President Obama has suggested that college loan debts might be retired after 20 years of dedicated payments, or after 10 years under circumstances such as teaching in a difficult school setting. The plan is a nice gesture, but it is short sighted, and misses the real point of the student loan debt crisis– that it is not really about student loan debt. The problem is that college cost that has risen at nearly twice the rate of inflation over the past generation. When that happens, more loans are necessary, and debt increases.

There are a number of factors that have contributed to the meteoric rise in college and university tuition rates. Consider just these few…

Federal earmarks were banned last year, which made a strong impact on colleges. Earmarks paid for research equipment, residence halls, and much more at colleges around the country. Without those earmarks, colleges have had to find the money elsewhere – from private endowment and foundation grantors, generous donors, and sales of college-related property and memorabilia. What that income doesn’t materialize, student costs increase.

Despite billions of dollars total in endowments are the country, colleges are surprisingly stingy with the distribution of their endowment money. Most colleges release only about 5% of endowment income each year, far less than what is needed to bring down costs and lighten the loan burden. Endowment money is received tax free, grows tax free, and is distributed tax free. Iowa Senator Chuck Grassley thinks that this is a scandal. He advocates colleges doing the right thing and lowering student cost by releasing more endowment income for scholarships, grants, and operating costs.

Supply and demand is alive and well in higher education. It has always been understood that a college education is an important step in a successful career and life. It is said that a college graduate will make $1 million more over their career than someone without a degree. Today, a college degree is considered the first step, an advanced degree is preferable. Colleges have what you need – a degree – so they can call the price, without negotiation. Like it or not, tuition will go up, so long as the diploma is valued and desired, and that increase makes for more loans and more debt.

The loudest voices being heard about college cost and student loan debt are those directly affected - students and parents. Unfortunately, they are blind to one of the primary contributing factors in cost inflation, a factor that they have created – the desire for increased luxuries on campus. If you have paid any attention to college campuses over the past twenty years you’ve noticed is that they have become “fancier”. This is because of an increasing demand by students and parents to have top notch amenities in every aspect of the college. Double rooms have given way to singles, gymnasiums have health club-style workout facilities, dining rooms look like food courts, and 100% wireless coverage is a given. All of this raises costs, and, ironically, students and families are demanding exactly the items that make price inflation necessary, and so the need for loans goes up.

Mr. President, if you want to address the student loan crisis, there are solutions. Consider these:

·      Demand that colleges use more of their endowment to reduce costs to students, including grants, direct loans, and program subsidies in the spirit of the Grassley plan. Confront college resistance with the offer to tax endowments to generate income for student loans.

·      Tell it straight to American families that they are complicit in rising costs when they demand luxury facilities and don’t expect tuition to rise. Be clear that their desires, increasing costs, and growing loan debt are directly related. Austerity isn’t popular, but neither is loan default.

·      Abandon your plan of loan forgiveness and avoid sending the “buy now, pay never” message of the housing crisis and the Wall Street bailout. Instead, hold Americans to their promises – to pay back the loans that they willingly signed on to.

·      Offer more options for repayment. If not with cash, with sweat equity in places like Habitat for Humanity, AmeriCorps, or something like the old Civilian Conservation Corps. If the Federal Government is going to give away money, you might as well get something back.

The student loan crisis is at least as troubling as the housing crisis, with one addition. When houses foreclose, there is an asset that can recover some of the money owed. Banks lose something, but not everything. In the case of student loans, when there is default, there is nothing to recover and re-sell – you can’t repossess an education, or a mind. President Obama is trying to prevent a mess like the mortgage crisis, and his plan could be of some help. However, a generous repayment and forgiveness plan won’t go far enough. It will take students, families, trustees, and colleges to radically change their behaviors to bring down costs or the problem will only worsen. 

We all live with limits. The government tells us how fast we should drive, what drugs are safe, and what can be said on TV. Regulation is part of our everyday experience. Most colleges and universities have to answer to more than 100 local, state, and federal regulations like zoning laws, crime reporting, and IRS form 990. Then there are accreditation organizations like Middle States, and regulatory agencies like the NCAA. Increasingly active and activist parents are pushing demands for internal regulatory policies. There’s no shortage of people and legislation telling colleges what to do. Why shouldn’t there be?

The effectiveness of the Net Price Calculator will be determined in time, since it was mandated for implementation just more than a month ago, but effectiveness is not the real issue. The powerfully negative reaction to the Net Price Calculator is the real story. There are bad feelings about this because it is believed that colleges don’t need the Net Price Calculator. They are home to America’s brightest minds, people who are invested with the public trust, and leaders in ethics. They don't need a dubious, and perhaps spurious, instrument to explain what they are giving and charging relative to other colleges. They know better than the rest of us about their market and pricing, right?

It is this kind of thinking that gave birth to the Net Price Calculator, and it is a strike at the heart of the privileged position of the academy. It is no secret that college costs rise well ahead of the rate of inflation. That inflation happens because colleges have enjoyed an uncritical trust for generations. Now, the market (and Congress) is waking up and asking about cost inflation and the associated value. Parents are becoming more activist because the bills are getting harder to pay. Congress is looking for a symbolic “win” in a troubled economy. And, recent developments in the financial and housing markets have created a demand for accountability. The financial and housing sectors cultivated a "don't ask questions, we know better" attitude. They had their collapse, and with that attitude, higher education could be next.

Comparing our higher education system to failed financial and mortgage corporations are not a stretch. Each has a powerful impact on the economy, each has leadership that makes national policy, and each considers regulation as a hindrance to doing their work. Today, “regulation” is just another word for “accountability”. Consider the Net Price Calculator a corrective, not a threat. Colleges are being asked if they have made good on their promises relative to price point. Graduation rates are being scrutinized along with costs. Colleges should be prepared to be under the same scrutiny that academics demand of their own disciplines. What looks like a wolf threatening the integrity of colleges and universities will be a sheep that warns against the hubris that claimed other sectors. If higher education is not more transparent, there isn’t a bailout large enough to save it.

America needs colleges and universities to be the best that they can be. For the most part, they are doing a good job under challenging circumstances. But, the Net Price Calculator, despite its flaws, allows for an unwelcomed peek inside the ivory tower. The market is asking “Why should we pay what you’re asking”? How colleges answer that question will make all the difference in their success and survival.

strategicplanningMD is currently in release 3.0 of its suite of applications, considered to be the healthcare industry leader. In the next release, scheduled for 2012, the companies plan to enhance the user experience, provide additional business intelligence and accountability tools, and strengthen the integration between applications.

“The Kyle David Group is a premier technology development firm, and having access to their expertise on this project will be integral in extending our software even further than we have visioned,” said Scott Regan, founder and chief executive officer of strategicplanningMD. “Their ability to take an idea and transform it into something even bigger and better is uncanny. We are excited about the direction our company is headed.”

strategicplanningMD’s suite of programs is anchored by StrategyPlanner, which combines a best-of-breed strategic planning methodology with robust business intelligence tools. Also included in the suite are benchmarking, forecasting, mapping, data analytics, and quality management applications.

“strategicplanningMD’s applications are already the best in the industry,” said Kyle David, chief executive officer of the Kyle David Group. “To be able to take an already leading-edge design and elevate it to even higher levels of performance really excites us. We are going to push the boundaries of the technology so that organizations can execute better and faster while enhancing their results.”  

The goal in the next version of the software is to reduce the time it takes an organization to actually develop a strategic plan, while enhancing execution and accountability. Currently, using a combination of strategicplanningMD’s web-based tools and consulting services, organizations have been able to move into decisive execution in less than 30 days. With help from the Kyle David Group, the company is looking to reduce that to one week or less.  

About the Company

Serving more than 70 clients in 23 states, strategicplanningMD is a healthcare business intelligence company that drives excellence through innovation and performance. Through its web-based software system and healthcare consulting services, the company helps executives respond to the significant pressures being put on the healthcare industry. strategicplanningMD's solutions enhance strategic planning and quality management processes, including visioning, analytics, plan development, quality metrics, key performance indicators, scorecards and quality improvement tracking. Clients represent both large and small healthcare providers, including the University of Florida health system.

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• “Know Thyself: Six Things Every College Should Know About A Social Media Plan”

• “Get Out Of My Yard: Four Keys To Dealing With Generational Differences In The Social Media Environment”

• “Keeping Up With The Jones': Five Strategies For Managing Expectations In Social Media Preparation and Implementation”.

Drawing on more than a decade of higher education experience, Peter will lead you through useful steps that you and your college can take to ensure that your social media plan is a success.
 

Join Peter on Tuesdays, October 11, 18 & 25 at 3 pm by following the links below to register for these informative and interactive learning experiences. Be sure to register for each webinar individually, thanks!

OCTOBER 11 @ 3 PM EST

Get Out Of My Yard: Four Keys To Dealing With Generational Differences In The Social Media Environment.

Among the assumptions when addressing social media is that young people know everything about technology and older people know nothing. It is not true. Nonetheless, these assumptions serve as barriers to creativity and progress. Implementing these key suggestions can help to bridge that gap:

• Don't make assumptions – not every kids is a computer wiz, not every forty-something can't send a text message.

• Get the generations together – discover what they can teach each other about social media and usage patterns

• Get the generations together - consider opportunities for shared imagination and leadership in key college projects.

• Sustain contact over time – don't make the connections episodic.

Your greatest asset in your social media and networking plan is the enthusiasm and context that comes with a variety of age groups working together. Harness that power for maximum success.

Click here to register

OCTOBER 18 @ 3 PM EST

Know Thyself: Six Points Will Be Examined To Ensure The Viability Of The Social Media Plan.

• Social media and social networking is not new, just new technology.

• Trust your instincts – you know how to use social media.

• Know thyself – you have a story to tell.

• Don't lie – or embellish, fabricate or exaggerate. People will know.

• Know your limits, you can't do everything.

• Know what you want out of social media – begin with the end in mind.

Using these six steps, you can be better prepared to embark on a social media plan that will be durable and successful.

Click here to register

OCTOBER 25 @ 3 PM EST

Keeping Up With The Jones': Five Strategies For Managing Expectations In Social Media Preparation and Implementation.

Your rival college is deeper into the social media environment than you are. Your President is pressing you to catch up. It seems that students are already miles ahead of the college in this technology. Everyone seems to have unrealistic expectations for how to create a social media plan, how to implement it, or how to measure its success.

• Send the message that social media is not intend to fix or save everything, it is part of a larger plan.

• Dispel the notion that since its on the Internet, it is low cost.

• Reject the idea that since college students do this all the time, it must be easy.

• Ignore the suggestion that you need to copy your competitors to compete.

• Don't forget that there was a world before Facebook, and there is a world beyond Facebook.

Your social media plan must be your social media plan. Your ideas, your platform, your goals, and your measured outcomes. Be yourself, not the Jones'.

Click here to register

When you're an industry leader in a popular and emerging technology like video streaming you can afford a public relations problem now and then.

When you have 25 million subscribers you can take a little chance on your subscriber rate and customer base.

When your stock is flying high you can take a few risks with your business and your brand.

Its Netflix of course. Unless you've been living back when movies came on a tape from a store, you know that a risk has become a blunder and then a nightmare for Netflix and CEO Reed Hastings. After splitting the streaming side of the business from the DVD distribution side, and raising prices nearly 50%, customers quickly found a Facebook page, Twitter account, message board or blog to give their two cents.

Hastings apologized. He really apologized. He expects people to believe that he's not living out a Simpson's episode where a landfill has a pile for Beta, VHS and an empty spot labeled “DVDs”. His apology is a decent start to set things right but it won't win back all the customers. The New York Times online reports that Netflix has lost 1 million of its 25 million subscribers and that stock has dropped 19%.

But this isn't the real problem. Hastings and company at Netflix took a business risk. Hastings is a risk-taker, but not a fool. He killed his own dream, the Netflix Player, in late 2007, because it wasn't future thinking enough for his vision. This most recent decision is not as crazy for business as some suggest (easy for me to say, I'm not a subscriber) – video streaming is the present and the future and Netflix is, as usual, ahead of times. The decision, and the accompanying price hike, are survivable. When streaming takes over, customers will be back (yes, DVDs will meet their inevitable demise – or did you think that VHS and videodisc were eternal?).

However, the “crazy like a fox thing” is wearing thin. Even the brilliant aren't immune from the occasional monumental brain freeze. What made the smart and creative Netflix, creative enough in 1998 to sell 10,000 President Clinton deposition DVDs for 2 cents each as a publicity stunt to promote the company, get so sloppy? High prices make consumers mad, bad judgment makes them crazy, and a complete lack of forethought destroys trust. The bad judgment? What else do you call naming your new business Qwikster without checking that the associated Twitter tag is best known for its dope smoking Elmo and tweets that read like they were sent by Cheech and Chong. Nice. That's the image I want associated with that little red envelope, although it looks likes the little red envelope problem is about to take care of itself.

It's alright for a business to take chances, even a business as large as Netflix. Customers expect it and will go with you – IF they trust you. But, even an eighth grader checks to see if their cool site name is already taken. Geez, the program even prompts you if the name is taken. Trust is like glass, its beautiful until broken, and then no one can put together all of the pieces. Reed, and Netflix, should have known better.

The recent Target launch of the Missoni line created enough traffic to crash Target's website. A disaster, a risk gone badly? Hardly! A retailer's dream. Not only has Target garnered world-wide attention for its stores and products, but a risk with such high reward only creates an insatiable hunger for more risk. The particular reward of the particular moment is nice, but its the risk that is the gift that keeps on giving.

Think of it in another way. Every employee likes to get rewarded. For most it is in the form of increased pay, but others prefer benefits like flexible hours, better insurance or a better office. These things don't magically appear, they are the result of successful risk. Again, risk generates two rewards – the obvious material enhancements, but also a boost in workplace morale. How? People, employees, like to be heard, they want to be valued, they want to be recognized for their contributions. Studies show that we want this even more than pay raises. A company that demonstrates that it is willing to take calculated risks, that the company is trying to improve, and then passes along the rewards to its employees will boost morale and loyalty much more than the company that plays it safe and is not able to share rewards. You can risk without reward, but you cannot reap reward without risk.

Daniel Fisher, of Forbes Magazine, wrote an article in February 2011, entitled “Study Turns Risk/Reward Relationship On Its Head”. http://www.forbes.com/sites/danielfisher/2011/02/03/study-turns-riskreward-relationship-on-its-head/ The theme picked up on a paper in the Financial Analysts Journal that suggested that low risk investors have done better over time just as high risk investors have had significant losses, some up to 90%. Makes us re-think risk, doesn't it? Nope. It makes us consider how we risk, not should we risk. Jump back to Target. There is no way that a huge retailer and a high-end brand decided over drinks one night to “get together and see what happens”. Yes, they took a risk, but that risk was planned, calculated, and carefully implemented. Perhaps they didn't anticipate the scope of the reward, but that's just a bonus. The real reward is that their risk worked. Even caution can have great yield, as Fisher and the Financial Analysts Journal hint at. In the end,you have to be in the game.

What does this mean for you? As a leader in business, and in your private life, there is no way to escape risk, though we may try. Fear paralyzes us, so we must take a reasoned and calculated approach to risk and use it to our advantage, and not wait for it to make decisions for us. Our employees depend on us to take the risks necessary to generate reward and create a sustainable company and business environment. In the technology sector, change is rapid, and opportunities for risk are readily available. Take them! You will fail. But, you will learn from those failures and demonstrate the kind of courage necessary to be a leader worthy to be followed. You will succeed too. In those cases, the risk once again creates the double reward – you'll have the spoils of victory in the moment, and you'll be energized and confident to try again the next time an opportunity is presented.  

I first had the pleasure of working with Peter when he was a college professor at Muhlenberg College. His level of thinking combined with his easy-going demeanor made him captivating and inspiring. I knew that I needed him on our staff and he was recruited as an advisor and contract consultant ever since. It wasn’t until recently that we found ourselves going back to Peter so much, that we knew we needed to have him on board full time.

Peter brings with him a wealth of experience. In contract engagements with The Kyle David Group over the years, Peter’s ability to innovate practically and go outside of the box for solutions has led us to some of our biggest successes. Peter brings with him comprehensive knowledge of mobile technology and best practices for implementation.

His former career with Muhlenberg College appointed him to the nine-member senior administrative staff, reporting directly to the College President. Serving as an adjunct professor, Peter has taught college-level courses in the general curriculum and in an honors program at both Muhlenberg College and Alveria College. He is especially gifted in understanding organizational systems and leading change through the use of technology. He is an accomplished public speaker, addressing topics of personal growth and personal and organizational success. He is sought widely for his thorough preparation, wit, and engaging style.

I’m very excited to put Peter will be in charge of growing our web development and technology management practices, because I know that his focus on efficient solutions will resonate with our clients. If you, or someone you know, is facing organizational difficulty with technology or just wants to know if there is a better or more economical way, I highly encourage you to reach out to Peter at 610-336-4822 or pbredlau@kyledavidgroup.com .

Now, I’m not a complete pessimist, because I think a lot of companies like Facebook were actually undervalued for a long time.  However, that doesn’t mean overvaluation is the solution.  (Did you hear that LinkedIn?)  There is one deal that I have been championing since last Spring, but I fear that if it takes place it’s going to rock the market and officially mark a critical moment in bubble 2.0: Apple needs to acquire American Express.  Now, I will make my case from not only the technological angle, but also a financial angle to support why I feel that this is the next leg for Apple and the internet in general.

Most notably, the reason why a marriage would be so fantastic hinges on the potential to integrate payment into the iPhone as a “mobile wallet” or even just a credit card through the device.  (We’re thinking the creative geniuses at Apple might name it iMoney.)  True, this is not a concept that has never been thought of before.  Starbucks has already integrated a direct payment solution into their app which has been wildly popular.  Unbridling this technology to all purchases is something that has banks and technology companies scrambling, fighting, and dealing behind closed doors.  There isn’t another day that goes by that the WSJ doesn’t have another story about a bank’s attempt at a “mobile wallet” only to never appear again.  That is why I feel strongly, that Apple should negate all of the nonsense, and just buy AMEX.

When I speak I always throw in a bit of chatter about why this deal will ultimately be tremendously successful.  Predictably, I will have my balloon deflated by b-school students that want to read me case studies of Coke acquiring Oil of Olay or some other example of why acquisitions outside of the acquirers core business won’t build value.  They have some merit too.  Running a bank/travel agency/publisher is vastly different than a technology and software company.  However, American Express’s bread and butter is in payment cards and merchant services.  This will be the next wave in what Jim Cramer refers to as the “mobile internet tsunami.”

Reason 1: The Business Ideals Match

Apple’s meteoric rise from the brink of failure to a technology and media powerhouse is no doubt in large part to the brilliance of Steve Jobs.  However, Jobs’s acumen in developing high-quality devices and software would not have worked without a rock solid business model focused on controlling the user experience.  This level of complete control is what has afforded them the opportunity to challenge Microsoft in a big way. 

Once the DVD of Windows 7 ships, Microsoft loses all control of it.  Not to mention the ostensibly non-existent technical support from Microsoft.  With any Apple product, you must purchase it at the Apple store or through an authorized dealer.  You service it through Apple Care and the Genius Bar.  You are holding a piece of their hardware, software, and support together in a ménage a trois that geeks and tech newbies can agree on.  That level of control allows them to quickly mitigate any issues and provide completely standardized support services—a massive advantage in the computing world.

Now, let’s shift to American Express.  (For the purposes of this piece, I’m going to be exclusively speaking to their payment card business when I reference them unless I state otherwise.)  American Express has always excelled in part because of their high-class clientele (a theme I will refer to later), however one of the hallmarks of any AMEX customer is their distinguishing taste for world-class customer service.  Rest assured, they are not the best.  When dealing with people’s money, you are always going to get some pushback.  However, American Express also controls (very tightly) both sides of the transaction.  Not only does Amex issue the card to the user, but they also issue the processing service directly to the merchant with the only “middle man” in the transaction being the party that connected AMEX with the merchant.  Unlike VISA and MasterCard who allow their card acceptance to be sold and resold like mortgages.  As any merchant will tell you, AMEX keeps a tight grip on their merchants.  This standardized support is analogous to Apple’s.

Summary: From a standpoint of experience control and customer service, Apple and AMEX are a perfect fit together.

Reason 2:  There is a war going on over mobile banking.

Online banking is no longer something for the tech savvy.  It is ubiquitous.  On the horizon is mobile banking, which hasn’t taken the spotlight yet, but will soon do so.  All major banks and credit card providers allow for some sort of mobile access.

There is a war going on with banks over mobile wallets.  Owning the bank would present a situation where Apple is the first mover (which they love to be) in the market, and be able to deliver a simple and consolidated product.  Given Apple’s track record at creating markets this is not new territory for them.

Summary:  Apple has a long history of setting precedents and standards.  To become the first market mover circumvents the war and will quickly establish dominance.

Reason 3:  Brand Status

Apple is a premium brand at a premium price.  There are plenty of knockoffs that are cheaper and may even be better, however the brand perception with Apple is that there is nothing more innovative or of higher quality.  Celebrities carry the iPhone, because there is simply nothing better.  That brand perception is what allows them to charge heavy premiums on their products while still dominating their market.  Their products range nearly all price points so that “status” can be obtained with an iPod touch for $100 or a MacBook Pro for $2500. 

To those who know the story of American Express, there is simply no difference.  The exclusivity and “high brow” perception of American Express is one of the reasons that notoriously savvy investor Warren Buffett took such a large stake in the company in the 1960s and holds it to this day.  To test his thesis that he should buy the company, he sat at nice restaurants to see how many people paid with an AMEX.  Apparently there were a lot because Buffet is the largest single investor in the company.  That brand perception is what brought American Express back from the brink of disaster when it made some poor investment choices (sound familiar?)

Now I’m sure that there are market research companies around the world that have sophisticated metrics of how luxurious a brand is and its general perception, however I like to use a highly academic metric of my own: the rapper metric.  Rappers make things luxurious. (i.e. Cadillac Escalade & Patron.  If someone can show me another segment that can make a grandpa car into a young and fit status symbol and tequila into a high brow drink and I will buy you lunch.)  By my last measure “Android” hasn’t been mentioned once.  However, multi-platinum rapper Lil’ Wayne’s lyric,

“Like a F-350, tank never empty
Damn everybody in the bank act friendly
Used to think my shit didn't stank boy was I wrong
Approving million dollar deals from my iPhone”

And American Express’s mentions in hip hop are innumerably great with particular frequency on the black card.  Jay-Z’s lyric in “It’s Alright”:

“Regardless of the fame
It’s hard, I can’t even walk through Harlem again,
Charge it to the game, I’m platinum like American Express”

Smartphones are personal devices.  People concern themselves greatly with their next purchase and how it is going to transform their lives.  The luxury brand in smartphones is no doubt Apple’s iPhone.  American Express is the luxury brand in credit cards.  It’s the reason Warren Buffett is such a large stakeholder.  Not only is it a world-class brand, but it is a toll bridge business.  The people that use it, use it for status and will keep using it as long as the cachet stays the same.  That has been the message from AMEX since day one.  Remember this ad?  And this one?

Summary:  Both brands cater to the perceptions of a higher class.  No realignment necessary.

Reason 4: Apple is missing the fifth “M”

The five reasons people access the Internet are: messaging, (social) media, music, movies, and MONEY.  Currently Apple caters to four out of the five.  As a company, Apple as created experiences and products that have proven their ability to weave the Apple brand into the fabric of our lives.  The brand extension into music, drove sales through its entire suite of products, creating a pathway to turn a low volume buyer into a high volume buyer. 

However, Apple’s connection with a person through music proves that it can hit someone at his or her core.  This is especially significant because they were not only able to capture someone’s musical habits, they were instrumental in curbing rampant piracy that was brought about by services like Napster.  This connection got people that were used to getting freebies to pay for their music, a largely unprecedented shift on the internet.

Music elicits the entire range of emotions that money does.  Music is personal as is money.  Just try to tell someone in Nashville that country sucks or ask someone how much money they make.  The reaction will be about the same.  People need to be able to control their music and their money and there is no better way to control it than through the device that has become a bodily appendage to many.

Summary:  Apple can seize markets and win.

Reason 5: It would put Google on the defensive

Google could do it faster as they have more android phones in force.  However, the Google brand doesn’t fit AMEX like Apple does.  The Apple brand is “hand-in-glove” for American Express.  The ability to get a deal on your smart phone, pay for it, and go would allow Apple to make Groupon its bitch.  This would be a huge coup for Apple and could quickly extend into the territory of PayPal and Google Checkout.

I think most importantly in this situation is that it would devalue Android powered devices.  They would be the number two player in this game and if MP3 players and tablets are any indication, the number two is barely visible from the throne of the number one.  When was the last time you heard someone say, “Golly, I can’t wait to get a Zune?”

Keeping the competition at bay is something that Apple is great at doing.  With Chrome OS from Google becoming a reality, it is going to be all the more important to keep the competition on the chase.  There is no better place for your competition.

Summary:  If Apple leads on this, Google will have a hard time catching up.

Reason 6: Acquisition that will immediately add $.02 per share.

For some high-level math, let’s take a look at Apple’s 20B in sales in 2010.  According to Quora, 20% of credit card transactions take place using an AMEX card.  Now, yes I understand that I’m making gross generalizations, but it is to prove a point.

20 Billion in 2010 annual sales X 80% by credit card X  20% of them are AMEX, and AMEX takes 1% of the transaction. $320M in savings. 

That is just an appetizer to the entre of savings that would he had through an acquisition. 

Summary: Most acquisitions don’t add value, but this one would right out of the gate.

Reason 7: Derivative Benefits

There are a plethora of secondary benefits Apple would receive, presenting an abundance of opportunity for future growth.  The biggest one would be they amalgamation of user purchase habits, preferences, and behaviors.  All of that data is a goldmine for advertisers.  It also has the potential for Apple to open up distribution channels and create strategic retail partnerships.  This is barely a secondary benefit and could be considered a primary.  If you can get a discount by just paying with your iPhone, bye-bye Groupon.  If your iPhone can alert you of deals within walking distance and let you checkout on the phone instantly, the landscape of capitalism in population dense areas will forever be changed.  Most importantly though for Apple, if your phone becomes a device that “pays for itself” you are creating a moat so wide for competition Google would have to start a crew team to even think about crossing it.

Now, there is the argument about privacy that comes with the territory of user data collection, however I don’t buy it.  People like to pretend they care, until their personal data gets them 2 for 1 pedicures.  Just look at the protests, and uproar that has come from Facebook changing their privacy policies daily, and Apple tracking users’ locations within their mobile devices.  What has come of it all?  Nothing, but a few 90 second filler segments on CNN.

Finally, in the derivative benefit column, this marriage would put VISA/MC on a strong defensive in addition to Google; a position that they really don’t know.  Having dominated the market for so many years, I would wage to guess that the lack of time spent in the trenches is a perfect reason why they will make knee-jerk reactions to this type of a deal and do something stupid like do a deal with Microsoft so that the next Kin can integrate payment.  Just imagine when your credit card gives you the blue screen of death.  This is a predictable and foreseeable failure, and should they omit from doing any deal, Apple will continue to farm away market share.

Summary:  The ancillaries are enormous and together may be even more valuable than mobile payments.

Wrap Up

Oddly enough, I’m generally a PC guy.  However, I would be naive to deny the impact that Apple’s product line is having on the market.  To me, an acquisition of AMEX not only makes sense, the cost of NOT doing it is greater than the cost of pulling the trigger.  Steve Jobs, Tim Cook, Kenneth Chenault, give me a ring.  Let’s put together a deal.

Below are the three parent tiers for which an audit is based as well as the individual items that we (The Kyle David Group) would analyze to determine how well the site is performing in each of these three tiers.

• Efficacy– What is the website designed to do, and how well does it do it?  Where are opportunities being missed and where are successes being made?  This may be applied to a large website globally, or to specific sites within a larger site.
  • Content Efficacy – Is the content on the site being read?  Is the content answering the questions that the visitor has?  If not, how could it be improved?
  • Navigational Clarity – Can the user intuitively find what they are looking for?  Are their multiple options for accessibility?  Given the amount of content in the site and how it is organized, could the navigation be reconfigured for better accessibility?
  • Interface hurdles – Are there technological barriers that are preventing browsers from interacting?  Is proper skip logic/location logic implemented into form submissions?
• Website Traffic– Where is website traffic coming from?  Is it the best source of traffic?  Could there be more opportunities or more economical opportunities?
  • Analytics – Is a true drill down analytics system installed on the site and is it properly measuring traffic?
  • Search Engine Marking Efforts – Is consideration being given to the indexability of the website?  If SEM techniques are being implemented, are they effective and economical?
  • Hard Advertisements – If the website is being advertised through a non-internet medium (i.e. print advertisements), how are they translating to traffic on the website?  Is that traffic effective?
• Competition – How does the website compare to others that are in the same space?
  • Aesthetics – Is the design and design technology of the site comparable to its peers?  If not, is it inhibiting the overall fidelity of the site?
  • Information – Is information being presented consistently with other sites in the space?  If not, is there an advantage to being an outlier?  If so, is there enough differentiation to create stickiness?
  • Positioning – Are other sites in the space positioning themselves for differentiation?  If so, why, and is it beneficial or detrimental to your site?

Answering these questions is critical to understanding how your website is either helping or hindering your organization as well as highlight simple changes that could be made to further the goals of the site and the brand of your organization.

Now, at least through my eyes, the newspaper benefited substantially by my employment.  They had a loyal customer base (I retained all of my deliveries except one in three years) as well as increased one (I was a hell of a newspaper subscription salesman).  This was a win-win relationship.  By any economic standard it was skewed in the newspaper’s favor. 

For all of these reasons, the first thing I did upon moving to a home of my own was call to have the local paper delivered.  And young Chuck, used to deliver with a smile.  I continued to pay my $6/week to get the local paper more because I was supporting the paperboy, rather than the paper.  (In fact, I was more often paying for a recycling chore.)  However, amid cutbacks, they fired the paperboy and I subsequently canceled the paper.  For the $20/week + tips, was this really a meaningful cutback?  Many people may find that a dollar saved is a dollar earned. (Remember when it used to be a penny?) I found this cutback absurd.

In thinking about this, I thought of all of the valuable business lessons that I learned and how I still use them today…

Value is in the Eye of the Beholder

My older brother had the route before me.  While he was just as disciplined, his heart wasn’t in it and collections were painful for him.  He wanted to get rid of the thing to the first person who would take it.  At the time, I wasn’t old enough, so I agreed to take the route over as long as he was the face of the operation until I was old enough.  I saw opportunity.  This wasn’t just a paper-route, it was weekly access to people whose lawns I could mow, driveways I could shovel, and yards I could rake.  Eventually it became Kyle’s Paper Delivery, Lawn Mowing, Babysitting, Yard Raking, Snow Shoveling, Christmas Light Hanging, and (eventually) Computer Fixing – Company.  I had a loyal customer base and likely the only 11 year old in suburbia with a pager.  When I was eventually old enough, I formally took it over, with a larger subscription base, up to date collections, and customers that called me first when something needed to be done.  (I was able to increase babysitting revenue by fixing computers while the kids were asleep.  It was a gold mine for an 11 year old.)

There is Power in a Well-Worded Contract

When I started my route, the paper was an afternoon delivery which meant that I could come home from school and start on my route.  It was quite convenient because I had all afternoon to deliver the papers.  The extra time gave me the opportunity to rake a few lawns while I was working my way up Sentinel Road.  However, word spread of my eagerness and I had increased my subscriber base by almost 50% in my territory (and won a small fleet of bikes and skateboards to prove it).  However, the newspaper dropped a bomb one day.  They were switching to morning delivery.  The claim to fame of the local paper is that it was always brought to your door.  There was no way that I could deliver that many papers to the door, before school, and still have enough energy to make it through the day. 

However, then I got an idea.  A lot of my subscribers got the city paper as well in the morning that was always at the end of the driveway.  They were going to have to go to the end of the driveway ANYWAY.  So I wrote a letter to my clients explaining my predicament.  I couldn’t continue the route if the paper had to be at the front door.  I enclosed a contract that released me from door-delivery and allowed me to bag a dry paper at the end of the driveway.  I agreed to a reduction in tip.  (I’m sure I also insinuated that if they ever wanted their kids to be cared for or their computer to work, they better sign up, but it was a long time ago.)  I only had one cancelation and a stack of releases. 

A couple of months later, one of the route inspectors must have spotted me tossing papers.  My route manager confronted me.  Imagine their surprise when I whipped out a file of releases with signatures.  The power of a well-worded contract is indisputable. 

Have a reliable #2…

There was never a stage where I wasn’t a workaholic, however there were always inevitable trips and reasons that I couldn’t deliver the paper myself.  Finding a substitute was easy, but finding a reliable substitute was not.  Papers would be poorly bagged and wet, not on-time, or not at all.  The kids in the neighborhood just didn’t get it.  They were killing my reputation and when I wasn’t tossing the papers myself.  As a result, I had a hard time concentrating on whatever I was supposed to be enjoying on “vacation.”  Then finally, I found someone who got it.  He and I became business partners on many lemonade stands and car washes.  We enjoyed a great partnership, I got to enjoy vacations and time off, and my customers never knew that I was gone.  In fairness, he knew he was good and charged a premium, but he was worth it.

Now it wasn’t just skills in running a business that I acquired, I sure learned a lot about sales too, but that is a post for a different day.