The Peter Principle characterizes corporate promotions in that competent employees are frequently promoted until they reach their level of incompetence. This Principle applies in all circumstances but is particularly relevant to family businesses, where the Paternal Instep allows family members to be promoted several levels above his or her level of incompetence (R.I. Sutton in The Peter Principle, Collins Business edition, 2009). The situation created by this move can be devastating in that positions higher up within the company have greater influence on the success or failure of the company. A ship needs a rudder to steer.
The problem with the the Paternal Instep is further highlighted by Andrew Carnegie, “There are but three generations in America from shirt sleeves to shirt sleeves,” meaning “The first generation builds the business, the second makes it a success, and the third wrecks it.”
While I was at Creative Memories the founder’s son promoted his daughter to run the company that was originally started by his father. The daughter had previously worked as a consultant and had no experience actually running an organization similar to Creative Memories. She was ill-prepared for the turmoil that Creative Memories faced, and the company soon entered bankruptcy. In doing so, Creative Memories fulfilled both the Peter Principle and Andrew Carnegie’s prophesy.
Black paper is one of the more difficult products to produce, or at least to produce well. Most black papers contain the ever-present carbon black, which is essentially soot produced from incomplete combustion of carbon containing materials. Carbon black is chemically stable but tends to rub off over time. Alternative products are typically more expensive or less stable. They bleed when exposed to moisture or fade when exposed to light.
When I was at Creative Memories, we were able to identify a combination of pigments that was stable and did not rub off. This paper was more expensive, but it met the requirements for permanence and photosafety.
One way to cut costs is to use white paper and dye the surface black. Paper made this was has a white edge wherever it is cut.
I have not kept up with the market for black paper and do not know what manufacturers are doing now, but I suspect that they are not producing the same quality paper that was available a few years ago.
In a related project, last year I had to redo my home driveway, and I wanted to use a dark colored concrete. It turned out that many of the formulations that were available were based on carbon black with many of the same problems I had seen firsthand with album pages. Fortunately, I was able to identify a manufacturer that used iron salts instead of carbon black. I am very pleased with my new driveway. For more information see Black is black… Or is it?
The last project I worked on at Creative Memories was a plan to manufacture digital photo products for other vendors, taking advantage of the Creative Memories Manufacturing and Distribution Center in St. Cloud, Minnesota. Creative Memories produced high quality photo books, calendars, and photo panels, and demand for these products was increasing throughout the photo industry.
By 2012, Creative Memories had significant excess capacity, and the company could not survive unless sales increased. The empty space in the Creative Memories Manufacturing and Distribution Center was evident to all. It was also clear to me and a few others that despite heroic efforts, the direct sales approach was unlikely to generate the required sales.
Operations recognized these concerns and in early 2012 offered me a position as Director of Digital Research and New Opportunities, with a goal of finding new markets for Creative Memories digital photo products. I had some early successes offering photo books to a small company in Minneapolis, as well as supplying products to Creative Memories in Australia; however, it quickly became clear that a more concerted and focused marketing effort was required. This project needed a name, a web site, and a presence at various trade shows. To succeed Creative Memories would have to leverage Creative Memories’ history and experience in the photo industry.
I settled on the name Creative Memories Press, created a web site, and registered for several trade shows. I also believed in transparency. I did not want to hide the fact that Creative Memories was offering products through other vendors, believing that the overall success of Creative Memories would benefit all, including Creative Memories Consultants.
Unfortunately, this plan never had the support of the entire Creative Memories executive team. The executive team outside of operations still believed in a miracle happening that would generate success within the direct sales industry.
When I launched the Creative Memories Press web site, a phone call from an upset Creative Memories Consultant to one of the company executives ended the entire plan. Creative Memories shut down the effort and cancelled plans to participate in industry trade shows. Fortunately, I had seen the situation coming and had received another job offer. On September 4, 2012, I left Creative Memories, realizing that another bankruptcy was inevitable.
On April 16, 2013, Creative Memories again filed for bankruptcy. Could Creative Memories Press have prevented this bankruptcy? I don’t know, but I would like to think so.
Every time I write an article about Creative Memories, I get a few comments back along the lines of “The old CM is in the past….it’s history. Let it go and move on! There’s no need to keep digging up old dirt.” Here are five reasons that I continue to write about the former Creative Memories:
- My readers like to read about Creative Memories. A typical non-Creative Memories post will get 100-200 views. A post about Creative Memories will get 500-1000 views.
- We can learn from Creative Memories and its response to changes in the market for traditional scrapbooks. According to George Santayana, “Those who cannot remember the past are condemned to repeat it.”
- I spent fourteen years with Creative Memories and am interested in documenting my experiences.
- Many of the issues that affected the former Creative Memories are still relevant to Forever, Youngevity (Our Memories for Life), and CM Group Holdings.
- Creative Memories is a relatively safe subject since my Non-Disclosure Agreement has expired and the former Creative Memories no longer exists. I would love to write more about the projects I am currently working on but unfortunately cannot, except in very general terms.
I had to review many events that happened while I was at Creative Memories for the recent trial, so you can expect to see a few more posts about Creative Memories over the next several months. I always label these posts with a “Creative Memories” tag, so you can skip them if you choose; otherwise enjoy, and I hope to see you on the All About Images blog.
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Creative Memories (yes, I know there is a company that currently uses that name, but that is not the company I am talking about) suffered a painful collapse as it was unable to adapt to changes in the marketplace, including the switch to digital photography. The death spiral was dramatic. In a few short years, Creative Memories went from a vibrant, healthy company to an empty shell incapable of sustaining its own existence. With this background, here are the some cognitive biases that destroyed Creative Memories.
- Bandwagon effect – If we all believe that digital photography is unimportant then that must make it so.
- Blind-spot bias – No one at Creative Memories recognized that their cognitive biases might affect their decisions.
- Confirmation bias – Creative Memories paid more attention to information that confirmed its preconceived notion that digital photography was unimportant than to information that cast doubt on that fact.
- Conservatism bias – Creative Memories maintained the illusion that the traditional scrapbook was key to the future long after the market had decided otherwise.
- Information bias – The more we study digital technology, the less need there is to take action.
- Ostrich effect – “Don’t send me any more information on digital!” If you don’t want to hear information relevant to your business, you are likely to make poor decisions.
- Overconfidence – Creative Memories executives knew more than anyone else. Overconfidence results in a failure to consider the fact that you might be wrong.
- Stereotyping – The Creative Memories sales force will not be able to adapt to digital technology.
- Zero-risk bias – It’s risky to change a business model, particularly if that model has always been highly profitable.
The bias combined to create the “perfect storm” that destroyed Creative Memories. It was not that the storm was unpredictable, it was that Creative Memories chose not to predict it.
Note added April 22, 2016: We all saw certain aspects of Creative Memories demise. My view is that digital was a significant factor in the failure because it reduced the overall demand for traditional scrapbooking products. Creative Memories had built an organization with infrastructure that the market was no longer capable of supporting. I certainly agree that other factors affected Creative Memories, as well. The new Creative Memories should do well because it is sized for the much smaller market for traditional scrapbooking supplies that remains.
Youngevity has just announced a new line of essential oils called Our Oils For Life (OOFL). These oils are acid-free, lignin-free, and buffered. They come in a photo-safe, PVC container and comply with the latest standards for unsupported medical claims. According to Youngevity, OOFL will lower cholesterol, prevent heart disease, and cure cancer. The new oils are expected to be especially popular among the scientifically illiterate.
According to inside sources, Ahni from Creative Memories will announce a competing line of essential oils. This announcement is expected soonish.
For more on essential oils see Using Essential Oils – Ultra Spiritual Life episode 33.