Monthly Archives: November 2016

Alternatives, Customers, Decisions, Differentiators, Sales

A Race to the Bottom

I had a phone call drop the other day. It wasn’t a big deal. In this wireless world I think we have all had phone calls drop. We also get static, interference and garbled messages, but hey, we’ve gotten used to it. The difference was that this call wasn’t a wireless call. It was a call using a land line desk phone. Come to think of it, having a land line call drop isn’t such an uncommon event these days either. I have commented in the past that not quite good enough is now good enough. I think this is just a symptom of what I call a race to the bottom.

Benjamin Franklin once said:

“The bitter taste of poor quality remains long after the sweetness of low price is forgotten”

I think for a very long time this was the case. It was accepted that there was a trade-off between quality and price. However it seems that times have changed. What was once true in a handmade, almost artisanal world does not seem to apply quite so steadfastly in the modern, mass production, readily interchangeable, short life span high technology world of today.

It used to be that you could get things cheaper but they invariably didn’t last as long as the more expensive better made items. This was a period when it took a while to make just about anything, and it was a requirement that it last based on what it cost to acquire. Back then when you bought something you expected to have it for a while. You expected quality almost directly in proportion to the price that was paid. You paid less, you expected less. If it wasn’t high quality you were going to have to live with that mistake for a while. As a manufacturer your reputation rested on every product you made.

I think the new approach today is to ask what is the best “relative” quality available at the absolute lowest price. Now it seems that the search is for as much quality as is obtainable at the lowest price. It is a somewhat subtle change in the relationship between price and quality, but I think it is an important one. I think in today’s world Ben Franklin would be asking what the minimum quality level is that can be endured at the target price point.

We are no longer buying quality. We are buying price and hoping for quality.

I guess that there still is a relationship of sorts between quality and price, it’s just that now it seems almost impossible to up-sell a customer (raise the price) based on quality. If you are not the cheapest, your chances of gaining the sale are probably going to be severely hindered by the other product that is the lowest price. Customers for the most part seem to view products as readily substitutable with each being able to perform essentially the same functions as the next, hence the “why pay more” approach.

I think it can also be traced somewhat to the public perception in the change of relative life expectancy the products. The shorter the life expectancy of a product, the quicker the next generation or replacement product hits the market, the more it seems that there is a tolerance for lower quality. It came out quick so a few bugs are always expected initially. As we have moved into the disposable high technology world, it seems the more tolerant the market is of lower quality, as long as the product is available for cheap.

Just over fifty years ago Gordon Moore noticed that technological capabilities doubled roughly every eighteen months. It seemed everything got either twice as fast or half as small on a very regular basis. This observation strangely enough became known as Moore’s Law. It basically ushered in the era of short product life cycles and rapid product replacement.

I have mentioned several times that I am probably a dinosaur. I remember (vaguely) my parents color television. All twenty three inches of that then massive cathode rate tube screen. Wow, what a monster. I also remember the repairman actually coming out to the house once or twice to repair it. Of course this was across the approximately fourteen years of its operational life in their living room.

Now televisions are huge with many larger than sixty or seventy inches. Unfortunately they are only expected to last a few years. Then they either break and must be replaced since the cost of repair is now so prohibitively high as compared to a new one, or are just replaced by the newer level of product technological advancement.

My point here is that while the absolute cost of the product may have come down in both real and time adjusted costs, I don’t think the total costs across the sample period have actually been reduced. In other words, the total cost of ownership across fourteen years and two repair visits is probably far less than the three to four televisions that might be expected to be purchased across the same time period today. However, it is only fair to note that who can say what the capabilities of a television will be in fourteen years at its current rate of evolution.

It seems again if you have a short technology cycle, short life expectancy, readily substitutable, mass production product, such as televisions, or smart phones, or personal computers, or just about every other electronic platform in the market today, quality is not the concern. Price is. And when that happens it looks like the race to the bottom is on.

The reason that I have gone into such belabored detail on what is obviously a consumer goods example is that it has been the bellwether for the business world as well. Let’s get back to my dropped call scenario.

For the longest time the communications infrastructure was a source of pride. I seem to recall when “five nines” of reliability, no down time, and always being able to place a call were proudly pointed to aspects of both the public and private communications systems. You could not get a higher quality infrastructure.

So you didn’t. You got a cheaper infrastructure. It now experiences issues and outages that in the past were unthinkable. And over time people have accepted it. Quality was sacrificed for price. You don’t hear anybody asking “Can you hear me now?” We all seem to be okay with it. We seem to have lost the drive and desire for “better” and have just settled for “cheaper”.

I don’t know if it is the consumerist behavior driving the business world in this direction or the business world drive for newer and cheaper technology that is stoking the consumerist behavior. As the apparent acceptance by customers for low quality continues, even though there seems to be an inordinate amount of business focus on creating the “relative” quality levels in technology products, price becomes an ever greater decision criterion. This trend can only benefit the low cost producers and providers in the market.

When quality is addressed as a cost as in the “cost of low quality” as it is measured today in business, instead of a generated value to the customer, then I think the bottom may be in sight. Feature, form, fit, function and quality no longer seem to be viable differentiators in the eyes of customers. Price and its financial partner, cost, now seem to be all that matters.

Maybe Ben Franklin was right in his time. I think Kurt Vonnegut may be right in this time. He was the one that said:

“In this world, you get what you pay for.”

The only issue now, is that we don’t seem to be willing to pay for it.

Activities, Alignment, Alternatives, Customers, Leadership

Why Do It

There is a brand out there that struck advertising gold with their catch phrase “Just do it”. We all know who they are, so I will not go there. For sneakers, exercising and sports it was brilliant. How incredibly “Zen”. It truly tapped into the psyche of every would-be athlete on the planet. Like so many other marketing trends in society it seems to have also found its way into our business vernacular. I am not so sure this is a good thing. Like process for process sake, just doing something for the sake of doing it, without examining the value or reason for doing it in business can be a waste.

I think we need to remember what drives organizations and what should cause them to take actions. Organizations exist primarily to bring value to its share holders. It does this by providing value to its customers. It seems that too many times they have a tendency to confuse activity with progress, much the same way that process can be confused with control.

I am convinced that there are three simple driving forces for actions in business. I am sure there are many that would potentially argue this point and say that there are actually a myriad of driving forces for action in business, but stick with me for a moment. When I look at the root cause analyses of all types of actions in business, and boil them down to the basics, I still keep coming back to these three:

Actions can be customer driven.
Actions can be revenue driven.
Actions can be cost driven.

If there are business decisions that result in activities that when analyzed cannot be attributed to one of these categories, I would probably challenge that it is an action or activity whose relevance should be called into question.

In other words, if an organization is doing something that cannot be attributed to one of these causes, I would ask why they are doing it.

Customer driven actions are just that, actions that benefit the customer primarily without regard to any other considerations. This means that they can be actions that are not in the current financial best interests of the business at that time. They are “investments” in the customer relationship which will hopefully produce greater returns to the business at a later date.

These are actions that are the result of externally focused decisions. They are actions designed to further the relationship or build incremental trust with that specific customer. They are usually strategic in nature and are focused on the longer term view of the business, not its immediate profitability.

Revenue driven actions are actions designed to grow the business, either through the acquisition of new customers or the expansion of business with existing customers. Since they don’t specifically focus on business profits or margins (they are looking at the top line, not the bottom line) they can be mixed between external and internal in their business focus.

These actions tend to be shorter term focused than the long term customer driven actions in that there is some consideration to the business results that are input into the decision and action process.

Cost driven actions are specifically internally focused and are used to target shorter term results. They are the result of decisions that are usually focused on the business performance and are designed to directly affect profitability and margins.

Cost driven actions are not solely defined by infrastructure or staff reduction types of actions. Some cost driven actions can be taken as a method of avoiding or reducing known costs. For example, business actions such as corporate wellness activities can also be considered cost driven actions. They are solely internally focused. They are designed to help improve employee productivity by reducing stress and resulting sick days. They also help reduce corporate healthcare costs and insurance premiums by reducing the claims and medical costs of employees who are in general healthier because of them. All of these improvements directly affect the corporate bottom line.

There may be some that believe that some actions are based on meeting legal or regulatory requirements, and should be categorized separately. I would argue that these too are cost based actions based on the argument that they are internal in nature (not affecting customers or revenue) and only affect costs in the form of what it costs to adhere to them, as well as what it will cost if they are not adhered to.

The tradeoffs between these decision drivers and actions are reasonably clear. There are the primarily short term affects of internally focused actions (such as cost cutting), the midterm effects of revenue growth actions (such as sales programs and discounts), and the long term aspects of customer relationship investments (such as faulty product replacements and customer satisfaction actions) and their effects and values to the business. There is the tradeoff between an external (customer needs) focus and an internal (primarily profitability) focus that must be balanced.

It is the business leader’s responsibility to continually monitor and balance the internal and external decision focus, and the short term – long term effects on the business. If they become too focused on the short term business performance, future revenue streams and customer relationships can be negatively affected. If they focus on the longer term and customer relationships, shorter term business performance may suffer due to the increased investments that are required.

Sometimes these decisions and actions can align and be complementary to each other. This alignment between short and long term decision and action, between internal and external focus then becomes relatively simple. Other times they will not be complementary in nature and tradeoffs will have to be made between the performance of the business today and the investment needed for the business to perform tomorrow. Cost actions will need to be balanced against investments in revenue growth and customer relationships.

I think the bottom line here (if you pardon the pun) is that customer focused decisions and actions are what keep any business or organization in business and should be prioritized above the others. After all, it is the customer that supplies the order that gets turned into revenue that ultimately drives profit. Forgetting, or re-prioritizing this axiom can in some instances occur briefly, but probably at the long term peril of the business. There are always other competitors in the market that regardless of their situation who will be willing to make the incremental investment in a customer.

I realize that I have greatly simplified the decision and action criteria here for an organization. However I do think that it is somewhat justified. We do have a tendency to make business as complicated as we want. I seem to have reached the point where I prefer a simpler approach as opposed to a cross functional team creating a new process and program to document the approach.

As I noted at the opening, it seems that too many times organizations undertake actions that don’t seem to support any of these key reasons for taking them. If there was a check and balance arrangement where processes or programs were reviewed with an understanding toward these criteria, they might be modified or removed all together.

Since this would be for all intents and purposes an internal only review, it would probably be classified as a cost base decision criteria and action.

Organizations have a limited number of resources. It seems in many instances they have an almost unlimited number of objectives and desires, many of which are somewhat conflicting. The business’s resources need to be spent or invested on those objectives that keep the customer in the forefront of the decision criteria and can best be aligned to provide the greatest return to the organization. These returns need to be balanced between the short and long terms.

Activities, Data, Efficiency, Humor, Performance

Little Things

Usually I start off one of these articles with a specific idea in mind. I try to examine a topic or a specific facet of business that I find interesting and provide my take on it. I end up trying to make a point or infer a position, and I also try to make it a little entertaining, at least to myself. I have been told on multiple occasions that it is not uncommon for me to miss that entertaining objective for others. Today I am thinking I might change things up and try a little different approach to things.

None of the topics running through my mind really seem worthy of their own entire article. However there doesn’t seem to be a way to banish them from my thought process in favor of a perceptibly higher priority topic. They continue to pop up and present themselves in various forms, apparently clamoring for my attention. It appears that the only solution is to run through them all and let them be sorted out on their own.

Fridays

Is it just me or does anyone else notice a perceptible drop in attendance at the office on Fridays? I understand all that has been written about the benefits of flexible hours and virtual offices and the like. If that was truly the cause of this phenomenon I would expect a little more even distribution of lower office attendance days across the rest of the work week.

I have seen the new television commercial where the “boss” proclaims much to everyone’s amusement that “Wednesday is the new Thursday”. That’s fine, but I definitely must have missed the memo where Friday has become the new Saturday.

On a related topic, I don’t seem to have much sympathy either for those who are ever more frequently complaining about having to attend calls or meetings on Friday afternoons. The last time I checked Friday was still part of what has been so quaintly and colloquially referred to as the “work week”. You know, that eight to five, Monday through Friday thing?

This is especially interesting to me since the latest information from Gallup.com is that the average work week is no longer forty hours, but closer to forty seven hours. That would mean that instead of just working eight to five Monday through Friday people are on average also working eight to four on Saturdays.

So I guess the conundrum to solve here is that people are working more hours and the business offices have lower attendance on Fridays. With all the additional hours being worked I am not so sure that more is actually being accomplished. Interesting. Maybe this one does deserve more thought and research. I’ll have to think about it.

Spam

I passed a milestone a little while ago. I am now averaging more than two hundred spam emails a day on my corporate email account. That is correct. Across a typical eight hour day I am now receiving a spam email every two and a half minutes. I must really be popular with the spammers. I don’t know why. I never respond regardless of how tempting they tell me their offer is.

What is a little more than disconcerting to me is that both my email system and my computer recognize that the junk emails are spam, and regardless of what setting I use to try and stem the ever increasing flow, nothing seems to work.

Now my system lets me know that they are spam, as it continues to present them to me:

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If the system knows that they are spam emails, why doesn’t it just get rid of them, or better yet, block them from even being presented. This number does not include the approximately fifteen other emails that did go directly to my junk email folder because I had already individually blocked the sender of previous spam emails.

As an aside I went out to www.todayifoundout.com and looked up the origin of the term “spam” as it relates to emails. This is what they had to say:

“The real origin of the term comes from a 1970 Monty Python’s Flying Circus skit. In this skit, all the restaurant’s menu items devolve into SPAM. When the waitress repeats the word SPAM, a group of Vikings in the corner sing “SPAM, SPAM, SPAM, SPAM, SPAM, SPAM, SPAM, SPAM, lovely SPAM! Wonderful SPAM!” drowning out other conversation, until they are finally told to shut it.
Exactly where this first translated to internet messages of varying type, such as chat messages, newsgroups, etc, isn’t entirely known as it sort of happened all over the place in a very short span of years, in terms of the name being applied to these messages. It is, however, well documented that the users in each of these first instances chose the word “spam” referring to the 1970 Monty Python sketch where SPAM singing was drowning out conversation and SPAM itself was unwanted and popping up all over the menu.”

“Drowning out all other conversation…” That sounds about right.

Spam Calls

As if spam emails are not enough, it seems I am now getting more and more spam phone calls as well. They are coming in on both my personal as well as business phones. These calls seem to have also spiked in frequency most recently.

I initially tried to be polite when I told them that I wasn’t interested in whatever it was that they were sure that I wanted to talk about. They just kept going on with their spiel. I would then be forced to hang up anyway. I then tried being a little more “forceful” in communicating my desire that they should never contemplate calling me again. Despite my directly questioning their intellects and species orientation, this didn’t seem to work either.

I have settled on what I think is a good solution to this particular business problem. When I receive a spam call, I simply answer the call, lay the receiver down and go on doing whatever it was that I was doing when the call interrupted me. The auto dialing system then connects the call to a person on the other end and I can eventually hear someone start speaking, and then realize that no one is listening. Eventually they hang up and go away.

Since these auto dialing spam phone call shops are predicated on the efficiency of the system, this method disrupts their entire process. I think that they then put me on some sort of a “do not call” list as the number of repeat offender calls from these places seems to be reducing. The only problem is that there seem to be so many new ones popping up to take their places.

I don’t want this to seem like some sort of scree or disconnected rant today. Business is obviously changing. How people work, where they work and what they do has changed. I have noted in the past that I am not so sure in many instances if these changes have been for the better. Working more hours from a virtual office, does not in itself indicate any sort of an improvement to me. It does however seem to be instrumental in generating what is now a forty seven hour work week.

I am not sure what the business benefit of generating spam is. I guess it can be considered the electronic replacement for Direct Mail Direct Response (DMDR) marketing and since there is now no cost for postage it seems to be running amok. I don’t think I have ever seen or heard of anyone responding to that stuff although a DMDR response of one to two percent was the expected target. I guess the logic is that if the volume of junk mail is increase by an order of magnitude then the response will increase proportionately as well.

Still, sending me ten requests for the thing I didn’t want once isn’t going to improve things.

Generating spam of any kind should be a punishable offense, at least in my opinion. Living in Texas the idea of dragging spammers through cactus or horse whipping immediately comes to mind as a suitable punishment. No need to get too medieval on them, at least for the initial offense.

I think that’s enough disparate business topics for this session. I’m sure I’ll have more to discuss in the future.