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It is better
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John Sumser

is more
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John Gall


The Electronic Recruiting News is a Free Daily Newsletter For Recruiters, HR Managers, Advertising Agencies and Clasified Advertising Operations

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Wisdom Automation (from our vault)

(June 16, 2000) We continue to wrestle with the notion that software is a form of media (like a compact disc or a piece of paper) and will eventually be priced accordingly. The question, we think, is how to maintain high margins in an environment that is continually turning high margin business into commodities at an extraordinary pace. Reaching far beyond the realm of Electronic Recruiting, this question is central to the long term success of any company in or out of our business.

Simply, the question is "How do you continue to provide your customer with novel, high value services?". Like we see everyday in Electronic Recruiting, the moment a good new idea hits the market, the competitors begin to copy it. Either market advantage is fleeting and dependent on a continuing stream of innovation or it requires a non-repeatable (or labor intensive) method. We think this question is at the center of the development of a workable strategy in our industry and the rest of the Internet industry.

One approach to solving the problem is to institutionalize a wisdom department. You may remember the scale of value that goes something like "Data - Information - Insight Wisdom". Wisdom represents the highest value, data the lowest. We believe that all wisdom has a half-life. At the half-life point, wisdom degrades into information and can be automated. A Wisdom department would be in charge of developing a constant stream of new wisdom and figuring out how to deliver it to the customer.

The other, more widely practiced approach (demonstrated by the HRXML consortium among others) is to wait until wisdom is totally degraded and becomes repeatable data. This approach, appropriate for a large institutional player, assumes that commodity pricing is a good thing and that low margins are the key to market dominance. In this model, survival is sold rather than the opportunity for a customer to gain real market benefit. We believe that this approach values mediocrity and consistency over innovation. It's much easier to execute (particularly if you are a big player with relatively limitless budgets),

We tend to look at the market as leaning towards one extreme or the other. The highest return on your investment is likely to come from the former while reliable performance, at rates consistent with all other players, comes from the latter. In a "War For Talent", no one can really afford the luxury of market performance. It is, by definition, declining.

- John Sumser © TwoColorHat. All Rights Reserved.

The Big Mo

(June 15, 2000) It's always a deep privilege to get to witness the passion that fuels the inside of really entrepreneurial companies. People who pursue a dream each day have a special sort of charge about their private affairs. The distinctions between the work, the passion, the family and the product, rather than being balanced are tightly integrated into a seamless view of reality. The company is the product; the product is the family; the family is the work; and, the work is the passion.

While passion doesn't guarantee entrepreneurial success, it appears to be a prerequisite. But, as any sensible player will tell you, passion is, at its best, a way to console yourself about the shortfall in your paycheck. Real success involves seeing well beyond the confines of an idiosyncratic sense of the future and into the soul of the market.

It also requires a serious investment beyond a self-serving sales pitch.

Early start companies in our space had a nice and understandable challenge. In order to make the Electronic Recruiting marketplace emerge, they had to educate customers. In those days, candidates outnumbered advertisers by an order of magnitude. The job was easy...get a customer to use the system and results would take care of themselves. The real advantage the first movers held was the leverage implicit in the market.

With over 30,000 competing vendors of various sizes and offerings, the game is very different today.

Earlier this week, we mentioned attending the first ever Chief Technical Officer Conference, hosted by in Austin. Leveraging their relationship with FastCompany, the team at managed to integrate a market need with their company's explosively growing business. The conference successfully placed in a thought leadership role in the industry.

The product line does not pretend to offer a full spectrum solution for CTOs. Rather, it solves one problem brilliantly. In order to successfully pull off the conference, had to invite a series of people who had larger, sometimes contradictory views of the way the world works. By combining these two issues into a single conference, the company managed to seriously amplify its market momentum.

In order for any company to make a permanent mark, it has to be a part of something larger. More than any competitor we know of, takes the challenge seriously. From deep community involvement (they have invested in saving a key Austin landmark...Willie Nelson's old Opera house) to important non-profit work, the company manifests a profound and reliable commitment to its local roots. On a larger scale, the CTO conference represented a profound move to give back to the larger market.

We are seriously impressed.

Investing in a network involves a kind of courageous risk taking approach that is not for the faint of heart. But then, the faint of heart rarely achieve real market momentum. When you invest in a network, the return on your investment can not be calculated in a straight line business fashion. The risk is that someone else will benefit from your investment. By delivering a relatively hype free CTO conference, the folks at demonstrated that they understand their broad responsibilities to the marketplace and are willing to take the risks involved in meeting them.

This is the way that real winners play the game. We were privileged to be a part of the process. The rest of the market should look closely.

- John Sumser © TwoColorHat. All Rights Reserved.

What's It Take? (from our vault)

(June 14, 2000) You can't get very far these days without seeing an ad for a job board. At least 20 companies are currently buying television time in various markets around the country, all with the same message. Frankly, the ads blur together in ways that make us wonder about the wisdom of the investment.

Imagine the perspective of an old school newspaper manager. Way back when (five years ago), building a classified advertising business was as simple as publishing the phone number and staffing the call center. The employment advertising cash cow simply rode the economy. No real investment was required to harvest marginal revenues. Advertising the fact that you had ads to sell was a ludicrous notion.

Building a national brand through television advertising is an expensive proposition. We've heard estimates as high as $300M/year to develop and sustain a distinct national image. Given the rough similarity of all online job services, we think the real homework has yet to be done.

Automobile advertising proves the fact that products with little difference can be marketed as distinct entities to tightly defined demographic niches. But then, automobile companies have lots of money and energy focused on demographic research, market demand and consumer preference. From what we see in the current crop of ads, job boards are all after the elusive job hunter.

It's the most expensive approach possible. Like most things, advertising requires a clear understanding of the intersection of the product and the market. That way, advertising costs can be managed while response rates that are worth the investment can be achieved. Market research drives the cost of advertising down while increasing its effectiveness.

The other problem is tougher.

Without significant functional improvements (and we don't mean silly resume pasting tricks), the current crop of competitors is going to stumble and fall. America's GDP continues to grow at over 5%/year while the pool of available candidates continues to shrink. The raw number of traditional managers is in absolute decline. The schools will produce a fraction of the required IT professionals this spring. Although NASDAQ fluctuations should loosen up some technical talent, it's a drop in the bucket.

Harvesting candidates through market specific research (probably coupled with direct human contact, not email bombing) will play an increasingly important role in the market. As candidate supplies continue to diminish, the level of concern about privacy and annoyance will continue to grow. Since real artificial intelligence systems are a long way off (unless you propose to force candidates to wade through profiling schemes), alternative methods that produce specific results for specific paying customers will become the name of the game.

While we're not saying that HR customers are going to become results oriented overnight, we are saying that market pressures will start to demand an increase in performance. All of the advertising in the world couldn't sell the Edsel. The market needs more performance and less noise.

- John Sumser © TwoColorHat. All Rights Reserved.


(June 13, 2000) Over the years, the sinking of the Titanic has evolved from the historical tragedy that it was into a mythical disaster of religious proportions. An excessive number of books, films and documentaries of varying degrees of quality have been devoted to the event. At the same time, the Battle of the Atlantic, fought in the Second World War, with hundreds of ships plunging to the ocean floor with thousands of lives lost, is, in comparison, a neglected moment in history.

The last few days have been witness to several Titanic sinkings.

Hollywood Entertainment Corporation's flagship has slipped to the bottom of the Internet ocean. Purchased by Hollywood Entertainment in 1998, evolved from a small East Bay video store into one of the top online sources for sale videocassettes and DVDs. A savvy player, made a name for itself in 1998 with the videotape release of James Cameron's Titanic. Loss-leader pricing tactics combined with a massive ad blitz drove traffic to Reel in unprecedented numbers. Despite the popularity of the site, the losses have been staggering. While the Hollywood Video stores' operating profits have risen 40%, Hollywood Entertainment's stock has plummeted 75%. has reportedly been costing Hollywood $5 million a month. Unable to find outside funding, this grand dame of e-commerce now lies with a broken back in the murky depths.

A short swim down the shipping lanes finds responding to a distress call from rival Taking aboard the surviving assets and strategic partnerships of the now-defunct may provide the necessary buoyancy for to keep itself from taking on water. Or maybe not.

These ships will have barely settled at the bottom before they are joined by others.

The events surrounding the death of and, to a lesser extent,'s absorption into prove a simple yet startling point. In the Internet economy, market leadership does not translate into market viability. The Online Recruiting Industry needs to take note. We are now spectators to the dramatic deaths of a few glorious Internet superships. Very soon we will be watching scores of companies around us disappear below the waterline. Some may be "rescued" through partnerships or purchase by larger entities, absorbed into their crews. However, these noble disasters will become neglected history as the number of lost souls steadily increases. The current winners in the industry may be those with the greatest name recognition, market penetration, and most memorable Super Bowl ads. The real winners will be those still afloat at the end of the year.

- Ingmars Lindbergs

Chief Talent Officer (CTO)

(June 12, 2000) This morning, we're speaking at the first ever Talent Officers' Conference. That means that there are actually enough CTOs to get them together for a conversation. After our normal period of pooh-poohing a good new idea, we're ready to buy into this trend.

Mind you, we don't buy into the idea that what HR managers need is a different title. Rather, we think that the labor supply problem is big enough to have its own function. The business of guaranteeing that a company will meet its growth objectives has become serious enough to deserve senior level attention. If CTOs are lucky, the administrative baggage of 20th Century HR won't migrate into the new gig.

While we like the idea, we're equally as sure that the standard HR new idea absorption squad will swallow it whole and turn it into a new buzzword. You've seen this happen's how HR avoided the rigors of Total Quality Management. The idea absorption squad (a critical political function in most large HR Departments) is responsible for taking new, scary ideas and converting them into programs so that the boss can say "Oh, yes, we have one of those."

Developing a successful Talent Office, requires a deep distrust of the buzzword process. The job is large and includes the following Responsibilities:

  • Guarantees Supply
  • Allocates / Rations Scarce Resources
  • Identifies Mines and Deposits
  • Implements Extraction Process
  • Manages Refining Process
  • Develops Alternative Sources
  • Enables Growth Objectives
In the right companies, the appointment of a CTO (with real objectives and budget authority) is a necessary adaptation to permanent changes in the labor supply. A CTO is the general in the war for talent and focuses on the logistics of developing a labor supply. Old school companies will get a new program and a new buzzword.

- John Sumser © TwoColorHat. All Rights Reserved.

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Materials written
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© TwoColorHat.
All Rights Reserved.

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