Empirical Rationalism and Other Oxymora
References & Book Reviews
Use the Data/Information You Have!
Jan 29th
A funny thing happened to me last week…. my health insurance company called me on my cell phone to conduct a customer satisfaction survey with my two month old daughter. Now, first of all, they KNOW that my daughter is only 9 weeks old! After several calls to get the faulty billing and account information correct, they did in fact pay for her birth. Second, they KNOW that they were calling on a cell phone. I think it is pretty odd that they assumed that I would be interested in paying for the privilege of helping them improve their customer satisfaction. However, the fact that I was paying for the call aside, I did the survey. Another aside, after about 10 minutes, they got to the Ultimate Question (you know, the only question the you need to ask and measure?). Somewhere along the line, I think they missed the whole point of the customer satisfaction exercise…
Anyway, the whole experience got me thinking about using the information that you have within the business. There is an old adage the goes something along the lines that you can’t have wisdom without knowledge, knowledge without information and information without data. It seems to me that, in the quest to gain wisdom, more and more businesses are over-looking the data and information that already exists within the business. Knowledge of the customer — that is, synthesized and critically analyzed information derived from organizational data– is simply non-existent in many businesses. My experience with the company in question has been horrific. In fact, in the past year, there has been a problem with EVERY single on one of the claims that I filed. However, instead of inferring that they have a problem from the data that they have already have in their CRM system, they choose to collect more data! It’s easier to collect data than to act on it, particularly quantitative data. This tendency is endemic in a lot of businesses. As the problems get worse, management just drills deeper and deeper into data that ultimately has no meaning. Meanwhile, customers defect and profitability suffers.
Without Customers, You Have a Hobby
Dec 18th
I saw Don Peppers at a conference a few months ago. For a guy that espouses the 1:1 marketing principle, I though that it was ironic that I walked away feeling like he had given the same presentation to a dozen audiences before. Seriously though, I bought the new Peppers and Rogers book, Return on Customer, anyway. The opening paragraph is great…
“Businesses succeed in getting, keeping and growing customers. Customers are the only reason you build factories, hire employees, schedule meetings, lay fibre-optic cables, dispatch service trucks, stock inventory, file for patents, operate call centres, negotiate contracts, write software or engage in any other kind of business activity whatsoever…. Without customers, you don’t have a business, you have a hobby. “
It is too easy to get caught up in the function of a job or business. That is, doing things rather than doing things to make money. Many people get into their chosen professions because they like doing what they do — programmers write code, dog breeders raise and show dogs, designers design. In other cases, people hate what they do — and they do it until 4:59pm and leave.
I think it is important to remember that “without customers, you have a hobby”. This is particularly true if you own, manage or are starting up a smaller business. If what you are doing does not get, keep or satisfy customers, you need to change what you are doing. If what you are doing isn’t making money, but you don’t want to change your activities because you love it, stop calling it a business and call it a hobby. If you hate what you are doing, get out and do something else.
The Starfish and the Spider
Nov 8th
Before I begin, I have to reiterate that I am not a big fan of business book metaphors; however, there is an interesting new book, The Starfish and the Spider, that attempts to explain “the unstoppable power of leaderless organizations” (I am beginning to hate taglines as well). In the spirit of full disclosure, I have not read said book yet, but I did read a pretty good review in the Boston Globe. The Starfish, with no head, represents the decentralized organization, and the Spider with many legs protruding from its head, is emblematic of the centralized organization. The authors contend that the starfish with no head and replicated organs throughout its body is harder to kill than a spider. The Globe article uses the example of Napster to illustrate the point. Napster was easy to kill because it was an established company with a leader – Kazaa and the other P2P sites that went underground are harder to stop. The authors also use history and current affairs to illustrate their point. The Aztecs were easy to capture, but as the Spanish pushed north they had a harder time with the Apaches. Al Qaeda is a perfect example of a Starfish organization. What do illegal operations and 500 year-old history have do with the modern business and the customer experience. Clearly, we are seeing a major technological and sociological shift in the way that people interact online. The rise of blogging, YouTube, wikis, social networking, etc. is illustrative of the power of the Starfish. I think this theory is complimentary to the long tail. A few weeks ago, we speculated if “the long tail” could be aggregated enough to be profitable. I suspect that the answer with a starfish business model, “yes”; with a spider business model, “no”.
A deeper look at product variety
Oct 26th
A bit more on product choice… First, Gourville argues that product variety may backfire if the consumer is faced with too many choices. He suggests that marketers limit the number of SKUs to avoid confusing the consumer. One important distinction that he makes is differentiating different types of product choice. “Aligned” assortment is generally good – whereby the tradeoffs are beneficial to the customer. Differing size, length and color of Levi’s 501’s is an example that he uses. “Non-aligned assortment” is where the customer has to make tradeoffs across dimensions – that is, one option precludes a different choice (for this one, he uses the example of entrée at a restaurant). Gourville argues that over choice comes from having to defend the channel from competitive domination (e.g. shelf space in a super market).
Can Big Ideas Help Small Businesses?
Oct 25th
Last month, Inc had an article on Reichheld’s Net Promoter Score (NPS) system that was implemented in a $25 million business. I know a lot of people who wouldn’t consider this business small, but the article got me to thinking about how small and medium sized businesses (SMBs) evaluate and implement new management concepts.
It seems to me that SMBs are at an obvious disadvantage when applying new methodologies. As the “chief bottle-washer and cook”, does the typical small business owner or manager have time to evaluate the latest management thinking, or the resources to learn, adapt and apply esoteric or theoretical concepts? And if they have the knowledge, skills and time, I suspect that other financial priorities such as rent, payroll and profit will likely take precedence over a risky experiment. There is no hiding from the bottom line in a small business – cash flow is king. In order to justify parting with hard-earned potential profit, small business owners need pragmatic, accessible and actionable advice that will result in a demonstrable return on investment.
