Of metrics and meaning

A few posts back, I commented on Corporate self-delusion in measuring customer satisfaction. Seth Godin makes the point in his blog regarding the importance not of measurement for measurement's sake, but measurement for knowledge's sake. Common metrics and the 'real thing' they are intended to measure:

• Good grades in school (the ability to solve problems in life)
• Lots of raw traffic to your blog (conversations among prospects who become fans or customers)
• Burning calories (feeling better and looking good)
• Clickthrough rate on ads (conversion rate to customers)
• High salary (long-term happiness)
• Class rank (actually learning something)
• Number of stock options (future prospects of your employer)
• This quarter's commission (reputation in the industry)
• Technorati rank (number of RSS subscribers)

I could add leads, visitors, reach, frequency, and a host of old black magic measurements to the list as well. And in addition to measuring the right thing, it is also important not to be blind to the subjective things as well. One does not trump the other.

http://sethgodin.typepad.com/seths_blog/2007/01/high_resolution.html

Stuck in the middle

The middle. The mean. The average. That’s where you are, with average efficiency and average margins. So what to do if you aspire to the low throughput high profit upper end – while leveraging the high efficiency, low margin lower end?

It is possible to make money in both ends of the market by simply creating two business models for the two ends of the market. Dividing the sales force is one example of this, but there are other considerations. In differentiating the markets, cost, quality, and delivery/responsiveness are all important. At the low end you’re working to fit specific needs. At the higher end, there are qualitative elements regarding service expectations.

Of course, to do this requires differentiation and awareness of the alternatives - both internally to your firm’s offerings as well as those of competitors. You can build awareness but long term success requires backing up these promises with real differentiation. And in case you just think you’ve had an ‘ah-ha’ moment, let me suggest that functional improvements are not enough either. Bit-rates and throughputs are no longer effective differentiators. Today, differentiation takes many forms. Complementary services. Strong consumer loyalty. Personalized service. A strong brand, in other words. At both ends of the value chain.

Start with the basics – ask consumers to understand what their needs are and what problems they experience. Observe their behaviors and analyze what it means to your offerings - You need to observe and find out by different means and then put the puzzle together yourself to discover what people really want to have. You have to figure out what people really want, even if they can’t yet express it. Organize cross-functional teams, including product management, sales, marketing, and support staff. This will aid the brand, inform product development, and add to the bottom line.

Out of the middle, toward the top.

A couple things to like about 43 Things

In the world of online social networking, there is about as much to like about it as there is to like about reality television (that is, not much). Between the pedophiles, timewasters, isolation, engendering of false importance, hijacking by poorly disguised shills trying to leverage this new medium, its all gotten a well deserved bad rap.

And then comes 43things.com; a social networking site, of sorts; also a bit of a support group, of sorts; a self-inflicted guilt trip, perhaps. But most of all it appears to be an example of what the personal element of the web can aspire to beyond the valley girl blog entries of MySpace and the shopping mall of Amazon.

Select your 43 things; create them yourself or get inspired by others' goals ("get my abs back", "read Anna Karenina", or "learn how to tie the stem of a marashino cherry with my tongue".

It doesn't matter what it is, as long as it is yours and you are committed to it. So happy New Year. As for me, I'll stick with my entry from a year ago - as it all still holds true.

And good luck with that cherry thing.

Giving the finger to the world

"Everyone hates us, I don't know why, we may not be perfect, but heaven knows we try."

- Randy Newman, "Political Science"

That line, from my favorite songwriter, was written over thirty years ago but it seems that history is repeating itself. According to a Pew survey, global perceptions of the United States continue to worsen. In Britain, our collective favorable rating is only 56%, off from 83% in 2000, and it is worse throughout Europe, where the favorable percentage falls to well below half. Even in Asia, in countries that benefitted from unmatched American generosity following several recent natural disasters, the perception of the United States is dismal.

New Pepsico CEO Indra Noori, quoted in a Septenber US News and World Report article, quipped: "Its time that U.S. businesspeople give the world a hand, not the finger."

All debate regarding current Administration policies and globalization aside, it may be time to work toward a makeover for 'brand America'.

The Bush Administration recently convened a group of 14 CEOs with Commerce secretary Carlos Gutierrez to discuss the issue, of which one of the many recommendations was to create a nationally coordinated marketing campaign. Interesting.

Back in the day, (mid-90s) when I was a Vice President for the Dallas Advertising League, I had the opportunity to share the dais with Roy Spence, President of respected Austin-based advertising agency GSD&M. Prior to his sure-to-be inspiring speech to the local advertising students who had gathered for this luncheon, our conversation had turned to politics. I'll always remember Roy for this illuminating comment: "There are too many unnecessary cabinet members. We just need the president, and a Secretary of Marketing. If the Department of Marketing did the job correctly, they'd be no reason to have any of the others."

And there would be peace in our time. (Hey, a boy can dream.)

Rethink Your Business

Interesting article in Fortune about managing chaos featured these interesting approaches to addressing your business challenges in what is an increasingly unpredictable world:

Tough talk: Force a conversation on how the company will have to operate differently to be successful not now, but two years (or more) out. This keeps navel gazing and self satisfaction of today’s successes at bay. I’ve referred to this as having Crucial Conversations, which is also the title of a book to which one of my former graduate professors contributed.

Yellow flags: Pay close attention tro what your sharpest, most mobile (those who can change suppliers easily) customers are doing. They act as an early warning system. That is, while it is possible to set up barriers to customer churn, ultimately these factors (sticky applications, etceteras) will merely slow the stampede. A few months ago, I finally changed banks even though I had established CDs, safe deposit boxes, checking, savings, online banking, direct deposit and a host of other services with them. The hassle postponed the move, but did not eliminate it, as I was finally irritated enough with high fees and poor service (and a non-committal response from executives to my complaints) that I took the time to make the adjustment.

Remodel early: Start changing your business model when you are most successful. See my earlier post from January: “The time to repair the roof is when the sun is shining.” (JFK)

Abandon yesterday: Maintaining what no longer works draws resources away from the job of creating tomorrow. Any decent financial planner knows that there is a time to abandon all hope that your holdings will rebound. Create a storyline: Your company’s past, present and future is a story: articulate it as such to all stakeholders!

Corporate Self-delusion

According to a Bain & Co. survey, corporate self-delusion is at critical levels, particularly as it concerns perceptions of customer satisfaction. The survey of 362 firms found that 80% believed they delivered a 'superior experience' to consumers. Yet only 8% of customers of those same 362 agreed with that characterization.

So why the chasm? One, companies are defining their own standards of performance. Two, they aren't looking broadly enough at the entire customer experience. It is critical that companies transform quality and service measurements according to customer expectations and experiences, not internal operational standards. Let's look at these two critical issues by picking on, say, randomly, a cable company...

Cableco says it has over a 90% satisfaction rating because they are arriving within a promised four hour window 94% of the time, and addressing the issue on the first visit 97% of the time. Trouble is, customers do not see waiting for half a day as good service, even when that time window is observed. Conscious of the value of their time, they want a narrower service window. Further, after a four hour wait, resolution on the first call is a considered a baseline standard for customers, not an indication of superior service.

Relatedly, if timeliness and first call resolution are the only standards Cableco uses to measure satisfaction, they'll overlook other critical touchpoints that impact customer experiences - from the initial call and ease of use of an IVR (Interactive Voice Response) system, to the physical appearance of technicians, through to the billing system and complaint resolution process.

Then, as competitors recognize the factors that are impacting the customer experience and make adjustments to their own policies to exploit them, Cableco will continue to hemmorage market share as their leadership gazes contentedly at a PowerPoint slide that reveals "90% customer satisfaction".

When it comes to customer satisfaction, measure the right things. Not just the easy things.

Confident Leadership

"The qualities that people look for most in leaders is not infallibility or infinite knowledge but confidence in themselves and in their group's collective ability to find a solution." - Jerry Colonna, Flatiron Partners

You have cash in the bank, a market-leading product, enviable market share, and the attention and affinity of analysts. Yet it is the confidence exposed and inherent in corporate leadership that drives morale. When it is said that companies succeed 'in spite of themselves', it is as equally likely due to this inability of leaders of companies in enviable circumstances to inspire and motivate employees as it is to complement leaders of an otherwise struggling organization with maintaining an environment of enthusiasm and dedication among employees.

If faced with being part of a currently leading organization uncertain of its circumstances, fearful of the future and unwilling to take risks, versus a struggling organization revitalized by a confident, encouraging leader; it is not difficult to determine to where the quality employees and smart investors will be drawn.

Yesterday means nothing, you don't lead from the rear.

720 Hours

I was perusing old Fast Company articles and stumbled across one from 2000 that highlighted a company called etime (I googled the company and discovered they were acquired in 2002 by TradeBeam, www.tradebeam.com).

In the article, it is pointed out that commerce technology's promise is not one way, and as the delivery of goods and services is sped through the introduction of new technologies, and suggests that accepted standards such as the 30 day due date for accounts receivable is a relic.

It sounds at first blush an overstatement, but upon refelection, if the issue were prepayment for goods and services with a thirty day delay before receiving them, it would cripple manufacturing (rendering JIT useless) and slow economic growth. What must be the as-yet unrecognized impact of slowed access to Accounts Receivable?

Treating your vendors well is a reflection on the brand, so this is an opportunity for creative differentiation in the market - at least as it impacts the supply chain. Certainly timely payment would be rewareded by vendors with discounts and better service, which is passed forward to the consumer.

So what argument still preserves thirty days (or more) AR in business to business transactions?

Perhaps this is yet another opportunity to rethink all of the ways the consumer is impacted by business decisions throughout the organization, and then re-create them to impact direct or indirect creative differentiation in the market.

What does it take to be a great marketer?

A great marketer is an individual that works to assure the company knows itself.

To do this a marketer must understand the motivators and measurements that drive activity in all the seemingly disparate functions of an organization and discover the common thread among each. This constancy drives, and is driven by, the vision of the organization, which in turn is incorporated into product and service roadmaps, evangelized by management and employees, communicated to the market, and finally delivered upon to the customer.

A great marketer is a leader in facilitating the discovery of the organization’s vision, a motivator in engendering it among employees, a strategist in building that vision into the delivered goods and services, a tactician in articulating it to the market, and a customer advocate in assuring that it is delivered upon.

Watch Your Behavior

For ages marketers have segmented consumers by age, education, geography, income and gender, or any combination of these descriptors and several other similar segments. More recently, these have been further parsed with psychographics, which segment individuals by beliefs and biases. Today, I advise clients to research and segment consumers by buying behaviors instead, as the other established segmentation methods are increasingly antiquated.

Aging but active boomers, formerly self-involved Gen Xers pushing strollers, computer-savvy grandmas, stay-at-home Dads and other so-called 'anomolies' are blurring long-held views of what defines a generation or gender. Combined with the power consumers have to gather and share information about brands and products, no traditional demographic component is particularly useful in product development or messaging.

Whether retail or business to business, buying decisions follow discrete, established processes of collecting and evaluating information that are far better barometers of what messages and media are most effective.

Reaching out and responding to consumers is most effective as a reflection of common behaviors, not birthdays.

...and in between promotions, a game was played.

In Promo-palooza, blogger David Nottoli recounts the number of promotions (not counting advertisements) to which he was subjected during a recent Padres-Mets game at Shea.

By the numbers:

Sponsored Promotions: 47
Participating Companies: 36
Attendence: 49,979
Final score: Mets over Padres, 4-3

http://davidnottoli.typepad.com/sidewalklife/2006/08/promopalooza.html

Dis-synergy

In the world of mergers and acquisitions, an activity that appears to be going through its cyclical upswing currently, there is much discussion regarding revenue synergies, expense synergies, and to an (unfortunately) far lesser extent, market and cultural synergies.

What is often overlooked are the dis-synergies* inherent in each proposed merger or acquisition. With 70% of M&A failing to reach the top-line synergies promised, and 25% missing the expense reduction mark by 25% or more, perhaps it is wise to give more weight in diligence to potential disruptions - dis-synergies - than the oh-so-appealing potential synergies. While they vary from industry to industry, some of these dis-synergies include:

- Not understanding customer motivations for loyalty, resulting in more customer loss than anticipated.
- Loss of employee productivity during the period of diligence
- Underestimation of the impact of 'onetime costs'
- Loss of quality employees to competitors seeming to offer more stability
- Underestimating the amount of time to address both the external and internal requirements of a merger, including information systems, branding, reporting structures, and all related processes

*Scott Christofferson, McKinsey and Company

For more information on this, contact Strategy180 (www.strategy180.com) for the McKinsey brief.