United/Smisek’s Marketing Sucked!

United/Smisek’s Marketing can’t work in a Hyper Connected World

Authenticity is not an option anymore!

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I have flown Millions of miles on United Airlines. And I can’t say I shed a tear when I heard  Smisek was “stepping down”. I am pretty sure my fellow 1Kers and Global Services passengers were also leading a silent cheer last week.

To be fair, Smisek and all airline CEO’s have a brutally difficult job. It is a tough business and the legacy airlines have tremendous transformation to go on just about every facet of their business.

But I can’t cut Mr. Smisek any slack on the horrific marketing that was pumped out during his tenure. I was a very frequent customer of United (SFO Hub) and the marketing would drive me crazy. Why? Because it was just so phony! Or more politely, inauthentic!

In today’s social/mobile world every consumer is hyper connected. It is not like the old days, where customers and prospects could not engage with one another and advertising and marketing could just decide what positioning and marketing message they wanted. But It today’s world, your brand and marketing message better be “who you are”. You can stretch it a little and brand “who you want to be”, but you better be showing tangible effort that your company is trying to get there quickly.

Bottom Line: In today’s hyper connected world, authenticity is not an option, it is a requirement. Violate the law of authenticity and become an Internet meme!

United’s marketing violated the new laws of marketing authenticity and then didn’t just violate them a little, they were guilty of multiple felonies.

Let’s just discuss two examples

First, United tried to rebrand itself as the “friendly” airline with a return to the Friendly skies campaign from yesteryear.  I am sure this sounded good in the marketing meetings. Customer research surely showed that passengers wanted a friendly experience and United’s competitors were not trying to “own” that positioning or word….so let’s go for it. Unfortunately, it is not 1970, you can’t just broadcast a message on traditional media and pound the message into customers. Customers knew that United was “Not friendly”. A quick examination of the united Twitter feed would have shown that. If you surveyed a 100,000 United customers and did a word association test, I am certain that United would get zero “friendly” responses. In fact, I am pretty sure “hostile” would far outrank anything close to friendly. The company has a long history of labor issues with its unions and every united passenger knows that their flight crew, gate agent and call center person is very unhappy with their job. I make it a point to never complain to United flight crews because I know they are less happy than I am when seated in 34B on EWR to SFO. The advertising was not only ineffective, it was a negative to the brand. It made customers dislike the airline even more.

Second example. It’s a smaller one. But it drove me crazy. When you get on the plane and have to watch the Airline’s promo videos, they were simply the worst. They were wonderfully produced and very high quality, but once again they violated the authenticity rule. They always had very happy United employees talking about the “how they loved working at United”. Really? In millions of miles flown, why had I never met any of these employees. The granddaddy of all inauthenticity was the “London Symphony video”. In that video, Smisek in a great suit, perfectly coiffed hair and a great manicure explained how he had contracted with the London Symphony orchestra to record the United theme song. Talk about tone deaf. The company who is too cash strapped to pay its employees or treat its customers well, is spending money with the London Symphony on the theme song?????!!!!! Worse than that, they actually produced a TV spot showing an orchestra playing in a United plane. The social mobile consumer was quick to point out on the internet that it was highly unlikely that a cello could fit in any of the spaces United alots for seats. And the message of the ad was “every movement carefully planned, coordinated and synchronized” and compared United performance to a finely tuned orchestra! Really? It does not come any less authentic than that. I mean, have you ever see United board a plane? How about just getting the right amount/variety of crappy food on the plane?

New United CEO, Oscar Munoz has a huge task in front of him, I can’t imagine his “fix it list”. Improving the airline’s on time record and customer service will be hard. Fixing the marketing won’t. Just make it authentic!

What do you get when you take a crappy company and cut it in two?

HP  is about to calve off its enterprise business and make itself into two companies. It held an analyst briefing today about the imminent process and there was not much good news there.

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Nothing would make me or most of Silicon Valley happier if this somehow turned into a fairy tale  ending. HP is an iconic company, perhaps the Valley’s first mega business. Its founder’s families are renowned philanthropists and Meg Whitman is a very talented executive navigating some treacherous waters in an old boat.

But there is just no chance for a happy ending. HP is a gigantic iceberg. The world’s fourth largest technology company at over $100B in revenues. But it has been shrinking for a long time.  You can argue all you want about execution, but if you are in crappy businesses, no amount of execution helps. If I were the Mckinsey-like consultant that was advising HP , I would have made them create four piles for their business.

  • Plle 1 – The great businesses. Those are businesses in growing markets and where we are the leader.
  • Pile 2 – The good businesses. Those businesses in growth markets where we are not yet the leader.
  • Pile 3: The crappy businesses. Businesses  in declining markets, but where we are the leader.
  • Pile 4 – The really crappy businesses. Businesses in declining markets where we are not the leader.

So here is why there can be no happy ending for HP, I don’t see any businesses that go in Pile 1 or Pile 2. They only have really, really crappy business and just plain crappy businesses.

Let take a quick recap:

The PC business . It’s a huge business for HP ( Thanks Carly) and they are a leader here. But we all know the PC market is declining, upgrade cycles are slowing and margins have always been a challenge in this business. The only people that made money on PC’s  were Gates and Balmer. And Michael Dell. Lets not forget him. Made lots. Very smart man.

Q3 Results: Personal Systems revenue was down 13% year over year with a 3.0% operating margin. Commercial revenue decreased 9% and Consumer revenue decreased 22%. Total units were down 11% with Notebooks units down 3% and Desktops units down 20%.

So let’s put this one in Pile 3 – Just Plain Crappy.

The Printer business.  Another huge business for HP. They are leaders in printers. And more importantly ink! I have an HP printer in my den that I bought 5 years ago. No need to upgrade it. I print a few things every month on that printer. I am carrying around a huge phone, a tablet and a ultra thin laptop, so why would I print anything. I can just show it on my device. And if people need a copy, then thats what Dropbox is for, isn’t it?

Q3 Results: Printing revenue was down 9% year over year with a 17.8% operating margin. Total hardware units were down 2% with Commercial hardware units down 6% and Consumer hardware units flat. Supplies revenue was down 6%.

Let’s put in pile 3 – Just Plain Crappy.

 

Enterprise Group: This has enterprise servers, storage and networking. Networking is actually a decent business, but HP is not the leader here. It could get a pile 2 rating. Even if you go cloud, you need networks,  sometimes even more networking, But HP is not the leader here.  Enterprise Servers are not a good business. People still need these, but with more workloads shifting to public clouds, this market is shrinking. Private cloud should be an opportunity, but with fewer buyers and better server utilization, you can expect to see further margin compression in a declining space. And Storage, if there was a Pile 5, it would be in that.  Hugely impacted by the cloud. This is a race to zero business. Declining market, declining prices, poor margins, need I say more.

Q3 results: Enterprise Group revenue was up 2% year over year with a 13.0% operating margin. Industry Standard Servers revenue was up 8%, Storage revenue was down 2%, Business Critical Systems revenue was down 21%, Networking revenue was up 22% and Technology Services revenue was down 9%

You could argue, this is the pile 3 business, but the overarching cloud trends are not good here. Pile 4.

Enterprise Services: HP bought the old EDS business. And when I say old, I mean Ross Perot old. (Admit it, when you read the name Ross Perot, you were tempted to go the Dead or Alive webiste, weren’t you? Let me save you the trouble, he is alive. 85 years old. Still kicking himself for that James Stockdale running mate choice.)

Tech consulting is still a growth business, but not the kind of consulting that HP does. Their expertise and business model is at least one generation old. But if you need some COBOL debugged they could handle that.

Q3 Results: Enterprise Services revenue was down 11% year over year with a 6.0% operating margin. Infrastructure Technology Outsourcing revenue was down 13%, and Application and Business Services revenue declined 7%.

Pile 4. Really, Really Crappy.

Enterprise Software. Unfortunately, this is almost all on premise software and most of it pretty old in the tooth. Acquisitions with the potential exception of Opsware have been weak to say the least. While Oracle has been making some nice cloud acquisitions, HP has been licking its wounds litigating with Mike Lynch. Enterprise software is getting eaten by the cloud. HP is only shrinking at about 6%, but look for increasing rates of decline in the near future.

Q3 Results: Software revenue was down 6% year over year with a 20.6% operating margin. License revenue was down 11%, support revenue was down 3%, professional services revenue was down 8% and software-as-a-service (SaaS) revenue was down 4%.

How could SaaS be down 4%? Must be really crappy SaaS.

Definitely, Pile 4 – Really, Really crappy.

So, there you have it. We would all like a happy ending here. But unfortunately only the investment banks will get one. They will make money in the split and then I suspect make some nice fees on the sales of the Enterprise business (to IBM?) and the Personal Group (to Lenova?)

Sorry. It s jungle out here.