What's up with trade agreements? Fear and pride, that's what.

So I was catching up on my Asia news while in Singapore recently, to learn that the ASEAN countries are essentially on notice that they'd better put-up-or-shut-up in creating a more integrated regional trading force. (ASEAN is sort of NAFTA East, but excludes China and India, although they are party to regional discussions with ASEAN.) I've been tracking this for a long time because I predict the Asian countries in ASEAN (and India and China, but especially the fast-rising Malaysia, Singapore, Thailand and Viet Nam) are in a position to both grow and be more powerful on the world political stage via a combination of economic emergence and tighter integration. With all the hand-wringing in the West about the impact of China as an economic superpower, I think China's got nothing on what can happen with ASEAN. After all, the structural and resource disparities among these countries create an ideal opportunity for partnership. Outside of India and China, ASEAN countries have labor, transportation, logistics and targeted industrial support well in hand -- and it's only going to get better.

And now, the WTO talks have sputtered (almost) to a close. The US Trade Representative, a very impressive woman named Susan Schwab, won't quite admit the current round is dead, but as of last Friday, the agricultural subsidy issues seem to have put the trade talks on life support.

So, with ASEAN, what's up? I think the security issues that are being blamed for sidetracking the talks are really a sideshow, as important as they are in the context of the Burma international aid fiasco. India and China have already begun military cooperation (as of last year), but given their very real border disputes, I believe the ASEAN cooperation framework is going to be less interesting to them than occasional bilateral moves between them. The ASEAN countries clearly have a window of opportunity. They need each other more than they would benefit from going it alone in the region. So I'm not really sure what's holding them up -- unless the newly shiny Vietnam, Thailand and now Cambodia are just not as interested in cooperation. Growth can make you heady.

And the farm subsidies that are confounding the WTO talks? It's fear. There are too many vested interests on all sides within the agribusiness arena to let this one be easily resolved. Plus, food supplies are a matter of national security (and, in France, food quality is a matter of national pride). It gets tricky pretty fast. 

I think the argument that the US wants open, free trade of food supplies (except when we don't) doesn't frame the US point-of-view accurately. For many businesses in the US, it's about creating new markets all around the world, in part by dismantling or damaging their domestic markets. While some might view this is economic "restructuring" in the name of free trade, I don't see it that way. Creative destruction can be well and good, but for me the social and national identity issues in a nation's food production are crucial. 

And I admit that's because I like my Croque Madames made with local French farm eggs, EU ham, Poilane bread, and Gruyere. It's not just France's identity at stake. It's my own. 

Think of it this way: Freer trade makes the source and type of food you eat far less "local". While it has been argued (even in the liberal online mag Salon.com, whose journalism I love) that local produce is not necessarily "green" (burns more fossil fuels per unit than mass distributed food), local produce has something that agribusiness folks can't every package. 

Meaning.

So, what's up with the trade agreements? In ASEAN, country pride. In the WTO -- global corporate pride. And a bit of fear that globalized food supplies will stamp out a lot of valuable things about place, sovereignty and security.

UPDATE: CNN covers this story today (Wednesday) with a nice summary of the WTO breakdown. And Forbes has a brief article as well that summarizes the issues, the winners/losers, and the hope for continuation of this seven-year-old Doha round.

Not all customers are alike - and some aren't even customers at all ...

Boy, I can't wait to share a blistering blog scandal with you. First, some background.

I was chatting with Jim Sterne, an eminent colleague from Canada who is also a customer strategist, while we were in Bogota at a recent CRM conference we were keynoting. I mentioned that I had been developing the five forces of customer experience management (think Porter's Five Forces, but through the looking glass ... ) that has as a pillar that a company's value is defined in part by networks of opinion. This is clear from detailed stock price research in financial services when a firm engages in fraud. The loss in total return to shareholders often far exceeds the actual fraud. 

You can also look at what happened when Egg, the online UK bank, was recently acquired by Citigroup. Citigroup promptly "fired" Egg's least profitable customers, sending them a letter indicating that Citigroup viewed them as a "risk". Big hullaballoo in the press, followed by threats by the UK government to look into it -- followed by the UK government actually looking into it. In the world of enterprise risk management, that means you've got reputation risks compounded by regulatory risks. Bad move, Citigroup. Forget the money you probably "saved" by firing those customers.

The point is, and Jim Sterne bore me out on this based on social network research he's done, your customers aren't all worth the same to you. Some Egg customers might not have been profitable, but because many of those actually paid their bills on time, they were rightly annoyed to be called "risky". Once you get to negative word of mouth, your "net promoter score" (Google(tm) that) drops like a cannon ball in jello. Splat. 

And, other folks who are not even your customers can pile onto this. This is negative network effect in action. 

Take the example of this thread on the very solid food blog Alosha's Kitchen. She wanted to share a potato salad recipe she had borrowed from a friend's site -- with some modifications of her own. She knew that the recipe she was borrowing had appeared in some form in Cook's Country (a publication of America's Test Kitchen, and Cook's Illustrated, the latter which I enjoy very much).

So she made her mods, gave Cook's Country due credit -- and promptly got called on the carpet by a public relations rep at ATK. You can read the entire exchange at the link.

The interesting thing is that this one incident has now generated literally HUNDREDS of responses just on Alosha's Kitchen blog. I suspect it will be echoed tens time over by the time it's all done, generating a signal in the blogosphere a thousand times bigger than ATK intended.

And, the question arises: What's the cost to ATK? First, you have to look at the brand values that are expressed in the company's behavior. Actions speak louder than words. Prior to this exchange, for many bloggers, ATK may have represented a quality assurance team, a bunch of heroic, practical cooks dedicated to helping us all avoid a bad meal, and to even ensure a very good meal when it really counts. Now that this exchange has been publicized, for many people the ATK brand values might be defined differently. Words used include "arrogant". 

Secondly, you have to look at lost future sales to current customers (discounted to today using the time value of money). Are we talking hundreds of dollars, or thousands? 

Thirdly, you have to look at the effect of the net promoter score, which is based in part on Reichheld's empirical (and generally accepted) observation that people who don't like your company will talk you down to other people. (New studies show that the negative word of mouth effect varies by sector and competitive environment, but the effect is still there). So, what is the loss of sales to customers you MIGHT have had? Some might argue you cannot know, but in fact, you can do a nice estimate based on Reichheld's work and multiplying by the discounted future value of the estimated number of lost future customers.

I'm guessing the cost of this exchange will be in the tens of thousands of dollars of lost future revenue. 

Now, when I teach the five forces of customer experience management, one of the points I make is that these forces make it REQUIRED that companies develop new core competencies, and chief among them:

Monitoring and dealing with bloggers in respectful ways. In fact, if you can, leverage them.

So, what would you recommend to ATK at this point? 

It's not all about the iPhone -- or is it?

Saw this on the NYTimes blog section today. 

V.C. Advice to Entrepreneurs: It’s Not All About the iPhone
By CLAIRE CAIN MILLER
Though almost every discussion at the MobileBeat conference in Sunnyvale, Calif., on Thursday centered around the iPhone, venture capitalists told mobile entrepreneurs to broaden their focus and build applications for all phones. Still, all anyone wanted to talk about was the Apple App Store, from which users have downloaded 30 million applications for the iPhone this month.

Startups should “intelligently hedge their bets across multiple platforms,” advised Richard Wong of Accel Partners. His firm has invested in mobile games and application site GetJar, “the store for the other 3 billion phones that aren’t iPhones,” as Mr. Wong put it.

Rick Segal of Blackberry Partners Fund and JLA Ventures reminded developers that the iPhone only accounts for a tiny share of the worldwide market. In India, for example, Nokia has 70 percent market share. “You must think multi-platform,” he said.

Some investors insisted that multiple mobile platforms–whether Apple’s, Google’s, Research in Motion’s or others–will thrive. Matt Murphy, head of Kleiner Perkins Caufield & Byers’ $100 million iFund, said most entrepreneurs who pitch him have iPhone applications, but that the platform war “is not a winner-take-all game.”

David Sokolic of Battery Ventures disagrees. He predicts a shakeout akin to the PC market and Microsoft’s Windows, with a clear leader emerging...

Two learning points here, I think.

1. It IS all about the iPhone for mobile entrepreneurs, whose main goal is to take invested capital and gain quick cash flows. The iPhone is not the product: the real product is the Apple platform, which is about as direct-to-consumer as you can get, with the added bonus of being a trusted channel. Apple's true insight with the iPod and the iPhone is that the PLATFORM is the offer, and the benefit of that offer is a simple, trusted source for digital content. By giving that platform so easily to entrepreneurs, Apple theoretically can build robust product ecosystem very quickly, while giving software developers the ability to leverage what they presumably do well: build and sell software. Software entrepreneurs are usually terrible at marketing. 

Contrast the Apple "platform" with what you have to go through to get Nokia's attention in India. I think the VC's are looking at this wrong. The risk is in getting to early cash flow, not in diversifying the customer base at a huge up-front cost for HR, multi-platform technical support, and high cost of marketing. 

2. Will a clear leader emerge? One thing that strategists almost uniformly ignore is the power of the retail channel to keep a leader from emerging. So long as both hardware and software are sold through retail, you'll have multiple players. Retailers just have too much incentive to keep suppliers vying for the value of their in-person sales channel to give it over to one provider. It gives the retailer buying power, and it gives the OEM a channel they can rely on -- even if there's price pressure. 

So, to answer the question, will a clear leader emerge, we have to look at the question, will people start buying phones and mobile software primarily through retail, or will they start buying the phones and software primarily via the Internet? Because on the Internet, clear leaders do emerge.

Want to lay bets on the future of mobile phone retail? I know how I'm placing my own bet.

UPDATE: Very interesting and intelligent forum/blog discussion on the topic of the iPhone app ecosystem vs the Facebook ecosystem. I have my own views, but the interesting thing here is that you can see the POV of investors, developers and customers. 

Framing, Obama, Jesse

And while we're on framing:

The Obama/Jesse controversy is a perfect example of "framing" with regards to racism in America.

http://www.baltimoresun.com/news/local/bal-te.md.jackson11jul11,0,3451704.story

The civil rights frame is "racial justice". Obama's is something to do with "beyond race." Some middle-of-the-road and right-wing listeners don't want "racial justice" to incur a penalty on them for things they didn't do ("I'm not a racist, why should my government have to use my tax money to create racial justice?") They want everyone to have a chance to make it in America, black or white, and to take responsibility for their own success or failure. That's the "personal responsibility" frame.

So, the argument that Jesse Jackson is making is essentially this: By Obama's adoption of the "personal responsibility" frame, he is rejecting the social/racial justice frame that created (and creates for many today) meaning with regards to civil rights and justice.

The communications lesson is that choosing a frame right can help you appeal to specific, desired audiences -- and at the same time keep you from appealing to other audiences, depending on the amount of bias for or against certain frames. I expect Obama knows what he's doing here. The risk for him is not capturing the middle. He knows he's got the left. So the personal responsibility frame can work for him from the middle to the right. As analysts have said, Jesse's comments probably make white middle-class people comfortable.

Framing, frames and globalization

We think and remember in stories, metaphors and other "non-literal" structures. 

This is why it's so hard to get people to tell us how they really feel and think using surveys. We can get close, we can use tricks -- and we can backfill with qualitative work -- but in the end, we'll get closer to understanding customers and how they perceive us by revealing the stories and metaphors they use to perceive our offerings.

Those frames vary across cultures. 

Challenge to my readers: Why are the Apple Mac vs PC ads funny and memorable in the US? Why are they more controversial, and perhaps less effective, in Japan? To what extent is the comparison ad less powerful in Japan because of they way Japan frames its key stories?