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Friday, June 6, 2008

Death by spreadsheet

I have watched many companies tank based on the power of the spreadsheet. See, the spreadsheet is a clever device that allows you to lie to yourself in completely factual fashion.

Here are a couple of examples:

Starbucks has been making big waves about its attempts to "get its mojo back". This is great, since the new Pike Place Blend is actually a half decent cup of coffee (I'm a coffee bigot, and I'd rather drink McDonald's coffee than the old, burnt, stale stuff that they used to serve).

But the mistake that they made was in following the spreadsheet--not really understanding the gestalt of faddish drinks (that you can only drink a certain sugary drink for a while, and then you get sick of it, and change to e.g. Jamba Juice)--just looking at top line growth, expansion of stores, same store sales year over year, etc. Those all looked good, while not pointing out the inherent fragility and fickleness of the market (and if you've ever been to a Starbucks in Southern California, you realize that the customer base can be extremely fickle).

Maybe they really understand the need to keep turning things over, but they have to manage to the spreadsheet, since Wall Street demands that.

The other case I'd mention is Guitar Center.

See, they've taken the new policy of not negotiating prices. This is certainly a "management by spreadsheet decision". Let me give you an example:

I currently own 3 basses, which are all "boutique" instruments. I have a bass amplification system that can homogenize your internal organs. I also run the sound at our church, and consulted on the purchase of our current sound system.

In other words, I spend a lot on, and I recommend the purchase of a substantial amount of gear.

Guitar Center just lost all of my business-- except for nick-nacky stuff that I won't wait for (cables, music stands, etc.). Because they no longer make deals.

I will buy online, because I'm not going to spend thousands at a place that won't cut me a deal. Imagine shopping at Wal-Mart when their prices were actually higher than the Mom-n-Pop.

If anyone is paying attention, now is the time to strike: Guitar Center, formerly unassailable, destroyer of the local music store, is now vulnerable. There is an opening for a new business model to usurp the hegemon (and it doesn't have to be "the Internets" & long tail FTW!).


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Just Compare It said...
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