Check out this quote from Costco's plain spoken CEO, Jim Sinegal:

At Costco, one of Mr. Sinegal’s cardinal rules is that no branded item can be marked up by more than 14 percent, and no private-label item by more than 15 percent. In contrast, supermarkets generally mark up merchandise by 25 percent, and department stores by 50 percent or more.

“They could probably get more money for a lot of items they sell,” said Ed Weller, a retailing analyst at ThinkEquity.

But Mr. Sinegal warned that if Costco increased markups to 16 or 18 percent, the company might slip down a dangerous slope and lose discipline in minimizing costs and prices.

Although there's more to Costco than its prices (the "treasure hunt" it engineers), having a firm limit on retail margins is part of its relationship with consumers. Consumers sometimes win big in this relationship. Where demand is extraordinarily high, Costco could break its 15 per cent rule and both raise profits and reduce out-of-stocks. This is commonly referred to as "good business".

But the unflappable Sinegal stands firm, in a sense allowing consumers to occasionally win a "shopping jackpot," further fulfilling its treasure hunt experience.

For casinos, their stream of revenue requires that they frequently hand over bags of money to random strangers. Any eight year old knows that this is their essential element (that and unnecessary sequins). Stop the jackpots and a casino wouldn't last a day.

Seems obvious. And it is obvious to Jim Sinegal. So why do other businesses subordinate their essential element to bottom line cost control?

I was reading a book about Google last night; though their success seems inevitable now, there was a point where Yahoo was monetizing their page much more than Google and I could imagine a reasonable person wondering if Google had the right strategy?

Of course, the right strategy was to subordinate monetization to the "product"; offering the fastest and best search results is Google's essential element.

Dictionary.com has a lot of ads and a lot of street cred. Perhaps for this reason I kept it as my standard dictionary for years after discovering the superior OneLook. But today I switched. 

OneLook is a writer's dictionary. It's clean and uses a simple command box with instructions right beneath the box. Its best feature, however, is the reverse dictionary: you type a few words and it usually produces hundreds of words or phrases in a sort of semantic triangulation.

Just 'cause I'm at it, I also use these writing tools:

• www.rhymezone.com
  
• Jack Lynch Guide to Grammar and Style
• Unofficial Canadian Dictionary
• Catalysts of creativity: googlism, Google Sets and the full text of Ulysses (not sure why, but 10 minutes of reading this always refreshes my mind)
• The best web-based mind-mapping tool I can find: http://bubbl.us/
• How to edit copy.

Tata Motors and Renault have both pioneered very cheap cars; the business strategy is initially based on Eastern European and South Asian economics, a constraint that is disciplining these car-makers to be cost-obsessed. These cars are built to have some reliability and not be ugly, but otherwise be stripped down versions of what we today consider a car.

What is that exactly?

Cars have become sort of space ships; no casual mechanic can understand how they work in their entirety. But a car built from scratch to be simple -- to have far fewer parts and simpler parts -- is a spectacular game-changer for this market. It's as powerful and simple as Wal-Mart's supply chain.

To some degree, cars are status symbols, and middle-class professionals are more likely to buy diapers and CDs at Wal-Mart than to drive a car that screams "cheap." But this doesn't mean they won't. In today's economics, with failed business models for major automakers, reduced disposable income for consumers, and the knowledge that fuel economy will continue to become a priority, small, cheap, reliable, simple cars will come to dominate. To put a figure on it, I predict the $7000 car in Canada by 2014; it will have around 50 hp and hold four passengers and some cargo. It will be noisy on the highway and be devoid of anything digital. It will be repairable by people who can understand how lawnmowers work.

These cars will displace $30,000 and $50,000 cars just as netbooks displaced notebooks and Ryanair displaced BA. Why? It's about distinguishing between features and the essential element of a technology.

The essential element of a car (apart from the status symbol) is that it is used to take people or cargo places that are too far to walk. Perhaps that's so simple that we have forgotten it. But Ryanair understood that the essential element of airlines is that they deliver destinations; a plane ticket is not a gourmet sandwich, nor leather, nor pretty skirts nor stereo headsets, it is Greece, Barcelona or Paris. Equally, netbooks provide the essential elements of surfing the web, writing prose, creating presentations and storing numerical data.

A BMW is a method of getting people or cargo further than one can walk ... PLUS, tens of thousands of dollars worth of surplus features. Certainly, in an era where compensatory consumption is vital, not just to egos but perhaps also to one's career and position among peers, these features were a true investment; like buying expensive season's tickets at the Air Canada Centre. But are we still in that era?

There are numerous supply and regulatory issues to be worked out; it could take five years before we see these cars in Canada. But when we do, I am certain it will form one of the most significant shifts in personal automobiles since the assembly line brought cars within reach of assembly line workers.

Good Business Week article (2007).

I have a Rogers Mobile plan and, frankly, I have no problems with it. I bought my phone in a former Rogers video store; perhaps seeing the writing for physical-media video rentals, the company leveraged its retail footprint to generate sales in other areas: TV, mobile, internet, VOIP, etc.

But when I was in that Rogers store, it felt empty. They had a few phone chargers on the wall and maybe some skins, but it was essentially a large empty space with a counter at the end. You don't need to physically browse "internet", "TV" or "VOIP", you just need to talk about it.

So, if Bell and Rogers are essentially in a coke and pepsi contest, where their products are not enormously distinct and they depend on sales rather than uniqueness to succeed, what will be the dynamic of selling Bell in Radio Shack? 

It could be a little busy ... maybe people like to buy abstract products like internet and VOIP in a clean room with a counter, as opposed to at a counter with radio controlled wasps. On the other hand, if Bell even breaks even on the radio controlled wasps, they can't help but do better by having the "push-through-tubes" services pushed through 750 shops. And maybe people who walk in for a battery walk out the VOIP, which cannot happen in the Rogers stores.

It will be interesting. Bell faces a lot of challenges both fixing the Radio Shack/Source model and integrating it with consumer communication platforms. But I think there's a lot of upside.

Who knows, maybe Rogers will respond by selling clock radios and printers next to VOIP.

Ryanair is easily my favourite company. For me, business is about strategy and operations. 

I don't really care whether BCE is a private company focused on servicing debt, or a public company serving regulators. Their decisions around content, and the pipes (including mobile ones) through which they push that content is most interesting. 

Here's a quote about Ryanair: 

Geoff Van Klaveren, an analyst in London at Exane BNP Paribas, said Ryanair hauls in more revenue, relatively speaking, from "ancillary" sales than any other airline. In the last financial year, to March 31, 2008, this category was equivalent to 18 per cent of total revenues of €2.7-billion, up from 14 per cent in 2005 and 11 per cent in 2001. "This will keep climbing," he said, which is one of the reasons Ryanair is one of the few airlines that carries an Exane "sector outperform" rating.

When I worked for a gas station company, I learned that their strategy is to effectively break even on the gas (they buy it from people making money on taking it out of the ground), and sell a few $2.75 cokes and maybe a $6.00 bag of milk to everyone who passes through the door. 

In fact, if Ryanair trusted the right company, it could sell off its entire aircraft operations division and rent back the flights, then operate solely as an ancillary business. As I said before, their business model is merely to convince a large fraction of Europe to lock themselves inside one of their pressurized, tube-shaped stores for 6 or 8 hours a month.

... companies must avoid the "Kumbaya Zone" - the place where social media is ultimately a time-waster and has little business value.

Link.

Services (transactional) above wikis blogs, videos
Internal above external.
Asia & Europe above NA.

McKinsey gets into the game. Key finding: Companies use Web 2.0 technologies more frequently for internal than for external purposes

However, I may have missed the whole point of the article, given I read it in Spreeder (see below)?!

http://www.mckinseyquarterly.com/article_page.aspx?ar=2174&pagenum=1

I used to call this the "fax machine effect" ... then I googled it. (you could also call it the inverted hockey stick __________] ... there's a long tail before explosive growth.)

It explains a lot in business and economics. The effect drives the growth of the Internet, many consumer electronics, stock markets, English ...

iTunes is to iPods what U2 concerts were to U2 albums.

But Circuit City is to Blockbuster what Startbucks is to emergency room coffee machines.

Convince all vacationing Europeans to lock themselves in one of your pressurized, tube-shaped stores.

If you spend a million bucks establishing a brand, and you do it well, you could benefit from that investment for years. But if you spend a million bucks on innovation, society will benefit forever.

Establishing market share has been important since the start of the post-war consumer economy ... an era that hasn't ended, but has morphed a little into to the knowledge economy. As a business tactic branding is still relevant. Ask Jeeves, Yahoo and even Google are cute and huggable -- more so than the racks of computers that comprise their offering.

But, clearly, one of these is winning where the others are not, and it's not because people want to hug it. It's nice that a search for "blue jays" no longer returns ornithology, as it easily could have prior to Google, but the company's better search results are only the first taste of how algorithms will displace brands.

Plentyoffish.com is a dating site. It could be the most profitable company in the history of legitimate business (income is suggested to be $5 - $10 million annually). One man manages one website -- oh, and he writes algorithms, which form the core of his site. He doesn't advertise and clearly has never worked with a graphic artist. I'm not even sure if his neighbours know what he does. What does he do? He simple runs a dating website that learns about people's tastes and matches them with similar people. But here's the brilliant part -- rather than coding psychology, he simple allows his members to interact with one another, providing real-time feedback on what makes people get along. If, all things being equal, people who like Ikea furniture also want to visit Thailand ... Pentyoffish.com probably knows this. Over time, the site introduces members to fewer duds and, like how Google gives you the right Blue Jays, builds its popularity by continually improving its ability to match potential mates.

Not that lava life doesn't have sexy ads. They do.

Amazon has been doing this with books for nearly a decade, but their system doesn't appear as sophisticated. Web2.0 definitions may miss the boat when they talk about Ajax and social networking. FaceBook is cool, but so are those hub caps that spin around when you stop. What's really of value are the algorithms that build value in a knowledge economy, and displace the need for branding.

It's a funny comment on human nature. This guy's been the top dog at Hydro One for four years; he earned $1.6 million last year. Stands to reason he could expect another few million in the years to come.

But, he may have also spent $45,000 on his secretary's credit card, possibly using her card to avoid detection, as his own corporate card would have been scrutinized. Now, he's out of a job.

It's such an odd comment on human nature. Imagine if you sat at a roulette wheel, and you realized that 99 per cent of the spots were black, but normal odds were offered. You bet and you win. You bet again and you win. You continue winning millions of dollars. Then, you order champaign for the dealer and charge it to some poor schleb's room. Then you get caught and can never bet again.