Note to Starbucks CEO: Don’t use technology (or loyalty programs) to demotivate your employees

December 26, 2012

app and empty tip jar 4 color cropped

Summary: While the Starbucks App is cool and makes buying coffee and food quick and easy without dealing with cash, credit or debit cards, the company appears to have developed the app without fully considering the impact on their employees. The app doesn’t offer users the option to tip baristas when making a purchase.  Other mobile payment apps like LevelUp and even taxi cab credit card machines make tipping quick and easy for users.  The Starbucks Rewards program also concerns us as it rewards customers for paying for one item at a time, even when purchasing multiple items, which could lead to increased employee and customer frustration.

Before writing about a couple of things I don’t like about the Starbucks loyalty program, let me start with a few things I love about the company and its CEO:

  • I read “Pour your heart into it,” CEO Howard Schultz first book about growing Starbucks in 1997 when I was CEO of The Loyalty Group and found it to be one of the most candid books about the challenges of leading a fast growing company.   I still recommend it to others today.
  • Starbucks offers full and part time employees who work at least 20 hours a week health insurance and other benefits, sadly unlike many food service and other U.S. companies.
  • I believe Howard is a role model for using his position and the millions of daily retail and online consumer touch points to advocate for social change.  A few examples: Starbucks was one of the first major corporate sponsors of Jumpstart for Young Children, the leading nonprofit that pairs college students with Head Start children, and remains a sponsor today; their Create Jobs for the USA raises funds for the Opportunity Finance Network that is dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and other disadvantaged people and communities join the economic mainstream; and yesterday I saw that the company has started a “Come Together” campaign through their stores in the nation’s capital region to lend their voice to other leaders calling for members of congress to address the fiscal cliff.
  • Perhaps most importantly, I like their coffee and love the employees at our local Starbucks on Church Street.

So here are a couple of things I wish they would change:

In the book about Starbucks “It’s not about the coffee,” author and former Starbucks President Howard Berman describes the Starbucks culture as one that “stresses people over profits.”

Sometimes you can tell how much a CEO and other executives “get” what it’s like to be on the front lines from seemingly unrelated decisions they make or support.  The Starbucks iphone app is a powerful example.  While I love the convenience and cool factor of paying with my phone, it has always bugged me that the app does not have a feature that would allow me to always tip my Starbuck’s baristas.  And, from my unscientific survey of watching those who pay with their phones vs with cash, it appears that the employees are losing out on this deal as few customers dig in their pockets for tips after paying with the app.

people not profit and app

Having paid a lot of my college expenses with tips earned from bartending at the Chestnut Pub in Morgantown during my WVU days and at private parties while completing my MBA at Chicago, I notice these things.   And when I mention this concern to Starbucks employees, they confirmed that tips are declining.  A few asked me to write about it and post it on the My Starbucks Idea page.  Hence this post.

Surely, this cannot be rocket science.  I say that not because I am capable of developing smart phone apps, but because I know that the Google Ventures backed Level Up, one of my favorite mobile payment apps, gives you both the opportunity to set a tip for whenever you pay at a restaurant and also reminds you when paying to add a tip.

OK, so they definately have more than their share of rocket scientists at Google and Google Ventures, but the same can’t be said for my local Bay State Taxi company (with all due respects).  For years, they have prompted customers to tip their cabbies when paying with a credit card.

level up and bay state taxi apps

So think about it Howard.  Might make a nice Holiday Gift for your employees.

As loyalty strategists, we’ve also struggled with the Starbucks Rewards program’s design from both a store efficiency and employee and customer satisfaction point of view. Here’s why:

Starbucks Rewards program members earn 1 “Star” every time they pay with either their registered Starbucks Card or the mobile app.  After the member earns 12,  they can redeem their Stars for one free drink or food item.  So what’s a maximizer to do? Obviously, ask to ring up multiple items with individual swipes or scans, even when being bought on a single store visit.  If you buy 3 items every weekday at Starbucks and pay for them as one purchase, it would take 2 and a half weeks to earn the free coffee or pastry reward.  But if you don’t mind looking like a jerk, and you ask your local Starbucks employee to ring up each item individually, you would earn the reward after only four days.   As the ATT commerical says “faster is better.”  Right?  So what’s wrong with this model?  At least two things:

  • Customers are rewarded for slowing down the speed of their transactions. A key benefit of a properly designed loyalty program should be to insure it capitalizes on Fred Reicheld’s principle that loyal customers should be lower cost to serve than occasional shoppers.  Reicheld  is a former Bain & Company Partner, the founding father of understanding the economics of customer loyalty and the author of The Loyalty Effect and numerous other books and articles.  He and his teams are also the driving force behind the Net Promoter Score.
  • This undoubtedly slows down the barista’s ability to efficiently serve customers and can yield increasing levels of customer and employee frustration.  In their HBR Classic Article Putting the Service-Profit Chain to Work, originally published in 1994, Jim Heskett, Tom Jones, Gary Loveman, Earl Sasser, Jr. and Len Schlesinger wrote

In exemplary service organizations, executives understand that they need to put customers and frontline workers at the center of their focus.Top-level executives of outstanding service organizations … understand that in the new economics of service, frontline workers and customers need to be the center of management concern. Successful service managers pay attention to the factors that drive profitability in this new service paradigm: investment in people, technology that supports frontline workers…”

So while Starbucks is redesigning the app to give customers the opportunity to efficiently tip their employees, we suggest they look at the overall program design and reward economics as well.

Questions:

Have you asked your employees how new social, mobile or other digital technology initiatives impact them and the customers they serve on a daily basis?

When you are in the design and development stage of new technocolgy enabled initiatives, do your front line employees have a seat at the table?

Additional Math:

For those of you so inclined, here’s the “loyalty math” that shows the value back to Starbucks  customers can range from as low as 6% to 17% in this simple example where we assume that the average item purchased is priced at $2.50 and the member redeems for one item priced at $5.00 after they earn 12 Stars.   Note, in our experience 6% is a high value reward and 17% is among the highest we have seen.  In a future article on “Loyalty Economics 101″ we’ll examine the behavior change needed to achieve a positive ROI from loyalty program reward levels.

starbucks rewards calculations

Is the U.S. coalition loyalty’s Afghanistan? Overcoming the challenges of the U.S. market.

October 22, 2012

Afghanistan map with question mark.

Net: Coalition loyalty programs are among the most successful and fastest growing businesses created over the past 25 years, with flourishing coalition programs currently operating in many countries around the world. The one glaring exception – the U.S. market. Why? It certainly isn’t for lack of trying. Over $1 billion has been lost by companies and investors attempting to launch coalition loyalty programs in the U.S.


We believe the reasons no one has launched a successful U.S. coalition program are embedded in the five unique challenges of the U.S. market:


  1. Overcrowded loyalty space – the average U.S. household has joined 18.5 loyalty programs, but remains active in 8.
  2. Lack of nationwide or clearly defined regional businesses in major consumer spending categories – difficult to identify coalition partners with consistent presence across markets.
  3. Few unique rewards – lots of commodity-based, “me too” rewards.
  4. Rewards are expensive – economic value back has become only distinguishing feature; competitors continue to increase percent back to compete, raising overall costs.
  5. Lack of cooperation among U.S. companies – American companies have not historically “played well in the sandbox together” and few examples of long term coalition partnerships for anything exist in the U.S.

So what’s the solution – “cut and run”?  Not necessarily.  We believe there is a path to daylight to develop a coalition loyalty program in the challenging U.S. market. Doing so will require a breakthrough program model that not only incorporates the requisite 6 A’s of Coalition Loyalty Success, but contains the following  elements:


A. Truly breakthrough, motivating assets to cut through the current “clutter” of loyalty programs.
B. Better designed rewards inventory with a selection of rewards that appeal to consumers on both an emotional and rational basis.
C. Critical program elements and unique assets that cannot be duplicated by competitors.

D. A regional approach that makes sense in order to create a strong coalition of leading partners.

E. A technology platform that leverages the new user friendly opportunities for member engagement enabled by 21st century social, mobile and interactive digital media, and finally, most importantly

F. Bold, visionary, risk taking leaders who are willing to “play to win” instead of “playing not to lose” and will benefit most from being the first to champion the tremendous potential of  participating in a coalition loyalty program.

First developed in the late 1980’s, coalition loyalty programs are multi-company, shopper rewards programs. Consumers who participate in these programs are rewarded with a single points-based currency for shopping at exclusive (or co-exclusive) sponsors within each major retail / consumer category: e.g., one supermarket sponsor, one gas station sponsor, one department store sponsor, one credit / debit card sponsor etc. Points earned collectively at these sponsors can then be redeemed by consumers for a variety of rewards such as travel, merchandise and gift cards / discounts at the sponsors.

Coalition programs like AIR MILES (Canada), Nectar (U.K.), Payback (Germany), Fly Buys (Australia) and others have been extraordinarily successful around the world. Unlike stand-alone retailer loyalty programs –  like CVS ExtraCare and Best Buy Rewardzone in the U.S. – points add up much more quickly for members of a coalition program shopping at tens (and even hundreds) of sponsors. This greater “rewards attainability” increases members participation in the program and enables the program operator to include a broad selection of program rewards, including lower value items like free gas or groceries and higher value items such as plane tickets, electronics, computers and vacation packages.

There has been a lot of news in the coalition loyalty space over the past year. AIR MILES Canada, the company founded by Sir Keith Mills, Craig Underwood and an extraordinary team of entrepreneurs in 1991, celebrated its 20th anniversary in Toronto last March.  Last week, Nectar, the U.K. coalition loyalty program created by Sir Keith in 2002 celebrated their 10th anniversary.  Both programs continue to grow and thrive for one simple reason:  they continue to create extraordinary value for their partners. Earlier this year, Sainsbury’s (a leading U.K. supermarket chain) extended its contract with Nectar for seven years. Like many retailer executives participating in coalition programs, Sainsbury’s CEO Justin King – formerly an executive at Asda, the U.K. subsidiary of Wal-Mart, and initially a skeptic of coalition programs – has clearly recognized the measurable economic and strategic value that the coalition model has created for Sainsbury’s.

As companies like AIR MILES and Nectar have demonstrated over many years, the coalition model provides tremendous value and a sustainable long-term competitive advantage for its sponsors. Many of the top programs penetrate 60-70% of all households:

CLP's

If the coalition loyalty model has been so successful in other countries, why has it failed in the U.S. market?  It’s not for a lack of trying as over a billion dollars has been lost by companies attempting to develop a coalition model in the huge, but challenging US market.  So what are the problems with the loyalty “terrain” of the American market that make it the “Afghanistan” of the coalition loyalty space?

Over much of the past decade,  we have analyzed the reasons behind the inability of loyalty companies to create a successful U.S. coalition program. Our team at SLI believe the most significant challenges of the U.S. include:

  1. An overcrowded loyalty space resulting in consumer “loyalty program fatigue” or “supersaturation.”
  2. Ubiquitous discount, merchandise and travel rewards that offer no point of differentiation and therefore can’t break through the clutter.
  3. The costs of rewards are expensive to the companies paying for them which make the economics of their loyalty programs challenging.
  4. Lack of nationwide or clearly defined regional businesses in the major consumer shopping categories needed to create a motivating level of consumer attainability.
  5. Few or no examples of U.S. businesses working together in multi-year coalitions of any form.

Overcrowded loyalty space

Without any coalition loyalty programs currently operating in the U.S. market, many consumer-facing businesses have developed their own single company “stand alone” loyalty program. Others – notably many of the larger supermarket chains – have developed gas discount programs with their own, and in some cases another, branded gas station.  This has resulted in a highly fragmented, cluttered loyalty landscape that can be overwhelming to consumers. Here’s an example of some of the reward programs bombarding consumers in Columbus, Ohio – and these are selected from only the gas and grocery sectors.

Columbus market

According to the loyalty consulting firm Colloquy, a division of Alliance Data Systems’ LoyaltyOne, the average U.S. household has joined 18.5 loyalty programs, but remains active in only 8 programs. In other words, the average American shopper has dropped out of more programs than those they have found rewarding enough to remain active in.  Colloquy conducts the study about every two years.  Graphing the past three studies clearly shows the impact of adding more “me too” programs in an overcrowded marketplace: US households are not increasing the number of programs they remain active in as they try new ones.  Sitting behind the glass in focus groups across the country over the past two years, we’ve heard consumers continually complain about the huge number of low perceived value, undifferentiated loyalty programs.

Bar chats joined vs active

With this kind of fragmented landscape, we believe it will be very difficult for a new loyalty program – even one as well designed as a coalition program – to break through the clutter and capture consumers’ attention.  We believe this challenge will be exacerbated for any program built around a “generic” set of rewards like free travel and discounts on gas purchases.

Few unique rewards

With many consumer-facing businesses developing their own standalone or one-partner loyalty programs in the U.S. market, you would expect these businesses to develop unique rewards and truly differentiating value propositions in order to effectively compete. However, what we see currently in the U.S. marketplace are an overabundance of “me too” programs, typically based solely on discounts / cash back and commodity rewards, with very little differentiating features.

One example of this is the gas loyalty programs that have recently gained popularity in the supermarket space. Consumers participating in these programs can typically earn 1 point per dollar on spending at the sponsoring supermarket. These gas points can then be redeemed instantly at the sponsoring gas station for cents off gallons of gas (typically 100 points = $0.10 off per gallon).  These points are always subject to many restrictions: e.g., points expire after 30-60 days, 15-20 gallons max fill-up, etc.  The gas programs are facilitated by a patented technology that instantly “rolls back” consumers’ price per gallon right at the pump. But a commodity program like this can be duplicated – and in many markets has been duplicated – by competitors.  For example, in the Columbus market, both Kroger and Giant Eagle operate gas loyalty programs.

So what becomes the differentiating feature(s) of the two competing gas programs? Other than the convenience of where the participating supermarket stores and sponsor gas stations are located, it all comes down to the  economic value back to the consumer. Indeed, in recent months Giant Eagle increased its value back by offering 50 points = $0.10 off (vs.previous 100 points = $0.10, which Kroger still offers).  With no unique rewards offering, you can see how this can quickly become a “race to the bottom”.

S&H

It reminds us of the “trading stamps” phenomenon of the 1960’s. Most retailers offered S&H Green Stamps or the yellow TV or Top Value stamps, and at one time as many as sixty percent of Americans collected them.  But eventually, the businesses paying for the stamps realized they did not provide a differentiating competitive advantage and were therefore merely an added cost of doing business and they stopped operating these expensive programs.

Which leads to the next challenge in the U.S. market.

Rewards are expensive

When loyalty schemes such as cash back rewards and the gas programs become merely a simple economic value back proposition for consumers, they can become very expensive to operate. We’ve seen this in the gas programs, where the estimated average cost of sales is 100-150bps, but can be much higher, depending on – literally – the number of gallons your vehicle holds.  This cost would be substantially higher if not for the structural breakage of the program design: e.g., can only be used in $100 increments, points expire within a month or two,  etc.

Other stand-alone retail loyalty programs can cost as much as 5-10% of affected sales.  CVS ExtraCare is 2% on most everything, but routinely offers as much as a 25% discount for a $25 purchase. Target’s in-store credit or debit card program offers 5% off all purchases. We recently met with a leading regional enterprise who was considering offering their best customers a 10% discount on one of their highest margin, most frequent and therefore largest sources of revenue.

Lack of nationwide or clearly defined regional businesses in major coalition categories

Horizontal AIR MILES & Nectar cards

One of the most important differences between countries that have successful coalition loyalty programs, such as Canada and the U.K., and the U.S. is the lack of either: (i) nationwide companies that operate in the critical consumer spending categories of supermarkets, retail gas and banking/credit card or (ii) businesses within each of the key categories that all operate in the same clearly identified regional markets. The development of AIR MILES in Canada was greatly enabled by the fact that in almost every small town and large city in Canada you can buy gas from Shell, Petro Canada or Esso or find Bank of Montreal, The Royal Bank of CIBC branches.  The one major exception is grocery, but one of the first things we learned when starting business development for AIR MILES in Canada was businesses were comfortable defining “Western Canada” as the four western provinces plus Thunder Bay, which is actually located in Ontario.  In the U.K., Nectar was similarly enabled by the presence of nationwide chains in all major consumer spending categories and a similar “mutually agreed upon” regional segmentation facilitated the development of Travel Club in Spain. There is no agreement with U.S. businesses on the geographical boundaries of defined regions, so trying to build a nationwide coalition that will offer sufficient number of households reasonable reward attainability becomes challenging, unless a program developer can get the request number of businesses to operate in a defined region.

As the chart below demonstrates for the retail gas station sector, no one gas chain will give you adequate coverage in multiple regions.  This graph shows the regional market share of one of the largest nationwide retail gas chains in the U.S. While the company has sufficient share in areas like Chicago, it is weak or non-existent in other markets such as Philadelphia, Minneapolis and Upstate New York.  This analysis helps explain why one supermarket chain that offers customers points good for gas discounts told us the percent of their shoppers redeeming for gas discounts ranges from 10% to 70% depending on the region. Additionally, while regional coalition models in the U.S. make more sense, it’s not obvious what regions should be chosen, as the potential coalition partners in each category all typically have different geographic footprints.

Updated disguised gas chain data

Few examples of true multi-company coalitions in the US market

U.S. companies are not accustomed to cooperating with each other to form larger long term coalitions. One reason could be that U.S. business leaders are more likely to employ a “go it alone” strategy where they are implementing something they perceive as uniquely theirs, or as it appears to be the case in many loyalty programs, attempt to “differentiate” with a higher cost version of what someone else is doing.

We also believe a psychological phenomenon we call the “leader joiner” challenge may add to the difficulty of developing a truly effective coalition loyalty program in the US.  Clearly no one has developed an effective coalition loyalty program in the US market; therefore, doing so requires at least one senior executive in each major consumer spending category to take a bold leadership leap.  But at the same time, by definition, joining a coalition program requires just that – joining and collaborating with other companies.  By doing so, no one C-level executive will get all the credit for the breakthrough program and the extraordinary results that thousands of hours of US consumer research demonstrate would accrue to the companies forming the coalition.  Finding “leader joiners” is hard in any culture, and likely even more so in the U.S.

Leader Joiner Matrix

Additionally, with many U.S. consumer businesses operating in slightly different geographies, it’s not always obvious what partners to work with. Few companies have perfectly congruent geographic footprints. Many of the large consumer businesses have nationwide strategies, and if the same partner is not present in all of the companies’ markets nationwide, forming a partnership may be less appealing.

So what are the potential solutions – what is needed to break into the U.S. market?

While the challenges of the U.S. market could lead many to favor a “cut and run” strategy for coalition program operators, we don’t believe these challenges are insurmountable. A well designed program will need to have the following five features:

A. Truly breakthrough, motivating assets

The program brand and value proposition must be truly unique to break through the current “clutter” of loyalty programs.  Consumers need to instantly “get it” and realize the program offers a unique and superior consumer value proposition.  As one head of a Detroit household put it recently when reviewing breakthrough, motivating rewards that resonated with her: “the rewards seem very attainable and they seem not like stupid rewards… these actually seem like they have value to the rewards.”

B. Better designed rewards inventory

A well designed coalition loyalty program will need a selection of rewards that appeal to consumers on both a rational and emotional basis.  A diverse rewards inventory that includes appealing options for “moms, dads and kids” will drive enrollment and increased engagement. As the loyalty marketing experts at COLLOQUY point out, currently in the U.S. market there is an over-abundance of rational deals, discounts and cash back rewards, when it’s really unique emotional loyalty hooks that can be much more powerful in creating lasting bonds with consumers.

Colloquy quote on emotional awards

Rewards that have high perceived value vs. their cost will be most effective, while consumers continue to prefer flexible rewards wherever possible. Rewards that can promote or enhance current charitable, community and employee initiatives will also be well received by key businesses.

Finally, coalition partners will benefit from rewards that can capture the opportunity to use social, mobile and digital media to help all stakeholders enhance their current initiatives and achieve their economic and strategic goals.

C. Unique, exclusive assets that cannot be duplicated by competitors

A breakthrough program will need to have exclusive rewards that competitors cannot duplicate. Although AIR MILES now offers consumers the opportunity to redeem their points for something in excess of 800 different rewards, when we launched the program in 1992, we offered only free air travel, hotels and rental cars.  What some have forgotten, as the program has expanded over the years, is that our initial sustainable competitive advantage came from the fact that we had secured exclusive contracts from four of the largest North American airlines.  No competitor could have duplicated our initial reward offering.  Although in many ways harder to do in 2012 than it was in 1992, we believe a program can be designed with exclusive assets that will drive a sustainable long-term competitive advantage for participating sponsors.

D. A regional approach that makes sense

A regional U.S. coalition program has the greatest probability of creating a strong coalition of leading partners.  The challenge will be getting the major partners to agree to develop a program or programs in the same region.  We believe the opportunity exists to capitalize on the few places where leading regional companies and a limited number of enlightened national players have already recognized the powerful opportunity to join together and tap into local and regional pride that is present in communities across the U.S.

E. A technology platform that leverages the new user friendly opportunities for member engagement enabled by 21st century social, mobile and interactive digital media

During the mid 1990’s SLI’s founder developed over 20 database marketing programs that leveraged the assets of a coalition loyalty program, including the motivational currency, the database and ability to develop micro-coalitions of sponsors targeting collector segments including movers, new parents and farmers.  In 1995, AIR MILES became one of the first loyalty programs on the internet.  In 2008, Underwood Partners assembled an extraordinary consulting team whose members included Nicco Mele, Pamela Rosenthal and Ken Dec to develop a strategy for one of the worlds leading coalition loyalty programs to leverage the capabilities of the internet and social media to increase collector engagement and sponsor profitability.  Our team identified over 50 initial new ideas and initiatives and our final report included 25 specific recommendations.  Since then, the capabilities of the iPhone and Android mobile platforms exponentially increased the ability to connect members to other members and prospective members, sponsors and program operators.  We also believe these platforms hold the potential to enhance the traditonal currency earning possibilities beyond those available to loyalty programs only a few years ago, which can broaden the historical view of “must have” categories and sponsors.

Mobile apps

and finally, most importantly

F. Bold, visionary leadership

Coalition operators must identify and win-over business leaders that will benefit most from being the first to champion the tremendous potential of participating in a coalition loyalty program.

In short, coalition operators need to find the U.S. equivalent of the business leaders at Safeway and Bank of Montreal who we identified in Canada back in 1992 when developing AIR MILES:

“Twenty minutes into the presentation I knew it was the biggest thing ever…It’s a leap of faith but … we have to go in big … You snooze–you lose.”

-          Gerry Geoffrey, Chief Financial Officer, Canada Safeway

(Two weeks later his AIR MILES customers had doubled their average spend at Safeway.)

“About an hour into the meeting, I stopped them and went to talk to our Vice Chairman. I told him, ‘I’d like to hang onto these guys. We need to set up a standstill arrangement so they won’t go talk to another bank’. That’s how excited we were about the program.”

-          Jim Brophy, VP Electronic Banking, Bank of Montreal

Clearly, without these visionary leaders, AIR MILES Canada would have never gotten off the ground and become the tremendous success that it has over the past 20 years.

Based on our findings from over ten thousand in-depth  interviews with U.S. consumers we have invested in over the past two years, we are confident the potential exists for a similar, sustainable coalition loyalty program to be developed in the U.S. market in the years ahead. But doing so will require a few bold visionary leaders who are willing to challenge the status quo and not follow the crowd by launching yet another stand alone loyalty program.

Craig Underwood, Lauren Creedon, Ian Drummond & James Ray

Collaboration Big Citizenship for Skateboarding in Brookline

February 3, 2011

Net: Realizing that our son had no dedicated places to skateboard in our town of Brookline, Massachusetts, my wife Patty organized a group of young skate boarders and parents, teachers, nonprofit and other leaders to advocate for the creation of safe places to skate in our community.  Although we have a lot of work to do and have only taken the first few steps in what will undoubtedly be a long journey, the collaborative efforts of our small but committed group, the over 100 friends who supported us online and the 60 young skaters and their parents who attended our presentation to the town’s Parks and Recreation Commission have successfully launched our campaign.

FBS LOGO VS 2 BLUE AND YELLOW

In his recently published book, my friend Alan Khazei – the social entrepreneur , Co-Founder of City Year and former candidate for the US Senate – makes the case for creating change through the collaborative efforts of public private partnerships, where citizen activists, business leaders and government agencies work together to address challenges and create new opportunities.  He refers to this model as Big Citizenship, advocating that the old models of relying too heavily on either big government or private industry are tired, ineffective and not appropriate for creating change in the 21st Century.

Big Citizenship CoverAlthough the concept of Big Citizenship is not intuitive to all, you clearly know it when you see it in action.  I had such an experience recently.  Realizing that our son had no place to skateboard in our town of Brookline, Massachusetts, my wife Patty organized a group of young skate boarders and  parents, teachers, nonprofit and other leaders to advocate for the creation of safe places to skate in our community.  Alan would see this as a clear example of the power of big citizenship, and I would agree. But I also see it as a compelling example of collaboration and, as we are beginning to increase our social and traditional media outreach, a great case study in how the internet can support and turbo-charge the efforts of a small but committed group.

None of this would have been possible without both Patty’s initiative and the phenomenal and strategic efforts of our friend Armin Bachman.  Armin is truly a Big Citizen.  (Last year I encouraged Alan to promote his book by starting a Big Citizen contest where people could nominate others for recognition; I had Armin in mind as a leading candidate.)  Armin is an entrepreneur; he is co-owner of Orchard Skateshop, by far the best skateboarding store in the Boston area.  He is a social entrepreneur, having founded the nonprofit Extension, to make skating more accessible in the greater Boston area.  Armin and

Armin and Myles the other owners of Orchard are big citizens in their community as well, giving 1% of their revenues to local nonprofits and helping new artists by hosting shows in the gallery above the shop.  He is also one very smart and connected dude, knowing leaders in the skateboarding space across the country and increasingly around the world, and very gifted at finding data related to developing safe places to skateboard.  (Full disclosure: Armin is also Myles skateboarding teacher.)

Other members of the original group included Nicco Berinstein, a Brookline High School 11th grader and avid skater; Eileen Amy, Nicco’s mother and a registered nurse; Michael McKittrick, a Brookline High School teacher and the faculty advisor to the school’s skateboarding club; John Wynne, a Cambridge businessman, skater, and a passionate skateboarding advocate; and our son Myles, an avid skater and the person who helped us see the need for safe places to skate in Brookline.

Armin, Patty and John found amazing data to support our cause, including the following:

-     Skateboarding is one of the fastest growing sports in the US (and around the world) and is now larger than baseball.

-     Skateboarding is the 3rd largest sport for ages 6-18 and the 6th largest participant sport in the US.

Brookline Athlete Numbers

-    Skateboarding is one of the safest sports, with less than 1/10th the injuries of basketball, 1/5th of baseball and 1/3rd of soccer. (My own experience mirrors the data: despite logging close to 100 hours watching skateboarders, the only real blood I have seen was my own when I was stupidly carrying my elbow pads while riding across an asphalt parking lot and wiped out on a pebble the size of a peanut  J).

-     Over half of the injuries occur from skating on poor surfaces like asphalt, usually caused by a lack of safe concrete skatespots and parks for community skaters.

-     Skateboarding is less noisy than football or local traffic and skating on concrete features is over 20% quieter than those made out of wood or metal.

-     Brookline has amazing recreational and sports facilities, including 14 official youth baseball fields – or one for every 60 kids who participate in Brookline baseball – and 8 dog parks, but no safe features or parks to skate on for the estimated 600 skaters who skate almost every day.

Brookline Facitilities

From Armin and John, we also learned that the idea of “ good places to skateboard” has evolved significantly over the past few years, with leading edge communities working with local architects and landscapers, skaters and national foundations to create a system of neighborhood skate parks, smaller “skate spots” and even smaller “skate dots.” One of the most innovative concepts we learned about was the creation of “skateable art” – concrete artforms designed to be both outdoor sculpture and great skateable features.

Skateable Art

Orchard Facebook PageArmed with this great data from Armin and the team, I was able to put my Bain skills to work and developed a presentation that we gave to the Brookline Parks and Recreation Commission.  Although the presentation was helpful in getting the support of the commissioners, I believe an equal or greater impact on the commissioners came from the 60 young skaters, their mothers, Brookline social workers, and members of the nonprofit Architects for Humanity who came to support us.   I haven’t been to a Parks and Rec meeting before, but I imagine that 60 people for a single topic was a rather large community turnout.  Credit to Armin again for both being able to factually and compellingly answer almost every question the commissioners asked and for putting our meeting on Orchard’s Facebook page, which received over 100 “likes” from the Orchard Community and many words of encouragement.

Although I am very focused on our goal of getting a system of safe, attractive places to skate in Brookline; as an entrepreneur, I have also learned to enjoy the journey and celebrate the mini-successes along the way.  One of the things I liked most about the meeting was seeing the sense of pride and empowerment Patty’s initiative gave the young skaters in the room.  These high school, middle school and elementary school Brookline residents were seeing democracy and big citizenship at work.  In fact, they were active participants.  Myles spoke after Patty’s introduction about the personal benefits of skating and many others answered questions from the commissioners.  None were shy about expressing their passion for skating or the appreciation they would feel for the town if Brookline embraced our vision of moving from a laggard to a leader in this fast growing, diverse and accessible sport.

As recently reported in The Brookline Patch, the online community news site that wrote an article about our efforts and the meeting, the commission had a positive response to our collaborative efforts:

“The presentation was well-organized, passionate and articulate,” said Erin Gallentine, director of Parks and Recreation.

The town formed the informal subcommittee to talk about the possibilities after two parents proposed facilities for skateboarding at a recent Parks and Recreation Commission meeting.

Gallentine said the town considered adding facilities next to the basketball court at Lawton Playground when the park was renovated, but the idea was scrapped after neighbors raised concerns about noise. A few proposals for skateboarding facilities have came before the Parks and Recreation Commission over the years, but Gallentine said the Underwood’s proposal had been particularly interesting.

Although we have a lot of work to do and know we have only taken the first few steps in what will undoubtedly be a long journey, the collaborative efforts of our small but committed group, the over 100 friends who supported us online and the 60 young skaters and their parents and supporters who attended our presentation to the town’s Parks and Recreation Commission have clearly move us forward.

Here’s what you can do to help:

Join our Facebook page Friends of Brookline Skaters

If you live in Brookline or know people who do, share this and our presentation with others.

Let us know if you are interested in helping with research, organizing or fundraising.

And think about opportunities in your own community to form collaborative public private partnerships and join with other big citizens to create the change you want to see.

Too little too late? Will Obama’s lack of collaboration kill health care reform?

February 13, 2010

Net: Obama’s failure to leverage the collaborative efforts of others, consider and include good ideas from his opponents and provide the requisite and timely leadership contributed greatly to congress’ inability to pass heath care reform.  Will the rhetoric and approaches of the last two weeks be enough to revive it or are they too little too late?

dr-mark-in-haiti2I have often wondered if there is a common event that gets people to start blogging.  I imagine for many it’s a topic or an issue they feel so passionate about that they feel compelled to share their thoughts with others.   For a wonderful example of this, see my friend Dr. Mark Pearlmutter’s blog from his two weeks as a volunteer in Haiti.

One thing I know for sure is what stopped me – jumping into the Citizens for Alan Khazei Senate campaign for the last 55 days of the 90 day special election to fill Ted Kennedy’s seat.  Since the campaign ended, I have had many posts “drafted” in my head, but have been experiencing some kind of weird writer’s block that kept my fingers from typing.   I began to fear that maybe leading 128 pages of policy work in under two months used up all of my words for the year!

As anyone who knows me knows – health care is my biggest issue and has been since my then six month old daughter was sick for the first time.  Fortunately, we were living in Toronto and had access to a wonderful pediatrician who returned our call at 10:00 in the evening and sent us to a world class children’s hospital a few blocks from our home.  I realized at that moment that there were millions of American’s who couldn’t have done what we did and became a dedicated soldier in the war to bring health care to all American’s and to lower the cost and improve quality for those of us lucky enough to have coverage.

I have written before about my frustration with Obama’s ineffective attempt to sell health care reform to the American people in the post What Obama can learn from Ross Perot, Cecil Underwood and Coalition Marketing.  Listening to some of his remarks about health care reform over the past ten days has me sufficiently agitated to start blogging again.  A few more suggestions for the President:

1. Look for others who have already collaborated and use them.

Last summer, I found an incredibly thorough bi-partisan proposal for health care reform called Crossing Our Lines: Working Together to Reform the U.S. Health System.  This report was written by former Senate Leaders Bob Dole, Howard Baker and Tom Daschle.  George Mitchell also was a major contributor to the project, but was not listed as an author on the final report after shifting all of his efforts to his role as special envoy to the Middle East.  The report was the product of a two-year consensus-building process called the The Leaders’ Project on the State of American Health Care.  Their plan is a comprehensive set of policy recommendations that aims to provide quality, affordable health coverage for all Americans and includes recommendations to improve quality and control costs.

crossing-our-linesHaving stumble upon this report, I was surprised that I had not heard of it from traditional news media or blogs, and disappointed that Obama wasn’t using this as a framework for his heath care reform efforts.  We used this as one of the primary sources for developing Alan Khazei’s health care policy during his race for the Massachusetts U.S. Senate seat.

Then, last week on either XM Radio’s POTUS or CNN, I heard the President refer to The Leaders report at least twice.  Saying,

“The component parts of this thing are pretty similar to what Howard Baker, Bob Dole and Tom Daschle proposed at the beginning of this debate last year.

“Now, you may not agree with Bob Dole and Howard Baker and Tom — and certainly you don’t agree with Tom Daschle on much … but that’s not a radical bunch. But if you were to listen to the debate, and, frankly, how some of you went after this bill, you’d think that this thing was some Bolshevik plot.”

“And so I’m thinking to myself, ‘Well, how is it that a plan that is pretty centrist… (more)

Why didn’t he use this as an example and – better yet – use Dole and Baker to help him sell health care reform over the past twelve months?

2. Collaboration means working together and using each other’s good ideas, not just giving them lip service.

RNC Chairman Michael Steele spoke at Harvard’s Institute of Politics last week. During his remarks, he mentioned that Republicans had offered over a dozen ideas and proposals for addressing the country’s dysfunctional medical malpractice system, but none of them were given serious consideration by the administration.    If Obama is serious about lowering the cost of health care, he needs to address medical malpractice, considered by many experts to be the major driver of defensive medicine.  The cost of defensive medicine has been estimated to be between $70 billion and $200 billion a year by PriceWaterhouseCoopers Health Research Institute and others.

Again, this idea is not new.  Bill Bradley wrote about the need to form a bi-partisan coalition to pass  health care reform and the opportunity to use medical malpractice reform as an issue that would bring Republicans to the table in his 2007 book, The New American Story. He made this point again in an August 2009 New York Times Op-Ed article, Tax Reform’s Lesson for Health Care Reform.

joint-commission1On the Khazei campaign, we reached out to our network of friends we were introduced to Dr. Alan Woodward, a former President of the Massachusetts Medical Society and a passionate expert on health care cost reduction.  Dr. Woodward turned us onto the successful approaches to medical malpractice reform being successfully implemented by the University of Michigan Health System and recommended on by the Joint Commission on Accreditation of Health Care Organizations. (I will write more about this in an upcoming post on the collaborate efforts of the Khazei campaign.)

Again, the answers are out there if you truly believe in collaboration and are willing to do the work to find them.

3. Collaboration does not mean abdication of leadership.

Anyone who has engaged in a truly collaborative effort quickly realizes that harnessing the wisdom of crowds takes work.  I recently experienced this when using 99designs.com to run a contest to develop a logo for a new organization among hundreds of graphic designers from around the world.  As John Della Volpe, the Founder of SocialSphere Strategies wrote about in a recent blog post, you need to provide leadership (a clearly written brief) and guidance (continuous feedback to initial and revised designs) to get a quality product when using this or other hugely collaborative processes.

President Obama’s lack of leadership on health care has been a concern to many of us who applauded his courage to take on this most important and possibly most challenging issue.  To me, his almost hand off approach through most of 2009 felt like a “guardrail to guardrail” over-reaction to the mistakes of the Clinton administration’s health care reform efforts.  Whereas the Clinton approach is remembered as one where Hilary Clinton, Ira Magaziner and a few others developed in closed meetings the plan they expected congress to pass, the Obama administration’s approach was almost the polar opposite.  The President’s instructions to congress to “increase coverage without increasing the deficit” and his failure to make a major address about health insurance reform until late summer are two examples of the lack of leadership he provided, with what we now see as disastrous results.

According to Politico Pulse – a great new source of information I recently found on my Kindle - at the closed door session with Democrats last week, Al Frankin and others raised this concern:

Sen. Al Franken ripped into White House senior adviser David Axelrod this week during a tense, closed-door session with Senate Democrats.   Five sources who were in the room tell POLITICO that Franken criticized Axelrod for the administration’s failure to provide clarity or direction on health care and the other big bills it wants Congress to enact.

Obama has scheduled a Health Care Summit meeting with Republicans on February 25th.  Lets hope he provides both real collaboration and leadership and that it won’t be too little too late.

What Obama can learn from Ross Perot, Cecil Underwood and Coalition Marketing

September 1, 2009

chu-and-ross-perotTwo weeks ago while on vacation in Washington, DC, Patty and I found D’Acqua, a great seafood restaurant on yelp and left two happy kids with room service and movies at our hotel.  We were seated a few tables away from David Axelrod, President Obama’s senior political advisor.  I was about to ask our waiter for a piece of paper to write him a note with some ideas on how they could more effectively promote healthcare reform legislation, when Patty let me know that wasn’t her idea of a romantic dinner together. 

I just finished reading The Battle for America 2008, a great book about the 2008 election, on my Kindle.  It is clear from the book that Barack Obama learned a lot about the need to prioritize healthcare reform from the late Senator Kennedy.  Here are a few thoughts on lessons he could learn and apply from others leaders:

From Ross Perot and Cecil Underwood – Use the data and a few high impact charts. 

Every time President Obama speaks on health care, I expect to see a few high impact charts that layout the major problems that need to be addressed.  And every time I am disappointed. The data is clear and easy to access.  A few examples:  Medicare’s administrative costs are about  1% of total costs, while private insurance administrative costs are around 15%; the average American family’s health care insurance premiums paid have doubled since 2001  from $6000 per year to $12,000 a year; US health care cost per capita is over $4000 higher than the next highest country.  Obama could make this data extremely relevant to the average American by showing the impact of higher health care costs on the price of a car or other goods made in the US vs Canada or Japan.

charts-for-blog-post1

 

 In 1992, Ross Perot effectively used simple charts to get some of his major points across.  Years early, in my father’s 1956 successful bid to become the youngest governor of West Virginia, he used simple posters to point out that the state was paying much more than surrounding states for road building equipment.

During my six years as a consultant, manager and partner at Bain & Company, we used simple bar charts to show clients their uncompetitive cost positions.  During my tenure, I showed CEO’s, factory workers, and cardiac surgeons these charts, and in every instance, they got it.  Obama needs to do the same. 

From Coalition Marketing – Use the logo’s of your diverse group of supporters and use their voices to support reform.

In 1992, after launching the AIR MILES shopping reward program in Canada, I coined the term Coalition Loyalty Program to describe reward programs where consumers could collect points from multiple retailers who were given exclusivity or co-exclusivity in their consumer spending category (e.g. grocery stores, gas stations, credit cards).  In addition to AIR MILES in Canada, other successful coalition loyalty programs include Nectar in the UK, Fly Buys in Australia and Upromise in the US.  One of the benefits of a coalition program versus a single company or stand-alone program is the power of coalition marketing.  When programs are launched with the full marketing support of leading companies like Safeway, Shell and Bank of Montreal, they achieve breakthrough awareness in record time. 

The support of these market leaders also gives the new program instant gravitas, which helps the company running the program to receive favorable PR coverage and in-turn, sign up more leading companies.  In all of our business development, PR and marketing materials we prominently featured the logos of our major sponsors.  Our coalition partners went even further to support the program and grow the coalition – they helped us sell new sponsors.  On one occasion, Derrick Fry, then SVP of Electronic Marketing for Bank of Montreal (which at the time was the 6th largest bank in North America) flew with us to Calgary to meet with a potential sponsor for dinner and then flew back to Toronto on the red eye.  On another occasion, Bill Turner, then CMO of Sears Canada, helped us pitch a leading Ontario grocer on the program.

The other thing missing when I watch Obama’s press conferences and rallies are the logos and names of the broad base of businesses, organizations and other leaders that support healthcare reform.  Among others, Wal-Mart, the AARP, PhRMA (the Pharmaceutical Research and Manufacturers Association), and the AMA all support healthcare reform.  Why not use these organizations’ support as proof that reform is needed and why not use their leaders to promote the need for reform? 

logos

One of the best examples of creating and leveraging a stellar list of supporters also comes from the coalition loyalty world.  In 2001, Michael Bronner and Jeff Bussgang, the founders of Upromise, with the help of their VC General Catalyst, created one of the most impressive lists of supporters ever assembled.  Their Advisory Board included: former Senator Bill Bradley; Kim Clark, then Dean of Harvard Business School, John Doerr from Kleiner Perkins, David Rockefeller; and John C Whitehead, former Chairman of Goldman Sachs and the Federal Reserve Bank of New York.  Talk about gravitas, with this lineup of supporters, Upromise could get a meeting with any CEO or CMO in the country and they used the group to help them recruit the largest coalition of sponsors ever assembled in the US.

A few months ago, former Senate Leaders Democrat Tom Daschle and Republicans Howard Baker and Bob Dole published Crossing Our Lines – Working Together to Reform the US Health System, their proposal for healthcare reform.  Why not use these three leaders along with the CEO’s of Wal-Mart, the AMA, PhRMA, and the AARP as a base to build a broad coalition of supporters and engage them in the active promotion of the need to pass healthcare reform?

I agree with the experts and pundants  that if Obama wants to pass healthcare legislation this year, he needs to take a more aggressive leadership role and also be more specific about the plan he wants, but I also believe he will be much more successful if he builds and leverages a coalition of supporters to help him.  That’s how he became president in the first place.

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