Posts Tagged ‘value’

I have been riding the Massachusetts Bay Transportation Authority (MBTA) Commuter rail service for 5 years and the service has not changed much in this time, but year on year the cost of a ticket rises, often more than inflation. In addition the daily parking rates received a 100% increase a year ago supposedly to help cover MBTA staff costs and yet the only way you can pay at most stations is by stuffing one dollar bills through a slot – no monthly contracts, pay by credit card etc that are commonly available in many municipal parking lots across the country.

I am moaning but I am trying to make a point here too – on February 1, 2010 a new rule has been put in place where commuters must only board where there is a conductor present. In effect about a 30% reduction in the number of places to board a train that already only has an entrance at each end of the carriage. I doubt in the history of rail service, its  origins date back to 1889, has this situation ever been the case and it is sad that our modern day educated commuter cannot let themselves on or off a train unescorted.

Most commuter systems around the world are being redesigned to eliminate the human element and to abstract the ticket management to before the actual commute, which is the prime purpose of the conductors on the MBTA. Even the T, the metro system in Boston, running alongside this same service operates with just a driver.

What I observe happening is that people with power today are making decisions because they operate in the vacuum of state/municipal organization, thinking they are immune to the consequences of the value their organization produces. At the end of the day the leaders of the MBTA are exposed to the same market pressures as any other free market business.  When the marginal utility or value does not exist passengers will consider alternative means of transport – it has happened before. When the cost of operation exceeds the value paid by customers and from the state taxes, it will draw significant attention by both disgruntled commuters and non-commuters who will see it as a waste of their tax dollars. It will not be perceived as a necessity but a problem.

Where there are problems there are opportunities… successful businesses thrive on the vulnerability of these sorts of problems. When opportunistic businesses, observe organizations entwined by their own history, they quickly swoop in with fresh ideas not constrained by the existing historical standards and cultures. Today’s impossibilities will become tomorrow’s opportunities. These options will sound welcoming and fresh to a disgruntled commuter and tax base. Although things generally move slowly in state/municipal processes once a movement starts it is hard to stop the momentum of the masses.

When this shift takes place it will become quickly apparent that even the state/municipal organizations are competing in a global marketplace irrespective of if the infrastructure is immovable such as in a train infrastructure. People and organizational practices can always be changed – it depends who holds the most compelling and valuable story at the time, which is what business is essentially. There are many transport service companies all over the globe that given the opportunity, and having no sentiment for existing established policies or traditions, will gladly start anew – possibly without a conductor or possibly one to keep all the doors open for their valued customers.

No customers  = no service, the value has to be there, and if you are not producing value with existing assets and opportunities there are a lot of companies out there determined to make better use of established assets like a rail network. Of late has been the acquisition by Warren Buffett’s Berkshire Hathaway investment company of Burlington Northern Santa Fe, the nation’s second-largest railroad for $34 Billion, their biggest acquisition yet.

Surprisingly this lesson has not been learned by the MBTA where this situation has already transpired in Boston’s Transportation History to quote

“The West End Street Railway had a virtual monopoly on all streetcar lines in greater Boston, but high profits, poor service, high fares and a general lack of concern for the public had resulted in alienation of the West End’s management from its customers. On December 9, 1897, under the supervision of the Transit Commission, a lease was entered into with the West End Street Railway by which the property of that company was leased to the Boston Elevated Railway Company”

Remember I told you so!

This article was contributed by Guy Ralfe, co-founder of Active Garage and co-author of the upcoming book "ProjectManagementTweets". You can follow Guy on Twitter at gralfe.

Tagged as: Action, active garage, business opportunity, Business Strategy, competition, competitors, Customer Service, execution, Guy Ralfe, services, takeover, value

Welcome to the tenth post in this 12-part series on QUALITY, titled #QUALITYtweet – 12 Ideas to Build a Quality Culture.

Here are the first nine posts, in case you would like to go back and take a look:

1. Quality #1: Quality is a long term differentiator
2. Quality #2: Cure Precedes Prevention
3. Quality #3: Great People + Good Processes = Great Quality
4. Quality #4: Simplifying Processes
5. Quality #5: Customers are your “Quality Partners”
6. Quality #6: Knowing what needs improvement
7. Quality #7: Productivity and Quality
8. Quality #8: Best Practices are Contextual
9. Quality #9: Quality of Relationship and Communication

#QUALITYtweet Formal inspections can be a

huge waste of resources if you have not invested

in getting it right the first time

The goal of any process improvement initiative is to prevent same problems from occurring again. New problems are an opportunity to identify areas of improvement but same problems occurring repetitively is a sign of stagnation.

As someone rightly said, “Quality can never be inspected in a product; it has to be built first.” Processes have to help identify the quality expectations from the customers and translate those expectations into a practical action plan to build/verify quality constantly.

Inspections done at the tail end of product life cycle can eat a huge chunk of your budget because later the problems are found, costlier the resolutions. On top of that, if you have not “engineered” quality in a product, inspections can be a huge waste. You can never verify something you have not built upfront.

In manufacturing world, it is very unlikely to find that a component is inspected after it is integrated in the product. The very idea of inspecting everything after completing all product development is a dangerous one – one that has many business and financial risks associated with it.

This is where “prevention” is always better than “cure”.

Don’t get me wrong. Inspections are still one of the best ways to find problems. The timing of inspection is very important.

When inspections are done earlier in development process:

• Fixing problems is less costly
• Early identification of critical risks helps you manage them proactively
• Lower risk of failure at the end

Following are some very simplified guidelines on how inspection activity can be leveraged to generate value and lower risks for your customers. Each one of these points can be a process in itself.

• Know customer’s quality expectations early and educate team
• Clarify the exact customer requirements (and be ready for change)
• Give thoughtful consideration to a robust product design
• Plan actions to ascertain that quality expectations are built in the product
• Inspect Early and Inspect Often in cycles
• Each cycle of early inspection reduces risk of failure
• With this, final cycles of inspection can focus on “value-delivered-to-customer” rather than “defects-found-at-the-tail-end”.

The process of inspection can be your biggest asset if you have invested early efforts in building quality and then inspecting it. Else, it can be a huge waste.  Reduce this waste and you will automatically start forming a culture where “building quality” always takes precedence over inspecting. Your journey towards a quality-oriented culture begins there

—

Tanmay is a Software Quality Management professional based out of India. He hosts QAspire Blog and tweets as @tnvora. He is also an author of the book #QUALITYtweet – 140 Bite-Sized Ideas to Deliver Quality in Every Project

Tagged as: active garage, asset, business, customer, defects, development, engineer, inspection, integration, manufacturing, product, qaspire, quality, resources, services, stagnation, tanmay vora, tnvora, value

In my earlier post on June 10, 2009 I shared an example of what ROI looks like. In this post, I am writing about if ROI is not seen as ROI, how your possibilities get killed even before you start to act on them. This happens when customers confuse the ROI (Return on Investment) with the ROC (Return on Cost).

ROI is a constitutive component of how we measure Value; so needless to say, it is a critical part of how we choose to transact (or not), in any situation. Then there is the Investment which is a critical part of the ROI. The biggest pitfall is how this shows up for your customers. Consider this example:

You are at the crossroads of your career. You work very hard at your job, day in day out… day in day out… day in day out… you get the picture. The more hard work you put in, the more of the same results are being produced (e.g. getting only a 2-5% raise year after year after year… ). There is no certainty of the promotion you’d hoped you’d get in your upcoming review. You met your goals, you fulfilled your promises and all that happens at the time of review cycle is you’re told the company did not meet its numbers so you’ll just get a 2% raise or worse, nothing at all.

At this point, you say “This is not working”. I need to go learn some new things. I need to look for where I can get more education… different education and with that you set out looking for it. Then you come across two choices; one education costs $20,000/year and the other $2,000/year. This is the crossroads at which you make a choice and the importance of this choice is huge because it will have an impact on perhaps your entire life.

The choice is made in how you think about this. Before I go further lets clearly distinguish that the “I=Investment” IS NOT “C=Cost”. Cost is usually thought of as something you have to pay in order to get something else RIGHT NOW. Investment is thought in the context of something you have to pay in order to get something bigger (than what you paid) in the future .

Most people look at the ROI as the ROC and that conversation closes the opportunity there and then. So, when you are talking to your customers about the value of what you are offering, make sure you CLEARLY bring forth that the price tag associated with your offer, is not a COST to them, it is, in fact an INVESTMENT, that they are making into a future possibility that will MORE THAN cover the investment they are making at that point.

If they still insist on looking at the “I” as the “C” ask them a simple question: “It is clear that you have considered the Cost of doing this. Have you considered the cost of NOT DOING IT!”

Try this in your next conversation. It works in bringing forth the ROI very clearly… and the results will show for themselves.

This article was contributed by Himanshu Jhamb, co-founder of Active Garage and co-author of the upcoming book "ProjectManagementTweets". You can follow Himanshu on Twitter at himjhamb.

Tagged as: active garage, business, Compensation, cost, himanshu jhamb, investment, Money, offer, raise, Return on Investment, Transaction, value

I have bad news for anyone who does product demos over the web: No one wants to see them. Seriously. Once you realize that it will be much easier to sell your software.

To clarify: They might have signed up for a demo OR they might have clicked a box on your website asking you to please schedule them for one OR they might have even agreed to watch it to learn what you’ve got, but they probably “want” to see it like you “want” to go to the bank on a long-weekend Friday. The point is: Yes, it does serve an important function but it’s no one’s idea of fun.

Understanding what customers want in a demo is critical in changing the demos from time-consuming events that are a necessary part of the sales process to a step in a shortened sales cycle that helps customers get on with their lives and makes them glad they met you.

Here are some tips – I apologize for any hurt feelings:

• Customers have only one question on their mind- “Can this thing solve my current business problem?”. If the answer is yes, you’re on your way to a sale, if it’s no, don’t waste their (and your) valuable time. Ask plenty of questions before you start presenting, even if it means you never get to actually demo the product. And don’t take all day getting to the stuff they care about or you’ll lose them.
• Buyers don’t care how cool your technology is This one is a little hard to take, especially since many of us doing demos built the products in question and are quite impressed with it ourselves. The genius of your algorithm or the glory of your GUI means nothing if it doesn’t help the customer in some way: either it helps  them generate more revenue, lower their cost or simply makes their job easier. Lots of us like to show off all the features because it’s “value added”. Since it’s not valuable unless the customer says it really is, in most of the cases it’s really “time added”, and not “value added”.
• Don’t talk like a programmer Odds are that early in the sales cycle the person watching the demo is not as technically adept as you are. They are probably not even IT people – they’re in Finance, or Sales or even HR- whichever group is actually going to use it.  Use a “programmer-to-mortal” dictionary if you have to and use their language not yours.
• They need to know you understand their issues Two things will help put them at ease.
  • Tell success stories that relate to their business. If they’re a small business, don’t just tell them IBM uses your product and loves it (they’ll think you’re too complicated and expensive). Conversely if you’re selling to a big enterprise, don’t just tell them about the little company that uses it (you won’t scale to their needs). Make your success stories relevant to their business.
  • Use their examples. If they are in HR, show them how to do the task they need done. Don’t use a sales example to the IT group. And if they call it a “screen” instead of an “interface”, you can too.

No one signs up for a web demo with a Slurpee ,a  jumbo bag of popcorn and a comfy chair. They want their questions answered, their problem solved and their lives back. You probably have better things to do, too.  Stop treating demos as presentations and more like sales calls and you’ll go a long way in achieving the purpose of the demo!

—
This article is contributed by Wayne Turmel, the founder and president of GreatWebMeetings and the host of The Cranky Middle Manager Show podcast. You can follow him on twitter at @greatwebmeeting.

Tagged as: active garage, buyers, customers, demos, effective demos, Greatwebmeetings, internet, products, programmer, success stories, value, Wayne Turmel, website

One million dollar question is -

Big fish in a small pond or small fish in a big pond?

As I was pondering on the above question, I couldn’t resist reflecting on my conversations with my Father a few years ago.

So, here is some background:

My father always said to me – “It is better to be a big fish in a small pond rather than to be a small fish in a big pond.”

This comment was typically in reference to divisions that he would transact with when it comes to banking, accounting, legal etc.

I particularly remember his choice to bank at the local branch when many of the other businessmen he interacted with drove many miles to have an account at the supposed Main branch of the bank in the nearest city.

A relative of mine was one who believed in dealing at the main branch, he spoke of only getting an appointment with the manager if they booked well in advance. He often complained of the effort it took to get loans approved and how the service was consistently on the shoddy side, but they still stuck with banking at the main branch because it made them feel they were a part of something big and important and this was where all the power was.

On the other hand our bank manager was our account manager. On many occasions they visited us and discussed business as long as it took. I recall the manager staying for lunch on many occasions. When we went to the branch we were always known and treated as a valued client. The support staff often knew what we were coming into the branch for, as they recognized us from a previous visit or when we spoke on the phone.

When it came to requesting new business loans people were often surprised how quickly my father could get an approval, what good rates he was able to secure and the extent of the leverage on the account the bank was prepared to offer. We were not getting any preferential treatment or having any rules flaunted for us, but still things were moving fast.

The reason: It was the relative power we held at the small branch that gave us the advantage.

Let us analyze what happened a bit more.

Let us assume that the average transaction value as a metric of worth to the branch.

Typically, the Main branch where the average account is of large corporations, requiring extensive services and producing large revenues for the branch. Assume the main branch had an average transaction of $50,000 and the local branch had an average transaction of $5,000.

If my average transaction is $10,000, at the main branch I will be an “expensive” customer – who costs a lot to service per transaction. At the local branch, I will be one of the higher contributors to the banks operations and so will be deemed a more favorable client. The local branch will likely go out of their way to keep my business as I can better help the branch meet its goals. Note in both instances I have the same average transaction value.

So my circumstances are the same but the situation values them differently.

The results my Father experiences to this day are due to this relative valuation. Both branch managers have access to the same credit and loans departments, but you can see how the local branch manager is compelled to present a stronger case for a like request than the main branch manager would.

So, my point:

This is the way the marketplace works. Always be conscious not only of what offers you can make, but where you make them.

Be the big fish by choosing the right pond!

This article was contributed by Guy Ralfe, co-founder of Active Garage and co-author of the upcoming book "ProjectManagementTweets". You can follow Guy on Twitter at gralfe.

Tagged as: active garage, business, Business Management, Entrepreneurship, influence, leverage, management, power, Strategy, strength, value, worth, www.activegarage.com

Entrepreneurial business ventures have the same business concerns as their conglomerate competitors – they all want to turn a profit. They want their revenues to be significantly larger than their costs.

Keeping it simple, to increase profit we have two approaches:
~ increase our revenues relative to the cost
~ reduce our costs relative to our revenues

During times of economic prosperity companies often deal with challenges associated with growth, in their operations, by sacrificing operational efficiency. Typical examples are acquiring equipment when we expand our orders rather than reworking the scheduling; hiring additional staff rather than reorganizing the process.

I will use an example to simulate a company going through a growth and contraction to highlight the effect:

A sample company produces 1000 widgets per month at $5/piece, produced by 2 machines costing $2,000/month each. Throughput is 500 units per machine.

Through economic prosperity, production increases to 2,000 widgets per month, however this production requires 5 machines because along the way as each successive machine is acquired, the sudden capacity relief resulted in a decline in efficiency. This efficiency is not regained as you approach each successive machine capacity limit. Throughput is now 400 per machine.

In a market contraction,  production reduces back to 1,000 widgets. This is half the peak value so the machines scale back at this new throughput rate of 400 units per machine (1000/400=2.5) This requires 2.5 machines which we obviously can’t have, so now we need 3 machines to produce our 1000 units per month.

If we look at these three scenarios from a profit margin point of view (below) the accumulated inefficiency during growth has a drastic effect on the profitability when operations have to be scaled down. This example used machines but the same concept applies to all resources.

Going back to the factors that influence profitability, this translates into value, which is what we are prepared to pay for items:

• the value produced for customers through product offerings – this will preserve the revenue side of the equation through both expansion and contraction.
• the value to the organization of resources (assets, employees, cash) – cost is the component that seems to creep out of hand quickest and can be difficult to reign in again once you have established a lower value to the organization. This usually shows up in falling utilization (% of productive time) and realization (% of potential revenue)

The market is cyclical and the challenges faced in prosperity are the same that will haunt you during contraction. So as your business grows, pay attention to which notch you keep the belt on!

–

This article was contributed by Guy Ralfe, co-founder of Active Garage and co-author of the upcoming book "ProjectManagementTweets". You can follow Guy on Twitter at gralfe.

Tagged as: Business Management, costs, cyclical, economic, economy, fiscal management, profit, value