims.

      We would suggest that brand executives, instead of relying so much on the rhetoric of persuasion, should instead work to trust those around them and become active participants in nurturing brand dialogue by fostering brand communities and sharing the knowledge gleaned from these encounters inside the organization. The 2009 Spanish, European, and World soccer club champion, FC Barcelona, practices this approach. The club, which is owned by its 170,000 members, encourages interaction. Chief Executive Joan Oliver i Fontanet says that who runs the club and how the team plays is determined in a dialogue with members. The club's slogan, més que un club ("more than a club"), recognizes this strong sense of community and involvement. This approach moves brand building beyond marketing, and integrates it into the very fabric of the organization and how it connects with the outside world. If branding can be re-branded, so that it comes to be seen as both substantive and trustworthy, it will help to better connect organizations with customers and other stakeholders.

      Five Imperatives to Regain Trust

      As the shift from a marketing communications–driven approach to brand building toward an organization-wide, participative approach gathers pace, managers will have to become aware of some new imperatives — but also some new dilemmas and challenges.

      1. Content not communication. It is what you produce and how you deliver it that matters if you want to build a relationship with customers. Advertising is sexy, PR is influential, and design is uplifting; but it is the substance of what you do that matters most. As media fragments and services become more dominant, the way companies interact with people and the products and services they deliver will increasingly influence consumers' perceptions of brands.

      2. Mind your language. Be aware that the language of branding is a turnoff inside many organizations, and that the hyperbole of marketing communications is increasingly ineffectual. Now that we are all creators through Facebook and YouTube and blogs, we better understand the language of persuasion. Increasingly, we can also see through organizational facades to the reality, so more transparency is required.

      3. Let go. The brand is not something that can be controlled by managers. It is employees and increasingly customers who self-manage brands. Managers and writers have long been seduced by the idea that marketing plans can be developed and implemented in a vacuum, but the reality of our socially mediated world is that brands are created by a diverse group of people.

      4. Open up. There is a greater requirement to make the brand open to the influence of others. In the future, the required expertise of a brand manager will be to listen, to absorb, and to share. Traditionally this receptivity to the outside world has been derived from market research, but the movement toward co-creation has led to the direct involvement of consumers in defining products and services and the way brands are delivered. The most important mental shift here is to stop seeing users as an object and to start seeing them as a source of creativity and value creation.

      5. Just do it. As Nike's famous slogan implies, accept that there will be successes and failures. Learn from open source practices, and experiment. The emergence of new approaches to branding doesn't require organizations to change their whole modus operandi. The point is to try things; to experiment with openness and to find out how the culture and strategy of your organization can best engage with customers.

      Opportunities and Dilemmas

      The world of brands is changing fast. Whereas in the past brand managers lived in a structured and seemingly predictable world, they now have to cope with a loss of power, a requirement to be continually adaptive, and the need to trust others. This brand new world is one of freedom, yet managers have to confront a number of challenges: greater transparency increases the volume of stakeholder interactions, co-creativity provides input but also resistance from the conservatism of many brand enthusiasts, and more dialogue can undermine the coherence of the brand.

      There are no easy solutions to these challenges, but we should pay attention to Joan Oliver i Fontanet's argument that brand building (perhaps like soccer) is an art that requires intuition and a willingness to adapt to ever-changing circumstances. That is much easier when you have a clear idea of what your brand stands for, and when you have a certain style of play. Then you can encourage experimentation and discovery within a framework as the brand moves from one state of uncertainty to another. This new freedom has the potential to inject dynamism into brands, so that they become continuously innovative and create real value.

      Author Profiles:

    • Nicholas Ind is the author of 10 books, including The Corporate Brand (NYU Press, 1997), Living the Brand: How to Transform Every Member of Your Organization into a Brand Champion (3rd ed., Kogan Page, 2007), and Branding Governance: A Participatory Approach to the Brand Building Process (with Rune Bjerke; Wiley, 2007). He is an associate professor at Oslo School of Management.
    • Majken Schultz is a professor of management at Copenhagen Business School and a partner in Reputation Institute, a private advisory and research firm. She has published widely in the field of management and branding and serves on several corporate boards.
      Thanks to Strategy+Business