What Is It Like To Be a Customer?
To paraphrase Thomas Nagel’s famous 1974 paper on consciousness, “What is it like to be a bat?”, I want to instead ask the question, “What is it like to be a customer?”
Customer Relations by Walking Around
Perhaps nowhere is the saying “time is money” more true than in the construction industry. There is no better indicator of project cost and budget over/underrun
The Tragedy of Overcapacity
Capital investment in production capability is the weakest link in the business value chain. It always has been and likely always will be. It’s the driving force behind the tendency towards cartels, collusion and monopolies. While it can make the first entrant into a brand new market, in the long run
The Future of Shopping
But one thing that is certain is that no matter which scenario comes to dominate the retail space, change is on the way, and you are going to have to get closer to your customer. You are going to have to know more about them, their changing buying and channel habits, and the type of shopping experience they prefer. Customer analytics will come to drive your business strategy in recognition of the fact that it has always been the consumer that ultimately decides whether that business strategy is a success or a failure.
Analytics for integrating the Value Disciplines
For the B2C business of the future, catering broadly to the middle class consumer, there will be nowhere to hide. Such a business will have to compete on all three Value Disciplines simultaneously: Customer intimacy, Low-cost producer, and Innovation. Or, perhaps not so much the single “business”, but the entire supply chain / value chain…
Your Customer Experience, and That Yellowed-Linoleum Look
Have you had the experience of walking into a new store or restaurant on opening day? All bright and shiny, entirely overstaffed with smiling faces tripping over each other to help you. Or the grand opening of a grocery store, with the aisles all clean, the lighting bright, all the lanes open. Then you come back in a year or two or five – the linoleum is stained and yellowed, the ceiling tiles streaked with smoke and grease, doors are broken, light bulbs burnt out, signs are crooked, there are only two lanes open, staffed by clerks who are too busy to acknowledge you, and the portions are smaller.
What happened?
It’s not just that the cost accountants moved in - something fundamental and special has been lost, and no one seems to have taken notice.
Trendspotting. Coolhunting.
While you might not think that businesses outside the trendy, youth-focused fashion and music markets would have much to learn from the practice of “coolhunting”, there are some key product life cycle principles common to both. Coolhunting is market research aimed at discovering, in their infancy, new trends in youth markets, catching them in the process of becoming ‘cool’, and then capitalizing on that knowledge by being first on the scene to take advantage of it. Coolhunting typically involves on-the-street interviews or focus groups, and there are numerous firms that specialize in providing this service, as well as other retailers and manufacturers that have taken this capability in house. The seamier side of coolhunting involves planting / infiltrating your people and products directly into the market, or paying certain key influencers in order to have them use and tout your product as if it was their own idea.
Of Products and Customers, Cabbages and Kings
Product evaluation criteria can utilize these four categories:
1) Fails to make money under any and all measures
2) Does not cover variable costs, but breaks even when future / downstream / derivative / service / after-market revenues are included
3) Covers its variable costs (which already includes standard direct and indirect costs, since he is assigning all costs via ABC)
4) Covers its variable costs and its associated cost of capital
Once you’ve segmented your products (or customers) by profitabiltiy, one of the basic tenants of activity-based management is to take the necessary actions to move the losers into the break-even column, and shift the break-even products into profitable territory. Yet his history showed that, once introduced, products tend to improve their profitability up to a point, then peak and level off there, no matter what actions R&D, manufacturing or marketing may attempt to propel them to the next level.
Prescription? We need to be better disciplined about terminating the losers.
Alignment with your Value Discipline Strategy
Whether you choose to call yourself customer centric, smoother operators, or innovators, any one of these can provide a sufficiently powerful vision around which to rally the organization, but to succeed requires that the entire organization align behind the chosen strategy – it’s why they call it value “DISCIPLINE”.
The Beatings Will Continue Until Forecast Accuracy Improves
Question: What is the maximum level of accuracy with which you can predict the toss of a fair coin?
Answer: 50%
It does not matter that you’ve set a mandatory minimum forecast accuracy level of 90%, or even 60%. There is no incentive, no bonus, no allocation of restricted stock options that could make me forecast a coin toss at better than 50%, nor any threat or punishment. The only thing threats accomplish are to invent ever more clever ways to tamper with the coin; to cheat.
Which brings us to this important forecasting principle: forecast accuracy is first and foremost a property of the data itself.