The entrepreneurial mindset

The World is Flat

2008-04-27T04:27:00.000-07:00

The world is flat - the playing field is being flattened by technology

GLOBALISATION 3.0:
Globalisation 1.0 - When Columbus set sail, opening trade between the Old World and the New World-until around 1800.
- It shrank the world from a size large to a size medium.
- was about countries and muscles -
Key agent of change/dynamic force of global integration was:
-Countries Globalising - how much brawn -how much muscle, how much horsepower, wind power, later, steam power -your country had
- and how creatively you could deploy it.
Primary questions:
- Where does my country fit into global competition and opportunities?
- How can I go global and collaborate with others through my country?

Globalization 2.0 ( lasted roughly from 1800 to 2000, interrupted)
- This era shrank the world from a size medium to a size small.
Key agent of change, the dynamic force driving global integration:
- Companies Globalising -was multinational companies - spearheaded first by the expansion of the Dutch and English joint-stock companies and the Industrial Revolution.
- 1st first half of this era, global integration was powered by falling transportation costs, thanks to the steam engine and the railroad,
- 2nd half by falling telecommunication costs-thanks to the diffusion of the telegraph, telephones, the PC, satellites, fiber-optic cable, and the early version of the World Wide Web.
- walls started falling all around the world, and integration, and the backlash to it, went to a whole new level.
- But even as the walls fell, there were still a lot of barriers to seamless global integration. (No email or web till post 1992)
Primary Questions:
- How can I go global and collaborate with others through my company?

Globalization 3.0 -around 2000
- shrinking from size small to a size tiny and flattening the playing field at the same time.
Key agents of change:
- software- all sorts of new applications-in conjunction with
- a global fiber-optic network that has made us all next-door neighbors.
- People Globalizing - Individuals must, and can, now ask, Where do I fit into the global competition and opportunities of the day
Primary Questions:
-How can I, on my own, collaborate with others globally?

Globalization 1.0 and 2.0 were driven primarily by European and American individuals and businesses. Even though China actually had the
biggest economy in the world in the eighteenth century, it was Western countries, companies, and explorers who were doing most of the globalizing and shaping of the
system. But going forward, this will be less and less true. Because it is flattening and shrinking the world, Globalization 3.0 is going to be more and more driven not
only by individuals but also by a much more diverse - non-Western, non-white-group of individuals. Individuals from every corner of the flat world are being empowered.
Globalization 3.0 makes it possible for so many more people to plug and play, and you are going to see every color of the human rainbow take part.

Outsourcing:
- Those who get caught in the past and resist change will be forced deeper into commoditization. Those who can create value through leadership, relationships and creativity will transform the industry, as well as strengthen relationships with their existing clients."

- no matter what your profession-doctor, lawyer, architect, accountant-if you are an American, you better be good at the touchy-feely service stuff, because anything that can be digitized can be outsourced to either the smartest or the cheapest producer, or both.-"Everyone has to focus on what exactly is their value-add."

- Services will always be protected - unlike goods they are not traded but produced & consumed in the same spot. You can't export a haircut!

- Even with the outsourcing of some jobs for western world to India, India's growing economy is creating demand for many more western products that they could never before afford. It goes full circle.

- homesourcing (employees working from home) and outsourcing aren't so much competing strategies as they are different manifestations of the same
thing: a relentless push by corporate America to lower costs and increase efficiency

Blogs:
They have given people a chance to stop yelling at their TV and now have a say in the process and speak out - share their perspectives and 'unfiltered' insights.

The 10 Forces that flattened the world
1. Winows up & walls down.
- Fall of Berlin wall heralded a a tippling towards democracy. More economies would be governed from the ground up, by interests & demands of the people.
- Communism was a great system for making people equal - equally poor! - Capitalism makes people unequally rich.
- Windows enabled any indiv to amass, author & diffuse as much info as they wanted & share it with others. Before we thought what one could do with pen & paper now this capability was with all.
- IAYF info at your fingertips empoyered masses.Info asymmetry was quickly becoming a thing of the past. Consider, no need for insurance brokers as info was available..
- The wall was brought down not by the USA crippling the USSR in the cold war arms race alone but throgh windowsallowing indiv download the future.

2. The new age of connectivity - the web.
- Internet was a low cost tool of global connectivity.
- Net vs. Web: net is a network of computers connected by cables. Web sits on top as a network of documents, sounds, vids, info..connected by hyperlinks.
- Dot-com bubble: investors looked at web & concluded that if if everything was to be digitized - data, commerce, books,music, photos - then the demand for info based products would be infinite.
This Lead to an inflated over investment in fiber-optic cables to wire the world. - However adoption was not as expedited as expected.This abundance of fiber drove down the prices of international calls and transporting data.
- The browser: helped make net truly interoperable. It ignored underlying topologies to allow seamless integration on a single protocol. Before this there were propietary corporate networks that were disconnected as they spoke different languages - essentally silos of info locked away.
10 years ago Joe in accounts would get on his PC in the office and try get hold of Sales yearly figures but couldn't as they were on a system his comp couldn't access that system He would try get the shipment info from goodyear but they had a diff system that their system couldn't connect with.Open protocols & XML was created to address this.
- point-&-click functionality meant trhat mere mortals could utilse the technology - you no longer had to communicate in 1s & 0s.
- Overinvestment is not necessarily a bad thing - Gates compared the Internet to the gold rush, the idea being that more money was made selling Levi's, picks, shovels, and hotel rooms to the gold diggers than from digging up gold from the earth.

3. Workflow Software
Work flow platforms are enabling us to do for the service industry what Henry Ford did for manufacturing
- "We are taking apart each task and sending it around to whomever can do it best, and because we are doing it in a virtual environment, people need
not be physically adjacent to each other, and then we are reassembling all the pieces back together at headquarters
- 24/7/365 we are all working around the clock around the planet.

3.b. Standards: - Common protocols - Instead of everyone trying to control the fire hydrant nozzle, they made all the nozzles and hoses the same, creating a
much bigger market that stretched across every neighborhood of the world. Then companies started to compete instead over the quality of the hose, the pump, and the
fire truck.
- Salesforce.com -(increased broadband, Ajax,..) software becomes something you rent rather than something you own. No need to worry about maintenance, upgrades, IT team. It is all managed externally by the service provider. Business solutions & best practices within & between companies can be shared. Newly developed modules can be sold back to salesforce.com - their customers in effect become their R&D and development team.

4. Opensourcing
Why? - IT people tend to be very bright and what everybody to know how bright they are - OS is peer-reviewed science
- Most software development involves a source code repository - it is managed by tools called a CVS ( Concurrent Versioning System) - allows me to connect to the server and pull down the latest version - i can make changes (a patch) when satisfied I can upload this to CVS server and it becomes the latest version

Apache: (The Apache tribe was the last tribe to surrender to the oncoming U.S. government - OS is about defiance, independence - pun: A PAtCHy server,)
IBM was trying to sell its own proprietary Web server, called GO, but it gained only a tiny sliver of the market. Apache proved to be both a better technology and free.
So IBM eventually decided that if it could not beat Apache, it should join Apache
- The world's biggest computer company decided that its engineers could not best the work of an ad hoc open-source collection of geeks, so they threw out their own technology and decided to go with the geeks! - let's invest in it and get rid of the one that we are trying to make on our own, which isn't as good."
- IBM wanted to build differentiated applications on top of Apache and charge money for them.
- Apache people were not interested in payment of cash - they wanted IBM's best engineers to help further develop Apache

There is no future in vanilla for most companies in a flat world. - the commercial future belongs to those who know how to make the richest chocolate sauce, the sweetest, lightest whipped cream, and the juiciest cherries to sit on top, or how to put them all together into a sundae.
Vanilla will be provided free by the OS community.

Also e.g.: RedHat can't sell you Linux per se (thats against OS regulationsCommercial Software:) but they have developed a business offering services around it and customising it for businesses.

Commercial Software: You spend a ton of money up front to develop a software product, and then the marginal cost of producing each one is very small, but if you sell a lot of them, you make back your investment and then plow profits back into developing the next generation.
- 'When you have a security crisis in your [software] system, you don't want to say, 'Where are the guys that work part-time developing this, is there even a number to call?'
- Microsoft has been able to count on the fact that the only thing more expensive than commercial software is free software.
- Few big companies can simply download Linux off the Web and expect it to work for all their tasks. A lot of design and systems engineering needs to go around
it and on top of it to tailor it to a company's specific needs, especially for sophisticated, large-scale, mission-critical operations. - costs as much if not more.

Community Answer: Goldcorp - miningdata competition = "where is the gold?" - 1400 scientists - mathamaticians, physicits, geologists, computer scientist - 1000% increase for a $100,000 prize.

5. Outsourcing Y2K bug fixes:
- Which country hard the greatest abundance of low-paid high skilled IT workers to perform such a tedious job? India
- Arguably, it is harder to get into an IIT than into Harvard or the Massachusetts Institute of Technology
- "India had no resources and no infrastructure," - "It produced people with quality and by quantity. But many of them rotted on the docks of India
like vegetables. Only a relative few could get on ships and get out...."For decades you had to leave India to be a professional. . . Now you can plug into the world from
India."
- India is a developing country with a developed intellectual capability

6. Offshoring
- when a company takes one of its factories that it is operating in Canton, Ohio, and moves the whole factory offshore to Canton, China. There, it
produces the very same product in the very same way, only with cheaper labor, lower taxes.
Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
It doesn't matter whether you are a lion or a gazelle.
When the sun comes up, you better start running.
- in thirty years we will have gone from "sold in China" to "made in China" to "designed in China" to "dreamt up in China"
- Low Chinese Prices are beneficial:
_Morgan Stanley estimating that since the mid-1990s alone, cheap imports from China have saved U.S. consumers roughly $600 billion and have saved U.S.
manufacturers untold billions in cheaper parts for their products. This savings, in turn, Fortune noted, has helped the Federal Reserve to hold down interest rates longer,
giving more Americans a chance to buy homes or refinance the ones they have, and giving businesses more capital to invest in new innovations
_If General Motors builds a factory offshore in Shanghai, it also ends up creating jobs in America by exporting a lot of goods and services to its own factory
in China and benefiting from lower parts costs in China for its factories in America.
- China will never be truly flat until it gets over that huge speed bump called "political reform."

7. Supply Chaining
Global supply chains that ddraw parts from all over the world is essential - complex
There are 2 challenges:
a. Global Optimization:
It doesn't matter if you can get one part cheaper in one place. The key is that the overall cost including delivery and setup is cheaper - e.g. buying groceries locally for an extra 1.50 or taking the bus for 2.00 to save that 1.50
- Need to mange all these factors - as transporatation manager I want to get those parts delivered at lowest cost , however if I am production manager I want to get those parts via the fastest and most reliable truck company

b. Coordinating (disruption prone) supply with (difficult-to-predict) demand:
- Don't want to purchase too many of one type of part or sweater - Too many: Need to discount - Too few: Missed opportunities not only day but for life
- Postponement is the strategy of reacting when stock is low and demand is high. However, need sophisticated IT processes to manage this e.g. Zara
- Dell.com has a customer for each and every product it develops - never stuck with products it can't sell
- Competition is more intense than ever - A smart and fast global supply chain becomes a competitive differentiator

- Walmart - RFID tags - quicker than barcodes (collective scan) - supply chain accounts for 5 - 10% of savings - gives info on products within size, amount, source - can splice & dice: what sells best on thurs evenings, what sells best during during hurricanes

8. Insourcing:
-Bringing an other companies core competencies that you don't yourself possess in-house to form part of the value-chain
e.g. UPS - synchronizing global supply chains for companies large and small
When our grandfathers owned shops, inventory was what was in the back room. Now it is a box two hours away on a package car, or it might be hundreds
more crossing the country by rail or jet

Toshiba had negative name as slow handling repairs: -If you own a Toshiba laptop and it breaks and you call Toshiba to have it repaired, Toshiba will tell you to drop it
off at a UPS store and have it shipped it to Toshiba, and it will get repaired and then be shipped back to you. But here's what they don't tell you: UPS doesn't just
pick up and deliver your Toshiba laptop. UPS actually repairs the computer in its own UPS-run workshop.
Toshiba came to UPS and asked it to design a better system. UPS said, "Look, instead of us picking up the machine from your
customers, bringing it to our hub, then flying it from our hub to your repair facility and then flying it back to our hub and then from our hub to your customer's house,
let's cut out all the middle steps. We, UPS, will pick it up, repair it ourselves, and send it right back to your customer.
- complaints went down dramatically.

9. Informing:
Search Engines for the masses - Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people.
- It is a total equalizer. - If someone has broadband, dial-up, or access to an Internet cafe, whether a kid in Cambodia, the university professor,
or me who runs this search engine, all have the same basic access to overall research information that anyone has.
- It is the antithesis of being told or taught or kept in the dark (Info. Asymmetry). It is about self-empowerment; it is empowering individuals to do what they think best with the information they want.
- "Though Google is like God - God is wireless, God is everywhere, and God sees everything. If you have any questions in the world, you ask Google."

10. The Steroids:
Digital, Mobile, Virtual, ..everything

Complementary Godds: there are goods that are complementary-whereby good A is a lot more valuable if you also have good B.
Its only good to have pencils because we have paper, its only good to have an eraser because we have pencils - individually they are not too valuable. We got a better quality of one and better quality of the other, your productivity improved. - This is known as the simultaneous improvement of complementary goods

Stepping onto the playing field LEGACY FREE
- meaning that many of them were so far behind they can leap right into the new technologies without having to worry about all the sunken costs of old systems. It
means that they can move very fast to adopt new, state-of-the-art technologies, which is why there are already more cell phones in use in China today than there are people
in the United States. Many Chinese just skipped over the landline phase..-went from NO phones to cell phones

Reverse Auctions companies bid down against each other rather than bid up against each other. They bid for contracts on everything from toilet paper for the Boeing factories to nuts and bolts-the off-the-shelf commodity parts-for Boeing's supply chain.

IT revolution the business press has been touting for the last twenty years? Sorry, but that was only the prologue. The last twenty years were just
about forging, sharpening, and distributing all the new tools with which to collaborate and connect. Now the real IT revolution is about to begin, as all the
complementarities between these tools start to really work together to level the playing field. The last twenty-five years in technology, said Fiorina, then the CEO of HP, have been justthe warm-up act Now we are going into the main event, she said, "and by the main event, I mean an era in which technology will literally transform every aspect
of business, every aspect of life and every aspect of society."

Vertical versus Hrizontal - moving from a vertical (command and control) world to a much more horizontal (connect and collaborate) flat world.

Red Ocean versus Blue Ocean Strategies - Creating New Market Spaces

2006-11-02T09:29:00.000-08:00

Rather than competing within the confines of the existing industry or trying to steal customers from rivals (Bloody or Red Ocean Strategy) in the HBR of October 2004 W. Chan Kim and Renée Mauborgne suggest Blue Ocean Strategy: developing uncontested market space that makes the competition irrelevant.

According to Kim and Mauborgne, competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market space.(Disruptive innovations)
Of course competition matters. But by focusing on competition and "competitive advantage", according to Kim and Mauborgne, scholars, companies, and consultants have ignored two very important - and far more lucrative - aspects of strategy:
- 1. Find and develop blue oceans, and
- 2. Exploit and protect blue oceans. These challenges are very different from those to which strategists have devoted most of their attention.
In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid.

There are two ways to create blue oceans:
1. Launch completely new industries, as eBay did with online auctions.
2. Created from within a red ocean, when a company expands the boundaries of an existing industry.

Certainly Kim and Mauborge deserve credits for having made the point of the over-focus on competitive advantage and also for their beautiful metaphor of the two types of oceans. Hopefully, the authors will provide more specific tools to find, create, develop, exploit and protect blue oceans in their forthcoming book (2005).

They define red oceans as all industries in existence today, where industry boundaries are defined and accepted, and the competitive rules are well understood. In red ocean industries, the authors contend that companies attempt to outperform their rivals in order to grab ever greater share. This competition turns products into commodities and pricing takes a hit. The water gets increasingly red from price wars and the lack of true innovation.

The authors contrast red oceans with blue oceans, or those industries that don't exist yet, often in an unknown market segment where demand is created rather than battled over.

Interpersonal Communication - When Delivering a Report

2006-11-01T12:49:00.000-08:00

When delivering effective reports for clients its important to keep them as concise and clear as possible. Here are some tips for writing in my experience:

- Write for the reader
Put yourself in the readers shoes as you write. If you were him, what information and angle is important to you.

- Use the CASED methodology
Critically examine the alternative to your suggestion
Analogy or Example to help in understanding
Support your suggestion with emperical evidence, charts and graphs. Don't overkill though.
Executive summarys should be provided at the beginning.
Diagnos based on proven frameworks and practices.

Value-based pricing

2006-10-31T07:54:00.000-08:00

Working on my thesis now I'm trying to find the best price for for a new software product. Traditional pricing has been based on the cost of production plus all expenses to get it to the customer. However, there may be a better approach to making the customer buy..

Value-based pricing is a method of pricing products in which companies first try to determine how much the products are worth to their customers. The goal is to avoid setting prices that are either too high for customers or lower than they would be willing to pay if they knew what kind of benefits they could get by using a product.

For example, one pharmaceutical maker priced a new antiulcer drug, but not by adding up the costs of developing and manufacturing the medication and tacking on the amount of profit it wanted to make.

Instead, the company used value-based pricing techniques to justify a higher price than it might otherwise have been able to get from medical insurers. Its weapon: studies that showed the new drug could help patients avoid expensive surgery, which in turn would lower costs for the insurance companies.

Six key ways to unleash markets through Disruptive Innovation

2006-10-11T09:04:00.000-07:00

http://hbswk.hbs.edu/item/3374.html

1. Disruptive innovations spur growth.
Companies have two basic options when they seek to build new-growth businesses. They can try to take an existing market from an entrenched competitor with sustaining innovations. Or they can try to take on a competitor with disruptive innovations that either create new markets or take root among an incumbent's worst customers. Our research overwhelmingly suggests that companies should seek out growth based on disruption.

Sustaining innovations, whether they involve incremental refinements or radical breakthroughs, improve the performance of established products and services along the dimensions that mainstream customers in major markets historically have valued. Examples: a microprocessor that enables personal computers to operate faster and a battery that lets laptop computers operate longer.

All Innovative ideas start out as half-baked propositions.
— Clayton M. Christensen, Michael E. Raynor,
and Scott D. Anthony

Companies march along a performance trajectory by introducing successive sustaining innovations—first to remain competitive in the short term. But, as noted in The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press, 1997), firms innovate faster than our lives change to adopt those innovations, creating opportunities for disruptive innovations. Although sustaining innovations move firms along the traditional performance trajectory, disruptive ones establish an entirely new performance trajectory.

Disruptive innovations often initially result in worse performance compared with established products and services in mainstream markets. But disruptive innovations have other benefits. They are often cheaper, simpler, smaller, and more convenient to use.

Consider the small off-road motorcycles introduced by Honda in the 1960s, Apple's first personal computer, and Intuit's QuickBooks accounting software. These innovations all initially underperformed the mainstream offerings. But they brought a different value proposition to a new market context that did not need all of the raw performance offered by the incumbent. They all created massive growth; to flip Joseph Schumpeter's famous phrase, creative destruction, on its head, this is creative creation. After taking root in a simple, undemanding application, disruptive innovations inexorably get better until they change the game, relegating previously dominant firms to the sidelines in often stunning fashion.

Incumbents almost always win battles of sustaining innovations. Their superior resources and well-honed processes are almost insurmountable strengths. Incumbents, however, almost always lose battles where the attacker has a legitimate disruptive innovation. To create a new-growth business, companies—established incumbents and start-ups alike—must be on the right side of the disruptive process by launching their own disruptive attacks.

2. Disruptive businesses either create new markets or take the low end of an established market.
There are two distinct types of disruptive innovations. The first type creates a new market by targeting nonconsumers, the second competes in the low end of an established market.

In a new-market disruption, attackers take root in a new "plane" of competition or a new context of use outside of an existing market. Consumers historically locked out of a market because they lacked the skills or wealth welcome a relatively simple product that allows them to get done what they had always wanted to get done. These markets typically start out small and ill defined. They don't meet the growth needs of large companies. And the incumbent feels no pain at first. Because it creates new consumption, the disruptor's growth doesn't affect the incumbent's core business. But as the innovation improves, it begins to pull customers away from the incumbent. And the incumbent doesn't have the ability to play in this new game.

Managers must be patient for growth but impatient for profitability.
— Clayton M. Christensen, Michael E. Raynor,
Scott D. Anthony

Transistors were a disruptive innovation. Mainstream suppliers of tabletop radios, which were made with vacuum tubes, couldn't figure out how to use transistors because they couldn't initially handle the power requirements of these components. Then in 1955, Sony introduced the pocket radio. It was a static-laced product with horrible fidelity. But it enabled teenagers to do something that they couldn't before—listen to rock'n'roll out of their parents' earshot. Had Sony targeted consumers in established markets, the pocket radio would have bombed. But for teenagers, the alternative to a Sony pocket radio was no radio at all. By competing against nonconsumption, Sony set a very low technical hurdle for itself: The product just had to be better than nothing in order to find delighted consumers.

The second type of disruptive innovation takes root among an incumbent's worst customers. These low-end disruptions do not create new markets, but they can create new growth. The disruption of integrated steel mills by steel minimills demonstrates how low-end disruptors harness what we call asymmetries of motivation.

Minimills first took hold in the steel industry in the mid-1960s. They were very efficient. They had a 20 percent cost advantage over integrated mills. But the quality of the steel they produced was inferior. The rebar market at the bottom rung of the industry (rebar is small steel bars made from scrap and used to create reinforced concrete) was the only market that would accept the minimills' steel.

As the minimills entered the rebar market, the integrated mills were happy to exit it. Their gross margins in the rebar business were a mere 7 percent, and rebar accounted for only 4 percent of the industry's tonnage. So the integrated mills decided to focus on higher-profit steel products. The minimills made boatloads of money until they finally drove the last of the integrated mills out of the market—and then the price of rebar dropped 20 percent, because rebar had essentially become a commodity market. The minimills' reward for victory was that none of them could make money.

To make attractive money again, the minimills had to figure out how to make better-quality steel in larger shapes—not only angle iron but also thicker bars and rods. Profit margins in this market tier were 12 percent, almost double those of the rebar market; the overall market was also twice as large. So the minimills invested in equipment to make the larger pieces and worked to improve the quality and consistency of their steel. As the minimills began making inroads with better and bigger steel, the integrated mills were happy to exit this market tier to concentrate on more profitable products. When the last integrated mill left the market, the price of angle iron collapsed. Once again, the minimills had to move up to the next tier of the industry in order to survive. And so on.

At each stage of the minimills' climb up-market, an asymmetry of motivation was at work. For the minimills, the need to enter a more profitable market provided the motivation to solve the technological hurdles preventing them from producing higher-quality steel. The integrated mills were happy to leave these markets because the lower tiers in their product mix were always less profitable than products targeting higher-end customers. Eventually, of course, the integrated mills ran out of markets to flee to.

3. Disruptive opportunities require a separate business-planning process.
All innovative ideas start out as half-baked propositions. They then go through a shaping process as they wind their way through the organization to reach senior management. When firms have a single process for all the various forms of innovation, what comes out the other end of the process looks like what has been approved in the past, and it all looks like sustaining innovations.

Consider IBM's efforts to introduce voice-recognition software. Early iterations of IBM's ViaVoice software package featured IBM's "ideal" customer on the front: an administrative assistant sitting in front of her computer, speaking into a headset. It is easy to see why IBM targeted such customers. They constituted a large, obvious market, well aligned with IBM's needs and capabilities. But think about IBM's value proposition to this woman. She types 80 words a minute and almost never makes a mistake. IBM was telling her, "Why don't you change your behavior and use a system that gives you lower accuracy and slower speeds. We promise future releases will get better." The only way to attract great typists would be for voice recognition to be faster and more accurate than typing. This is a very high technical hurdle.

Where has voice-recognition technology begun to take off? Kids love the ability to tell their animated toys to "stop" or "go." "Press or say one" menu commands are another obvious application. In these contexts, people are delighted with a crummy voice-recognition product. Another good market for the technology may be all those executives you see standing in airport lines, trying to punch messages into their BlackBerries. Their fingers are too big to enable accurate typing—they'd be more than happy with a voice-recognition algorithm that's only 80% accurate.

Not surprisingly, disruptive ideas stand a small chance of ever seeing the light of day when they are evaluated with the screens and lenses a company uses to identify and shape sustaining innovations. Companies frustrated by an inability to create new growth shouldn't conclude that they aren't generating enough good ideas. The problem doesn't lie in their creativity; it lies in their processes.

Only by creating a parallel process for developing and shaping disruptive ideas—one that acknowledges their distinctive features—can companies successfully launch disruption after disruption. Such a process relies more on pattern recognition than on data-driven market analysis. After all, markets that do not exist cannot be analyzed. Even when numbers are available, they are never clear.

An intuitive process can still be rigorous if managers use the right tools. For example, discovery-driven planning lets you create a plan to test assumptions; aggregate project planning helps you allocate resources between sustaining and disruptive opportunities; the "schools of experience" theory informs hiring decisions.

4. Don't try to change your customers—help them.
Faulty market segmentation schemes help to explain the stunningly high rate of failure of new-product development. Most companies define markets in terms of product categories and demographics. We just don't live our lives in product categories or in demographics. When companies segment markets this way they often fail to connect with their customers.

How do we live our lives? During the course of the day, problems arise, jobs we need to get done. We look around to hire products to get those jobs done. Products that successfully match the circumstances we find ourselves in end up being the real "killer applications." They make it easier for consumers to do something they were already trying to accomplish.

Some manufacturers pushed digital cameras based on the value proposition that they made it easy to edit out the red eyes from all your images and create an online album of your best photos. Research shows, however, that 98 percent of all photos get looked at only once. Only the most conscientious of us prioritized editing images or creating albums. Where digital camera makers found success was in marketing their products to consumers who used to order double prints of their photos and mail them to relatives. The digital technology enables consumers to use the Internet to do more easily what they already wanted to do.

A business plan predicated upon asking customers to adopt new priorities and behave differently from how they have in the past is an uphill death march through knee-deep mud. Instead of designing products and services that dictate consumers' behavior, let the tasks people are trying to get done inform your design.

5. Integrate across whatever is not good enough.
One critical decision firms face when creating an innovation-driven growth business is determining its optimal scope. Specifically, which activities need to be managed internally and which can be safely outsourced?

The answer often is driven by the fad of the day. During the 1960s, everyone thought IBM's integration was an unassailable point of competitive advantage. Because IBM controlled such a wide swath of the industry's value chain, it could make better products than anybody else. So companies copied IBM and tried to integrate. In the 1990s, everyone thought that Cisco's disintegrated business model that made extensive use of outsourcing was an unassailable point of competitive advantage. So companies jumped on this new bandwagon and sought to disintegrate.

The critical question is: What are the circumstances in which my firm should be integrated and what are the circumstances in which my firm can be a specialist? Integration provides advantages whenever a product is not good enough to meet customer needs. Proprietary, interdependent architectures allow companies to run multiple experiments, pushing the frontier of what is possible. Engineers can reconfigure their systems to wring the best performance possible out of the available technology.

Think about the computer industry. In its early days, you simply couldn't exist as a specialist provider. There were too many unpredictable interdependencies across every interface in the first mainframes. The manufacturing process depended on the design of the computer and vice versa. The design of the operating system affected the design of the logic circuitry. IBM had to be integrated across the entire value chain to produce a mainframe that came close to meeting its customers' needs.

By contrast, the modular architectures that characterize disintegration always sacrifice raw performance. Stitching together a system with partner companies reduces the degrees of design freedom engineers have to optimize the entire system. But modular architectures have other benefits. Companies can customize their products by upgrading individual subsystems without having to redesign an entire product. They can mix and match components from best-of-breed suppliers to respond conveniently to individual customers' needs.

But even in a modular architecture, successful companies still are integrated—just in a different place. Consider the computer industry in the 1990s. The computer's basic performance was more than good enough. What did customers want instead? They wanted lower prices and a computer customized for their needs. Because the product's functionality was more than good enough, companies like Dell could outsource the subsystems from which its machines were assembled. What was not good enough? The interface with the customer. By directly interacting with customers, Dell could ensure it delivered what customers wanted—convenience and customization. Value flowed to Dell and to the manufacturers of important subsystems that themselves were not good enough, like Microsoft and Intel.

In short, companies must be integrated across whatever interface drives performance along the dimension that customers value. In an industry's early days, integration typically needs to occur across interfaces that drive raw performance—for example, design and assembly. Once a product's basic performance is more than good enough, competition forces firms to compete on convenience or customization. In these situations, specialist firms emerge and the necessary locus of integration typically shifts to the interface with the customer.

6. Be patient for growth but impatient for profitability.
Managers inside new-growth businesses often feel tremendous pressure to quickly ramp up sales volume. But disruptive businesses can't get big very fast. The only way to make them grow quickly is to cram them into large, obvious markets. In established markets, customers don't care about the disruptive innovation's strengths. They only care about its weaknesses. This is a recipe for disaster, and one reason why company-backed disruptive ventures can have a leg up. Venture capitalists have become increasingly impatient for businesses to get huge. As long as their core businesses are growing healthily, companies will find it easier to wait for the disruptive businesses to find a foothold market and slowly build commercial mass.

Managers must be patient for growth but impatient for profitability. When you are willing to put up with a lot of losses before a disruptive business turns profitable, that means you are trying to lay the foundation for a huge new business. Insisting on early profitability pushes the new disruptive business to find the markets where its unique capabilities will be uniquely valued. Forced to keep its fixed costs low, the new business can serve small customers who would not meet the needs of a high fixed cost structure.

Managers in large companies who read The Innovator's Dilemma may have finished the book thinking they're destined to fail, no matter what they do. We hope to shift their sentiment from despair to hope. If managers understand the theories of innovation, they have the ability to create new-growth businesses again and again.

Clay Christensen and Disruptive Innovation

2006-10-11T07:37:00.000-07:00

Here are 5 tips from Clay Christensen professor at HBS and author of The Innovator’s Dilemma and, The Innovator’s Solution.

1) The most ideal market segment is the one that isn’t being served.

When the only other option is nothing, by default your product is better. So strive to find that product and market.

Solar panels cannot seem to find their place in the United States; the power they generate is insufficient and the technology is cumbersome. However, in Mongolia, solar panels are sold everywhere for powering TV sets. The reason the market is better in Mongolia is because the alternative to solar power is no power; there is no competition with a better form of energy.

Seems like a no-brainer concept, but a lot of companies aren’t catching on. In 1979 all the major electronics companies were trying to develop their vacuum tubes for high-end tabletop radios, floor-standing TVs, etc. Meanwhile, Sony realized that their technology wasn’t as good as the competition’s but it was good enough for teenagers who couldn’t afford to buy the high-end products. Sony sold thousands of Walkman portable music players because the alternative to poor quality music was no music.

The lesson is to figure out which markets are not being served because its easier to compete against no competition. This somewhat segues into the next point:

2) Launch the product that is good enough.

If a product will suffice for the market, do not spend millions of dollars in R&D refining it or trying to improve it for the high-end. Just launch it.

Kodak was trying to find a way to replace the traditional glass lens with a plastic one. Though they had a decent plastic frame, it didn’t produce the professional quality pictures they had wanted. For five years Kodak kept working on a way to improve the plastic lens but had few advances. Finally they gave up, changed the market and decided to launch the FunSaver disposable camera. When the alternative to fairly decent pictures of Disneyland is no pictures of Disneyland, everyone was grateful to purchase the FunSaver.

This is entirely speculation, but I think part of the concern Kodak had with launching an inferior product was the detriment to the brand. If done correctly though, I think that there is a way around it. The Kodak Funsaver and Mini Cooper (though not officially BMW, is still associated) are good examples of selling a lower-end product without harming the brand.

The big question is how to apply this lesson to our every day lives? What exactly is “good enough” and how do we know when the R&D team has reached that point? How many features suffice and what development will only result in marginal returns? One way to figure that out is by internalizing the next lesson:

3) Understand the job and you will understand the market

If one can figure out why someone is employing the product/service, then one can better design and market the product. This might have been the most adamant lesson of the day, and it is not as obvious as it seems.

Clay uses McDonalds Milkshakes to explain his lesson. McDonalds wanted to increase milkshake sales, so it brought in consultants to observe how the shakes were being used. They noticed that they were purchased for two distinct jobs. First, commuters were buying them for the long drive to the office. It was better than breakfast sandwiches, bagels, fruit and candy bars because it was cleaner, easy to eat, entertaining, took a long time to drink, and kept the stomach full until lunch. The second milkshake job was for parents looking to buy a child a treat for dinner- the problem was that it took so long for the child to drink that it often tried the parent’s patience and was eventually discarded half full by a stressed-out parent. Because there are two distinct jobs that require different characteristic shakes, there is no one-size-fits-all solution to optimizing the milkshake.

A nice side effect of understanding the job is that it changes the market for that product. The competition for morning McShakes is not just the milkshake category. It’s the entire morning commute job: breakfast sandwiches, bagels, fruit, candy bars and boredom.

4) Disruptive companies can enter all industries

Assuming the trend that all companies try to move up into selling higher-end products where margins are higher, there is always room for companies to enter in the lower-end market where the more established companies care less.

This trend can be seen in several industries including steel, automobile, animation, computers, digital cameras, airlines, healthcare and several others. Take retailing as an example. Department stores such as Macy’s originally sold hard goods (paint, tools) and soft goods (shoes, clothes), where the highest margins were. When Wal-Mart and other mass discount stores came into the industry, they sold the lower-end hard goods. Meanwhile, the department stores were willing to give up the lower-end products and focus on the more profitable soft goods. Slowly but surely, the mass discount stores started selling more soft goods and eating into the department stores’ space. So what is coming in below mass discount stores? Perhaps e-commerce retailers will be the next phase of the retail industry’s evolution.

This provides a good framework for thinking about how industries are changing and what to expect for the future. It also gives a strong warning to think twice before exiting a product segment and entering a new one. It certainly is not a bad idea to market the more profitable product, but keep an eye out for the evolution and figure out where you fit in.

5) Outsourcing can be dangerous, so do it with care

Be careful when outsourcing functions of the company; if one goes overboard he or she might outsource the value of their company.

Computer manufacturers are notorious about over-sourcing, but it could easily happen to any company. Well-established, vertically integrated companies are always seeking to improve stock price by raising revenues or decreasing costs, or decreasing assets. Ways to decrease costs and assets is by outsourcing work, which will close down factories, and lighten up salaries and benefits. True story of one computer manufacturer: what began with outsourcing chip making and board manufacturing, continued to design and supply. Each time the outsourcee told the computer company, “its not your core competency to do this, let me do it for cheaper.” Meanwhile, revenues stayed the same, while the assets and costs decreased and stock price improved; it was in the interest of the stockholders to outsource. Eventually the company had nothing left but its brand. And then the outsourcee went directly to Best Buy, and said, “forget about that computer manufacturer, would you like us to make you ‘Best Buy’ branded computers?”

The way to get around the dilemma above is to own the outsourcee. If that is not possible, consider this: core competency is not the way to determine what to outsource. Instead, one should determine where will value be in the future (which is where the company will need to make core in the future) and internalize that job.

Cannibalisation

2006-10-11T06:07:00.000-07:00

No, its not when a tribesman eats a clown in the jungle and asks does this taste funny to you..well it is, but not in this case.

In this case its a situation where a new brand gains sales at the expense of the introduction of another of the company’s brands. For example when Coca Cola introduced Vanilla Cola. The sales generated from their new offering takes away from the sales of their orinal offering, regular coke.
Therefore, the estimated profit generated from the new product must be reduced by the earnings on the lost sales.

Its not what you know..

2006-10-11T03:34:00.000-07:00

In todays information society, those who are best informed will lead the pack. Unlike only a few decades earlier anyone can gain access to any public information. No longer is it limited to a select elite.
This has created a parigm shift. No longer should there be a need to learn off facts and stories and dates, as was forced upon us during school. Using the internet and with todays hyper speeds we can have the knowledge infront of us as fast if not faster than if we were to regurrgetate it from memory.
It has now become a case of Not what we know, but what ways we know how to find what!

So on that point here are some tips for using Google more effectively:

synonyms ~house searches for home and all its synonyms (e.g. Home, residence, lodging,..)

numeration 2000..2006 searches for the range between 2000 and 2006 (e.g 2000, 2001,2002,2003,2004,2005,2006)

wildcard "You'll * me at the *" searches using * as the wilcard

The Law of Diminishing (Marginal) Returns

2006-10-10T06:26:00.000-07:00

I'm sure you have heard of it, and even know what it is but never associated it with an economic law...
It is a concept which describes the decrease in total production when varying the quantity of one productive factor while holding the remaining factors constant.

It states that for every additional unit of one of the factors of production (usually land, labor, or capital) employed to produce goods or services, the output generated by each additional unit will eventually fall.

To illustrate with an example, I am an apple producer that has seen that as one man I can pick 100 apples a day. By hiring an additional worker, I find that the two of us can pick 200 apples a day. However, after hiring a second worker, I notice that the three of us can only pick 250 a day. Eventually each additional increment pays off less than previous ones.

Another similar law is trhat of Diminishing (Marginal) Utility:
In layman terms, as an extra unit of a commodity is consumed by an individual, the satisfaction gained from each additional unit will fall. For example, if I like apples, every time I eat an apple I will derive some pleasure form eating one. However, after 20 apples, the amount of pleasure I will enjoy in eating my 21st apple will be less then when I ate the first one.

Innovation - The Utility Buyer Map

2006-10-04T09:03:00.000-07:00

As we saw from the Motorola example: A new product has to offer customers exceptional utility at an attractive price, and the comany must be able to deliver it at a tidy profit.

But how do managers identify the commercial readiness and potential of a new idea?

Three tools aim to help managers answer these questions:
1. The Buyer Utility Map - aims to indicate the liklihood that a customer will be attracted to the idea.
2. The Price Corridor of the Mass - aims to identify what price will unlock the greatest number of customers.
3. The Business Model guide - offers a framework to ascertain whether and how a company can profitably deliver the new idea at the targeted price.

Furthermore, many innovations have to overcome other Adoption Hurdles:
-strong resistance from stakeholders
-directors fear of moving out of comfortzone
-...

The Utility Buyer Map
The managers at Motorola fell into the common trap: they reveled in the bells and whistles of their new technology.
Succesful innovators rely on the the product's utility.
How a product is developed becomes more a function of its utility to customers
and
less a function of its technical possibilities.

The Six Stages of the buyer experience cycle (x-axis)
A customer experience can usually be broken down into a cycle of six distinct stages, from purchase to disposal. Each stage encompasses a variety of specific experiences. E.g. Purchasing includes the experiences of browsing amazon.com as well as the experience of pushing a physical shopping cart through Tescos.
In order to guage the quality of the buyer's experience at each stage:
A customer's product experience passes through six stages. To help companies assess the quality of a buyer's total experience, their are key questions for each stage. Together they uncover the full picture of the experience cycle.

The Six Utility Lever (y-axis)
The ways in which companies unlock utility for their customers. The most common lever used is customer productivity - helping customers do things faster, better or in easier ways. E.g. , the financial company Bloomberg makes traders more efficent by offering online analytics that quickly analyses and compare the raw information it delivers.

By placing a new product on one of the 36 spaces of the Buyer Utility map, one can quickly see if/how the new idea creates a different utility proposition from existing products.

New utility lever at the same stage:
Starbucks - revolutionised the office-workers' coffee break traditionally coffee in delis or fast-food places , competitors offered fast + cheap coffee - in terms of the map those competitors focused on delivering productivity in the purchasing experience.
Starbucks however moved into a new space entirely, by est. chic coffee bars with an exotic mix of brews, the company injected fun and cachet into the coffee purchasing experience. They inovvated in the fun & image/purchase space.

Same utility lever at a new stage:
Innovation through extending a familiarity utility to differnt parts of the customers' experience.
Michael Dell did just this in the computer business. Manufacturers used to compete by offering faster computers with more features and software. In terms of the map this was productivity in the use of their machines. Dell extended the same utility to the delivery experience. By bypassing dealers, Dell delivers PCs tailored to customers' needs faster than any other manufacturer. Aswell as the costs saved by removing this link in the value chain.

New utility at a a new stage:
Something completely new, e.g. Alto, a disposable fluorescent bulb manufacturered by Phillips. Most bulb manufacturers competed to offer customers more productivity in use, they did not pay attention to the fact that the bulbs had to be carried off to a special dump because of their harmful mercury content. By creating a bulb that could be disposed of environmentally friendally they moved into a whole new space. Env. friendliness in disposal. In its first year alone it poached 25% of the US market while enjoying supperior margins.

Beyond highlighting the difference between ideas that are genuine innovations and those that are essentially revisions of existing offerings, the buyer utility map reminds one just how many unexplored innovation possibilities there are.

Example of an innovative company that created exceptional utility:
Charles Schwab was a discount broker.Schwab's first innovation was to make customers feel safe trading over the phone and later online. At the time when most brokers were competing on price, Schwab recognised that customers were actually more concerned about the safe executions of their trades. By providing instantaneous computer confirmation the perceived risk is eliminated.
Schwab then went on to make purchasing more convenient. Most discount brokers were only open during normal office hours when most of their customers weren't free. Schwab offered 24hr 7 day a week service and a Schwab one cash management a/c avoiding the inconvenient bank hours.
The next innovation came in the simplicity and maintenance space. It saw how difficult it was for customers to track and manage their mutual fund investments. Customers would typically receive statements from each of the fund companies they dealt with. They would be burdened by sticking it all together to get a better picture of performance. Schwab launched One Source a consolodated statement of all mutual investments purchased through Schwab.
Whether or not Schwab continus to lead will be dependent in great part on their ability to sniff out new utility spaces before competitors do.

On what spaces does your company lie? Where could they move to?

Innovation - A brief example of a don't

2006-10-04T09:01:00.000-07:00

In 1998 Motorola rolled out the 'Iridium', this new mobile phone, as the company declared, was to revolutionise providing un-interrupted wireless communication anywhere in the world regardless of terrain or country.

However, Motorola had got it wrong. It was a complete flop. In its rush to emrace a new technology, they had over looked its many drawbacks: heavy, needed an array of attachments, couldn't be used in a car or indoors - exactly where jet-setting executives needed it.

At $3,000 a pop, users couldn't see the compelling reason to switch from their current $150 handsets.

As the tale illustrates, it hapens to the best of us. Sometimes a new technology is rushed to market too soon or in the wrong place or at the wrong price.

Write it before you type it!

2006-09-28T01:34:00.000-07:00

Having seen my Director always write his findings, recommendations and reports down before having his PA type them up I had thought he was just lazy. But having been forced to do the same (without the PA) due to a non-starting computer I began to see there might be something more to this...
As I wrote I felt an immediate flow of creative thought being effortlessly transcribed to paper. It reminded me of those school days when my essays often won best prize. There was no inhibitive chunk of plastic and clunky keys to repress my flow of ideas....
Oh wait a minute, synonym check that word doesn't look high-quality,
ah i selled that wrong backspace-backspace-backspace,
sh*t i missed aspace, left-arrow left-arrow
...
I'm sure you can all relate to this. Just in this paragragh I have done it several times.
I'm not sawing gather all your computers and toss them into a burning inferno like the bra burning feminists of the sixties. But give a thought to using the old papyrus and quill for those creative pieces that require original thinking. I guarantee you will notice a positive difference.

Chaos Theory - "The Butterfly Effect"

2006-09-21T01:48:00.000-07:00

Ok, you might be thinking I'm going a little off topic with this one, and yeah, you'd be right! But I find it fascinating to understand this concept. This morning after looking up some movies to hire tonight I stumbled accross "The Butterfly Effect" with Ashton Kutcher. This lead me to look into this effect in more detail. I'll try explain Chaos Theory in the next few sentences:

- In a chaotic system, the use of the laws of physics to make accurate long-term predictions is impossible, even theoretically.
- To make long-term predications it would require giving the initial conditions to infinite precision ( i.e. measure to their exact size with discrepancies. Unfortunately measuring equipment will never be able to measure to infinite precision. E.G. try measuring to a millionth of an inch. Try measure a coastline - the closer you go, the more inlets and thus greater distance.).
- Even the smallest imaginable discrepancy between two sets of initial conditions would always result in a huge discrepancy at later or earlier times. This was noticed by Lorenzo when he wanted to start his weather predicting computer program mid-way to save time. In stead of entering the usual 0.5673456 he just entered 0.5673 expecting no significant alteration. However, the difference was huge.
- This means that in order to make long-term weather forecasts with any degree of accuracy at all, it would be necessary to take an infinite number of measurements.
- Even if it were possible to fill the entire atmosphere of the earth with an enormous array of measuring instruments---in this case thermometers, wind gauges, and barometers---uncertainty in the initial conditions would arise from the minute variations in measured values between each set of instruments in the array.
- This principle is sometimes called the "Butterfly Effect." In terms of weather forecasts, the "Butterfly Effect" refers to the idea that whether or not a butterfly flaps its wings in a certain part of the world can make the difference in whether or not a storm arises one year later on the other side of the world.

-It is now accepted that weather forecasts can be accurate only in the short-term, and that long-term forecasts, even made with the most sophisticated computer methods imaginable, will always be no better than guesses.
Examples of such systems are: the atmospher, plate techtonics, population growth, the solar system and Economies.

Interpersonal Communication - The Ladder of Inference

2006-09-19T07:58:00.000-07:00

The Ladder of Inference describes the thinking process that we go through, usually without realizing it, to get from a fact to a decision or action. The thinking stages can be seen as rungs on a ladder

Example from mindtools:

The regional Sales Manager has just read the latest sales figures. Sales in Don’s territory are down - again. It’s simply not good enough. He needs to be fired!

Most people would agree that the Sales Manager may have just jumped to a rash conclusion. So let’s see how the scenario plays using the Ladder of Inference:

The latest month’s sales figures (reality) have come in, and the Sales Manager immediately focuses on Don’s territory (selected reality). Sales are down on the previous months again (interpreted reality). The Sales Manager assumes that the drop in sales is entirely to do with the Don’s performance (assumption), and decides that Don hasn’t been performing well (conclusion). So he forms the opinion that Don isn’t up to the job (belief). He feels that firing Don is the best options (action).

Now let’s challenge the Sales Manager’s thinking using the Ladder of Inference:

The Sales Manager came to the sales figures with an existing belief that Don, a new salesmen, couldn’t possibly be as good as the "old-timers" who he has trained for years. He focused on Don’s territory because Don is the newest salesman, and selected facts that supported what he already believed (that Don wouldn’t be doing a good job).

To get back to facts and reality, we must challenge the Sales Manager’s selection of data and his assumptions about Don’s likely performance.

Although the figures are down in Don’s territory, they have actually dipped less than in other areas. Don is actually a great salesman, but he and his colleagues have in fact been let down by new products being delayed, and by old products running out of stock.

Once the Sales Manager changes his assumptions, he will see the need to focus on solving the production issues. He can also learn from Don – how is it that Don has performed better than other sales people in the face of stock problems? Can others learn from him?

Interpersonal Communication - Questioning Techniques

2006-09-19T07:20:00.000-07:00

Questioning Techniques - Asking questions effectively
If you put the wrong information in, you'll get the wrong information out is often said in relation to computer systems:
Asking the right question is at the heart of effective communications and information exchange.

for example, you can gather better information and learn more, you can build stronger relationships, manage people more effectively and help others to learn too.

Following on in the series of interpersonal communication posts we will look at some common questioning techniques, and when (and when not) to use them:

Open vs. Closed Questions
Closed question - receives a single word or very short, factual answer. “Are you thirsty?” vs "How do you feel about grabbing a drink?" “Where do you live?” vs "What do you do for accomodation?"

CLOSED - One aims for a 'yes' or 'no'.

OPEN - The key here is the opening clause. The more inviting question gives the questionee an opportunity to describe in detail:

"How do you ..[feel|think|like|see]"

"What do you ..[do|feel|think|like|see]"

"What did you ..[do|feel|think|like|see]"

"Why ..[do|did|is] .. in your opinion"

Open questions are good for:

Developing an open conversation: “What did you get up to on vacation?”
Finding our more detail: “What else do we need to do to make this a success?”
Finding out the other person’s opinion or issues: “What do you think about those changes?”

Closed questions are good for:

Testing your understanding, or the other person’s: “So, if I get this qualification, I will get a rise?”
Concluding a discussion or making a decision: “Now we know the facts, are we all agreed this is the right course of action?”
Frame setting: “Are you happy with the service from your bank?”

A misplaced closed question, on the other hand, can kill the conversation and lead to awkward silences, so are best avoided when a conversation is in full flow.

Funnel Questions

This technique involves starting with general questions, and then narrowing to the target with each level. It’s often used by detectives taking a statement from a witness. Start with closed questions. As you progress through the tunnel, start using more open questions:

“How many people were involved in the fight?”
“About ten.”
“Were they kids or adults?”
“Mostly kids.”
“What sort of ages were they?”
“About fourteen or fifteen.”
“Were any of them wearing anything distinctive?”
“Yes, several of them had red baseball caps on.”
“Can you remember if there was a logo on any of the caps?”
“Now you come to mention it, yes, I remember seeing a big letter N.”

Using this technique, the detective has helped the witness re-live the scene and gradually focus on a useful detail.

Much more effective than asking, “Are there any details you can give me about what you saw?”

Funnel questions are good for:

Finding out more detail about a specific point: “Tell me more about Option 2.”
Gaining the interest or increasing the confidence of the person you’re speaking with: “Have you used the IT Helpdesk?”, “Did they solve your problem?”, “What was the attitude of the person who took your call?”

Probing Questions

Asking probing questions is another strategy for finding out more detail.

“When exactly do you need this report by, and do you want to see a draft before I give you my final version?”,

or to investigate whether there is proof for what has been said,

“How do you know exactly that the new database can’t be used by the sales force?”

“What exactly do you mean by fast-track?”

“Who, exactly, wanted this report?”

Use exactly to get as much information as possible.

Probing questions are good for:

Gaining clarification to ensure you have the whole story and that you understand it thoroughly; and
Drawing information out of people who are trying to avoid telling you something.

Leading Questions

Leading questions try to lead the respondent to your way of thinking. They can do this in several ways:

With an assumption: “How late/early do you think that the project will deliver?” This assumes that the project will certainly not be completed on time.

By adding a personal appeal to agree at the end: “Lori’s very efficient, don’t you think?” or “Option 2 is better, isn’t it?”

Phrasing the question so that the “easiest” response is “yes” (our natural tendency to prefer to say “yes” than “no” plays an important part in the phrasing of referendum questions): “Shall we all approve Option 2?” is more likely to get a positive response than “Do you want to approve option 2 or not?”
A good way of doing this is to make it personal. For example, “Would you like me to go ahead with Option 2?” rather than “Shall I choose Option 2?”

Giving people a choice between two options, both of which you would be happy with, rather than the choice of one option or not doing anything at all. Strictly speaking, the choice of “neither” is still available when you ask “Which would you prefer of A or B”, but most people will be caught up in deciding between your two preferences.The alternative if you have preference for A is, "Will I choose A or not?"

Note that leading questions tend to be closed.

Leading questions are good for:

Getting the answer you want but leaving the other person feeling that they have had a choice.
Closing a sale: “If that answers all of your questions, when would you like us to deliver?”

Rhetorical Questions

They’re really just statements phrased in question form: “Isn’t John’s design work so creative?”

People use rhetorical questions because they are engaging for the listener — as they are drawn into agreeing (“Yes it is and I like working with such a creative colleague”) — rather than feeling that they are being “told” something like

“John is a very creative designer”. (To which they may answer "So What?")

Rhetorical questions are even more powerful if you use a string of them. “Isn’t that a great display? Don’t you love the way the text picks up the colors in the photographs? Doesn’t it use space really well? Wouldn’t you love to have a display like that for our products?”

Rhetorical questions are good for:

Engaging the listener

Using Questioning Techniques

You have probably used all of these questioning techniques before in your everyday life, at work and at home. But by consciously applying the appropriate kind of questioning, you can gain the information, response or outcome that you want even more effectively.

Questions are a powerful way of:

Learning: Ask open and closed questions, and use probing questioning.
Relationship building: People generally respond positively if you ask about what they do or enquire about their opinions. If you do this in an affirmative way “Tell me what you like best about working here”, you will help to build and maintain an open dialogue.
Managing and coaching: Here, rhetorical and leading questions are useful too. They can help get people to reflect and to commit to courses of action that you’ve suggested: “Wouldn’t it be great to gain some further qualifications?”
Avoiding misunderstandings: Use probing questions to seek clarification, particularly when the consequences are significant. And to make sure you avoid jumping to conclusions.
Diffusing a heated situation: You can calm an angry customer or colleague by using funnel questions to get them to go into more detail about their grievance. This will not only distract them from their emotions, but will often help you to identify a small practical thing that you can do, which is often enough to make them feel that they have “won” something, and no longer need to be angry.
Persuading people: No one likes to be lectured, but asking a series of open questions will help others to embrace the reasons behind your point of view. “What do you think about bringing the sales force in for half a day to have their laptops upgraded?”

Don't prove me right

2006-09-18T11:22:00.000-07:00

It seems in many cases if I imply that someones work ethtic is bad, that person goes out of their way to prove those words are true. I recently heard an analogy that depicts this phenomenon perfectly and I thought I would share it with you..

"It's like a lamb telling a wolf your mother and father were killers and having the wolf eat the lamb in protest. "

Interpersonal Communication - Active Listening

2006-09-18T06:23:00.000-07:00

Active listening will be the first of many posts on interpersonal communication based on the mind tools website. This is a very interesting area for me. To have poor interpersonal communications skills (which include active listening), your productivity will suffer simply because you do not have the tools needed to influence, persuade and negotiate – all necessary for workplace success. You can be the smartest person in the room, but if you cannot communicate nobody will benefit from this and your ability will not be utilised.

Active Listening
You must be able to listen attentively if you are to:
- perform to expectations
- avoid conflicts and misunderstandings
- succeed - in any arena.
Following are a few short tips to help you enhance your communications skills and to ensure you are an active listener:

1. Start by Understanding Your Own Communication Style
Good communication skills require a high level of self-awareness. Understanding your personal style of communicating will go a long way toward helping you to create good and lasting impressions on others. By becoming more aware of how others perceive you, you can adapt more readily to their styles of communicating. This does not mean you have to be a chameleon, changing with every personality you meet. Instead, you can make another person more comfortable with you by selecting and emphasizing certain behaviors that fit within your personality and resonate with another. In doing this, you will prepare yourself to become an active listener.

2. Be An Active Listener
People speak at 100 to 175 words per minute (WPM), but they can listen intelligently at 600 to 800 words per minute. Since only a part of our mind is paying attention, it is easy to go into mind drift - thinking about other things while listening to someone.

For each meeting you should highlight a list of points and/or questions you would like the speaker to clarify. You can either ask the speaker explicitly each of these or try answer them from what they say. This will give your listening purpose. These can be combined with the points you would like to cover yourself.

If you're finding it particularly difficult to concentrate on what someone is saying, try repeating their words mentally as they say it - this will reinforce their message and help you control mind drift.

For each word you hear (or read) try to create a mental image for it. This will greatly help you to concentrate on what the speaker has to say and greatly improve your memory.

Take notes using key-words only. Even best letter cant transcribe that fast. Use a dictiphone if possible.

Ask questions which show you have listened and understand. But don't interrupt.

Following up is key! This can be done with an email to thank and summarise the main points - the minutes.

3. Use Nonverbal Communication
Use nonverbal behaviors to raise the channel of interpersonal communication. Nonverbal communication is facial expressions like smiles, gestures, eye contact, nodding and even your posture.

This shows the person you are communicating with, that you are indeed listening actively and will prompt further communications while keeping costly, time-consuming misunderstandings at a minimum.

4. Give Feedback
Remember that what someone says and what we hear can be amazingly different! Our personal filters, assumptions, judgments, and beliefs can distort what we hear.

Repeat back or summarize to ensure that you understand.Restate what you think you heard and ask, "Have I understood you correctly?"

Confirm that you and speaker are on the same wave-length. "What I believe you just said is ZZZ; Have I understood you correctly?"

If you want the speaker to speak as much as possible use gestures to show you agree, understand and are interested:

"Right, OK, Yes, Sure, I agree, That is true, Oh really, I see, That is interesting,..
Can you clarify please, can you illustrate with an example, explain further,.."

Be emphatetic in your feedback and paraphrasing.

Feedback is a verbal communications means used to clearly demonstrate you are actively listening and to confirm the communications between you and others.

5. Jott down questions that may arise.
Resist the urge two pepper the speaker with too many questions, jott down possible questions. Many times the answer to your question may be in the message if you contine listening.

6. Take notes
Transcribe the key notes from the meeting. If possible ask the speaker for permission to use a dictiphone, 'that you can turn off at any point'!

7. Be able to 'Parrot'
Try summarise the key sections by providing:
facts, thoughts and beliefs you heard, convey underlying feelings, communicate the speakers needs and wants. This allows the user to add anything she missed or clarify any discrepancies.

To be an effective listner you need to Strike a balance between listening and responding. If you are unsure be sure to ask the seaker to 'further explain'.

Belief

2006-09-15T01:31:00.000-07:00

Maybe a little of topic here again but I thought I would share this with you. Its another interesting anecdote to help us realise we can do what we set our minds to..

How High Can You Jump?

Flea trainers have observed a predictable and strange habit of fleas while training them. Fleas are trained by putting them in a cardboard box with a top on it. The fleas will jump up and hit the top of the cardboard box over and over and over again. As you watch them jump and hit the lid, something very interesting becomes obvious. The fleas continue to jump, but they are no longer jumping high enough to hit the top. Apparently, Excedrin headache 1738 forces them to limit the height of their jump.

When you take off the lid, the fleas continue to jump, but they will not jump out of the box. They won't jump out because they can't jump out. Why? The reason is simple. They have conditioned themselves to jump just so high. Once they have conditioned themselves to jump just so high, that's all they can do!

Many times, people do the same thing. They restrict themselves and never reach their potential. Just like the fleas, they fail to jump higher, thinking they are doing all they can do.

Thiking outside the box

2006-09-15T01:13:00.000-07:00

Here are two anecdotes that exemplify how changes perceived to be failures, given the right kind of thinking, can actually present opportunities!

Post-it Notes

The 3M Company encourages creativity from its employees. The company allows its researchers to spend 15 percent of their time on any project that interests them. This attitude has brought fantastic benefits not only to the employees but to the 3M Company itself Many times, a spark of an idea turned into a successful product has boosted 3M's profits tremendously.

Some years ago, a scientist in 3M's commercial office took advantage of this 15 percent creative time. This scientist, Art Fry, came up with an idea for one of 3M's best-selling products. It seems that Art Fry dealt with a small irritation every Sunday as he sang in the church choir. After marking his pages in the hymnal with small bits of paper, the small pieces would invariably fall out all over the floor.

Suddenly, an idea struck Fry. He remembered an adhesive developed by a colleague that everyone thought was a failure because it did not stick very well. "I coated the adhesive on a paper sample," Fry recalls, "and I found that it was not only a good bookmark, but it was great for writing notes. It will stay in place as long as you want it to, and then you can remove it without damage."

Yes, Art Fry hit the jackpot. The resulting product was called Post-it! and has become one of 3M's most successful office products.

From Candles to Soap

In 1879, Procter and Gamble's best seller was candles. But the company was in trouble. Thomas Edison had invented the light bulb, and it looked as if candles would become obsolete. Their fears became reality when the market for candles plummeted since they were now sold only forspecial occasions.

The outlook appeared to be bleak for Procter and Gamble. However, at this time, it seemed that destiny played a dramatic part in pulling the struggling company from the clutches of bankruptcy. A forgetful employee at a small factory in Cincinnati forgot to turn off his machine when he went to lunch. The result? A frothing mass of lather filled with air bubbles. He almost threw the stuff away but instead decided to make it into soap. The soap floated. Thus, Ivory soap was born and became the mainstay of the Procter and Gamble Company.

Why was soap that floats such a hot item at that time? In Cincinnati, during that period, some people bathed in the Ohio River. Floating soap would never sink and consequently never got lost. So, Ivory soap became a best seller in Ohio and eventually across the country also.

Like Procter and Gamble, never give up when things go wrong or when seemingly unsurmountable problems arise. Creativity put to work can change a problem and turn it into a gold mine.

NLP - Neuro Linguistic Processing

2006-09-14T06:33:00.000-07:00

Might be straying a little of track here but I happened to have a conversation with my director yesterday regarding communication skills and how effective they are regardless of the context. He went on to mention NLP which he had found quite interesting, having heard the name before but not knowing too much about it I decided to further investigate....

NLP: Useful model of beliefs and techniques that offer a way to use the mind and body to achieve excellence in learning, business, counseling, relationships, sports and other experiences of life.

"The initial ideas of NLP were developed around 1973 by Richard Bandler, a student, and John Grinder, a professor of linguistics, in association with the social scientist Gregory Bateson. The term "Neuro-linguistic programming" denotes a set of models and principles meant to explore how mind and neurology (neuro), language patterns (linguistic), and the organization of human perception and cognition into systemic patterns (programming) interact to create subjective reality and human behaviors."

One article purports "NLP looks for patterns and one of the earliest patterns noticed in humans was a tendency for the eyes to look in a certain direction when thinking in a certain way."

One examples goes:
If you are trying to convince your teenager to clean his room and every time he
refers to his lack of interest in the subject, he looks up and to his right, he's probably constructing an image,
possibly an unpleasant image of himself cleaning his room.
If you continue telling him how nice it would feel to have the room clean,
you're not likely to get far.

You're trying to appeal to how it feels to have a solution when all he's seeing is a problem.

You're not speaking the same language representationally.

If you were to recognize this difference and tell him how nice his room would look with everything appearing neat you would have a better chance of getting some action out of him.

So essentially,
Recognizing whether someone is seeing, hearing or feeling, allows you to match the sensory system they're using and communicate with them much more easily.

The Whole Product Revisited

2006-09-11T06:32:00.000-07:00

In a previous post we discussed the 'Whole Product', a term made famous in Geoffery Moore's book, "Crossing The Chasm". This is a very important concept in sellig hi-tech products. In the following post we will look at it again with some new examples.

If you are the only person in the world with a FAX machine, it's of no use to you. Once
enough people have FAX machines and access to a telephone line, then the utility
of the FAX becomes evident.

The whole product is the FAX machine plus the telephone system.

A Whole Product has easy-to-use characteristics, easily available technical support and tutorials, and is stable with few bugs. There are lots of reference customers around, and several of the Pragmatist's direct competitors have already implemented the technology, so the Pragmatist knows the technology will work for its industry. In short, the Pragmatist organization is the home of the "It's safe because lots of other companies use it!" type of thinking.

There are many road blocks on the way to selling new high technology products. First some people tinker in a garage and come up with a product idea which they show off at their local club. If the idea seems good they get some financing and actually create a product.

The Innovators are eager to get their hands on these new gadgets but often they don't have the money to buy them so the company "seeds" them with beta product.

As soon as the Early Adopters hear about the new gadget they try to figure out if it will give their companies a lead and often they will buy the product and they are willing to put up with the extra hardship that new, untested, products bring with them.
So far so good.

The next big hurdle is to convince the Early Majority to buy the product. Here the problem is Catch 22.

The Early Majority likes to buy products that other members of the Early Majority have already bought.

The Crossing the Chasm that More refers to is the jump that needs to be made between Early Adopters and the first lot of Early Majority. He recommends the Bowling Alley approach to marketing in the hope that this will unleash a Tornado.

When that happens, the company has to change its marketing strategy once more to fit it to the current circumstances.

How to Sell to a CIO? or anyone for that matter

2006-09-07T03:03:00.000-07:00

When selling technology it is often the CIO you will have to sell to. Here are some tips on how to do this effectively..
Eric Goldfarb, CIO of recovery auditing firm PRG-Schultz International, describes the demands that executives like himself make of technology vendors these days. As he says: “Imagine making your living selling broken things and having to routinely promise features that don't exist at a price that's set independently of the value of the product or service being rendered!”

Now, he asks: “Imagine (on the other side of the table) being a CIO who is betting your company, your career and the livelihood of your staff on that product and the salesperson's promises. That's what a CIO does every day."

Many company's success depends entirely on their technology.

Here are some tips when selling:

1. “Respect the CIO’s time”:

"There are thousands of technology companies in the out there. If 5% think they have something to sell to me, they let me know either by voice mail, phone calls or in meetings. That's a lot of communications. To break through all that chatter, you need to tell a story that addresses my problems and intrigues me enough to schedule a 20-minute meeting with you. Tell me a story that shows how you address my problems, and intrigue me enough to get a 20-minute meeting. “If you can do that, I'll give you another 20 minutes and, maybe, a sale.”

2. “Put the right person at the table”:

“I'm looking for people who will listen to and understand the company's problems and the CIO's concerns. Only then can the person come up with the right ideas and solutions.”

3. “Understand that CIOs differ from salespeople”:

“We think we’re different to most salespeople. We’re analytical, not emotional - We want process, facts and figures.”
“Be insatiably curious … you should know my company’s weaknesses. Pitch your product as the best way to reduce that weakness. Your product should be a solution to existing problems. Connecting with the CIO and the company doesn't mean you'll close a sale right away. Follow up and reinforce your value proposition with voice mail, e-mail and in every subsequent meeting. This process mirrors how the CIO works. It matches the psychological profile.”

4. Differentiate with a service:

“Today's technology companies look a lot alike. They employ similar people with similar educational backgrounds; they produce similar things with similar prices and similar quality. What's different about you and your company? These days, building the best product isn't enough; it's simply the price of entry.”
“Use services to differentiate yourself from the competition. If you can sell your product along with a valuable service, you'll increase your odds of making your product sales goals.”

5. Solve, don’t sell:

“Every technology sale has five doors that must be opened in order to proceed:
need, money, urgency, desire and trust.
Once these doors are all open, then you can start being truly successful.

The key to the door of success means you're not selling a product; you're solving a problem.

Once you've identified the need, focus on making my organization better and my life easier.
“I don't expect you to know every detail in each module. Get the right resources in your own organization involved in solving my problem. The most successful salespeople can pluck the right resources out of their organization to help my company.”

6. Stand by your CIO:

“Over the course of implementing products or software, something's bound to break. The salesperson who stands by me over the years and doesn't run away at the first sign of trouble is going to be successful. John Keegan in The Masks of Command (Penguin USA, 1989) said, "The first and greatest imperative of command is to be present and in person. Those who impose risk must be seen to share it." Try mitigate the risk.
“You're not building customer satisfaction; you're building customer success. There's a difference, and the result will make us all winners.”

Some Tools to Clarify the Compelling Reason
Also, here is some tools from Moore's "Crossing the Chasm" that allows you to explain your product in a structured and concise manner to help the customer attain that Eureka factor:

Why Segment Markets? (and pick just 1 to target at a time - FoCus)

- Maximize benefit of resources... references, collateral, internal procedures and documentation (this is our biggest issue)

-Higher Critical Mass of Word Of Mouth (because if your early successes are all in different markets then those different stories don't add together - market consisting of buyers who reference each other)

-Big fish in a small pond: halo effect of 'being a winner' (this is more important in true Crossing The Chasm situations, where there is a real need for a Whole Product solution to be assembled from multiple vendors, and therefore the prospect wants to feel certain that you will have partners creating the supplemental pieces of the Whole Product)

User Scenarios
How the user's life will improve by using your product.

Header/thumbnail description of buyer

BEFORE OUR PRODUCT: day-in-the-life

scene/situation

desired outcome

attempted approach

interfering factors

economic consequences

AFTER OUR PRODUCT: day-in-the-life

new approach

enabling factors

economic rewards

Market Development Strategy Checklist
evaluate all the markets/User Scenarios you're considering targeting against this list of criteria. Outcome is to pick one as a beach-head.

showstopper issues: low score on any of these eliminates a market from consideration

Target customer: single, identifiable economic buyer for the offer. Accessible to sales channel, and sufficiently funded to pay.

Compelling reason to buy: Are the economic consequences sufficient to mandate any reasonable economic buyer to fix the problems called out in the scenario? If pragmatists can live with the problem for another year, they will.

Whole Product: Can we field a complete solution to the target customer's compelling reason to buy?

Competition: Has this problem already been addressed by another company such that they have crossed the chasm ahead of us and occupied the space we would be targetting?

-the market alternative is the company the target customer has been buying from for years - the old way of doing things

- the product alternative is another discontinuous innovation trying to solve the same problem you are (to the interfering factors), but not as well-targeted to your market segment

Partner and allies: Do we already have the relationships necessary to fulfill the whole product?

Distribution: Do we have a sales channel in place that can call on the target customer?

Pricing: Is the price of the Whole Product? consistent with the target customer's budget and the value gained by fixing the broken process? Do all the partners get compensated adequately to keep their attention and loyalty?

Our Positioning: Is the company credible as a provider of products and services to the target niche?

Next target customer: If we dominate this niche, does it have good "bowling pin"(knock on effect) potential? That is, will these customers and partners faciliate our entry into adjacent niches?

The Positioning Statement
This should drive you sales approach.

For ____ (target customers)
o

Who are dissatisfied with ___ (current market alternative),
o

Our product is a ___ (new product category)
o

That provides ___ (key problem-solving capability).
o

Unlike ___ (the product alternative),
o

We have assembled ___ (key Whole Product features to maximize fit for specific target market segment)

Value Proposition: Who it targets, What it does and How it benefits the user.

E.g. Azotel's solution targets local entrepreneurs. It allows them easily set up wireless internet services. This is done more easily and less costly than ever before.

Positioning:
“Positioning is based on the target segment you intend to dominate and the value proposition you intend to dominate it with.”

How do you know when your company has crossed the 'chasm'?

2006-09-07T02:55:00.000-07:00

So in the last chapter we learned about an important aspect of technology adoption and the necessity to cross the chasm to move into the main market of the pragmatists. Now we will look at how you know your company has crossed the chasm courtesy of TCG..

As most veterans of market development initiatives involving new technologies know only too well from the many scars they carry, such efforts usually occur in an environment devoid of sufficient or accurate market research data. Assuming for one moment that a company has fought a serious and disciplined campaign to establish a beachhead that will provide them with strong customer references and reward them with increased market ‘power’ going forward, how can they tell when they have passed the ‘tipping point’?
Here are a few of the ones that successful chasm-crossers most often see occurring:

1. Fewer customer buying decisions are indefinite or deferred, i.e., the pipeline and forecast become a more reliable indicator of actual decisions to buy;

2. Sales cycles get shorter, your win ratio goes up, and deal size and reach increase;

3. Revenue starts to grow in a predictable curve, instead of going up and down like a yo-yo;

4. Opportunities start coming to you as a result of customer references;

5. Desirable partners start gravitating to you and asking to be included in your deals;

6. Competitors start ceding the segment to you, focusing their energy elsewhere;

7. Competitors’ sales reps (and others) contact you for possible job opportunities;

8. People no longer ask you to spell the name of your company when you mention it over the phone (this is especially for startups and other young companies);

9. Analysts cover your category, and start calling you for briefings;

10. Prospects do not want to spend a lot of time on the compelling reason to buy, but instead want to focus on whether or not you have the whole product for their problem.

The Technology Adoption Life Cycle - TALC

2006-09-07T02:41:00.000-07:00

First of you must be thinking, 'what is the chasm?'. Well, the chasm is part of the Technology Adoption Lifecycle, made famous by Geoffery Moore. Making any sense? NO, ok..back to basics.
The Technology Adoption Lifecycle(TALC) aims to explain the adoption by business and individuals of high technology products, particularly those that represent a discontinuous innovation.

Innovators are people who like technology for technology's sake. They seek out
the newest products, and they are willing to use them even before they are
officially released to the market. In the Microcosm they include the beta testers
and the hackers. Companies often "seed" the innovators with free equipment.

Early Adopters also buy new products early, not for the thrill of using new
technology but because they feel that the new technology will give them and their
companies a head start over the rest of the world. Early adopters rely on the
innovators' opinions to make the purchasing decision.

Early Majority also relate well to new technology but they don't necessarily want
to be the first kid on the block to try a new toy. The early adopters are on the lookout for new products while the early majority has to be sold. If this sales effort is successful, it creates the Tornado because, once a certain percentage of early majority buys the product, they all want to buy it. The early majority cannot stand to be left behind. Ipods are in this area now.

Late Majority starts to buy when the product is well established., typically when
the product has penetrated roughly 50% of the market (you can't lose your job by
buying Windoze). All mums and Dads that were initially reluctant to get mobile phones.

Laggards don't want to buy technology, period. They buy when they have no other
choice.

The "Chasm" refers to the time lag between the early adopters and the early majority taking up the product. Many high tech companies have floundered in the chasm, just after volume starts to rise at the end of the early adoption phase. All too often, sales suddenly dry up if the early majority does not buy.

Compelling Reason to Buy

2006-09-05T09:42:00.001-07:00

With any new product or service it is very imperative that the customer identifies the compelling reason to buy, that is, the reason to use this methodology over any other to solve a particular problem.

Here is a method to identify a Clear Compelling Event -
A clear compelling event means that it is clear what the customer needs to buy, when he needs to buy it, and why.
Important to distinguish between a customer who is thinking about buying a new machine some day and a customer that has a specific need to buy a machine to perform a certain function by a specific date.

Some Review Questions

1 Why does the customer need a new machine?
2 Can his existing machines do the work?
3 What alternatives does he have rather than to buy a new
machine?
4 Is there specific project or special use for the machine?
5 If so, what dates does the project need to be started and
completed?
6 What is the planned payback for the customer on this
project?
7 What are the consequences if they do not meet the project
dates or the payback targets?
8 What date does the customer need the machine?
9 When will the “Request for Proposals” be available?
10 When are the proposals due?
11 When will the customer award a contract?
12 What will happen if he buys the machine 60 days later?
13 Are there target prices for each of the machines in the
deal?
14 How accurate are the target prices?
15 Are the target prices sufficient to purchase the machines
needed?
16 Has the customer documented any formal decision criteria
to assist them with the selection of the best machine?
17 What are the informal decision criteria at this customer?
18 Is the cost of system 10-20% of the cost of the problem it solves. Can this be proved?

Add a little anecdote

2006-09-05T09:42:00.000-07:00

Going back to the presentation post, if you are looking to make a speech more interesting and really capture listener attention with a sppech with some life, simply add an anecdote.

Here are some good anecdote resources:
http://www.bizmove.com/inspiration/m9b.htm
http://www.businesslead.com/business/anecdotes.htm
http://www.patsula.com/smallbusinessquotes/#Success

Effective Presenting

2006-09-05T08:49:00.000-07:00

The best way to present a presentation is a la David letterman. In top ten format.
"Why?" you ask..

You will listen to a lot of presenters and realise that a lot are crap, not prepared, arrogant, believe audience can read small font, they dont know what they are saying so pad slides with extra text..and so on.

By using top ten format, If I am such a bad presenter, the audience can simply subtract from ten to know when the suffering will end for them! Besides this, it makes thing concise and easy to remember...

WBS - Work Breakdown Structure

2006-09-05T05:02:00.000-07:00

Starting to write the business case for my thesis now. As now and like before any project one needs to define a WBS (work breakdown Structure) before the gantt chart to ascertain the project activities and scope. Here is a quick breakdown, no pun intended, of what is involved..

WBS - The list of tasks and subtasks defined for a project. This list is done in a hierarchical fashion, grouping sets of related tasks under a common parent task.

Purpose - to document the scope of a project.
Its hierarchical arrangement allows for easy identification of the terminal elements (the actual items to be done in a project). Being an exhaustive document of the project scope, the WBS serves as the basis (indeed, the backbone) for much of project planning. All the work to be done in a project must trace its origin from one or more WBS entries.

How to - Project management is not about performing the work, but rather more concerned about monitoring the work, so a good maxim to follow in preparing the WBS is to go to just enough detail to allow a piece of work to assigned to a resource, and then the status monitored.

An example of a work breakdown for painting a room (activity-oriented) is, to state the obvious:

1. Prepare materials

1.1Buy paint

1.2Buy a ladder

1.3 Buy brushes/rollers

1.4 Buy wallpaper remover

2 Prepare room
2.1 Remove old wallpaper
2.2 Remove detachable decorations
2.3 Cover floor with old newspapers
2.4 Cover electrical outlets/switches with tape
2.5 Cover furniture with sheets

3 Paint the room

4 Clean up the room
4.1 Dispose or store left over paint
4.2 Clean brushes/rollers
4.3 Dispose of old newspapers
4.4 Remove covers

Innovation

2006-09-04T11:58:00.000-07:00

knowing a winning..slides
buzz..newsleter...

Business Processes

2006-09-04T11:46:00.000-07:00

So, we have all heard of it but find it hard to explain it...let alone give examples..
A collection of related, structured activities--a chain of events--that produce a specific service or product for a particular customer or customers.

Characteristics of a Business Process:
Business processes can be clearly defined, documented, taught, and improved based on “lessons learned.”

• defines “how we do it around here.”
• is useful for training employees
• Performance of the business process can be measured
• When things go wrong, the “lessons learned” as a result of failure analysis can be used to improve the process - This is how organizational knowledge is accumulated and refined.

Operations Business Processes:
1. Receive customer order request (pull signal)
2. Schedule / confirm materials availability
3. Schedule / confirm labor and equipment availability
4. Confirm delivery dates and quantities to customer
5. Receive all materials
7. Fabricate parts / Prepare for event
8. Assemble, test, package, and ship / Deliver services
9. Invoice customer
10.Receive payment

Sales Process: (example for Capital Equipment)
P. Qualify potential new customers
1. Known need and willing to buy our brand
2. Clear compelling event established
3. Preliminary quotation at the customer
4. Good mentors established
5. Funding confirmed
6. Contract negotiations
7. Salesman reports that the deal is acceptable
8. Verbal contract approval from the customer
9. Order is at headquarters
10. Order is accepted at headquarters
11. Machine is shipped
12. Customer satisfaction survey is completed

Measurement managed organisations work

2006-09-04T11:27:00.000-07:00

“Is Measurement Worth It?”
Adapted from Balanced Scorecard: Step-by-Step by Paul Niven, 2002

Measure of Success | Measurement Managed Organizations | Non-Measurement Managed Organizations

Performance Management Items:
Industry leader over past three years |74% | 44%
Financially ranked in top 3rd of their industry | 83% | 52%
Success in last major change effort |97% | 55%
Culture Items:
Agreement on strategy |93% | 37%
Communication of strategy |60% | 8%
Information shared openly and candidly |71% | 30%

__________________________________________________________
So, Why do managed organisations work?

Three universal truths:
• Every human being wants to be treated with dignity and respect,
every single day. . .
. . . {Engaged in reviews vs. ignored}

• People want to make a contribution with what they do, they want
their lives to have meaning. . .
. . . {Tools build capacity, human capital}

• All people want someone to notice what they do. . .
. . . {Accountability for performance measures}

_______________________________________________________

Hindsights - Some more wisdom from Guy Kawasaki

2006-08-24T07:28:00.000-07:00

I read through a speech a Guy Kawasaki gave at Palo Alto High School Baccalaureate Speech 6/11/95 called “Hindsights”. It was him looking back and wishing he knew then what he knew now. Below I have taken some excerpts and summarised some of his messages.

"I am going to talk about hindsights today. Hindsights that I’ve accumulated in the 20 years from where you are to where I am. Don’t blindly believe me. Don’t take what I say as “truth.” Just listen. Perhaps my experience can help you out a tiny bit."

#10: Live off your parents as long as possible.

"You are going to work the rest of your lives, so don’t be in a rush to
start....
Delay, as long as possible, the inevitable entry into the workplace and a
lifetime of servitude to bozos who know less than you do, but who make
more money. "

#9 Pursue joy, not happiness.
This is probably the hardest lesson of all to learn. It probably seems to
you that the goal in life is to be “happy.” - happiness should be
predictable. Nice house. Nice car. Nice material things.
Take my word for it, happiness is temporary and fleeting.
Joy, by contrast,is unpredictable. It comes from pursuing interests and passions that do not
obviously result in happiness.
Pursuing joy, not happiness will translate into one thing over the next
few years for you: Study what you love. I think only one person on the original Macintosh team had a
classic “computer science” degree.

You parents have a responsibility in this area. Don’t force your kids to
follow in your footsteps or to live your dreams.

My father was a senator in Hawaii. His dream was to be a lawyer, but he only had a high school
education. He wanted me to be a lawyer.
For him, I went to law school. For me, I quit after two weeks. I view
this a terrific validation of my inherent intelligence.

#8: Challenge the known and embrace the unknown.

One of the biggest mistakes you can make in life is to accept the known
and resist the unknown.

You should, in fact, do exactly the opposite:
challenge the known and embrace the unknown.
Let me tell you a short story about ice. In the late 1800s there was a
thriving ice industry in the Northeast. Companies would cut blocks of ice
from frozen lakes and ponds and sell them around the world. The largest
single shipment was 200 tons that was shipped to India. 100 tons got
there un-melted, but this was enough to make a profit.
- These ice harvesters, however, were put out of business by companies that
invented mechanical ice makers. It was no longer necessary to cut and
ship ice because companies could make it in any city during any season.
- These ice makers, however, were put out of business by refrigerator
companies. If it was convenient to make ice at a manufacturing plant,
imagine how much better it was to make ice and create cold storage in
everyone’s home.
- You would think that the ice harvesters would see the advantages of ice
making and adopt this technology. However, all they could think about was
the known: better saws, better storage, better transportation.
- Then you would think that the ice makers would see the advantages of
refrigerators and adopt this technology. The truth is that the ice
harvesters couldn’t embrace the unknown and jump their curve to the next
curve.
Challenge the known and embrace the unknown, or you’ll be like the ice
harvester and ice makers.

#7: Learn to speak a foreign language, play a musical instrument, and
play non-contact sports.

#6: Continue to learn.
Learning is a process not an event. I thought learning would be over when
I got my degree. It’s not true. You should never stop learning. Indeed, it
gets easier to learn once you’re out of school because it’s easier to see
the relevance of why you need to learn.
In university you’re learning in a structured, dedicated environment right now.
You can also learn a tremendous amount without school.

#5: Learn to like yourself or change yourself until you can like
yourself.
I know a forty year old woman who was a drug addict. She is a mother of
three. She traced the start of her drug addiction to smoking dope in high
school.
This woman told me that she started taking drugs because she hated herself
when she was sober. She did not like drugs so much as much as she hated
herself. Drugs were not the cause though she thought they were the
solution.
She turned her life around only after she realized that she was in a
downward spiral. Fix your problem. Fix your life. Then you won’t need to
take drugs. Drugs are neither the solution nor the problem.

#4: Don’t get married too soon.
I got married when I was 32. That’s about the right age. Until you’re about
that age, you may not know who you are. You also may not know who you’re
marrying.
I don’t know one person who got married too late. I know many people who
got married too young. If you do decide to get married, just keep in mind
that you need to accept the person for what he or she is right now.

#3: Play to win and win to play.
Playing to win is one of the finest things you can do. It enables you to
fulfill your potential. It enables you to improve the world and,
conveniently, develop high expectations for everyone else too.
And what if you lose? Just make sure you lose while trying something
grand. Avinash Dixit, an economics professor at Princeton, and Barry
Nalebuff, an economics and management professor at the Yale School of
Organization and Management, say it this way:
“If you are going to fail, you might as well fail at a difficult task.
Failure causes others to downgrade their expectations of you in the
future. The seriousness of this problem depends on what you attempt.”
In its purest form, winning becomes a means, not an end, to improve
yourself and your competition.
Winning is also a means to play again. The unexamined life may not be
worth living, but the unlived life is not worth examining. The rewards of
winning—money, power, satisfaction, and self-confidence—should not be
squandered.
Thus, in addition to playing to win, you have a second, more important
obligation: To compete again to the depth and breadth and height that
your soul can reach. Ultimately, your greatest competition is yourself.

#2: Obey the absolutes.
Playing to win, however, does not mean playing dirty. As you grow older
and older, you will find that things change from absolute to relative. When
you were very young, it was absolutely wrong to lie, cheat, or steal. As
you get older, and particularly when you enter the workforce, you will be
tempted by the “system” to think in relative terms. “I made more money.”
“I have a nicer car.” “I went on a better vacation.”
Worse, “I didn’t cheat as much on my taxes as my partner.” “I just have a
few drinks. I don’t take cocaine.” “I don’t pad my expense reports as
much as others.”
This is completely wrong. Preserve and obey the absolutes as much as you
can. If you never lie, cheat, or steal, you will never have to remember
who you lied to, how you cheated, and what you stole.
There absolutely are absolute rights and wrongs.

#1: Enjoy your family and friends before they are gone.
This is the most important hindsight. It doesn’t need much explanation.
I’ll just repeat it: Enjoy your family and friends before they are gone.
Nothing-not money, power, or fame-can replace your family and friends or
bring them back once they are gone. Our greatest joy has been our baby,
and I predict that children will bring you the greatest joy in your
lives—especially if they graduate from college in four years.
And now, I’m going to give you one extra hindsight because I’ve probably
cost your parents thousands of dollars today. It’s something that I hate
to admit too.
By and large, the older you get, the more you’re going to realize that
your parents were right. More and more—until finally, you become your
parents. I know you’re all saying, “Yeah, right.” Mark my words.
Remember these ten things: if just one of them helps you helps just
one of you, this speech will have been a success:
#10: Live off your parents as long as possible.
#9 Pursue joy, not happiness.
#8: Challenge the known and embrace the unknown.
#7: Learn to speak a foreign language, play a musical instrument, and
play non-contact sports.
#6: Continue to learn.
#5: Learn to like yourself or change yourself until you can like yourself.
#4: Don’t get married too soon.
#3: Play to win and win to play.
#2: Obey the absolutes.
#1: Enjoy your family and friends before they are gone.

Why Read?

2006-08-24T03:12:00.000-07:00

To re-iterate the title with some expletives. Why the f#ck read? It takes up alot of valuable time that could be spent learning something.
After watching Guy Kawalaski's video (link in previous post) where he creatively illustrates the chief principles of his book, incidentelly the one recommended for last years ICT Business Opportunities course that I never got time to read!!, I realised that the 45 minutes I spent listening and watching that video would have commensurated to reading the preface and maybe half way throught the second chapter time wise. But in terms of learning it was worth 3 ingeminations of the book.
It gives so much more to get it not only summarised with concise examples but also straight from the horses mouth.
I'm sure Guy would have loved to write a 30 page book on his 11 main principles. But a 30 page book doesn't sell. Infact it's not even a book its a pamphlet to most people!

I'm currently reading a book on grammar, yes a book! Its called 'Eats, shoots and leaves'. Why grammar guidlines can't be put in bullet point form in a nice concise 15 page "pamhlet" I'll never know. Instead I'm forced to read 200+ pages filled with irrelavent info and silly anecdotes so that Lynne Truss can charge a book price!
Less is more, books bore! Video is the dillio!

The Art of The Start

2006-08-23T05:47:00.000-07:00

Watched Guy Kawasaki, former Apple employee and author of "The Art of The Start" today. Very funny guy and great speaker with some great words to say about Entrepreneurship and Intrapreneurship, check it out here:
http://video.google.com/videoplay?docid=-3755718939216161559&q=label%3Aentrepreneurship
Here is a summary of his 10 main points on Entrepreneurship:

1# If you truly want to be a successful entrepreneur or to change the world your reason to start a business must be: TO CREATE MEANING NOT CREATE MONEY
How does one create meaning?
- Increase the quality of life (e.g. Apple: allow users be creative, save time, ...)
- Right a wrong (e.g. Apple: MS-DOS was wrong, needed to be done right!)
- Prevent the end of somethging good

Helps you to attract the right people who are not focused on money solely.

2# Create a Mantra for your employees - Why do you (employees) exist?
Example of a wrong 'Mission Statement for employess' - Wendys Fast food chain:
"The mission of Wendys is to deliver superior quality products and services for our customer and communities through leadership, innovation and partnership"
- Very generic (see Dilbert's mission statement generator http://www.dilbert.com/comics/dilbert/games/career/bin/ms.cgi)
- employees won't recall or strive for this
Wendy's should be changed to "Healthy fast food" - Encapsulated what they do and strive for.

FedEx - "Peace of Mind"
Nike - "Authentic Athletic Performance"

3# Get Going!
Not so much research, no focus group, just get going...
1. Think Different - Don't do better sameness!
2. Polarize People - Create a product/service that wont appeal to all. Will end up mediocre!
3. Find a few soul mates - Steve Jobs : Paul Allen, Bill Gates : Steve Balmer -> need some one to compliment yourself, balance yourself off -> marketing: engineering, visionary: operational

4# Develop a Business Model
1. Specificity - Who is my customer & how do I get my money out of her purse? "It's my money in her purse"
2. Keep it Simple - Do not innovate business models. Keep them simple. Innovate the technology and processes..

5# Weave a MAT( Milestones, Assumptions, Tasks)
When starting a company it is like the first skiier down the slope. Its a wonderful experience but need focus and direction.
1. Milestones: "Finishing Design", what you would call your spouse and tell her!
2. Assumptions: What are the number of customers you can call per day, what is the customer ROI, how does it coast to install our software - write them and test them.
3. Tasks - Help you reach milestones, help you test assumptions. "Rent an office" etc..

6# Niche yourself
Holy Grail of Marketing: Need to create value for the customer and be unique.

7# 10: 20: 30 rule
When pitching to a venture capitalist they hear a lot of pitches daily:

10 slides - no more than ten slides. Don't bore the audience KISS principle.

20 minutes - If given an hour make the presentation for 20 minutes. Allow for unexpected occurences. Don't bore. Allow alot of question time.

30 pt font - should be the smallest font on the Power point slides. Makes it easy to read, reduces the amount of text you can add so you have to know your slides and not read them.

8# Hire infected people
1. Regardless of background hire those interested in product. Guy was himself in jewlery business when hired but loved mac.
2. Hire people better than yourself. A people hire A+ people. B people hire C people. C people hire D people...

9# Lessen barriers to adoption?
1. Flatten the learning curve. Make it easier to 'plug and play'. - How many people can change the clock on the VCR?
2. Don't require eople to do anything you yourself wouldnt.
- fill out 65 text fields to sign-up.
3. Embrace evangelists
- reward those people who will bring your message to the world

10# Seed the clouds
1. Let 100 flowers blossom - If non intended users buy your product let it be. It may lead to product differentiation or a new product.
2. Enable Test Drives - Let people try out the products in trial versions. Show they are smart and you trust them.
3.Lower level influence. Don't always look to the CxO when trying to push the product. The higher up, the thinner the air. Get real influencers, tech. support, secetaries (post-its!),..

#11. Don't listen to the Bozos.
"I Think there is a market for maybe 5 computers in the world" Thomas watson, Chairman IBM, 1943

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." Western Union Internal memo, 1876

"There is no reason why anyone would want a computer in their home" Ken Olsen, Founder, Digital Equipment Corp. 1977

What is Strategy?

2006-08-18T05:42:00.000-07:00

Competitive moves & business approaches to produce successful performance
or
Management’s “Game Plan” for

Running the business
Strengthening firm’s competitive position
Satisfying customers
Achieving performance targets

TBC..

Economies of Scope

2006-08-18T01:29:00.000-07:00

Economies of scope are one of the main reasons for such marketing strategies as product bundling, product lining, and family branding. The situation that arises when the cost of performing multiple business functions simultaneously proves more efficient than performing each business function independently. A case of synergy.

Often, as the number of products promoted is increased and broader media used, more people can be reached with each dollar spent. This is one example of economies of scope. These efficiencies do not last, however, at some point, additional advertising expenditure on new products will start to be less effective (an example of diseconomies of scope).

The affect of an economy of scope is to increase the efficiency of production as a result of increasing the number of different but related products offered.

If a sales force is selling several products they can often do so more efficiently than if they are selling only one product. The cost of their travel time is distributed over a greater revenue base, so cost efficiency improves. There can also be synergies between products such that offering a complete range of products gives the consumer a more desirable product offering than a single product would. Economies of scope can also operate through distribution efficiencies. It can be more efficient to ship a range of products to any given location than to ship a single type of product to that location.

For example, since jet fuel, gasoline, heating oil, lubricating oil and so forth are all constituents of petroleum that are gotten by "cracking" the petroleum into the separate constituents of its mixture, there is an economy of scope in operating a refinery. It is obviously better to produce all of these products jointly than to try to produce them separately.

For example, McDonalds can produce both hamburgers and French fries at a lower average cost than what it would cost two separate firms to produce the same goods. This is because McDonalds hamburgers and French fries share the use of food storage, preparation facilities, and so forth during production.

Another example is a company such as Proctor & Gamble, which produces hundreds of products from razors to toothpaste. They can afford to hire expensive graphic designers and marketing experts who will use their skills across the product lines. Because the costs are spread out, this lowers the average total cost of production for each product.

The Practical Vs. The Visionary Entrepreneur

2006-08-18T01:26:00.000-07:00

There are two types of entrepreneurs in this world, visionary and practical.
The visionary entrepreneur has a grand vision for a product. They most likely found this vision while climbing in Huascaran National Park (Peru) or shopping in Calcutta. This type of entrepreneur needs no advice other than follow the dream. They'll doggedly chase it until they succeed or they end up in the gutter.

The practical entrepreneur is a much different beast. Most likely you know you want to do "something". You long to be your own boss and determine your own fate, but you don't have a grand vision to pursue. Instead, your looking to put your skills to work in a project that has a good chance at success. Millions would be great, but replacing your salary is just as appealing at least as a first step.

A lot of people out there have the talent to succeed, not many if not no good ideas.

If you fit this criteria, the 4 rules will assit you in figuring out a focus for a new venture.

1. Fragmented Market

This is my most critical factor and something I almost never see discussed anywhere else. A fragmented market is the practical entrepreneurs best friend. It's simple the most important thing to look for in your market research.

A fragmented market is one where:
- there are lots of small to mid size companies and where even the big players have stiff competition.
- There should be no dominant company.
- No company should have a double digit percentage of the market or at worst low double digits.

No need to create markets
The reason this is the most critical factor is because of what it represents. First, it indicates that there are customers for this type of product. If you want to give yourself the best chance to succeed you need to enter a market where there are already customers looking for a solution.

You don't want to have to spend a lot of time and money explaining to potential customers why they need a solution for problem X. You want a market where they already know they have a problem and are looking for solutions.

Creating markets is the province of the visionary entrepreneur not the practical one.

No best = No one to compare to
Second, while there is lots of competition there is no competitor who is dominant. There is no competitor who you will always be compared against and have to stand up to. For example, building a piece of presentation software means you will always be compared to PowerPoint, building an image editor means going up against Photoshop, building a search engine means being compared with Google. These comparisons put you in a severe disadvantage. Those are dominant companies with dominant positions in the market.

Potential customers already have a clear idea in their head about what those products do and why they're the best which means you'll need to do a lot more work to explain why yours is better/different.

A rising tide helps all ships
Third, lots of other companies talking about the market and advertising in the market helps you. It creates awareness for potential customers all without you having to spend a cent. A rising tide raises all ships, etc.

Best of breed
Finally, in a varied market there's sure to be several companies which you compare very favorably against. Hence, you become a best of breed product when compared to these lesser alternatives. Since there's no obvious product to choose, potential customers will end up taking a somewhat random sampling of the market and you'll have a better chance at being seen as a best of breed option when compared to a random set of alternatives.

2. Business Before Consumer
In general, I would lean towards a B2B (Business to business) model over B2C. Primarily because I think early success is easier in a B2B market. When selling to businesses :

- you're free to charge more for your product this means you need to attract less potential customers early on to start being profitable.

- Business customers also have more opportunity for future growth. For example if a business buys 5 licenses to your product and in 6 months they've expanded their operations and now need 5 more these additional 5 licenses cost you exactly $0 to acquire and are pure profit.

These scenarios are very common in business and much less common in consumer products.

- Consumer products are also much more dependent on "being a hit". If you make a utility that sells for $20 then you need to sell at least 4000 licenses to cover your previous $80,000 year salary. While not a huge number it's still 4000 individuals you need to reach and convert. There's also little chance of hitting a home run by finding someone who wants 500 licenses at once, which is very possible in a corporate scenario.

3. Clear and Simple Revenue Model
You should be able to explain your revenue model in a sentence. "We're going to sell per seat licenses for $100 a seat and a 15% yearly maintenance fee". If the product you're researching would require special pricing then you need to avoid that market. Micro-transactions and the like are the domain of the visionary not the practical.

Beyond just being simple to explain you should have a complete understanding of how you would sell the product and your gross margins before you write one line of code. If it's unclear what approximate price you could charge or what your costs would be in this market then it's not a good market to enter. It doesn't have to be down to the dollar but you should know if you can charge $50 a person or $150.

Pricing Transparency
Clear and simple revenue models can also provide a competitive advantage over your competition. Older companies tend to have their pricing "evolve" over time into multiple tiers often separated by versions with unclear definitions like "pro" vs "enterprise". Making your pricing simpler to understand means customers can figure out your pricing at a glance rather than using a calculator and reading 5 pages of marketing hype to figure out the differences between versions. That's a lot of extra work for the consumer and we all know how people feel about extra work.

4. Dog Food

When you're a small shop there's not a lot of time for all the functions you need to perform. There's programming, marketing, testing,PR, and so on. One part that often gets left out is product research. Not just does the product work, but how can it be better. What features would make the experience of using this product superior. When your time is tight, avoiding these issues is an easy way to free up more time.

Eat your own dog food
One way to help ensure that at least some of this gets done is to make sure you build a product you'll actually use on a daily basis ("eat your own dog food"). This way there's at least some time built right in to your normal day. What features frustrate you, where could you do something better. Because you're getting the true customer experience you'll gain more insight into the product than if you just sat down and brainstormed about a product you don't use yourself.

Articulate Speaking

2006-08-17T01:59:00.000-07:00

Had a meeting yesterday in which I had to deliver my conclusion on whether a client should move into the Scandinavian market. I was against, while another consultant who was set to benefit from any such move was in favour. Knowing I had the better arguments but unable to fully convince our client, it came down to an inability to out articulate Mr.Consultants ardour...
Effective articulation is to knowledge as an engine is to petrol.

The Articulate Executive in Action

"If you are reasonably good at what you do, clearly articulate your ideas to all audiences, and know how to deliver your message so that people remember it and act on it, you can call yourself a leader," declares the author.

"Add integrity, courage, commitment, and vision, and you can call yourself a worthy leader."

You may think you're managing. But if you're merely managing, without articulating your vision, the inevitable consequence is "a strong bias toward the middle," or mediocrity. That's "the first step toward losing the game," cautions Toogood.

"High octane for the fast track," is CVA, or communications value added.

"If a leader with good business sense and a great idea or a solid sense of direction can talk the talk, that company will prosper."

Seven principles of CVA, include the diktat,

never bore such as, by making your presentation sink into "a stifling cloud of white noise that effectively turns everybody off."

More than before "always leave people with more when they walk out than when they walked in."

What you know "Importantly, speak only about what you know, tell stories, and be ready!Don't sound uninformed, out of your depth"

Then comes the POWER formula to help you step on the gas:

Punch, One theme, Window, Ear, and Retention. `

Punch - is achieved by strong statement that comes right at the start, rhetorical question, quotes, projection into the future, humour and so on.

One Theme - Stick to `one' message, though you may discuss it in many ways.

Window - is about `specific examples, illustrations, and anecdotes to provide proof'.

Ear - You lose the `ear', if you don't stay conversational and begin `speechifying.'

Retention - requires you to summarise key points, looping back to beginning, or asking audience to do something specific.

Not being competent with language is the 50 per cent problem' because, with such a liability, "you're not likely to connect, no matter how smart you are."

The answer to the quandary is "to look, act, and sound like a leader in all your communications."

___________________________________________________________________

The Lost Art of the Great Speech: How to Write One; How to Deliver It

Dowis devotes several chapters to rhetorical devices that can lift a speech from the respectable to the eloquent. To illustrate how rhetoric can immortalize ideas, he uses the following quotations from speeches by famous Americans:

We pause to ask what our country has done for each of us and to ask ourselves what we can do for our country in return.
--Justice Oliver Wendell Holmes, May 30, 1884

In the great fulfillment, we must have a citizenship less concerned with what the government can do for it and more anxious about what it can do for the nation.
--Warren G. Harding, Republican national convention, June 7, 1916

And so, my fellow Americans, ask not what your country can do for you. Ask what you can do for your country.
--John F. Kennedy, Inaugural Address, January 20, 1961

Here are some suggestions from for making your speech successful.

1. Recognize the advantages of using a written speech: It helps to ensure that you will not ramble, that you will meet your time constraints, and that you will include important points with smooth transitions between them.

2. Limit your speech to a few main points. "The more ideas you pack into your speech, the less attention any single idea will get."

3. To achieve a sense of balance that is pleasing to the ear -- and often memorable -- express related thoughts in a group of three with each element of the triad having the same grammatical form and perhaps having repeated sounds.

4. Use simple, concrete, direct language: vivid nouns and strong verbs.

5. Keep your tone conversational with personal references, when they are appropriate, and contractions.

6. If you use humor, use it sparingly, and be sure that it relates to the point you are making. Do not use humor that could possibly offend anyone in your audience.

7. Mark the final copy of your speech for delivery, not for publication. Double space it with large type, short lines, and unbroken phrases. Use only the upper half of an 8 1/2- by 11-inch sheet so that it will be easier for you to look from your script to your audience.

8. Use pauses for dramatic effect, for emphasis, and as a transition. Think of pauses as the oral equivalent of punctuation marks and typographical devices. If a comma represents a short pause, a new heading warrants a long one. If your pauses seem too long, they are probably about right.

9. After you have practiced delivering your speech, record it -- on videotape if possible. Examine all aspects of your speech, including body language, for ways to improve your delivery.

10. Prepare an audio tape of your speech after you have practiced your delivery. Listen to it at least once a day to become more familiar with your speech.

Strategic Management Self Study

2006-08-15T07:02:00.000-07:00

http://www.csuchico.edu/mgmt/strategy/

Principal of Competitive markets

2006-08-15T06:58:00.000-07:00

The higher a company’s costs are above those of close rivals, the more competitively vulnerable it becomes!

Core Competencies

2006-08-15T06:47:00.000-07:00

A core competency is something a company does especially well in comparison to its competitors!

Some examples:
* Superior skills in producing high quality product
* Superior system for delivering customer orders accurately & swiftly
* Better after-sale service capability
* More skill in achieving low operating costs
* Unique formula for selecting good retail locations
* Unusual innovativeness in developing new products
* Better merchandising & product display skills
* Superior mastery of an important technology
* Unusually effective sales force

A CORE COMPETENCE is important because of
o Added capability it gives firm
o Competitive edge it can yield
o Potential for it being a cornerstone of strategy

COMPETITIVE ADVANTAGE is easier to build when
o Firm has a CORE COMPETENCE
o Rival firms do not have offsetting competencies
o It’s costly & time-consuming for rivals to match competency

OPPORTUNITIES (from SWOT) most relevant to a firm are factors in EXTERNAL environment offering

* Some kind of competitive advantage
* Important avenues for growth

External factors posing a THREAT to firm

* Emergence of cheaper technologies
* Introduction of new/better products by rivals
* Entry of low-cost foreign competitors
* New regulations
* Vulnerability to rise in interest rates
* Potential of hostile takeover
* Unfavorable demographic shifts
* Adverse shifts in foreign exchange rates
* Political upheaval in a country

Role of SWOT analysis
SWOT analysis helps answer key questions

* Does firm have internal strengths an attractive strategy can be built on?
* Which weaknesses does strategy need to correct?
* Do firm’s weaknesses disqualify it from pursuing certain opportunities?
* Which opportunities does firm have resources to pursue with a chance of success?
* What threats should firm worry most about?

DECIDING WHAT THE STRATEGIC ISSUES ARE<

2006-08-15T06:26:00.000-07:00

Having thorough understanding of the strategic issues a company faces is a precondition for effective strategy-making.
Until strategists have a clear fix on the issues, they are NOT ready to craft a strategy!

* Is present strategy adequate in light of driving forces in industry & geared to industry’s FUTURE key success factors?
* How good a defense does present strategy offer against the five competitive forces?
* Does present strategy adequately protect firm against external threats & internal weaknesses?
* Is firm vulnerable to competitive attack by rivals?
* Does firm have a competitive advantage or must it work to offset competitive disadvantage?
* Where are strong/weak spots in present strategy?

Competitive Position Evaluation

2006-08-14T09:23:00.000-07:00

"Competitiveness entails concentrating resources on those activities where the company
can gain dominating expertise to serve its target customers"

A competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors:

* Reveals strength of firm’s competitive position
* Shows how firm stacks up against rivals
* Indicates whether firm is at a competitive advantage/disadvantage against each rival
* Provides insight into how firm can build its strategy on its competitive strengths
* Provides insight into how firm can make strategic moves to alleviate its competitive weaknesses

One common and useful technique is constructing a competitor array. The steps include:

* define your industry - scope and nature of the industry
* determine who your competitors are
* determine who your customers are and what benefits they expect
* determine what the key success factors are in your industry
* rank the key success factors by giving each one a weighting - The sum of all the weightings must add up to one.
* rate each competitor on each of the key success factors - this can best be displayed on a two dimensional matrix - competitors along the top and key success factors down the side.
* multiply each cell in the matrix by the factor weighting.
* sum columns for a weighted assessment of the overall strength of each competitor relative to each other.

An example of a competitor array follows:

Based on material presented in "Beat the Competition: How to Use Competitive Intelligence to Develop Winning Business Strategies", Ian Gordon, Basil Blackwell Publishers, Oxford, UK, 1989.

Some Key performance indicators would be:
- product innovation ability
- distribution networks
- customer focus

Competitive strengths and competitive advantages empower a company to improve its long-term market position!

The Value Chain

2006-08-14T08:49:00.000-07:00

* A VALUE CHAIN consists of two major types of activities

* PRIMARY ACTIVITIES that create value for customers
* RELATED SUPPORT ACTIVITIES

* Costs of performing each value chain activity can be DRIVEN UP or DOWN by two types of factors

Structural cost drivers
* Scale economies
* Experience curve effects
* Technology requirements
* Capital intensity
* Complexity of product line

Executional cost drivers
* Commitment of work force to continuous improvement
* Attitudes & capabilities regarding quality
* Cycle time in getting new products to market
* Utilization of existing capacity
* Whether internal business processes are efficiently designed & executed
* How efficiently firm works with suppliers and/or customers to reduce costs

Keys to understanding a company's cost structure
* Whether firm is trying to achieve a competitive advantage based on
o Lower costs or
o Differentiation
* How costs in one value chain activity spill over to affect costs of others
* Whether linkages among activities in value chain present opportunities for cost reduction

The value chain system

* COST COMPETITIVENESS depends on
o Costs of internally performed activities
o Costs in value chains of suppliers & forward channel allies

* Assessing firm’s COMPETITIVENESS requires knowledge of value chain system
o Firm’s own value chain
o Value chains of suppliers
o Value chains of forward channel allies

SUPPLIERS’ value chains matter
o Suppliers incur costs in creating & delivering inputs used in firm’s value chain
o Cost & quality of inputs influence firm’s cost and/or differentiation capabilities

FORWARD CHANNEL value chains matter
o Costs & margins of downstream firms are part of price paid by ultimate end-user
o Activities channel allies perform affect satisfaction of end-user

Example value chain activities:
Timber farming > Logging > Pulp mills > Papermaking > Printing & publishing > PULP & PAPER INDUSTRY

Benchamarking
* Benchmarking performance of a firm’s activities against rivals & best practice firms provides evidence of firm’s cost competitiveness
* Benchmarking is an excellent tool to determine
o If costs are in line with competitors
o Which business processes need to be scrutinized for improvement
o Which firms perform a given activity best

Focuses on CROSS-COMPANY comparisons of how well activities are performed

* Purchase of materials
* Payment of suppliers
* Management of inventories
* Training of employees
* Processing of payrolls
* Getting new products to market
* Performance of quality control
* Filling & shipping of customer orders

KEY POINT: A firm’s COMPETITIVENESS depends on how well it manages its VALUE CHAIN relative to competitors

Three areas in firm’s value chain contributes to cost differences compared to rivals

* 1. SUPPLIERS’ activities
* 2. Firm’s INTERNAL activities
* 3. FORWARD channel activities

Correcting supplier related cost disadvantage
* Negotiate more favorable prices with suppliers
* Work with suppliers to help them achieve lower costs
* Integrate backward
* Use lower-priced substitute inputs
* Do a better job of managing linkages between suppliers’ value chains & firm’s own chain
* Try to make up difference by initiating cost savings in other areas of value chain

Correcting forward channel cost disadvantage
* Push for more favorable terms with distributors & other forward channel allies
* Work closely with forward channel allies & customers to identify win-win opportunities to reduce costs
* Change to a more economical distribution strategy
* Try to make up difference by initiating cost savings earlier in value chain

Correcting Internal cost disadvantages
* Initiate internal budget reductions
* Re-engineer business processes to do better job of managing executional cost drivers
* Try to eliminate some cost-producing activities by revamping value chain system
* Relocate high-cost activities to lower-cost geographic areas
* See if certain activities can be outsourced or performed cheaper by contractors
* Invest in cost-saving technological improvements
* Innovate around troublesome cost components
* Simplify product design to achieve cost reduction
* Try to make up difference by achieving savings in other areas of value chain system

KEY POINT: Value chain analysis is a powerful managerial tool for identifying which activities have COMPETITIVE ADVANTAGE potential

Competitive Edge is based on ability to:
* Perform competitively crucial activities along value chain better than rivals
Diagnosing competitive capabilities involves
* Construct a value chain of firm’s activities
* Examine linkages among internally performed activities & linkages with suppliers’ & customers’ chains
* Identify activities & competencies critical to customer satisfaction & market success
* Make appropriate internal & external benchmarking comparisons to determine
o How well firm performs activities
o How cost structure compares with rivals

The Opportunity Assesment Framework

2006-08-14T03:46:00.000-07:00

Here is a framework I developed last year for one of the entrepreneurship classes. We used this to evaluate the potential of triple play services over WiMax as a new business concept.

1. What is The Idea
1.1 What are the market opportunities and what the solution might be? What makes it particularly compelling?
1.2 Do you have personal experiences with this market area?
1.3 Is there existing intellectual property that you must license or new intellectual property you must develop?
1.4 Has anyone tried something like this before?
1.5 Previous developments in this area
2. The Opportunity
2.1 Opportunity Recognition:
2.1.1 Trends
2.1.2 High Speed Internet (Broadband)
2.1.3 IPTV
2.1.4 Telephone services (VOIP)
2.2 IPTV Projections
2.3 Wireless
3. The Market Space
3.1 Positioning
3.2 Emerging Markets
3.3 Competitive analysis
3.3.1Relative cost
3.3.2 Service
3.3.3 Name recognition
3.3.4 Features
3.4 Possible market entrants:
3.4.1 Differentatiation Strategy
3.4.2 Cost Leadership Strategy
3.5 Competitive advantage matrix
3.6 Barriers to entry for competitors
3.6.1 Challenges posed by Wireless triple play services:
3.6.2 Custom built DRG
4. The Customer Space
4.1 Target Market:
4.2 What the customer needs
4.3 Why does the customer need it
4.4 Benefits of WiMAX
4.5 What is customer using today?
4.6 How the customers will be reached
4.7 Market Segment
5. Partners and Allies
6. Business Model
6.1 Revenue Model
6.2 Distribution Model
6.3 Production Model
7. Risk Analysis
7.1 Risk Summary
7.1.1 Financial Risk
7.1.2 Technological Risk
8. References
9. Appendix
9.1 Analyzing Emerging Markets: Lithuania
9.2 Number of subscribers per package
9.3 Revenue per package per year
9.4 Anticipated Growth
9.5 Sample Scenario Conclusions

Technological oriented versus customer oriented

2006-08-09T02:28:00.000-07:00

A common mistake made by many companies in the IT industry is that they rely too much on their products 'bells and whistles' to try and entice the customer.
How many of those bright and funny symboled buttons do you use on your TV remote?
How much of the functionality do you use in word? It has far more features than the average user will ever need. Do you know there is a function that lets you type about foxes and lazy dogs multiple times?
TRY THIS:

Open a new Word document and type (or copy and paste) the following:

_ rand(200,99)

Press Enter and wait 3 seconds...

here _ is the 'equals sign' its just the blog wont allow it
make sure you enter the actual 'equals sign'

This product "innovation" is meant to keep them on top!? If you ask me if they focused on innovating in respect to what the customer wants and not what their geeks think would be 'cool' functionality they'd be a lot more succesful. Many comapnies make this tradgic mistake: betamax as we saw earlier, ericsson mobiles (for a while), microsoft SQL is on the way there.
Its the health industry equivalent of booking an appointment for your family doctor. Upon entering and taking a chair and proceeding to tell him you ailment he interrupts with
"wait till you see the cool new drug I have for you to try out!".

How to evaluate a market opportunity

2006-07-31T06:19:00.000-07:00

Here is a framework I have been developing over the past year to help identify a possible market opportunity and its potential.

General Market Overview

Country Profile

Geographical Location

Economic Situation

Industry Trends

- market size

- growth/decline

- industry shift/focus

- Total Addressable market versus Total available market

Industry Leaders

- market share (graphs)

PEST

Porters’ Five Forces

Demographic Breakdown

The Population ?

Market Size and Structure in particular industry

Market Size by value (€) and forecasts

Breakdown by sector

Channels of Distribution

Comment on importance of other factors

TALC position & consequence

Company Overiew

Name, Sectore, Location, Directors, Sales by Market, Key customers

Offering

Product/Service Offering

Type of clients

How do they sell their product

Who are the main competitors in the existing markets

Value proposition/unique selling point

Core competency definition (tools)

Competition from other manufacturers in the market (ranked by turnover)

Name

Contact Info.

No. Employees

Turnover

Market share

- description/key points to note

Critical Success Factors

KPI

Competitive Analysis

SWOT versus Competition

Tendency to Buy Matrix

http://www.brs-inc.com/models/model6.asp

Market Development Strategy Checklist

- Commercialisation tool

Competitor Scan (proj comm. tool)

Competitor analysis framework (proj. comm.. tool)

Competitor array (proj. comm.. tool)

Profiles of Key distributers

Executive Summary and Recommendations

The marketing mix (project comm. Tool)

Marketing communications mix (DDART)

Customer profiles (project comm. Tool)

- customer attitudes (project comm.. tool)

Whole product solution (DDART)

Positioning statement (DDART)

Partnership give/get matrix (DDART)

Economic analysis?(DDART)

Nine point strategy checklist? (DDART)

Define the competitive reason to buy (Tools)

Reality test (DDART)

Analysis 5 forces (DDART)

Countering Adoption Risks (tools)

Perfect Competition

2006-07-31T05:47:00.000-07:00

Was embarrased I couldn't recall exactly this was earlier, I had first learned it while preparing for school exams. Here is a refresh for you:

Perfect competition is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices.

Perfect competition requires that the following five parameters be fulfilled. In such a market, prices would normally move instantaneously to equilibrium. However, perfect competition does not rule out economic bubbles, in which the concept of equilibrium prices is not meaningful.

Atomicity
An atomistic market is one in which there are a large number of small producers and consumers on a given market, each so small that its actions have no significant impact on others. Firms are price takers, meaning that the market sets the price that they must choose.

Homogeneity
Goods and services are perfect substitutes; that is, there is no product differentiation.

Perfect and complete information
All firms and consumers know the prices set by all firms (see perfect information and complete information).

Equal access
All firms have access to production technologies, and resources (including information) are perfectly mobile.

Free entry
Any firm may enter or exit the market as it wishes (see barriers to entry).

The model is in most cases only a distant approximation of real markets, with the possible exception of certain large street markets. In general, few, if any of the conditions listed above will apply in real markets. For example, firms will never have perfect information about each other, and there will always be some transaction costs. In a perfectly competitive market, there will be both allocative efficiency and productive efficiency.

Allocative efficiency occurs when price (P) is equal to marginal cost (MC), at which point the good is available to the consumer at the lowest possible price. It describes an allocation of resources such that no possible reallocation could make one agent (producer or consumer) better off without making at least one other agent worse off.
Productive efficiency occurs when the firm produces at the lowest point on the average cost curve (AC), implying it cannot produce the goods any more cheaply. This would be achieved in perfect competition, since if a firm was not doing it another firm would be able to undercut it by selling products at a lower price. Achievement of a specific level of output or objective using the most cost-effective means

In contrast to a monopoly or oligopoly, it is impossible for a firm in perfect competition to earn abnormal profit in the long run, which is to say that a firm cannot make any more money than is necessary to cover its costs. If a firm is earning abnormal profit in the short term, this will act as a trigger for other firms to enter the market. They will compete with the first firm, driving the market price down until all firms are earning normal profit. On the other hand, if firms are making a loss, then some firms will leave the industry, reduce the supply and increase the price. Therefore, all firms can only make normal profit in the long run.

Example:
A number of strawberry stands opposite each other on a road selling punnets of strawberries freshly picked by their attendant from the nearby field.

"If we build they will come"

2006-07-31T03:32:00.000-07:00

The idea that the superior product will win out in the marketplace pervades much of the product development literature (e.g., Cooper 1987; Gruenwald 1985; Kleinschmidt and Cooper 1991). However, the history of technology is full of examples that contradict this notion.

Sony's BetaMax, considered by many to be a better
machine (Perry 1988; Cusumano, Mylonadis, and Rosenbloom 1992), lost the market to the VHS format videocassette player largely due to not meeting the needs of consumers. Similarly, compact disk technology provides unparalleled sound reproduction capabilities, including increased dynamic range. Yet, for many consumers, louder highs and softer
lows were a nuisance. Soon, compact disk players incorporated a 'CD-r' button, to provide for a reduction in dynamic range for certain listening environments such as automobiles. This ironic situation shows how product attribute superiority does not always lead to customer satisfaction.

So the lesson seems to be, If we build what they want they will come.

The Whole Product Example - VHS versus BetaMax

2006-07-31T02:58:00.000-07:00

"The whole product" model also provided a convincing explanation of why VHS had thrashed Betamax. VHS offered a bigger choice of hardware at lower cost, the tapes were cheaper and more easily available, there were a lot more movies to rent, and so on. That is they had a better whole product offering.

If you were to take yourself out on the high street to pursue the latest video you would see VHS recorders more readily available to rent, while the video shop would have three walls of VHS movies and only one for Betamax.

Indeed, the main thing that didn't fit was the idea was that Betamax was "technically superior". SLooking at the two,there was absolutely no visible difference in picture quality, and some reviews had found that VHS's quality was superior.

Many "knew" Betamax was superior -- that was the received wisdom, even at the time - and maybe it was, in a lab. But no one was buying a lab test rig. In terms of "the whole product", VHS was clearly superior, so that's the way the customer went. Along with everybody else.

Betamax had owned the market, but lost it because Sony got one simple decision wrong. It chose to make smaller, neater tapes that lasted for an hour, whereas the VHS manufacturers used basically the same technology with a bulkier tape that lasted two hours (What do you think the customer wanted?). Instead of poring over the sound and picture quality, reviewers could simply have taken the systems home. Their spouses/children/grandparents and everybody else would quickly have told them the truth. "We're going out tonight and I want to record a movie. That Betamax tape is useless: it isn't long enough. Get rid of it."

Betamax was the first successful consumer video format, and at one time it had close to 100% of the market. All of the video machines in use and all of the pre-recorded movies were Betamax. It had a de facto monopoly, and an element of lock-in (because of tape incompatibilities). It lost because, at the time, it could not do what consumers wanted: record a whole movie unattended. And although Betamax playing times were extended, they never caught up with VHS.

Other elements of the oft-repeated Betamax story are also wrong. For example, while Sony was certainly slow to bring in other manufacturers, it had tried to license it to rivals such as JVC before VHS was even launched. Betamax was not generally more expensive: Sony had to slash its original high prices but generally it was competitive. Indeed, after it had lost the market, Betamax machines were often cheaper than VHS ones.

And at the beginning, there was no comparative shortage of Betamax movies to rent: actually, they were all Betamax.

Even if Betamax had been "technically superior", it wouldn't have mattered. VHS users have long had the chance to upgrade to the compatible SuperVHS format with superior picture quality. But rather than demanding better pictures for today's TV sets, consumers have shown more interest in LP (Long Play) modes that reduce the picture quality to provide longer recording times.

VHS won because "the whole product" did what people wanted at a price they were willing to pay. And when people use the VHS v Beta analogy, they are not indicating a market failure but their own ignorance.

While being technologically driven is essential, managers must remember whose perceptions of superiority ultimately lead to product success. It is imperative that the customer deems the product "superior".

The Whole Product

2006-07-31T02:46:00.000-07:00

No geeks, have ever come across the concept of "the whole product", though it is well known to marketing people. Real people may not be aware of it, but the "whole product" model is an accurate description of the way they buy things.

When someone buys a Wintel(Windows Intel) PC, they are buying the ability to choose from dozens of models from hundreds of hardware suppliers, or have one built to order, or build one themselves. They are buying the ability to access hundreds of peripherals, hundreds of thousands of applications, and millions of websites that work best with their system.

The point is that when someone buys and uses a product, the technological aspects are a small and often uninteresting part of the decision, whether this be conscious or not. When you choose a new computer, you are also buying into a vast infrastructure of capabilities, services and support. These include the availability of cheap software on every high street, cheap hardware additions, and the ability to use the same format as your friends (to save a file and have it compatible elsewhere, or send it via email to another computer without problems), the ability to buy hardware such as a printer and know it will just work.

They are buying the choice of hundreds of magazines, thousands of books, and all the supporting services from educational courses to repair shops.

They are also buying the confidence that their system will keep progressing even if individual manufacturers fail.

In marketing terms, "the core product" - such as a car, a computer, or a video recorder - is just the start. You have to add on all the things like reliability, service and support (the expected product), its expansion capabilities (the augmented product), and its potential for future development (the potential product) to get "the whole product".

Since real people make real buying decisions based on "the whole product" (and if they didn't, we'd change the model), simpleminded comparisons of products by technological feature are very likely to get it wrong.

This model by Geoffery Moore in Crossing the Chasm was introduced to me last year as part of my masters degree course in ICT entrepreneurship. I have applied it where possible ever since.

Critical Mass

2006-07-27T08:10:00.000-07:00

Heard this word in a business sense for the first time so I decided to look into it a little more.

"Critical mass is the minimum amount (of something) required to start or maintain a venture;
"the battle for the computer market has now reached critical mass";
"there is now a critical mass of successful women to take the lead";
"they sold the business because it lacked critical mass" ;
Factors involved in critical-mass considerations for technological management include the number of research programs and number of graduate students;

Therefore it is the scale or volume at which processes become self-perpetuating. The minimum size of a firm thought necessary to compete effectively.

Disruptive innovations - Friend or Foe

2006-07-24T01:13:00.000-07:00

Ok, so I'm going to change direction now and look at two forces steerining the broadband internet.
File sharing and VOIP(Voice over internet protocol).
File Sharing
It wasn't until 2001 that filesharing really hit home with the emergence of Kazza by Niklas Zennström and Janus Friis. Pre 2001 napster reigned supreme. This service alloed users to download music for free from the internet. Though this was a form of file sharing it wasn't filesharing as we know it today. With napster all files were located on a central server and had to be downloaded from this central server. The further you were located on the internet the longer it took to download the file. Furthermore the more users requesting from the central server the more congested it became and slower. With P-2-P(peer to peer) technology, pioneered by Kazaa, users could now share amongst themselves directly excluding the centralised server. This meant the shortest path to the nearest user was utilised rather than going all the way to the central server.
VOIP
This technology was then utilised in the VOIP software Skype, from the same inventors. This meant that users could transmit voice data directly over an internet connection without the voice having to travel to a centralised location as in Kazaa. This allowed the voice to maintain utmost quality and allowed the network scale quickly as there was no need to augment a centralised location.
Disruptive innovations
These two offerings are what we refer to as disruptive innovations. A new technological innovation, product, or service that eventually overturns the existing dominant technology or product in the market.

"Disruptive innovations can be broadly classified into lower-end and new-market disruptive innovations. A new-market disruptive innovation is often aimed at non-consumption, whereas a lower-end disruptive innovation is aimed at main stream customers who were ignored by established companies. Sometimes, a disruptive technology comes to dominate an existing market by either filling a role in a new market that the older technology could not fill (as more expensive, lower capacity but smaller-sized hard disks did for newly developed notebook computers in the 1980s) or by successively moving up-market through performance improvements until finally displacing the market incumbents (as digital photography has begun to replace film photography).

By contrast, sustaining technology or innovation refers to the successive incremental improvements to performance that market incumbents incorporate into their existing product."

The dominant player in the Kazaa case would be the Movie Industry as Kazaa allowed a new method of accessing movies free of charge. While the dominant player in the Skype case would be the Telcos.

An interesting rebuke from Zennstrom when asked about the legality of his software:
"When radio stations started playing music the record companies started suing radio stations. They thought now that people could listen to music for free, who would want to buy a record in a record shop? But I think we all agree that radio stations are good stuff.

"And the VCR did the same thing: the movie industry thought nobody would ever watch movies any more.

"But that technology enabled the movie industry to make much more revenue. The single largest revenue source for the movie industry is videos."

In a similar way fax machine companies might have wanted to sue the makers of email as the telegraph users wanted to sue the makers of the fax machine.
These disruptive innovations will always continue to develop and enrich our daily lives. They are intended to bring benefits to the user and because they can do this better and more cost-effictively than the incumbents, the incumbents become unnerved. They don't want to lose their dominat position to a technolgy that is superior to theirs. This is ofcourse a natural reaction on their behalf but what would have happened if the movie industry had won their lawsuit against the VCR companies or the music industry had won against the radio broadcasters. Develeopment and progression would have suffered and we would have had it alot more boring!
In the end with these innovations everyone wins, only the incumbents can't sit back in their dominant position. They are forced to change their offering or business model so it can fit with the new innovation. The new innovation can even serve as a new element of their business model. For example, how radio allows users to "buy now" the song they have just heard or how the major bulk of money for the movie industry in generated through videos.

Critical Success factors Versus Key Performance Indicators

2006-07-20T06:08:00.000-07:00

As part of any balanced score card strategy evaluation one needs to have both objectives to be fulfilled and measurements of performance.

Critical Success Factor
CSF is a term for an organisation or project to achieve its mission. For example, a CSF for a successful Information Technology (IT) project is user involvement. A company may use the critical success factor method as a means for identifying the important elements of their success.

They are those things which must go right for the organisation to achieve its mission.

The advantages of identifying CSFs are that they are simple to understand; they help focus attention on major concerns; they are easy to communicate to coworkers; they are easy to monitor; and they can be used in concert with strategic planning methodologies. Using critical success factors as an isolated event does not represent critical strategic thinking. But when used in conjunction with a planning process, identifying CSFs is extremely important because it keeps people focused.

Clarifying the priority order of CSFs, measuring results, and rewarding superior performance will improve the odds for long-term success as well.

Things that are measured get done more often than things that are not measured.

Each CSF should be measurable and associated with a target goal. You don't need exact measures to manage. Primary measures that should be listed include critical success levels (such as number of transactions per month) or, in cases where specific measurements are more difficult, general goals should be specified (such as moving up in an industry customer service survey).

Example of Critical Success factors for Company XYZ:

Critical Success Factor	Source of CSF	Primary Measures & Targets
1. Increase # of customers	Industry	95% customer retention rate; 15% new customers per yr
2. Instal PC-based customer service ...hot line	Strategy	90% of customer queries answered in 1 hour
3. Increase # customer service reps	Strategy	3 reps per 100 customers
4. Restructure capital structure	Environmental	Lower cost of capital by 2%
5. Raise employee morale and ...productivity	Temporal	Increase employee retention rate to 95% / yr.

When setting standards, raising standards often raises results (and the reverse is also true).

A critical success factor is not a key performance indicator or KPI. Critical Success Factors are elements that are vital for a strategy to be successful. KPIs are measures that quantify objectives and enable the measurement of strategic performance.

For example: KPI = number of new customers CSF = installation of a call centre for providing quotations

For example: Mission = "Increase Average Revenue per Customer from £10 to £15 by EOY 2008" CSF="Reduce costs per customer" KPI = 'Average Revenue Per Customer'

KPIs are typically tied to an organization's strategy (as exemplified through techniques such as the Balanced Scorecard).

Categorising the KPIs

Key Performance Indicators define a set of values used to measure against. These raw sets of values fed to systems to summarize information against are called indicators. Indicators identifiable as possible candidates for KPIs can be summarized into the following sub-categories:

Quantitative indicators which can be presented as a number.
Practical indicators that interface with existing company processes.
Directional indicators specifying whether an organization is getting better or not.
Actionable indicators are sufficiently in an organization's control to effect change.

How it works

For each CSF, Key Performance Indicators (KPI’s) are identified to measure progress in achieving the objectives.
For each KPI, targets and actions can be aligned and assigned to ensure activity is focused on delivering the objectives.
Initiatives can be identified which will enable the targets to be achieved.

The BSC revisited -Customer Perspective

2006-07-20T05:56:00.000-07:00

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralised and automated. But the point is that the current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.

There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

The BSC revisited -Customer Perspective

2006-07-20T05:55:00.000-07:00

Recent management philosophy has shown an increasing realisation of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analysed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

The BSC revisited - Business Processes Perspective

2006-07-20T05:53:00.000-07:00

This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

In addition to the strategic management process, two kinds of business processes may be identified:

a) mission-oriented processes. Mission-oriented processes are the special functions and many unique problems are encountered in these processes.

b) support processes. The support processes are more repetitive in nature, and hence easier to measure and benchmark using generic metrics.

The BSC revisited - Learning Perspective

2006-07-20T05:51:00.000-07:00

This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge -- are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Government agencies often find themselves unable to hire new technical workers, and at the same time there is a decline in training of existing employees. This is a leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization.

Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige criteria call "high performance work systems." One of these, the Intranet, will be examined in detail later in this document.

The Balanced Score Card

2006-07-20T03:20:00.000-07:00

It was only last night when I was having a heated discussion about how an organisation should fulfill its strategies when I was introduced again to the term 'balanced score card'. I had heard it previously through my workings with AIESEC but hadn't really looked into it in too much depth. Looking into I realised I had implemented many of its elements in my previous projects, but never knew that there was a formalised method as such. Hmmm, Little did I know.

Balanced scorecard

This is a concept for measuring a company's activities in terms of its vision and strategies. Helping it adhere to its startegic management objectives and gain a clear prescription as to what should be measured in order to 'balance' the financial perspective.

It gives managers a comprehensive view of the performance of a business.

It is a strategic management system that forces managers to focus on the important performance metrics that drive success.

It balances a financial perspective with customer, internal process, and learning & growth perspectives.

The system consists of four processes:
1. Translating the vision into operational goals;
2. Communicate the vision and link it to individual performance;
3. Business planning;
4. Feedback and learning and adjusting the strategy accordingly.

A Comprehensive view of business performance

The scorecard seeks to measure a business from the following perspectives:

+ Financial perspective - measures reflecting financial performance, for example number of debtors, cash flow or return on investment. The financial performance of an organization is fundamental to its success. Even non-profit organisations must make the books balance. Financial figures suffer from two major drawbacks:
o They are historical. Whilst they tell us what has happened to the organization they may not tell us what is currently happening, or be a good indicator of future performance.
o It is common for the current market value of an organisation to exceed the market value of its assets. Tobin's-q measures the ratio of the value of a company's assets to its market value. The excess value can be thought of as intangible assets. These figures are not measured by normal financial reporting.

+ Customer perspective - measures having a direct impact on customers, for example time taken to process a phone call, results of customer surveys, number of complaints or competitive rankings.

+ Business process perspective - measures reflecting the performance of key business processes, for example the time spent prospecting, number of units that required rework or process cost.

+Learning and growth perspective - measures describing the company's learning curve -- for example, number of employee suggestions or total hours spent on staff training.

The specific measures within each of the perspectives will be chosen to reflect the drivers of the particular business. The method can facilitate the separation of strategic policymaking from the implementation, so that organisational goals can be broken into task oriented objectives which can be managed by front-line staff.
It can also help detect correlation between activities. For example, we might find that the internal business objective of implementing a new telephone system can help the customer objective of reducing response time to telephone calls, leading to increased sales from repeat business.

You can't improve what you can't measure

So metrics must be developed based on the priorities of the strategic plan, which provides the key business drivers and criteria for metrics that managers most desire to watch. Processes are then designed to collect information relevant to these metrics and reduce it to numerical form for storage, display, and analysis. Decision makers examine the outcomes of various measured processes and strategies and track the results to guide the company and provide feedback.

So the value of metrics is in their ability to provide a factual basis for defining:

Strategic feedback to show the present status of the organisation from many perspectives for decision makers
Diagnostic feedback into various processes to guide improvements on a continuous basis
Trends in performance over time as the metrics are tracked
Feedback around the measurement methods themselves, and which metrics should be tracked
Quantitative inputs to forecasting methods and models for decision support systems

Some Useful Liks on implementing the BSC

http://www.2gc.co.uk/pdf/2GC-PS050616.pdf

http://www.2gc.co.uk/pdf/2GC-RSS.pdf

http://www.2gc.co.uk/pdf/2GC-SMESME.pdf

http://www.2gc.co.uk/pdf/2GC-BSCEVA.pdf

http://www.2gc.co.uk/forum/viewtopic.php?t=75

Cross Functional teams

2006-07-20T03:15:00.000-07:00

We mentioned this buzz word in the previous post. But what exactly are they?

A CFT consists of a group of people working toward a common goal and made of people with different functional expertise. It could include people from finance, marketing, operations, and human resources departments. Typically it also includes employees from all levels of an organization. Members may also come from outside an organization (in particular, from suppliers, key customers, or consultants). They respond to broad objectives, but not to specific directives. A non-business yet good example of cross-functional teams are music bands. Songs are the result of collaboration and participation, and the goals are decided by consensus.

Strategic management

2006-07-20T02:03:00.000-07:00

Ever since my switch from a strictly technically mindset to a more business and "entrepreneurial mindset" one of the areas I have been most interested in is strategic management.
For those of you not familiar with this term, it is

the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and then over time initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate to keep the operations aligened to the startegy or to change the strategy to fit best external factors.

Strategic management is necessary for every company whether a startup or a global corporation. It can even used to help steer projects (school, work) to succes.
Usually employed by the team leader/CEO/Managing Director, it provides the overall drection to the whole enterprise.
The last part of the definition is important, "to change the strategy to best fit external factors". Having a great strategy is only half the battle, keeping it great is the second half. And you don't always have control of that. Enterprises can fail despite 'excellent' strategy because the world changes in a way they failed to understand. A strategy must connect with purpose, vision and likely current and future trends.

Strategic management can be seen as a combination of strategy formulation and strategy implementation, but strategy must be closely aligned with purpose.

RStrategy Formulation

involves:

Doing a situation analysis: both internal and external; both micro-environmental and macro-environmental.
Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

AKA: Where you are now| Where you want to go | How to get there

(SWOT, PEST, Core competence identification, 5 forces,..)

Strategy Imlementation

involves:

Allocation of sufficient resources (financial, personnel, time, technology support)
Establishing a chain of command or some alternative structure (such as cross functional teams)
Assigning responsibility of specific tasks or processes to specific individuals or groups
Managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Strategy formulation and implementation is an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is dynamic - partially planned and partially unplanned.

Strategic Inflection Points

There are critical points at which a strategy must take a new direction in order to be in step with a changing business environment. These critical points of change are called strategic inflection points.

"a strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end. Strategic inflection points can be caused by technological change but they are more than technological change. They can be caused by competitors but they are more than just competition. They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient." Andrew S. Grove, Intel

He goes on to give examples:

"In the mid-eighties, the Japanese memory producers brought upon us an inflection point so overwhelming that it forced us out of memory chips and into the relatively new field of microprocessors. The microprocessor business that we have dedicated ourselves to has since gone on to cause the mother of all inflection points for other companies, bringing very difficult times to the classical mainframe computer industry."

"The fact that an automated teller machine could be built has changed banking. If interconnected inexpensive computers can be used in medical diagnosis and consulting, it may change medical care. The possibility that all entertainment content can be created, stored, transmitted and displayed in digital form may change the entire media industry. In short, strategic inflection points are about fundamental change in any business, technological or not."

"You need to plan the way a fire department plans: It cannot anticipate where the next fire will be, so it has to shape an energetic and efficient team that is capable of responding to the unanticipated as well as to any ordinary event. Understanding the nature of strategic inflection points and what to do about them will help you safeguard your company's well-being."

Reasons why strategic plans fail

Failure to understand the customer
- Why do they buy
- Is there a real need for the product
- inadequate or incorrect market research
Inability to predict enviromental reaction
- What will competitors do
  - Fighting Brands
  - Price Wras
- Will government intervene
Over-estimation of resource competence
- Can the staff, equipment, and processes handle the new strategy
- Failure to develop new employee and management skills
Failure to coordinate
- Reporting and control relationships not adequate
- Organizational structure not flexible enough
Failure to obtain senior management commitment
- Failure to get management involved right from the start
- Failure to obtain sufficient company resources to accomplish task
Failure to obtain employee commitment
- New strategy not well explained to employees
- No incentives given to workers to embrace the new strategy
Under-estimation of time requirements
- No critical path analysis done
Failure to follow the plan
- No follow through after initial planning
- No tracking of progress against plan
- No consequences for above
Failure to manage change
- Inadequate understanding of the internal resistance to change
- Lack of vision on the relationships between processes, technology and organization
Poor communications
- Insufficient information sharing among stakeholders
- Exclusion of stakeholders and delegates

Caveat

Although important, too much direction can stifle creativity, especially if it is rigidly enforced. In an uncertain and ambiguous world, fluidity can be more important than a finely tuned strategic compass. When a strategy becomes internalized into a corporate culture, it can lead group think. It can also cause an organization to define itself too narrowly - market myopia.

(Marketing myopia: organizations was constricted in terms of what they, too narrowly, saw as the business they were in - e.g. oil companies redefining their business as energy rather than just petroleum.

Marketing hyperopia - a better vision of distant issues than of near ones.

Marketing macropia - meaning an overly broad view of your industry.

)

Next question then, Are you an entrepreneur?

2006-07-12T01:50:00.000-07:00

Why not try out these two tests.

The Entrepreneur Self-Test was developed by the Rural Entrepreneurship Initiative. This assessment was designed to help an individual identify and understand his/her entrepreneurial potential.
http://www.tvaed.com/pdf/entrepreneur_self_test.pdf

The Startup Journal Entrepreneurship Aptitude test.
http://www.startupjournal.com/specialreports/smallbusiness/1q.htm

So what is an entrepreneur, and could you spot one if you saw one?

2006-07-11T07:33:00.000-07:00

One day when Christopher Robin and Winnie-the-Pooh and Piglet were all talking together, Christopher Robin finished the mouthful he was eating and said carelessly: “I saw a heffalump today, Piglet.”
“What was it doing?” asked Piglet.
“Just lumping along,” said Christopher Robin. “I don’t think it saw me.”
“I saw one once,” said Piglet. “At least I think I did,” he said. “Only perhaps it wasn’t.”
“So did I,” said Pooh, wondering what a Heffalump was like.
“You don’t often see them,” said Christopher Robin carelessly.
“Not now,” said Piglet.
“Not at this time of year,” said Pooh.

The above might illustrate most peoples view of entrepreneurs. We know they exist, think we know what they are but can we actually characterise them? and if so how do we do so?

Most commonly, the term entrepreneur applies to a person who establishes a new entity to offer a new or existing product or service into a new or existing market, whether for a profit or not-for-profit outcome.

As a risk bearer:
Richard Cantillon, an Irish man living in France, was the first to introduce the term entrepreneur and his unique risk bearing function in economics during the early 18th century. He defined an entrepreneur as an agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. Uncertainty is defined as a risk, which cannot be insured against and is incalculable.

As an organiser:
Jean–Baptiste Say, an aristocratic industrialist, developed the concept of entrepreneur a little further. His definition associates entrepreneur with the functions of co-ordination, organisation and supervision. According to him, an entrepreneur is one who combines the land of one, labor of another and the capital of yet another, and, thus, produces a product.

As someone willing to engage in uncertainty:
Frank Knight, in his seminal contribution to economics Risk, Uncertainty and Profit (1921), defines uncertainty as a primary attribute of his entrepreneurship theory. If there were no uncertainty no losses would be made. Risk is calculable, uncertainty is not. Entrepreneur is a person who is willing to put his career and capital on an uncertain venture.

As a leader:
More recently, researchers such as R. B. Reich have argued that leadership, management ability, and team-building should be added to the definition.

So know that we kinda know what they are, Where do the come from?

Well there are two principal theories. The "supply" theory and, you guessed it, the "demand" theory.
Supply: Entrepreneurs are born, not made. Some people have the personality traits that make a good entrepreneur. As John G. Burch 1996 described them:
* A desire to achieve
* Hard working
* Desire to work for themselves
* Nurturing quality
* Acceptance of responsibility Some entrepreneurs may be driven more by altruism than by self-interest.
* Reward orientation: Desire to achieve, work hard, and take responsibility, but also with a commensurate desire to be rewarded handsomely for their efforts; rewards can be in forms other than money, such as recognition and respect.
* Optimism: Live by the philosophy that this is the best of times, and that anything is possible.
* Orientation to excellence: Often desire to achieve something outstanding that they can be proud of.
* Organization: Are good at bringing together the components (including people) of a venture.
* Profit orientation: Want to make a profit; but the profit serves primarily as a meter to gauge their success and achievement.

In academic circles however, the "demand" theory is now generally more prevalent.
The demand theory holds that entrepreneurs emerge out of the combination of entrepreneurial opportunities and people who are well-positioned to take advantage of them. Thus, anyone who encounters the right conditions might become an entrepreneur, if they find themselves in a position where they find a valuable problem that they alone can solve.

So, hopefully now you have a better understanding of what an entrepreneur is and how they are formed. In my opinion they are formed from a hybrid of the two theories. No matter how could an opportunity is, if one doesnt have a propensity towards risk and a desire to work very hard for many hours alone then the individual will sit snug in the arms of employment and let the opportunity pass by; until it is maybe discovered by someone more willing to pursue the endeavour.

“A journey of a thousand miles must begin with a single step.”

2006-07-11T06:52:00.000-07:00

After much debating (no pun intended) and deliberating I decided to go with aul Lao Tzu's the Chinese founder of Taoism quote as the first subject of the first post of what I hope will be many more useful and interesting ones.
Having always intended to setup an account I have never wanted to take that initiall belegauering signing up process. But today I decided to get it over and done with, we're in action!
So what is this blog going to be about then, why should I waste my looking at this blog when I could be working? Well to be honest I can't tell you right now, but after a few posts I'll get back to you!