Home Depot tries to get back to basics

August 31, 2007

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Home Depot continues to attract comment for its strategic decisions. Is it retreating to a low-risk low growth position?

Home Depot has had a tough few years. Its management was criticized for its lack of progress under Bob Nardelli. It was criticised for paying Nardelli too much while he was there, and too much when he left. The sale of its contractor supply business to private equity has been renegotiated downwards during difficult financial market conditions.

Now the strategy itself is criticised, according to a Newsweek report. It seems that

The really important question about the sale of Home Depot’s construction supply business isn’t the price, which Home Depot lowered 18% on Aug. 28, to $8.5 billion, after round-the-clock negotiations. The real issue is whether the unit should be sold at all. Some upset investors argue that by selling HD Supply, which serves contractors rather than do-it-yourselfers, Home Depot’s new management is dumping its best hope for future growth simply to finance a stock buyback and exorcise the ghost of ex-Chief Executive Robert Nardelli, who masterminded the purchase

A Strategic Dilemma

This is the sort of strategic dilemma taught through cases at Business Schools. The cases are intended to demonstrate how students should think about complex business issues, rather than to supply best-practice silver-bullet answers.

Home Depot faces a well-known dilemma. It has long passed a growth phase when its stock was rising in sensational fashion. Efforts to maintain the growth led to a decision to bring in new and dynamic management. When the desired growth was not achieved, the leader was deposed. Nardelli’s demise was made easier by his management style and a skill at extracting extremely favourable personal rewards. It should be noted that this might suggest he was a difficult boss, but not a stupid one. He has since found further and gainful employment elsewhere. His strategy for Home Depot was to find growth for the business.

But continued lack of growth made it harder for the company to finance change. Nardelli’s plan for the future included growth from the side of the business selling to contractors. This remains a high-potential but therefore risky option.

Here’s the dilemma. The market is outside the experience range of the company. There will be need for considerable learning. (Remember those old graphs of new markets/new products?). It may well require new management. Ah, there’s the rub. Home Depot is not exactly over-burdened with leadership talent. But it may well flinch from even more bloodletting.

It seems a signal that the company is settling for stability over a more risky growth strategy. Not exciting, but by no means a stupid strategy.


Tribute to Nelson Mandela

August 29, 2007

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A nine foot statue of Nelson Mandela now stands in London’s Parliament Square. The homage paid to a great leader is the outcome of over a decade of controversy

On August 29th 2007, the great man watched as the wraps came off his statue in Parliament Square. Fleetingly I thought of other statues of leaders. How size certainly does matter. How art and politics can not be kept apart, any more than sport and politics could be kept apart in an earlier South Africa. How the downing of statues can be as symbolic an act as their erections.

Nelson Mandela doesn’t need a statue

He already is an awesome world-figure, destined for his place in the history of the 20th Century. There may well be revisions to the story. There always are. Human-scaled blemishes will be revealed to enrich the tale of his role in the struggle of his country on what he termed a long walk to freedom. Enriched by evidence of weakness, temptations yielded to … Otherwise, the deification process will have succeeded in eliminating the personality behind the icon.

I was immensely moved by Mandela’s story written down in his autobiography. I go back to it from time to time. I remain in awe of what he communicated about his time in prison.

‘Even in the grimmest times … I would see a glimmer of humanity in one of the guards, perhaps just for a second, but that was enough to reassure me and keep me going. Man’s goodness is a flame that can be hidden but never extinguished’.

With Mandela, the process is reversed. In his every public action his ‘goodness’ shines through. We search for that second of wilfulness and vengefulness that seems forever hidden. For from diminishing his achievements, I feel this will enrich them by connecting them more strongly to the wider human world of weakness and frailty to self-service.

The Charismatic Leader

The idea of the great charismatic leader is coming increasingly under scrutiny. Leadership scholars have largely discarded earlier ideas of the heroic leader, or at very least challenged them. In the 1980s, a tamed-down version of charisma was proposed, as the transformational leader. More recently, the expression post-charismatic leader has emerged, from theological and secular sources.

In this context, Nelson Mandela and his story deserves the closest attention. He may be the exceptional case which tests a wider concept. Classical leadership theory would suggest that the course of history was fundamentally influenced by the actions of the great leader.

An excellent recent biography by Professor Lodge adds to several authorized biographies, as well as Mandela’s own accounts. It suggests that Nelson Mandela was

Especially sensitive to the imperatives for acting out a messianic leadership role during his [time as a guerrilla commander] …deliberately constructing a mythological legitimacy.. to engender hopes that salvation would be achieved through heroic self-sacrifice

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Did the charismatic leader make a difference? The more you dig, the more complexities emerge. Whether you read to challenge the idea of the great leader, or to challenge it, read for yourself.

Look on my works, ye mighty and despair

Today’s story of the tribute in Parliament Square is more of an ironic tale. One version might run as follows.

The idea of erecting a statue to Nelson Mandela has been around for over a decade. There was (and still is) a highly suitable place in Trafalgar Square, which has four plinths for monumental pieces. Three are occupied with military and monarchic figures. The fourth would be particularly appropriate as it is close to the South Africa House, focus of so many ‘Free Nelson Mandela’ demos during his imprisonment on Robben Island.

When the public was invited to suggest appropriate images, For some while, a favored image was of a piece which would celebrate animals in wartime service. Nelson Mandela was among other front runners together with The Queen, Margaret Thatcher, Lady Diana, as well as long shots such as David Beckham, Winnie the Pooh, and a very large Pidgeon, (capturing one of the more intrusive visiting groups that flock to Trafalgar Square).

The fund-raising ran ahead of the official decision, and the statute commissioned was considered too massive for the original location. Eventually the political pieces fell into place, and Nelson Mandela’s image was unveiled at Parliament Square, rather than close by to that other Nelson atop his column in Trafalgar Square.

What the poet says

Trust the poets to have something interesting to say. Anyone with a taste for such things will find something in Shelley’s words I borrowed above.


Tactics for a general election: The significance of Kerr’s Folly

August 28, 2007

The next General Election may be several years away. It is already shaping the thoughts and actions of the main political parties. While the new European Treaty may be of secondary importance to voters, it could play a vital part in the outcome of the election.

Conservatives and Labourites alike should be thinking beyond the obvious regarding the treatment of the New European Treaty. The issue is very much on the political agenda. The Government stands accused of breaking an election pledge. So how damaging might it be to Gordon Brown?

Background.

This week all the pressure seemed to be on Gordon Brown. Two unions, The GMB and RMT, are calling for a referendum by tabling motions for the TUC annual conference. This adds from the left to calls from the Conservatives and UKIP parties from the right. Presumably the pro-Europe Liberal Democrats would also welcome a referendum. This suggests that the government faces opposition from inside and outside its ranks to its decision to avoid a referendum.

Kerr’s Folly

A classic paper in the Academy of Management Journal in 1975 by Steven Kerr drew attention to ‘the folly of rewarding A, while hoping for B’. The essential point made by the author is that the key to effective implementation of plans is understanding how reward systems work. Or, as Bill Starbuck memorably put it, ‘it’s the reward system, stupid’.

According to Kerr, numerous examples exist of reward systems that foul-up because the types of behavior rewarded are those that the rewarder is trying to discourage, while the behavior desired is not being rewarded at all. He explores this in various social, economic, and political fields. The paper leads us to the notion that politicians are all too-aware of the process through which the electorate wishes to obtain one thing and might appear to be of rewarding the politicians by voting for them. However, experience has shown that the electorate may wish for one thing and punish the politican by voting in effect to deny the policies approved of. Specifically, in politics, policy is couched in a deliberately vague manner, lest the electorate punish the ‘honest’ politician for spelling our any unpleasant consequences of that policy.

The [American] citizenry supposedly wants its candidates for public office to set forth operative goals, making their proposed programs clear, and specifying sources and uses of funds. However, since operative goals are lower in acceptance, and since aspirants to public office need acceptance .. most politicians prefer to speak only of official goals, at least until after the election. … The [American] voter typically punishes (withholds support from) candidates who frankly discuss where the money will come from, rewards politicians who speak only of [policy] goals, but hopes that candidates (despite the reward system) will discuss the issues [revealing potential pain to the voter].

In other words, Kerr’s folly indicates how we get the political behaviors and elect the politicians we deserve

The Behaviors we Deserve

It becomes the received political wisdom for a political leader to find ways of presenting policy with avoidance of mention of its costs, leaving that to the opponents of the policy. This happens to be one of the strengths of an open society. For example, in the UK, Conservative policy for releasing citizens from the burdens of taxation have to be justified increasingly with specific explanations of funding for maintaining social institutions such as the Health Service.

The Treaty, The Election and Kerr’s Folly

A knowledge of the theory of Kerr’s Folly might not win an election. But it explains and perhaps helps predict political ‘moves’.
Let’s see how it might be working at present. Gordon Brown is pressed ‘to stick to an election commitment’. He is benefitting from being seen as a ‘Not like Blair’ statesman. He is thus vulnerable to accusations of behaving in a Blair-like way, involving a bit of ducking and weaving. Thus he risks the displeasure of a proportion of the electorate, demonstrated by a slump in opinion polls.

In its original form, Ferr’s Folly suggests that the electorate may want to punish a politican for avoiding any tricky behavior, spin, or obfuscation. But if so, the folly is that the self-same people appear to deprive themselves of evicting such politicians by discounting the undesired behaviors, and when it coms to the vital vote, cast it on different grounds. In other words, if the electorate thinks a referendum will not really make much difference presumably to self-interest, a slump in opinion polls interpreted as disapproval on general grounds moral grounds will ultimately not count for much.

So, should David Cameron choose to fight over the principle of Labour’s broken promise? Probably not. One of the reasons is that there is still considerable ‘wriggle-room’ for the Government. The finer details of the logical or even moral case are not so critical as the evidence of personal disadvantage of the issue to voters.

The Knight’s Move

But battles are rarely predictable. A sudden unexpected surprise, like a devious Knight’s Move in Chess, changes the entire game.
Suppose Mr Cameron does go big on this attack on Mr Brown and his failure to stick to the Manifesto of the last Election? This may present the Prime Minister with the opportunity to be ‘forced’ to accept a call for an early election. If so, be sure it will be at the time of his choosing. It is not unknown in the heat of battle to drive the enemy into a more favorable position.


Leaders we deserve: The WordPress example

August 26, 2007

giant-despair.jpgThis weekend the WordPress internet company ran into serious delivery difficulties. It received a flood of encouraging messages from its customers. The company had earned considerable goodwill through its unwavering customer-orientation. This provides insights into exemplary corporate leadership

In a few years the WordPress organization has signed up over a million bloggers. Subscribers this weekend faced life without a fully-functioning service from their fast-growing provider. That’s a lot of disappointed bloggers. No doubt there were many whose anger and frustration boiled over towards Word Press and the world in general.

However, it seems that quite a lot of people reacted with considerable goodwill towards the company. My own reaction echoed a substantial number of customers who sent emails to Word Press. One typical one came from member advertboy:

Thanks for the heads up.. I completely understand it has nothing to do with WordPress but rather your datacenter providers. I hope you are getting compensation from your datacenter provider …, this is really an unacceptable outage for any business.

Other emails described the fears that the user had been responsible for loss of contact with WordPress, and the subsequent relief to discover there was someone out there caring. Despair turns to hope.

During the night, the team at WordPress continued to work. Tellyworth found time to reply to queries:

The problem wasn’t a hacker, virus or anything malicious like that. We’re still not sure but it looks like a failed upgrade at one of our providers. It hasn’t affected our servers, just network traffic to and between them. Intermittent network problems are still affecting some people, and that will probably continue until after the scheduled maintenance

Unconditional trust

The company seems to have achieved something special within its global network of subscribers. Subscribers? Customers? Members of an extended family? Corporate speak falls short of what’s going on here. To be sure, many corporations say that the customer is their prime concern. But their rhetoric is often ultimately self-defeating. It dulls the senses as it echoes around the catacombs of cynicism. Customers mostly accept that in a far from perfect world, in business transactions they are likely to be dealing with the frailties of human beings intent on putting self-preservation first. Being nice to customers happens to be one way of doing business. Sme firms do their best. But that pragmatic stance is tested when ‘putting people first’ means ‘putting corporate interests second’. Caveat emptor rings as true to day as it has for a couple of millennia.

A few firms transcend pragmatism. Word Press illustrates a process within which a corporate culture is established which has behaves so as to engender unconditional trust in its business actions. How to earn trust? Be trustworthy. Easy to say. For some firms it is also easy to do because it is natural. It would be unnatural for the firm not to work through the night finding a thousand things that might, just might help in a period of crisis. The process is made easier because they already have a lot of capital earned and deposited in the psychological Bank of Trust.

I had been struck by the enthusiasm for improvement shown by the company in its communications. These tend to inform users of improvements to the service. But also they reveal a deep commitment to creativity. What Carl Rogers was describing as the human need to create, so often shrivelled up in corporate life. Only this week users were told how good things come in threes, and learned about the new visuals showing daily, weekly and monthly blog traffic.

Tom Peters was an influential guru from the last Millennium. He wrote a lot of things about excellence, much of it rather insanely enthusiastic of the virtues of being, well, insanely enthusiastic about your business life. He would have loved to have a Word Press to illustrate his ideas.

The disturbances persist

Attempts to preview this post suggest that the crisis is not yet passed. But Giant Despair is more or less under lock and key. Let’s give it another try …


What’s going on at Tottenham?

August 24, 2007

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There is a belief in football sports lore that a manager is in trouble when his chairman publically offers him support. This week Martin Jol of Tottenham Hotspur was the latest recipient of such an endorsement, delivered by his chairman David Levy

The story is rich in leadership implications. Martin Jol is widely recognized as a successful international football coach. As Manager, he has been as as successful as outside experts expected in his time at Tottenham Hotspur. Last season ended with the club in a creditable fifth-place in the Premier league. The evidence is that he is well-respected by the players. His acquisition of Dimitar Berbatov has been a huge success, with the Bulgarian striker scoring over twenty goals in his first season at the club. Despite interest from Manchester United and Chelsea, Tottenham was able to reatain their star striker, who has indicated the importance to him of his manager’s influence.

So why is there any doubt over Jol’s future? The obvious source of dissatisafaction is the two successive losses at the start of the season earlier this month. This was followed by a convincing win, but the rumours grew. The directors at the club appeared to have reached a view that their manager was not the person through which they would fulfil their goal of becoming one of the top four English premiership clubs. On this criterion, last season’s fifth place was a failure, even if it had been judged a signal success by most disinterested observers (if there is such a thing).

It appears that the poor start to the season may just have reinforced a corporate view that had emerged earlier. According to iol,

Spurs had offered his job to Sevilla coach Juande Ramos
In almost three years in charge his position has never been under such scrutiny for his usual media briefing…Jol only received the “100 percent” support of his chairperson Daniel Levy at the third attempt on Thursday, [August 23rd 2007] two previous statements from the Spurs’ board this week notably failed to give him their full backing…As Jol prepared to give his version of events, Spurs were forced to deny rumours that Fabio Capello was next in line to take over the helm after Ramos’s decision to stay put in Sevilla

So, there is some evidence of board-room discontent. It calls to mind the background of rumours around Jose Mourinho at Chelsea earlier this year, and Sven Goran Eriksson as he approached the end of his time as England manager.

Come to think of it …

Ambition drives business leaders onwards, and sometimes upwards. The goal of reaching the top four clubs in the land is one that can be understood. Only the churlish would point out that such an ambition needs deep pockets, maybe deeper than those around Tottenham at present. The ambition would have been further strengthened by the ease with which Chelsea has jumped to the top of the status table in London, as well as the top of the league nationally since the Abramovitch takeover and his foolishly wealthy support. That must hurt. For the moment, in town, Tottenham must look up to Arsenal who must look up to Chelsea. I looks up to him, but he looks up to me, as the old John Cheese sketch put it.

Admirable ambition. If the stories turn out to be accurate, the ambition was rather unrealistic, and badly executed. A fine manager is put under pressure, and the club has succeeded in the short-term only in undermining his efforts.


Silence of the leaders in Postal and Climate Protests

August 21, 2007

images1.jpgWhen leaders are silent, the absence of noise may be revealing. David Cameron and Gordon Brown remain remarkably quiet over the Postal Dispute. This week, their silence extended to the climate change protests at Heathrow

As the great Sherlock Holmes taught us, the hardest thing to see is what is missing from a story. One of the functions of the Press is to point to the gaps, the spaces between words. To drag a response out of politicians, for example.

I mentioned in an earlier post a lack of contribution from our political leaders into the on-going postal dispute . The Prime Minister may indeed have been attending to a host of urgent issues over the last two months. That might just explain it. He can’t be expected to speak out on everything. But what about his ministers? Isn’t that a more surprising silence?

Then there’s David Cameron. Why hasn’t he pointed out that Gordon Brown has been guilty of inaction over the dispute? And why has Ming Campbell been so silent, on behalf of the Liberal Democrats?

The silence of our political leaders this week has extended to story of the protestors against the third runway at Heathrow. Which, inevitably is also about political policy over global warming.

Leaders have to choose where to stand and fight

There can be little doubt that Brown and Campbell have thought about and discussed the Postal Strike, and the events this week around the perimeter of Heathrow Airport. For whatever reasons, they have made deliberate decisions to say nothing. Silence is significant.

The press has shown minimal interest in the first of these stories. But it was for its duration particularly interested in the second. A Daily Telegraph piece about the protest resulted in as many on-line replies I have ever come across in reply to a news story.

What happens next? One day after the protests, the story is off the news agenda. Try finding follow-up reports after the one-week protest ended on Sunday August 19th 2007. The most comprehensive account I could find appeared in The Guardian in a slightly truncated form of the blog by environmental activist George Monbiot.

This week, David Cameron chose to target possible closures of local hospitals. Ming Campbell was busily drawing attention to the tricky matter of troop withdrawals from Iraq. David and Ming have chosen where they wish to fight for the moment. Gordon Brown keeps his powder dry, and his position secure, garrisoning his political forces behind the barricades of impressive opinion polls of recent weeks.

What conclusions can we draw?

If we shift the military metaphor to that of a military game, the chess concept of Zugswang comes to mind. In chess it sometimes is worse for you if you have to move, better if you your opponent has to move. It’s like meeting another car in a narrow lane without passing spots. Someone has to reverse out of there. If that retreat is not acceptable to either, you have a stalemate or no result.

The point is, each player is reluctant to move. But in chess the rules of the game force one player to move or forfeit the game. A player in Zugswang moves, and if the opponent knows how to continue, there is a forced win (or more subtly a forced weakening of position).

The lack of action on either side suggests there is a zugswang-type position building up. Cameron watches Brown. Brown watches Cameron. Neither can find a satisfactory active move. Tick follows Tock follows tick.

Why might this be so? The specific contexts of the two examples have to be explored more deeply. The outlook for the Post Office Union looks bleak. Mr Brown seems have accepted the broad strategy position for its modernization developed under the Blair regime. Either that, or he may be biding his time before making an intervention. Cameron wishes above all to secure the moderate political ground, but it requires a leap of imagination that I for one am incapable of making, to find a way in which he could offer strong support in favour of the Union position. There are too many ways in which the stance could be claimed to be anti-progressive.

However, the Heathrow protest is rather different. Mr Cameron would like to be seen as a strong supporter of environmental causes. In this case, it could be seen as a progressive move to find some common cause against the Government’s transport policy. His advisors will be assessing the significance of the volume and tenor of responses to the Daily Telegraph article mentioned above.

According to Monbiot

We haven’t prevented runaway climate change by camping beside Heathrow and surrounding the offices of BAA, nor did we expect to do so. But we have made it harder for … unheard people to be swept aside, and harder for the government to forget that its plan for perpetual growth in corporate utopia is also a plan for the destruction of life on earth

He may well be on to something.

With grateful of acknowledgement for the image Silence of the lambs from Flickr. by Victoriano Great photograph.


Sven, Alex and the Prawn Sandwich Brigade

August 19, 2007

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The first battle of the season between Manchester City and Manchester United is an opportunity to evaluate the impact of two celebrated leaders of contrasting styles. Sir Alex (The hairdryer) Ferguson blows as hot as Sven Goran Eriksson remains icily cool. The press have managed to squeeze out a story of mutual antagonism. The city remains largely disinterested in the press version of events.

Matches between Manchester City and Manchester United do not seem to be among the highlights of the year for some local fans. City fans say it is because United supporters don’t come from Manchester. And anyway, they are inclined to add, the only Premiership stadium in the city is now Eastlands and until recently was at Maine Road, spiritual home of Manchester City.

Still, the press can always find a way to make the event more noteworthy. I picked up the story on the day of the Manchester derby match of August 19th 2007.

In The Sunday Telegraph, Roy Collins referred to ‘that mixture of Swedish and English that should perhaps be known as Svenglais’. Sven has excellent English, somewhat easier to understand than most English (not to mention Scottish) pundits and commentators.

It brought back to mind the gratuitous and unthinkingly xeonphobic articles Sven suffered during his time as England manager. As if on cue, I came across another article by Manchester City fan and Guardian blogger/ reporter Simon Hattenstone who acclaimed Sven’s great start as City’s manager, while hedging his bets in advance of the Manchester Derby, resorting (I think) to irony.

Svennis, I’m so, so, so, so, so sorry. I shouldn’t have compared you to Death in The Seventh Seal, shouldn’t have called you frigid, lily-livered and deluded, or harked on about your Cuban heels, or made gratuitous references to your Zeus-like libido, or been catty about the sweet dream that you were managing Manchester United, or questioned your ingenious scouting on YouTube. I was foolish, Svennis, an ignoramus. Glib. Just a stupid football fan wantonly giving you sticks.

With friends like these …

A more balanced view of Sven’s track-record found in an excellent BBC highs and lows treatment. And a useful if hagiographic account of Sir Alex in a ManU fanzone.

How to create a story

The tabloids managed to work up a story (an old one of ‘Fergie’s mind games’).
“People are trying to get me to talk about Sven, but I don’t know enough about him for an opinion really.” Which didn’t stop an article in The People from Steve Bates featuring the ‘exclusive’ that

Sir Alex Ferguson took a dig at Manchester derby rival Sven Goran Eriksson last night, claiming he’s only managing in the Premier League for the big-money wages.

I thought I’d offer a little local background to the match …

What’s it like in Manchester?

Wet. Cool. Quiet. At nine in the morning, the main signs of life are a few cars on near-deserted roads in the suburbs, and even fewer customers for the morning paper at the newsagents. The supermarkets are still getting ready for the mid-morning shoppers. The weather is worth a couple of hundred auxiliary coppers on crowd-control duties; the magistrate who sanctioned an early Sunday kickoff also did her civic duty.

It’s hard to believe it will be possible to play a game of tennis outdoors. It may be harder to understand how a group of us manages to play almost every Sunday. That’s because we play on an all-weather court, and in drizzle, and between showers. And so we shall today.

At the bar, Eric is having a late breakfast before going to the match. He says he fancies City to win. Eric always fancies City to win. But there’s always hope.

Ours is a mixed club. Mixed in a mostly tolerant way. There are reds and blues, but more than a smattering of the other regional reds (Liverpool supporters). To complicate the mix more, quite a few members are also supporters of that other local sympathy case, Stockport County (‘My other car’s a Porsche’).

Bragging rights

Supporters, true supporters, aren’t supposed to fraternise with the enemy. Maybe we are the kind so neatly skewered by Roy Keene as the prawn sandwich brigade. Anyway, I can’t see me tossing insults at Eric across the stadium, or vice-versa. We just wouldn’t accuse each other of being that sort of tosser. As for bragging rights, that’s maybe one of the psychological payoffs us prawn sandwich brigadiers have to do without. At least it makes Mondays more bearable for all sides. On the other hand, there is plenty of interest in football. I could probably say who supports whom for most of these folk …

Still falls the rain

In my mind’s eye, I can see more-committed praetorian guardsmen gathering prior to battle. Rain will not weary them, nor the clouds dispel. Their drummers will rally the troops as they head for the East Manchester fields, having supped well on what used to be called the Cream of Manchester, the blessed Boddingtons, brewed but a stone’s throw from Strangeways prison. As true to my stereotyping, as they to theirs, I head off home, if not to a prawn sandwich then maybe for a piece of Pork and Pickle pie.

Stop Press

City 1 United 0. Eric’s dream has come true. Sven’s team tops the table, Sir Alex, for the moment, has come out second best. I can’t remember what the Pork and Pickle pie tasted like.


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