Andrea Hill's Ruminations on Business 2008-11-22T22:50:34Z http://ruminations.hill-management.com/atom.aspx Quick Blogcast Sunday_Evening_Reflection.MP3 tag:ruminations.hill-management.com,2008-05-18:c5e2aa0d-9292-4723-ac58-abcc2609f269 Andrea Hill 2008-05-18T21:21:29Z 2008-05-18T21:10:46Z
 


(c) 2008. Andrea M. Hill]]> On any given Sunday evening a significant percentage of the workforce is dreading the end of the weekend. If you're one of them, and if your reason for dreading work is that someone - or some thing - is keeping you from being effective, you may want to listen to this. Update on Blog tag:ruminations.hill-management.com,2008-05-18:e68277aa-e649-4c7a-b080-355c202b558c Andrea Hill 2008-05-18T18:27:56Z 2008-05-18T18:18:00Z
This is Jenna - not Andrea. You might know that Andrea has been trying to sell her New Mexico house for a while now so she can get her family back up to the Chicagoland area. Well it sold! Between her busy work schedule and packing and moving all her household goods, Andrea is not posting to the blog as much as she would like. But she'll be back to regular blog postings by late June (she says early June but maybe we might convince her to just settle in first).

If you're looking for a little daily business insight she has been putting a little business one-liner on the net (she can use her cell phone for that) and it is always on the home page of our HMC website. So if you go to www.hill-management.com you can see those updated daily. Otherwise, thanks for your attention and concern and please be assured that she will blog regularly again in the near future. And the good news is we'll all be together in the office on a regular basis now!

Thanks again,

Jenna Wolfgram
Hill Management Consulting
jwolf@hill-management.com
]]> If you're looking for a daily dose of business insight, Andrea Hill has been publishing a business one-liner on our home page. Go to www.hill-management.com for the daily snippet. When advertising, don't start in the middle! tag:ruminations.hill-management.com,2008-05-07:adc48321-98ea-4c94-82c9-299bbb3587f9 Andrea Hill 2008-05-07T17:44:26Z 2008-05-07T15:41:00Z
The most common complaint of business owners is that the graphic designer or copywriter does not fully understand the product or service or cannot convey the message in a meaningful way to the prospective customers. This problem is complicated by the fact that most business owners are not trained art directors or advertising designers. Soon the designer begins grumbling about insufficient design direction and the business owner begins grumbling about mounting costs and missed deadlines.

Sometimes the business owner decides to just do it herself.  But when an amateur positions herself in front of a blank screen to design a page or write compelling copy, the result is like Novocain to the brain. So many decisions must be made, including colors, shapes, positions, photographs, fonts, headlines, and body copy. Some small business owners decide not to advertise rather than put an unflattering promotion before the public.

Promotional design does not have to be so difficult. The problem with most efforts is that the design process is the middle of an effort that has a clear beginning – a beginning most business owners do not understand or complete. This is the equivalent of building the first floor of a house before digging the basement and pouring the foundation. Advertising and promotional dollars are generally best spent promoting a brand or a business over single product promotions. The most important thing a business owner can do to ensure quality promotions is to develop descriptions for the following eight characteristics:

1. Competitive environment. This important overview identifies the competition and discusses how your business differentiates itself from its competitors, including what competitive advantage you enjoy and plan to exploit.

2. Target audience. A detailed description of the most likely customers for the product or service being offered. This should include information regarding who the prospects are currently purchasing from and all customer needs, habits, and behaviors that must be satisfied.

3. Core values. When a business understands the values it stands for it can consistently convey those values through copy, graphics, and service policies. Much as mature individuals prioritize and demonstrate consistency of behavior based on sound value systems, business benefits from the same consistency.

4. Most important message. Based on a sound understanding of the core values, distill those values into a statement that conveys the reality of the business and explains why the business exists.

5. Brand personality. Very few people beyond the age of eight establish meaningful relationships with objects, and a business is an object. If your business were a person, who would that person be? Describe that person as if they were a character in a novel. Hint: it's not necessarily you.

6. Voice, tone and image. Building on the work in #5, decide how this person speaks, what types of words they use, and what type of image they convey to others. The work of #5 and #6 is the process of anthropomorphizing your brand.

7. Reasons to act or believe. This is the list of emotional and rational reasons for prospective customers to act on or believe in your offer. For example, a rational reason to buy a new dress is because I need a new dress for my office party. An emotional reason to buy a new dress is because it will make me look beautiful. Customers require both rational and emotional reasons to act.

8. Sensory and emotional triggers. Though this section may seem silly, it is both a great deal of fun and a big help to the person designing and writing your promotion. Consider the colors, textures, aromas, sounds, visual imagery, and tastes you would like customers to associate with your offer. Once you have developed a cogent list, make sure the elements work harmoniously together. For instance, does your offering taste more like grape juice or single malt scotch? If single malt scotch is the answer, but the smell you associate it with is cotton candy, does that make sense?

Once these eight issues have been addressed, all that remains for each subsequent promotion is to draft a succinct statement about what the promotion is expected to achieve. This statement should include goals regarding customer perception, sales, and lead generation.

From a promotional design standpoint, the process of developing these eight elements will make the job of developing logos, selecting headlines, writing meaningful copy, and choosing colors and fonts significantly easier for whoever designs the advertising promotion. From a customer standpoint, the resulting consistency will contribute to an enhanced understanding of your brand that will lead to repeat business and customer loyalty.


(c) 2008. Andrea M. Hill ]]> Worried about wasting advertising dollars on substandard promotional efforts? Don't lose sleep over designing your next advertisement or marketing campaign. These eight simple steps will make the process of writing effective copy and creating strong graphic design much easier. Catch cost erosion before it catches you tag:ruminations.hill-management.com,2008-04-16:dd02f030-fa94-47b7-8d93-5c983168a99c Andrea Hill 2008-04-16T19:43:04Z 2008-04-16T19:29:00Z
In a presentation earlier this week, I spoke with a jewelry industry group about a cost-tracking strategy. The format of the forum was a lot of fun. It was a panel presentation offering 75 Business Ideas in 75 Minutes. The downside was that if I went over a minute per business idea a normally mannerly fellow named Rich Youmans would honk a loud bicycle horn at me. Though I am not generally very rule-bound, that horn was a true behavior modifier. I knew this concept was hard to describe effectively, and I knew Rich would be holding a bike horn, so I had spent a bit of time prior to the panel getting it down to one paragraph. Now I’d like to give it a little more attention.

Here’s the tip:

Compare your company's cost curve with the industry's price curve. Costs and prices usually decline (looking at inflation-adjusted numbers). By comparing your cost curve with the industry's price curve, you can tell if your costs are declining at the rate necessary for your company to remain competitive. This doesn't mean you have to drop your prices – it just means you've maintained enough operating, supply chain, and management efficiency to do so if challenged. Keep your margin as long as you can, but don't price yourself out of the market simply because you have no other option. If your costs are declining faster than the industry price curve is declining, make sure you understand why! It's not unusual for a company to achieve a competitive advantage that they do not understand, and therefore, do not exploit.

Now that I have more than a minute, let’s break this down a bit:

“Compare your company’s cost curve with the industry’s price curve.” It is next to impossible to learn about competitors’ costs, but it is not hard to watch their selling prices. Anyone can monitor overall price trends in a spreadsheet and create a graph. The best way to do this is to select specific products and group them into product categories. If you and your competitors sell hundreds of products, you may want to monitor key products or products that are representative of groups of products. Conduct a competitor selling price analysis quarterly or twice annually, and plug in the selling price for each of the items you are tracking. Don't get caught up in trying to figure out what price your competitors charge for bulk sales. That information is important for your own sales negotiations. But for this analysis discount strategies lack value and can keep you from achieving your purpose.

Once you have collected competitor selling prices, do the same analysis for your own products, only this time, you're plugging in your product costs (not selling prices). Track only variable costs for this exercise. Yes, marketing, operations, and shipping all play a role in your product cost. But your purpose for doing this project is to see if your cost trends are mirroring industry price trends, to make sure you are managing your variable costs commensurate with the industry. If you are adamant about seeing freight costs, do a separate freight cost analysis rather than combining freight costs with variable product costs. Freight costs follow their own trends and can skew your understanding of your variable cost management. Variable costs include costs of raw materials, direct labor costs, and packaging costs.

Now here comes the hard part. You don't get any gratification out of this exercise unless you 1) go back in time and recreate all the information for previous quarters, or 2) wait until you have collected several quarters of data. Most people opt to start collecting data and do their first trend analysis at some point 1-2 years down the road. For those of you who think "That's crazy, why do it at all then?" . . . hey, the time is going to go by anyway.

To compare your cost trend with the price trend of the industry, calculate the average cost of your products and the average selling price of your competitors' products. If you are tracking a few dozen (or less) directly comparable products, you can compare product to product. What is more likely is that you are tracking generally comparable products. In that case, lump the competitor products and your own products into comparable product categories, then calculate the average for each category. Finally, create charts out of the average selling prices and costs. Your final analysis will look something like this:



What you are measuring is whether or not your cost trend mirrors the industry pricing trend. In the example shown, the trendlines for the baby doll category are roughly equivalent, suggesting that costs are not decreasing at a slower rate than competitive pricing. However, the trendline for the dollhouse category indicates that costs are decreasing disproportionately to competitor selling prices, indicating a need for deeper analysis.

One last possibility, not shown in the graph, is that your costs are declining more rapidly than competitive pricing. This would indicate an opportunity to exploit a competitive advantage through lower pricing, or even better, to rake in additional margin while the getting is good. I would only consider dropping selling prices if the product or product category was one that would lead to considerably greater market share and sales growth on related products for the effort. Too often, companies drop their selling prices and simply shrink revenue as a result.

It is not uncommon to be retained by a company to dig into why they are no longer competitive, and upon doing the analysis, find out that their cost-erosion problem began years ago. This simple method requires a few hours once every quarter or twice a year. When combined with other prudent cost management strategies, it will point out cost erosion rapidly and can set you on a path to correcting problems before they become devastating.

(c) 2008. Andrea M. Hill ]]> What you are measuring is whether or not your cost trend mirrors the industry pricing trend. In the example shown, the trendlines for the baby doll category are roughly equivalent, suggesting that costs are not decreasing at a slower rate than competitive pricing. However, the trendline for the dollhouse category indicates that costs are decreasing disproportionately to competitor selling prices, indicating a need for deeper analysis. Why Project Discipline Matters tag:ruminations.hill-management.com,2008-04-02:175a7341-156e-4ae4-8f0a-e4fdaf93642f Andrea Hill 2008-04-02T13:52:01Z 2008-04-02T13:49:00Z
The most commonly sought type of communication system is a project planning or project management system. Every company is engaged in some sort of project management and/or product development, and those projects are usually the basis of the primary value-added activities of the company. Value-add activities are the foundation of profitability, so it is no wonder that companies who do not do a good job of managing projects also do not do a good job of turning profits. The observations I will make in this column can be applied to other types of communication systems, such as knowledge-management applications and CRM, but for the sake of broadest reader application, we'll talk about project management.

In every company I have ever gone into and set up a project planning system, there has been significant initial resistance. The objection is always the same: "We have enough to do without an extra layer of reporting." So my first step is to help them analyze what has worked and not worked about previous project management efforts. Nine times out of 10 the failures are related to project communication, and when they can see that in graphic form, diagrammed on a white board, they give the system a chance.

It is probably no surprise to you that many project management efforts are doomed from the beginning. Why? Because project sponsors frequently do not agree with one another about project scope, desired outcome, or budget requirements. Sometimes this disagreement is opaque even to those in disagreement. This happens because people use the same words but mean different things by them, or because people assume knowledge or agreement on the part of others and do not explore their assumptions. Sometimes the disagreement is clear to the top managers, but they proceed anyway. The two primary reasons for this are: 1) They do not wish to engage in conflict and think that by avoiding it, the conflict will go away (sound crazy to you? Start observing and see how often intelligent people engage in patently crazy behavior), or 2) the participants are aware they disagree, but they figure they will fight it out on the details instead of at the beginning. Yes, these illustrations are examples of management dysfunction and failure, but they are also examples of the types of communication failure that prevent an otherwise worthy project from ever getting a chance.

Even if a project is launched with full agreement and clear communication, it can fail due to communication glitches throughout the life of the project. Creating open, accessible information systems is the goal of every project management effort. The most common complaint I hear about project management systems goes something like this: "Project management systems make all the employees do the work twice, once when they perform the action and once again when they fill in group members through software programs or required reporting."

In a well-constructed project plan there is as much reporting as is necessary for the team to function well together, no more and no less. If a group is engaged in product development of a complex nature, with lots of participants from engineering through marketing, there is much information to be shared. If a group is engaged in simple project planning, then less information sharing may be necessary. If you consider that failure to provide enough information (or the right information) keeps other team members from doing their jobs effectively, then fears regarding recording and reporting requirements can be looked at in a different way.

Ideally the construction of the project plan is such that the communication step only takes a moment or two to complete. But there are times when doing the work means providing complete documentation of a step just taken. If it is important for other team members to be able to access the information, it is not double work. It is a necessity. Even in projects that only include one or two people working in the same room, assuming that the participants hear one another's conversations or paid attention every time the others spoke is dangerous. That old saw about the meaning of the word assume is still correct. Furthermore, many times decisions have to be made by some team members when other team members are unavailable. The presence of effective documentation and status reporting can make the difference between a great decision and a disastrous one.

Finally, do you think that reporting of projects doesn't occur in environments without project management systems? Of course it does. But it is highly inefficient. Person X is waiting for technical information regarding a step taken by Person B, but Person B is unavailable. So Person X wastes three days on the project, because they can't proceed without the information. That's not the worst case scenario though. The worst case scenario is that Person B proceeds without the information, and makes a mistake that ultimately costs the project time and money in rework activities (or causes the company to lose an important customer, or to lose public face).

Managers regularly ask for reports and updates on projects. A project worker can document activity very quickly when the activity has just occurred. But sitting down to write a project status report a few weeks later could cause a project worker to lose a day or two running around collecting information they have forgotten in order to write the report (not to mention interrupting other project workers from their project responsibilities). What do you think is more efficient – immediate documentation followed by point-and-click reporting, or assembling reports on demand? Hey – some managers can even be trained to pull their own reports . The additional time people spend communicating in a project management environment is nothing compared to the time they save by NOT having to run around repairing mistakes made due to lack of communication or reconstructing previous work and/or decisions.

Ultimately, there are only three reasons for resisting project management disciplines: 1) Failure to understand the potential benefits, 2) failure to understand that the system is not creating new or additional work, but rather, is placing the work in a specific order and requiring that it get done, or 3) a desire to operate without disciplines, in order to have as much leeway as possible to do things their own way. For those struggling with Reason #1 and Reason #2, I hope these explanations have provided some illumination.

Once implemented (defined – all participants understand the system, use the system as designed, and have optimized the system – half-hearted attempts by uncommitted work teams can't be referred to as implemented), project management results speak for themselves. In most cases project productivity climbs by 15-35%. Which brings us back to the reason for most project efforts in most organizations – to create new value. And what are we supposed to be doing, if not doing a better (faster, less costly, higher quality) job of creating profits for the organization?

(c) 2008. Andrea M. Hill ]]> It is probably no surprise to you that many project management efforts are doomed from the beginning. Why? Because project sponsors frequently do not agree with one another about project scope, desired outcome, or budget requirements. Sometimes this disagreement is opaque even to those in disagreement. This happens because people use the same words but mean different things by them, or because people assume knowledge or agreement on the part of others and do not explore their assumptions. Sometimes the disagreement is clear to the top managers, but they proceed anyway. That Cash Won't Hatch Part Deux tag:ruminations.hill-management.com,2008-03-27:e4fda406-2372-4495-8d50-9dc480346ecd Andrea Hill 2008-03-28T16:46:06Z 2008-03-27T16:24:00Z click here to see previous article), nearly all of it positive (except for one seemingly misunderstood soul who felt the need to inform me that they did not mind the term supply chain management, they just didn't like the fact that I was so focused on it). Well. Anyway, I received a few questions regarding target pricing and negotiating tactics, and that presents an opportunity to discuss a very important topic given our current economic climate.

In an ideal world, every professional buyer would be a technical expert on all of the products they purchase. If a buyer is responsible for buying a handful of products in extremely large volumes, they should certainly step up to that ideal. But in most cases, buyers are responsible for a broad spectrum of products, and technical expertise on all of them is something to strive for but perhaps unattainable. For the latter type of buyer, how does one know which products absolutely demand his or her technical expertise, and which products can be more entrusted to the vendor (assuming one has done the work of building trustworthy vendor relationships – a different article entirely)?

Buyers have particular responsibility related to high volume/high profit potential products. If any product is responsible for a significant percentage of the firm or division's profitability, it is not enough to make sure the product or its components arrive on time and are of acceptable quality. It is also important to understand the manufacturing process related to that product, the market conditions affecting the components of that product, and the vendor's ability to manage those manufacturing and market conditions.

Beyond those obvious high-focus products, where is the next best place for a buyer to focus their attention? On products where the labor cost is a high percentage of total cost. Why is this so important? Because your opportunities to work on productivity improvements with vendors are very high on these products.

Let's say you negotiate with a manufacturer to produce a product for you, and their quoted cost is $60.00 per unit. If the labor costs associated with the product are $30 and the material costs are $30, figure the manufacturer's profit is 10% of material and labor, or $6.00. The manufacturer sees this as $54.00 cost and $6.00 profit. The manufacturer's material costs are difficult to negotiate (though you should always try), but there is opportunity in the labor cost. If the manufacturer can be motivated to reduce their labor costs through productivity improvements related to better work flow, improved use of technology, or process innovation, they could pass a portion of those savings along to you – or all of it if you present a compelling enough business argument. If the manufacturer can reduce their costs by 15%, that's another $4.50 per unit that is available for negotiation. Given how often a concerted effort at efficiency improvement leads to 15%+ gains, it is reasonable to expect that type of result.

If you don't know how much labor goes into your manufacturer's cost quote, you don't know how much negotiating room you have. Will manufacturers always quote labor costs? It depends on what type of products you are buying and what type of relationship you have with them. If the manufacturer is producing a contract good for you, then a labor quote should always be part of the manufacturer's price. If your purchasing represents a significant percentage of your manufacturer's business, or if the product you are purchasing represents a high-volume opportunity for the manufacturer, they should be willing to break down their costs for you. Alternatively, if you are staying on top of industry and market trends you can back out the costs of materials for yourself to see if there is additional opportunity for negotiation.

It is somewhat shocking to me how often purchasers have not visited vendor manufacturing facilities, and how few purchasers would understand what they are looking at once they actually arrived at those facilities. If you don’t know whether or not your manufacturer is an efficient producer, you don't know whether or not there are opportunities to work together to improve the cost.

Here are a few things to look for when assessing the efficiency of your manufacturer:
  • Does your manufacturer use disciplines to build quality into the system? An operation that inspects for quality at the end, rather than incorporating quality into their process, is spending unnecessary money. Once unqualified products reach the end of the production cycle they have already expended materials and labor, and the policing process will prevent those products from getting to customers, but they won't save the manufacturer from incurring the costs again. Some disciplines that build quality into the system include Lean Manufacturing, Six Sigma, and TQM.
  • Does your manufacturer use visual productivity tools? If you can't see anything in the work environment creating a focus on metrics, they probably aren't doing a good job of measuring efficiency. Look for visual tools in each work area that communicate piece or part production goals, efficiency and production targets, and performance reports. Of course, it's possible that a manufacturer will remove those types of visual cues from the walls before taking an important customer on a tour (though it doesn't make much sense – it's difficult to deduce anything about the financial size or health of a company from local production metrics), so if you don't see anything, you might ask. If the manufacturer can't speak to their productivity programs, you've either got a tremendous opportunity to work with them for reduced costs, a reason to worry, or both.
  • Is the environment clean? This may seem like a small detail, but it has been observed over and over again that clean manufacturing environments are generally more efficient manufacturing environments.
  • Ask about productivity improvements over the past five years. If your manufacturer has been focusing on being more efficient, they will be able to speak to those efforts.
  • This last tip goes back to the comments at the beginning of this article related to the extent to which purchasers can be technical experts on all of their products. It helps to understand the manufacturing processes used to produce your products. If you understand manufacturing best practices, you can assess whether or not your manufacturer is using them.
Of course, you also must take into account how many layers there are between you and the manufacturer. If you are dependent on distributors, you want to make sure that the distributors from which you purchase are sound operators that constantly negotiate with the manufacturers on your behalf. The distributors are dependent on you to stay in business, so they need to keep their prices reined in to keep you in business. The distributor takes on the burden of carrying inventory and possibly some value-add activities, and there are costs associated with that.  But you can still demand that your distributor use its muscle to keep manufacturers' costs under control as a condition of your loyalty.

In these times of threatened inflation combined with likely recession, a business must do everything in its power to reduce costs. Please note – that may not (probably should not) mean that you will choose to reduce prices! I am not a fan of selling cheap to gain business, because it rarely works. If you have the operational efficiencies of a Wal-Mart you can afford to compete on price. But if you don't have that kind of muscle – the kind of muscle that enables you to put your competitors out of business – you can't afford to sell cheaply as a strategy.

Rather, your reasoning behind controlling costs is to enable you to keep as much of a lid on price inflation as possible. If your competitor's prices are increasing and your prices are able to hold steady or increase at a slower rate, you may be able to claim competitive advantage. Because you don't want to do this at the expense of profit margin, you need to create efficiencies in your supply chain. Hence our focus on reducing labor costs.

Difficult economic climates call for increased skills in strategic areas, and supply chain management is certainly the big one. Of course, it's always good business to maintain a very lean and efficient supply chain operation. But if you don't think you've been doing as great a job of supply chain management as you should, now is the time to correct it.

(c) 2008. Andrea M. Hill
]]> Supply Chain Management represents the best opportunity to maintain your footing in a difficult economy. Buyers have particular responsibility related to high volume/high profit potential products. If any product is responsible for a significant percentage of the firm or division's profitability, it is not enough to make sure the product or its components arrive on time and are of acceptable quality. It is also important to understand the manufacturing process related to that product, the market conditions affecting the components of that product, and the vendor's ability to manage those manufacturing and market conditions. Beyond those obvious high-focus products, where is the next best place for a buyer to focus their attention? On products where the labor cost is a high percentage of total cost. Why is this so important? Because your opportunities to work on productivity improvements with vendors are very high on these products. Bad relationship at work? Bid for a better one. tag:ruminations.hill-management.com,2008-03-21:407eebac-0efb-4cfe-a66c-21e113c7c7eb Andrea Hill 2008-03-21T22:58:52Z 2008-03-21T22:54:00Z bids for connection - the verbal and non-verbal requests for attention and validation that take place hundreds of times per day in human relationships.

The relationships we have at work are significant. Like our families of birth, we generally have little control over who the members of the family are. Our work relationships have the power to bring us joy or cause us anguish. They can lead to the greatest creative breakthroughs or significant physical and mental breakdowns. Or they may be nowhere near those highs or lows, just droning on in the background of our work life, not driving us crazy but not making our lives any richer either. The bottom line for business is that an organization filled with happy humans is more likely to be profitable than a similar business filled with the unhappy sort. In his book The Relationship Cure, Gottman says “A bid can be a question, a gesture, a look, a touch – any single expression that says “I want to feel connected to you.” A response to a bid is just that – a positive or negative answer to somebody’s request for emotional connection.” According to Gottman, there are three types of response to bids: turning toward responses, turning away responses, and turning against responses. One example from the book (pp 36-37) works as follows:

Turn toward the bid
BID: How was your vacation?
RESPONSE: It was all right. The slopes at Sun Mountain are magnificent, but the ski conditions were lousy. Have you ever been there?

Turn away from the bid
BID: How was your vacation?
RESPONSE: Have you got any messages for me?

Turn against the bid
BID: How was your vacation?
RESPONSE: As if you really cared.

Relationships that involve mostly turning toward responses are far healthier than relationships that do not. Interestingly, relationships that involve turning against and turning away from responses both fail at equal rates, but the turning against relationships fail more slowly than the relationships where the predominant form of response is to turn away from, or ignore, the other person.

When I take on a new client, one of the first things I do is observe relationships among team members in the area in which I will be advising. It is not unusual for a business to possess all the knowledge and talent it requires to be successful, but for that knowledge and talent to be inaccessible to the organization - even as it collects a paycheck. Once I observe interpersonal communication I gain tremendous insight into how my help may best be offered. When I read Gottman’s latest book, I started watching the bid processes specifically. Some of the most difficult-to-understand team dynamics became much clearer to me with this simple but powerful information.

In one situation, I have a division head who, based on my observation, seemed would be a very unpopular manager. He is one of the worst interrupters I have ever met, and I found just trying to complete a conversation with him to be exhausting. Much to my surprise, I encountered a staff who is genuinely devoted to him. It’s not that they don’t notice he interrupts - they simply take the interruptions in stride. Without the information on bidding, I would not have been able to sort this out. But armed with my new knowledge, I realized that in all other ways this guy turns toward their bids, and bids them frequently (even if he interrupts their answers). The staff clearly feels connected to their manager, and they forgive him his irritating habit. Another constant interrupter who perhaps turned away from or turned against their subordinates’ bids - and who did not bid others effectively - would likely become negatively known for the habit of interrupting.

In another company, an extremely capable and hard-working specialist is failing miserably, and her senior sponsor is worried about whether or not the situation can be turned around. She is responsible for three teams, and in each team is entirely dysfunctional. Not cruel to one another, overly competitive, or filled with slackers. Quite the opposite, in fact. The teams simply do not engage. Trying to get a handle on this problem - because this strange staff demotivation was my only real clue regarding my clients’ difficulties - I asked to observe two team members who were also on other teams with different leaders. I observed that both individuals were participating energetically in those other situations. Using my new knowledge I realized that this woman systematically turns away from bids, ignoring them, changing the subject, or vaguely “um-hmm”-ing a response. Gottman says that bidders who are ignored learn quickly not to bid again. I was brought in to solve what seemed to be a management and strategic problem, but I honestly think this woman has all the management and strategic skill she needs. So in addition to reviewing and tweaking the existing management and strategic framework, I have shared this information with her and started coaching her in turning toward the bids of others. Already we are seeing a warming up of the operating environment - though team members are understandably skeptical and may take a while to trust that their manager intends to respond to their bids consistently.

I personally find turning against responses difficult to work with. People who are cynical and antagonistic toward others seem to me to be less inclined to work on their communication skills than those who are simply mindless. But when I see turning against responses now, I have a better understanding of what they are. I have always had a negative gut reaction to people who use strong sarcasm or express cynicism during job interviews, though I couldn’t always support why I thought those behaviors were bad signs. Now I understand that there is a good chance those behaviors will present themselves as turning against responses in the work environment, which will disrupt team harmony and ability to innovate.

Not that argument and debate can’t be consistent with team harmony. One of my customer sites is an absolute joy to work with and they are constantly arguing with one another. My new Gottman knowledge helped me get beyond knowing that they are a joy to work with, to understanding why. A recent meeting to discuss the launch of a new product illustrated the power of turning toward the bids of others. The team was divided in three camps over the product launch and their debate was heated within minutes of the beginning of the meeting. Yet the atmosphere in the room was one of excitement and fun rather than competition and discord. The team members turned toward one another’s bids even as they argued against them, peppering the argument with humor and laughter, and building on each others’ ideas even as they fought to make sure their own were heard. I didn’t record one moment of sarcasm or criticism during the exchange. There was no point at which a team member cut another down. Over the next two days I watched the team closely, and sure enough, they turned toward one another’s bids constantly, and bid one another constantly. This behavior is described by Gottman as a sort of bid banking, storing up a savings of positively-exchanged bids, to be cashed in at times of conflict, making the conflict easier to deal with and the relationship more likely to repair afterwards.

Many years of corporate management have taught me that one dysfunctional person can alter the chemistry of an entire department and hold that department’s performance to suboptimum levels for years on end. This new information on bidding has introduced me to a whole new way of evaluating work groups. I highly recommend that you evaluate the following questions to improve your work relationships and results:

  • Evaluate how often you bid
  • Evaluate how effectively you bid. Are you direct or round-about? Positive or negative?
  • Evaluate how you respond to the bids of others. Do you turn toward, turn away from, or turn against most often? When you are turning away from or turning against, why are you doing so?
  • Evaluate your most important work relationships in terms of how those people respond to your bids
  • Have you stopped bidding anyone? If so, why? Is it hurting your work relationship or your professional performance?
  • Is there any particularly influential person in your work experience who consistently turns against or turns away from your bids or the bids of others? Is there anything you can do to bring this problem to their attention?
  • How do you react when someone turns away from your bids?
  • How do you react when someone turns against your bids?
  • If you can’t influence the person who is responding in undesirable ways, what steps can you take to protect your feelings (i.e., most people feel insignificant or insecure when they are ignored) and manage your reactions to minimize their negative effect on you and your performance?



We’ve all experienced some work situation that got under our skin and we couldn’t figure out why it bothered us so much. The woman who ignores you every time she walks past in the hallway, the guy who wanders off or answers his cell phone just as you begin to speak to him, the person who turns even simple inquiries into cynical little jabs. Everybody is moaning and groaning about the economy and Wall Street, but economic down cycles come only every five or six years and only last for 8-10 months. Negative work relationships last for years and damage your business even when the dollar is strong and the economy is booming. So one more thing to add to the list. Next time you’re book shopping or at your local library, check out a copy of John M. Gottman’s The Relationship Cure. Because building better connections with co-workers may be the best economic boost a company can hope for.

(c) 2008. Andrea M. Hill ]]> The relationships we have at work are significant. Like our families of birth, we generally have little control over who the members of the family are. Our work relationships have the power to bring us joy or cause us anguish. They can lead to the greatest creative breakthroughs or significant physical and mental breakdowns. Or they may be nowhere near those highs or lows, just droning on in the background of our work life, not driving us crazy but not making our lives any richer either. The bottom line for business is that an organization filled with happy humans is more likely to be profitable than a similar business filled with the unhappy sort. In his book The Relationship Cure, Gottman says “A bid can be a question, a gesture, a look, a touch – any single expression that says “I want to feel connected to you.” A response to a bid is just that – a positive or negative answer to somebody’s request for emotional connection.” According to Gottman, there are three types of response to bids: turning toward responses, turning away responses, and turning against responses. One example from the book (pp 36-37) works as follows: That cash won't hatch! Don't let your strategic players just sit on it. tag:ruminations.hill-management.com,2008-03-20:79d4e1f4-b935-4500-9fec-698f4ea67a69 Andrea Hill 2008-03-20T15:14:27Z 2008-03-20T15:06:00Z
One of his recommend management practices is: End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, in a long-term relationship of loyalty and trust. While no maxim can be held to be true for all its applicable situations, a lot of businesspeople would benefit from paying better attention to this particular piece of wisdom.

To apply this, one must first examine the concept of total cost. Though cost-based accounting methods can be credited with advancing organizational ability to dissect operating processes and analyze where change might be most beneficial, cost accounting also has a downside. The very process of apportioning costs applies component-based to thinking to system-wide problems. Does this mean that cost allocations are bad and should not be done? Definitely not! (though I have discovered that this topic has a strange knack for bringing out the argumentative extremist in far too many businessmen). The solution is to recognize that component-based thinking creates a certain type of bias, and that bias can be offset by approaching the same problem (or, ideally, set of problems) with system-based thinking. Here's an example of an actual problem that I endeavored for years to solve, but I could never get the relevant players to accept the rationale or change behavior (cue big sigh here). The group in question even hated the term - - supply chain management. OK, here we go: If you ask a 6th grader to make a list of the things they should consider when purchasing a product for resale, they would probably give you a list like this:

  • How much the item costs
  • How much they can sell it for


With a little additional prompting (i.e., how is it going to get here? Do you have to pay for that? If you don't, does the price show up somewhere else? ) you can get them to add:

  • Cost of transportation
  • Who pays cost of transportation


Most businesses operate very close to this 6th grade list. They may add a few other considerations, such as:

  • How much the item costs
  • How much they can sell it for
  • Cost of transportation
  • Who pays cost of transportation
  • Minimum purchase requirements
  • Discounts for early pay/penalties for late pay
  • Length of payment terms


When Deming says minimize total cost he doesn't mean even this slightly more expanded list. He means to consider a host of other issues that present themselves within the system of the supply chain. That list looks something like this:

  • How well the item specifications match with customer expectations
  • The extent to which (if at all) features need to be adapted or adjusted
  • Who will do the adjustments
  • How much time will those adjustments take, and does the timeframe work given customer expectations
  • Whether or not the product will be exclusively available to the buyer
  • Minimum purchase requirements
  • Storage requirements for product (space, climate, management, etc.)
  • Whether or not the product is packaged to buyer specifications
  • Who will modify packaging, and at what cost.
  • Who will manage ongoing packaging. If packaging will be managed by buyer, consider:
  • Cost of packaging materials on an ongoing basis
  • Cost of packaging labor on an ongoing basis (or cost of purchasing automation, and the ROI)
  • Space requirements related to packaging materials and packaging activity
  • How much time does packaging add to the supply cycle
  • Whether or not custom packaged products can be returned for inventory balancing, and what labor is involved
  • How much the item costs
  • Cost of transportation
  • Who pays cost of transportation
  • How product is expected to arrive at buyer location
  • Whether or not quality inspections are required at buyer location, and to what degree
  • Degree of difficulty in receiving and stocking products
  • Exception handling – if there are errors, how are those errors communicated to the vendor and what administration is required
  • Who pays shipping costs of return items, what is that anticipated cost, and how does it ultimately affect overall product cost
  • A host of quality issues; what level of quality is present in the product, how much time will be spent addressing quality problems - by sales, customer service, purchasing, receiving, accounting, and shipping personnel
  • Purchase order processing - how easy is it to navigate the seller's purchasing environment, both for initial purchase and for expediting
  • Accounts payable processing - how easy is it for the AP staff to match invoices to purchase orders, apply credits, and take discounts? How often must the AP staff do a complete reconciliation of the vendor to balance books
  • Discounts for early pay/penalties for late pay
  • Length of payment terms
  • Ability to meet delivery requirements - how much time will company sales/service people spend apologizing for insufficient stock situations, how much will those stock-outs cost in terms of customer loyalty and compensatory activities such as subsequent free shipping, and how much additional labor will be expended as a result


This list is more like what Deming was talking about when he said companies must minimize total cost. And though selling price must always be set with a keen eye toward competitive environment and a company's specific value added, product cost considerations should at least involve contemplation of this whole list – not just direct product costs.

As you review the list you can probably think of various supply chain minefields from different companies you have worked at over time or different vendors you have dealt with. Three of the most common areas of inflated total cost relate to quality issues, receiving difficulties, and accounting management. I remember being told by one particularly self-impressed purchasing agent that her time was infinitely more valuable than the time of the people in the receiving department. Well I don't know how she figured it, but a week-worth of her time at, oh, let's say $25/hour ($1,000 total) to problem solve with the vendor to reduce receiving issues, or even another $1,000 week-worth locating a superior vendor and negotiating a contract, would be worth it. Consider the alternatives: three people at $11/hour spending an additional three hours (on top of the two hours already allocated – not in this calculation) to receive the products every shipment (say, 5X year) equals $495. Another accounting person to handle system adjustments, questions of the vendor, and rebalancing accounts (1 person X $16/hour X 2 hours X 5 times per year – or $160). But then, the real kicker. The receiving department and the accounting department each need to hire one additional person, because a handful of accounts like the one I am describing results in their inability to stay on top of their service level agreements. Cost? For wage and benefits loading (at 30%) $29,744 for the receiver and $43,264 for the accountant. For Pete's sake - do the vendor management!

Deming also alluded to the difference between a really great supplier relationship and an average one. Loyalty and trust. Trusting supplier relationships aren't just based on whether or not you pay your bills on time (though that is certainly important). They are also based on whether or not you provide them with timely information, give them information they need to be better performers, make only commitments you can keep, and never promise what you can't deliver in terms of sales volume.

Not to be undervalued at any time, the importance of supplier relationships increases dramatically during times of economic stress and uncertainty. Difficult economic times highlight the difference between excellent companies and those that are merely average. If you want to experience a successful 2008, you'll put your best people or your best effort on managing supplier relationships and operations related to supplies - and you'll take great pains to ensure that those departments work seamlessly together with respect, trust, and cooperation. Managing a business through recession is all about cash flow. Keep in mind the entire system when you try to figure out who is sitting on your cash.

(c) 2008. Andrea M. Hill

]]> Though cost-based accounting methods can be credited with advancing organizational ability to dissect operating processes and analyze where change might be most beneficial, cost accounting also has a downside. The very process of apportioning costs applies component-based to thinking to system-wide problems. Does this mean that cost allocations are bad and should not be done? Definitely not! (though I have discovered that this topic has a strange knack for bringing out the argumentative extremist in far too many businessmen). The solution is to recognize that component-based thinking creates a certain type of bias, and that bias can be offset by approaching the same problem (or, ideally, set of problems) with system-based thinking. Here's an example of an actual problem The Untrod Path of Customer Intimacy tag:ruminations.hill-management.com,2008-03-13:d029f44c-93b1-4a9f-8b30-6401f6de2749 Andrea Hill 2008-03-13T22:54:17Z 2008-03-13T22:40:00Z How many of us are actually able to get out of our own heads in order to see things from the perspectives of others, and when we do, how long are we able to stay in that place? It's such a difficult proposition that the very concept of customer intimacy – which is a technical term for attempting to walk in someone else's moccasins – inspires the writing of business books, journal articles, newspaper columns, and blogs blogs blogs.

If you have ever gone through the process of selling a home while still living in it (yes, we are still selling our home), then you know what I mean. The realtor – if she's any good – works with you to stage your home. She tells you to start crating your art work. That's hard to swallow – you love your art work. But you're motivated to sell the house, so you try to wrap your mind around why you're so upset about being asked to do so. After all, once you move into your new home you'll be able to see it all again. Eventually you realize that your real issue is that the art in your home defines you. It tells the people who walk in your home a little bit about who you are and what you value. Besides, you think the house simply looks better with the art on display.

From the perspective of the home shopper, they don't care who you are. The less present you are while they are looking at a house they are trying to imagine as their own, the better. And there's a good chance they don't have your taste in art. Yet a realtor told me that one of the most difficult things to do is to get the seller to remove the art from the walls. Perhaps they are motivated to sell their house, but they just can't see the transaction from the buyer's perspective.

Many years ago I was working with a client who had a chain of retail stores. His sales had dropped dramatically. An evaluation of changes in the past 24 months indicated that a multi-store redesign had taken place at the beginning of the decline in sales. The owner had eliminated the cash register station near the front of the store and replaced it with an enclosed island in the center of the store toward the back. Sure enough, the stores that had not been redesigned (due to space or other considerations) did not experience the dramatic same-store revenue reductions that the redesigned stores experienced. Observing traffic in the two types of stores was very instructive. In the non-redesigned stores, the clerks were roaming about the store at all times, and they were frequently at the front of the store to greet incoming customers. The clerks in the redesigned stores had a tendency to stay within their islands and weren't available to greet the customers. Two things astounded me. The first – that the management of the chain hadn't considered the impact of redesign from the customers' perspective in the first place. The second – that when I presented my conclusion they wouldn't accept it. The owner's argument against changing back to the original layout or modifying the new layout was that it would be expensive, though in truth, he was simply enamored of what he considered to be a modern store layout. The cost to rehabilitate the stores would have been roughly $20,000. The chain was out of business less than 12 months later.

It can be difficult to develop sensitivity to the customer. Back in my college years when I was bartending I had great customer sensitivity (I can't bring myself to use the term intimacy in this context). My customers sat across the bar from me one or more times each week and told me all their problems. I knew from the looks on their faces and their body language what type of day they'd had when they walked in. But 25 years later I was the CEO of a company with a few hundred thousand customers. No body language or facial expressions to work with there. Of course, by then I knew how to slice and dice and segment the data, and once we did that we produced overlays and extracts, and we called the decisions we made as a result "customer intimacy." Yay us.

Then I'd go to a trade show and mingle with my customers, and they'd tell me about things we were doing wrong, things we could do better, and how the world looked from their perspective. And in some cases it would be clear that our slicing, dicing and segmenting had not prevented us from making inferior choices. Why? How could it be that the best practices of the direct marketing industry and the recommendations made by MIT and Harvard Business School professors could not lead us to the promised land of customer intimacy?

Here's why. Database analysis to study customers is a lot like looking at the animals in the zoo. Don't get me wrong - you can learn a lot. But it's an observation, not an experience. How the heck did we get to the point where the word intimacy, which means a close association or connection, of or relating to inner character or essential nature (according to Webster's unabridged) – how did we start applying that word to a business concept that most people interpret to mean "figure out what your customers buy, when they buy it, how they buy it, and why they buy it – and use that information to sell them more of it" ?

Treacy and Wiersema coined the term customer intimacy in their book The Discipline of Market Leaders. Their intention, in the tiniest of nutshells, was to point out that companies whose value propositions depend on being perceived by their customers as the best option for service must build a culture around that concept. Sales and service people need to be empowered in those organizations to serve the customers' needs, make decisions for the customers' benefits, and put the customers' interests front-and-center. The rest of the organization must accept this leadership by sales and service, and themselves take up the customer cause. (for previous entries related Treacy & Wiersema's theories, click here and here).

A company with a sales force that has direct relationships with customers and can advocate for those specific customers within the organization can achieve customer intimacy. But in this world of mega-companies that serve hundreds of thousands of customers through indirect means, such as the internet and via toll-free numbers, the pursuit of customer intimacy through segmentation and analysis is impracticable. You may be able to describe the animals behind the bars, but that doesn't mean you understand them.

So is the pursuit of customer intimacy a lost cause? I don't think so. But it's not easy, and what it requires (even in companies that fit well within the Treacy and Wiersema mold) is what we find it most difficult as humans to do. It requires us to see the world from a perspective other than our own. I was reading an article in Multichannel Merchant today about designing store windows, and the author was recommending that merchants walk outside the store and view the windows as the customers would view them. Makes sense, right? Yet how many store managers do you think will walk outside the store, stare at the handiwork and take pleasure in the result, observe the various products and make sure they are set out properly to highlight the features, and then go back inside the store?

What's wrong with that? Well, did the store manager walk backward from the window to observe how the window appears from 5-, 10-, 35-, or 60-feet away? Did she walk all the way to the right, then all the way to the left, to see how the window looks from each angle? Did she ask someone completely unfamiliar with the product to describe to her what that person saw, in an effort to eliminate the bias she (the manager) has because she already knows what the display is supposed to be showing? Unfortunately, few people think that way.

Years ago a guy named Joe Lovato used to sit in a cubicle outside my office and provide technical support to customers. I've got a lot of great stories about how he took care of his customers, but for the purpose of illustrating today's concept, one story stands out. A customer had called to complain about a piece of equipment they had purchased. Joe was always good at asking questions and getting to the bottom of what was wrong, but this time I heard him ask, "Can you tell me what you were hoping it would do?" He asked this in all seriousness, with not an iota of sarcasm. He asked the customer about their hopes, and in the process, both learned how to help the customer and validated the customer. Most technical support people – even very good ones – stick to trying to tell the customer how the product in question is supposed to perform, and focus on discerning what the customer has done wrong. Asking a customer about what they hoped is a profound way of saying "I want to see this from your perspective." I'll never forget that.

Unfortunately, for every Joe, there is an art director who looks down on the customer to whom they are selling, a narcissistic product manager who makes every customer issue a referendum on herself, a bored sales person just trying to meet his quota, a customer support person going through a nasty divorce, a sycophantic marketing person who simply agrees with whoever is in power, and a copywriter who has no clue what the customer does with the product they are writing about. I don't care where you work – you were probably able to picture at least two of these people.

As with so many business issues, the key to achieving customer intimacy lies in hiring. Hiring people with enough maturity (it's not an age thing) and emotional intelligence (which means they didn't have to read the book) to recognize the importance of learning about their business, their products, and their services from the customers' perspective. Hiring people with enough compassion and passion to actually want to know who other people are and what makes them tick. Hiring people who recognize the inherent value of others, not as a matter of personal pride, but because that's just how they behave. Because the goal isn't just to admire someone's moccasins, nor is it to try them on. It's to walk a mile in them. And if you want to get the mileage out of your customer intimacy program, that's what you and your entire organization will need to learn to do.


(c) 2008. Andrea M. Hill

]]> Here's why. Database analysis to study customers is a lot like looking at the animals in the zoo. Don't get me wrong - you can learn a lot. But it's an observation, not an experience. How the heck did we get to the point where the word intimacy, which means a close association or connection, of or relating to inner character or essential nature (according to Webster's unabridged) – how did we start applying that word to a business concept that most people interpret to mean "figure out what your customers buy, when they buy it, how they buy it, and why they buy it – and use that information to sell them more of it" ? Know the Message in Your Medium tag:ruminations.hill-management.com,2008-03-12:284d4545-cb1a-4fcb-9480-72c9df273006 Andrea Hill 2008-03-12T09:48:54Z 2008-03-12T09:44:00Z Thriller album with a great deal of interest. I think it's a brilliant marketing effort. In case you've missed it, Sony BMG has melded new marketing media and traditional marketing media to introduce a remake of the highest selling album of all time. The company has a particular challenge in introducing the remake of the album. The average consumer thinks Michael Jackson is a freak at best and a pederast at worst, and Jackson's financial challenges can be credited in part with Americans' faint disgust with him as a human being. The music world still considers Jackson to be a genius, but while they regularly incorporate his work in their own work – either directly or through significant inspiration – that influence is less obvious to the public. So the typical approaches to a 25th anniversary album – a tour, appearances on all the talk shows, etc. – were not an option. So in a brilliant display of their understanding of new media options, the company challenged professional dancers to perform Thriller's zombie dance in public venues from London's Chinatown to Cophenhagen's busiest train terminal. In each case, the audience for the dancers was 100 people or less. But every performance was posted on YouTube, and the videos have been downloaded nearly 1.5 million times so far. Every YouTube viewer of a Thriller promo is also exposed to the Michael Jackson YouTube site, where a promotion of the 25th anniversary album has been viewed over 600,000 times. The story received so much viral play that it was picked up by the New York Times and other major papers. In the first week of release the new album rocketed into the number one spot on Billboard's Top Pop chart and placed in top five or better rankings in music markets around the world.

Marketing continues to change. Today's marketers absolutely must understand not only what these marketing tools are and how to use them, but also the social implications of the new marketing tools. A reflection on the recent history of marketing and its evolution over the past 60 years helps illustrate this point.

Marketers who came of age in the 1940s – 1960s were selling to a very different consumer than are the marketers of today. From a social standpoint, there was little deviation from what was deemed conventional behavior, and deep social conformity led to conformity of taste and product usage. This was reinforced commercially, because product differentiation was expensive to achieve. Individuation of taste and access to unique products was reserved for the wealthy. From the marketer's perspective, the communication venues were limited (though significantly expanded from prior decades). Print, radio, and television were the primary means of reaching consumers, and all three mediums were focused on addressing mass audiences. This led to programming and advertising that was overwhelmingly homogeneous. How were the major social issues of the time influenced by the dramatic rise of the television as a communication medium during those years?

The 1960s-1990s saw dramatic change in cultural and social tastes reflective of the nonconformist predilections of baby boomers. Not surprisingly, direct marketing came of age during this time, bringing to a society that was still treated homogeneously by mass media a refreshing ability to cater to diverse tastes and interests. By the 1980s cable television ushered in the segmentation of America on a large scale, replacing the big three networks (ABC, CBS, NBC) and their virtually indistinguishable programming perspectives with literally hundreds of alternatives – many of them geared to comparatively tiny segments of the population. Cable television was the gateway to today's internet world – a world in which consumers take for granted the expectation that they can control the content they consume. The PC revolution was aided by the launch of Compuserve and AOL, delivering the ability to customize a media content experience. From that point it was a small leap for customers to begin to expect they could also control the marketing messages to which they were exposed.

Today's marketer faces a complex array of marketing choices. Email, wikis, social networking, personalized search, user-generated content, blogs, streaming video, vertical search engines, targeted communities, web enabled phones, location-based services and mobile search, participatory advertising, RSS, and VOIP are all new tools in the marketer's toolbox.

Marketing is simply the business of communication. The proper definition of communication involves two or more parties. Traditional approaches to marketing, limited by the technology and social perspectives of their times, reduced marketing to a one-way method. Today's marketers have the opportunity to embrace genuine communication with their customers. And this opportunity comes with a significant learning curve. But the learning curve is somewhat more than the average marketer may be realizing. Yes, a big part of the learning curve is simply mastering all these new tools – remembering your log-ins for the different services, and figuring out how to use them, which customers are attracted to them, and what purpose they serve. But in fact, those things are the easiest part of the learning equation.

Remember the book – and the saying – the medium is the message? Marshall McLuhan, author of the saying and of the 1964 book of the same name, theorized that every message is not only influenced, but defined, by the medium by which the message is delivered. McLuhan died in 1980, before any of these new digital marketing mediums were possible, let alone conceived of. Yet his work is as relevant today as it was back when he was worried about the ultimate social impact of the television. McLuhan argued that at the intelligent, rational levels of perception, human beings take a message and consider its content carefully. However, at the empirical – experiential – level of consciousness, the medium itself is the message.

As we have discussed numerous other times in these columns, humans are not all that skilled at critical thinking. When you consider this disjunction between intended content and medium, it's not hard to understand why young females suffer from a variety of eating disorders, young males begin to suspect that their role in life is to be sexy and adolescent for ever, or young children find it difficult to differentiate between cartoons and real life. The subtext of every advertisement is at least as powerful – and sometimes more powerful – than the intended content.

Maybe Sony BMG stumbled into this idea through sheer luck, but I prefer to believe they carefully considered all the aspects of this challenging marketing situation. They took the product of a once-great but now sullied star and removed the taint. By highlighting the creativity, gumption, and sheer fun of young people with talent providing impromptu performances in public places, Sony BMG created focus on the music, how it made us feel in 1983 when we first heard it, and how it still makes us feel today.

Marketers today would be well-advised to expand their thinking well beyond the typical questions of features and benefits of products and services. Features and benefits continue to be of significant importance, but they are only the starting point. Marketers must also consider the mediums that are most relevant for the delivery of the message. That evaluation needs to be expanded beyond the questions of who is using this medium and what is the expense of using this medium. The evaluation also needs to include an assessment of how the medium itself influences the message – both from a message efficacy standpoint and from an ethical standpoint.

Sound complicated? No more so than when McLuhan first started publicly exploring these ideas in 1951, in his book The Mechanical Bride. Society may seem more complicated to us now, but it seemed plenty complicated to those who were our age in the 50s and 60s. And though we may be the first generations to experience the explosion of digital marketing, I daresay the rise of radio and television felt every bit as earth shaking in their time. At the end of the day, marketing is a social effort, informed (hopefully) by history, and both defined by and defining of current cultural norms. When marketing is approached with respect for all the disciplines involved – analytics, verbal and graphic arts, psychology, sociology, and ethics – it can be a resoundingly satisfying career choice.


(c) 2008. Andrea M. Hill

]]> Remember the book – and the saying – the medium is the message? Marshall McLuhan, author of the saying and of the 1964 book of the same name, theorized that every message is not only influenced, but defined, by the medium by which the message is delivered. McLuhan died in 1980, before any of these new digital marketing mediums were possible, let alone conceived of. Yet his work is as relevant today as it was back when he was worried about the ultimate social impact of the television. McLuhan argued that at the intelligent, rational levels of perception, human beings take a message and consider its content carefully. However, at the empirical – experiential – level of consciousness, the medium itself is the message. Why Someone May Hate Your Ideas tag:ruminations.hill-management.com,2008-03-11:e93cf4d9-4c02-4c50-b551-ae38634a6281 Andrea Hill 2008-03-11T22:44:51Z 2008-03-11T22:37:00Z  
The Medium is the Message: Why Someone May Hate Your Ideas

I can't write much tonight, because I need to finish the darned article. Yet as stuck as I am, this information is helping me refine my idea (a little procrastination isn't hurting either). Though the seven reasons will work in any situation where a member of a team is presenting an idea for consideration, the list also works any time someone is trying to refine the presentation of an idea, say, for a magazine whose submission deadline is today and it's already 11:40 pm . . . or when you're running late because you hate your own idea . . .

Enjoy!


]]> Seven reasons why someone may hate your ideas. Modern Manners tag:ruminations.hill-management.com,2008-03-07:018e34f7-0625-426e-bffb-d136d22ce474 Andrea Hill 2008-03-07T21:57:33Z 2008-03-07T21:50:00Z
No, I don't believe innovation is unimportant. I do think the word is over-used, and I think people would rather attend expensive seminars in San Francisco to learn about it than actually engage in it. But I think it's important. I also think it is woefully misunderstood. And I think the primary reason for our ongoing misunderstanding is our failure to recognize the importance of relevance.

Simple question. What matters more? Giving your customers something new, exciting, never-seen-before at a great price, or giving them something relevant to their needs? Ideally you don't have to choose between the two, but if you do, you should bet the bank on relevant every time. That's right. Every single time. Because an innovation that is award-winning but irrelevant will never turn a profit. Sure, there have been innovators who developed something entirely irrelevant to one market, and then stumbled into another market that scooped their invention up with glee. But their luck was based on finding someone to whom their product (or service) was ultimately relevant. And yes, there are some customers who will buy something completely irrelevant just for the sake of being the first, or the only, person to acquire it. But there aren't enough of those people around to make essentially irrelevant ideas into commercial success.

This is advice your grandfather could have given you. Yet one only has to do research for three or four minutes to uncover a treasure trove of innovative products that died due to unsatisfactory (or entirely absent) ROIs. Products like Digiscents/iSmell (no kidding – digital smell synthesizers and software applications that transmit scents over the web), Flexplay (self-destructive DVDs?), and Microsoft Bob come to mind.

I'm not suggesting relevance is easy to discern. An important starting point is to listen carefully to what customers have to say, pay attention to how they work, play, and care for their families, or to how and why they are using your and your competitors' products. The next critical step is to listen carefully to your sales, service, customer support people, vendors, and service providers. Surveys, focus groups, and other forms of customer research can be of great benefit. Ideally you are able to develop a strong sense of relevance to your customer because you are your customer. But even with all of those tools at your disposal, it can be difficult to determine relevance. Many people were working in computing in the decades leading up to the 1980s, but only a handful were able to see how incredibly relevant the personal computer would ultimately be.

The failure to innovate with relevance isn't just limited to new products and services. Sometimes perfectly relevant new products and services are doomed by completely irrelevant marketing. You know the kind I mean. Marketing that is superficially sexy, glossy, purports to be edgy, and is resolutely mundane. No amount of information regarding the intended customer's needs, wants, or perspectives influenced the marketing department's creation. Customer awareness was not their concern.

Most of my readers are already familiar with my Great-aunt Carrie. Another of her excellent sayings – which I have thought about on numerous occasions lately – was pretty is as pretty does. As I child I used to say "but what does that mean Aunt Carrie?" The only answer she would ever give me was that I should think about it.

Well, I did think about it then, and I continue to think about it now. I'm inviting you to think about it with me. Innovate? Yes, of course. But don't just make it pretty. Make sure it has manners too.


(c) 2008. Andrea M. Hill ]]> No, I don't believe innovation is unimportant. I do think the word is over-used, and I think people would rather attend expensive seminars in San Francisco to learn about it than actually engage in it. But I think it's important. I also think it is woefully misunderstood. And I think the primary reason for our ongoing misunderstanding is our failure to recognize the importance of relevance. Move Your Mic Away From the Speaker Please tag:ruminations.hill-management.com,2008-03-06:bbb4301e-2724-46d7-a843-587810c9a884 Andrea Hill 2008-03-06T18:34:51Z 2008-03-06T17:46:00Z
Most people would rather look up the many diverse definitions of feedback than actually put themselves through the agony of giving it or receiving it.

Actually, feedback is an incredibly stupid term. I'm sure it was invented by some management theory enthusiast who thought it sounded more intelligent, more B-school, more commercial than the plebian "hey, can we talk for a minute?" Feedback is the process-ized, depersonalized, anti-literate term for a mere element of the human process known to most of us as communication.

The idea is good. The idea is that we should be telling the truth in our organizations, and that by telling the truth, we avail ourselves of information and insight that will enable us to do a better job. Believe it or not, that idea is revolutionary. Though that begs the question - can an idea whose time has come again, and again, and again still be revolutionary? Hans Christian Anderson alluded to the importance of truth-telling (or our lack of willingness to engage in it) in 1837 when he first published The Emperor's New Clothes. Shakespeare plays with it in Measure for Measure and Alls Well That Ends Well (actually, it's a major theme throughout his work). Boccaccio loved a sexual masquerade, Jesus of Nazareth tried to express his concerns about it in the early days of the Christian calendar, and both Socrates and Plato devoted a hefty part of their storied lives to holding forth on the topic.

Yet most of our early memories of truth-telling consist of our mothers telling us not to tell Aunt Etta that we love the way the skin on the underside of her arm jiggles when we touch it; of our fathers telling our mothers "No! I never think you look fat!" and then winking at us; of our early lessons about never telling the boy or girl you like that you actually like them; and of our parents' Sunday brunch discussion about how Pastor Williams' sermon was so much hokum, when we clearly heard them tell him what a great sermon it was as we exited the church.

If centuries of philosophy, religion, social and political discourse have not led to comfort with telling uncomfortable truths or indeed, hearing them, then I think it is possible that the notion of truth-telling at work is, indeed, revolutionary.

Our discomfort with truth-telling leads us to say we like things we don't actually like. Such as your girlfriend's chicken tortilla soup, which tastes like soggy flour. But you can't say that, so you eat it while cringing inwardly. When does she find out? When she's been your wife for two years and suddenly you can no longer tolerate it and you blurt out that you absolutely hate that stuff. The risk that was avoided during the courtship was not the risk of hurting her feelings. Not really. It was the risk of mustering enough courage to say what you thought in a kind and loving manner. If receiving feedback is difficult, giving it is more so.

Most of our failures to tell the truth are due to cowardice rather than sensitivity for others. That cowardice hurts the deserving recipient far more than the information from which our pseudo-sensitivity was protecting them.

In business this cowardice leads to employees who don't realize they are doing a terrible job until their annual review – at which point it costs them a raise and causes a probationary period, demotion, or possibly termination. The same cowardice results in senior executives being shielded from important information from the field, because it's risky to provide information that hasn't been asked for, or, even if it has, might prove to be irritating. Cowardice leads to failure to provide a peer with an observation about how their performance could be improved, how they could make a better impression, or about a mistake they made. Could malice drive some of that? Probably, but I'd wager not as often as cowardice is the culprit.

So. Feedback. It's a dumb word. But if we could all develop a knack for kindly, with empathy, and a genuine desire for the betterment of another person and the enrichment of our relationship with them – develop a knack for telling them the truth, we would enjoy a more nuanced, more productive work experience. And maybe we could even un-name it after a while. Maybe the word feedback would go away, a silly historical reference to a time when communication skills were bereft of an effective means for telling one another about what is real.


(c) 2008. Andrea M. Hill]]> Our discomfort with truth-telling leads us to say we like things we don't actually like. Such as your girlfriend's chicken tortilla soup, which tastes like soggy flour. But you can't say that, so you eat it while cringing inwardly. When does she find out? When she's been your wife for two years and suddenly you can no longer tolerate it and you blurt out that you absolutely hate that stuff. The risk that was avoided during the courtship was not the risk of hurting her feelings. Not really. It was the risk of mustering enough courage to say what you thought in a kind and loving manner. If receiving feedback is difficult, giving it is more so. Are You Writing Your Own Obituary? tag:ruminations.hill-management.com,2008-03-05:6346b78a-e1b7-4706-aa4d-af5b098b04a5 Andrea Hill 2008-03-05T22:43:15Z 2008-03-05T22:18:00Z Everywhere I travel the talk is of the coming recession. In terms ranging from laconic to histrionic, the nation is coming to grip with an economic adjustment. Though the range of response from person to person is not surprising, the range of response from industry to industry is perplexing.

My work is divided among the apparel, consumer electronics, entertainment, and jewelry industries. All four industries are experiencing similar consumer withdrawal, as customers who once shopped like Lindsay Lohan thanks to their home equity loans are now cutting up their credit cards and rediscovering what it's like to live on their $45,000 annual salary.

There are similarities. The smart companies across industries are evaluating means to reduce their costs, maintain brand, marketing and sales focus, and increase customer value. Savvy operators have switched from a quarterly/monthly financial evaluation strategy to a monthly/weekly financial evaluation strategy. Even the folks who don't care much for reading are watching the financial and business news every day.

But one difference stands out, and it's mystifying to me. In the apparel industry, retailers and design labels alike are aware that tough times are ahead, but most assume they will weather the storm. In consumer electronics everyone is aware that they will no longer benefit from a buyer for absolutely anything that gets thrown on the shelf, but most assume they will weather the storm. And in the entertainment industry all levels are aware that the models will continue to change rapidly and somewhat confusedly, though most all assume they will weather the storm. The jewelry industry, however, seems to be convinced – sometimes seemingly committed to – its own demise.

Why do I say this? Because everywhere I go, everyone I talk to in the jewelry industry asks me "are we going to survive this? What's going to happen to the jewelry industry?" At first I thought this reaction was isolated to a few struggling players. But that's not the case. There seems to be no profile for the jewelry industry death-watcher.

The bottom line is that the jewelry industry is going to be fine. The jewelry industry is simply going through challenges that have affected every other mature industry, including each of the industries I currently serve.

Less expensive imports have threatened nearly every type of industry over the past 50 years. But the apparel and textile manufacturing business in the US is now larger than it was in both shipments and dollars in the mid-80s, when the end of American textile and apparel manufacturing was prophesied. Yes, jobs in those industries have decreased by nearly half. Was it due to cheap imports, outsourcing of jobs, or relocating plants to markets with lower labor costs? While all of those things played a part, their part was arguably small. Textile and apparel industry watchers estimate that 80% of the reduction in jobs was due to the creation of efficiencies, allowing the manufacturing operations to work with less labor.

For the past 50 years Ma-and-Pa retailers have been swallowed up by mass merchants. Yet small business accounts for 50% of total US private sector employment, pays more than 45% of total US private payroll, has generated 70%-80% of net new jobs annually for the past decade, and accounted for over 650,000 start-ups in 2006. As I travel I seek out innovative apparel boutiques, jewelry stores, and independent music/book/video retailers, and I have been delighted to find thriving independent retailers in nearly every community.

So back to my initial question. Why are jewelry retailers so much gloomier about their prospects than business owners in other industries? It's not a rhetorical question – I don't have the answer to that and I'm hoping that some of you do.

I do have an observation about what will set apart the winners from the losers. Actually, it's a question raised by Heraclitus regarding when an object that persists through time transitions into a different object. The story that was told to illustrate Heraclitus' question was this:


“The ship wherein Theseus and the youth of Athens returned had thirty oars, and was preserved by the Athenians down even to the time of Demetrius Phalereus, for they took away the old planks as they decayed, putting in new and stronger timber in their place, insomuch that this ship became a standing example among the philosophers, for the logical question of things that grow; one side holding that the ship remained the same, and the other contending that it was not the same. (Vita Thesei, 22-23)


Businesses that survive over the years take away old planks that are decayed and replace them with newer, stronger timber. One of my favorite retail stores in the world is on Howard Street in Chicago. It has been owned by the same woman for at least 30 years. At times it has been a jewelry store, a clothing store, a costume store, and an antique store. In fact, at all times it has held all of those things, but during different times it has emphasized those things differently. And always that store has been a place that has welcomed its neighborhood, known its shoppers, and offered amusement and conversation to anyone who entered the premise. That seems to be the best recipe for long-term retail success – a formula that has found adherents in nearly every community.


Retailers and small manufacturers need to ask of themselves a few vital questions.

  1. Why do my customers buy my products?
  2. How do my products stand out in my customers' minds?
  3. How do my services stand out in my customers' minds?
  4. What are the biggest hassles my customers encounter when buying from me, and what could I do to eliminate them? (the hassles, not the customers)
  5. Are there any specific barriers to being my customer, and if so, how can I remove them?
  6. Which of my customers require substantially more or less sales attention than the others? Why? What insights can I glean from this?
  7. If my store were shuttered, to whom would it matter, and why?
  8. Which of my customers would miss me most, and why?
  9. How long would it take another company to fill the void?
  10. If I were just starting my business today, would I do the things I am doing now? What would be different?



The asking and answering of these questions will lead to vital insights that can help any business owner figure out which planks are decayed and need to be replaced. Not all businesses will survive the test of time, but some will. Might as well be yours.

(c) 2008. Andrea M. Hill

]]> There are similarities. The smart companies across industries are evaluating means to reduce their costs, maintain brand, marketing and sales focus, and increase customer value. Savvy operators have switched from a quarterly/monthly financial evaluation strategy to a monthly/weekly financial evaluation strategy. Even the folks who don't care much for reading are watching the financial and business news every day. Can You Measure Your Gut? tag:ruminations.hill-management.com,2008-02-15:2af67fe3-1f8c-4fcd-a4f2-08beff48508f Andrea Hill 2008-02-15T14:21:09Z 2008-02-15T14:15:00Z
Overall, the consultant's process was quite good, and we implemented the process nearly by the (her) book. She hadn't developed anything earthshaking or new. In fact, it was largely text-book strategy set to a rational and clear formula to assist with discipline and retention. This is a good thing. But there was one other aspect of her process that was also text-book that made me uncomfortable, and that's what we're examining today.

She took a traditional b-school marketing approach to customer lifetime value (CLV). That approach says that some customers are simply not as valuable as others, and a business should drop them and focus on the ones that are profitable. Now I'm all for dropping unprofitable customers! But the methodology for defining who those unprofitable customers are is largely incorrect, and leaves a lot of money on the table.

In the case of the consultant, she advised that customers who fit our strategic definitions should get first everything: calls should be routed to answer those customers first, they should receive the direct mail offers, they should receive all available attention. According to the consultant, we could serve the low value customers but only if we didn't spend any additional money or effort to do so.

The traditional b-school approach is called a standard CLV model. It demands that you calculate the net present value of all revenue and marketing dollars over a period of time (usually 1-3 years, but could be as much as decades, depending on the business) for each customer, and only keep the customers who show positive net present value for the marketing investment. Makes sense, right? Frequently, no.

You see, the standard CLV model is just a snapshot in time. There is a cost to acquire a customer, and a cost to maintain a customer. Once the customer is acquired, the maintenance cost can be leveraged over long or short periods of time – it just depends on when you decide to exercise your option to drop them. So at that static moment in which the measurement is made, it may make sense to drop a whole batch of customers, based on anticipation of their behavior in the upcoming time period. But if you run the same projection in a month, or even a week, you could get a different result. I always found the standard CLV model sort of frustrating, because while I felt in my gut that something was wrong with it, I had nothing more substantive to back it up.

Recently I stumbled across a study published in the Journal of Marketing in 2006 that explains the weakness of the standard CLV approach. First, the article confirms that standard CLV models present an overall biased approach. The study authors point out that the standard CLV model assumes that unprofitable customers will continue to be unprofitable. This is true for some presently unprofitable customers, and not for others. Once a customer is cut off, the firm can no longer exercise options to benefit from the opportunity present in that customer, so use of the standard CLV approach actually undermines the opportunity to exercise options in the future. Future options could include offering presently unprofitable customers offers that were not offered previously and which would benefit that group of customers, maintaining service to those unprofitable customers at low cost, and of course, cutting off those customers at a later date.

At the heart of the standard CLV model is the idea that marketing resources are scarce and must be carefully administered. Well, all resources are ultimately scarce, though there is no doubt that marketing resources can be expensive. Because executives have a difficult time measuring and proving how effective their marketing dollars are, it feels better to cut them than to worry about spending indiscriminately.

The standard CLV model was developed in response to business culture heavily influenced by activity based costing (ABC). Developed by Robert Kaplan (who also developed the Balanced Scorecard), the method is intended as a tool for understanding product and customer cost and profitability. In a business it is rather simple to directly measure the time it takes to make, QC, pack and ship a widget, the time and cost involved in answering a phone call, the time and cost related to processing invoices, or placing a purchase order, or to hold a meeting. What is difficult to directly attribute is the value of any particular step. We businesspeople don't like ambiguity, so we lean hard on the things that can be carefully measured. Ask an engineer the measurement of one of her activities, and she can provide the answer with a tolerance measured in hundredths. Ask a marketer for a measurement of an activity, and you will get an answer that has a lot of qualifiers in it. So we create models like standard CLV, which gives us the satisfaction of certainty and metrics, and which turns the blind eye of denial on the idea of human psychology and market behavior.

The aforementioned business consultant actually had a reasonable rejoinder to my hesitance about making the less profitable customers wait on hold (in my opinion, a good business doesn't let any of its customers wait on hold). Her process accommodated an eye toward development of lower-value customers.

But in most businesses, there is an ongoing battle between what can be measured in operations – and therefore, cut in costs – and what can be measured in marketing. As we head into a recession in the next 12-24 months, there are some important marketing adjustments businesses must make. Managing a business in recession means feeding the quacking ducks – not cajoling the ducks into a new diet. But that still requires marketing, and marketing will continue to be difficult to measure. For the metrics geeks out there, I strongly recommend the article referenced here. It provides some interesting approaches to offset the inherent bias in standard CLV. Finally, let's all remember that a good handle on human psychology and an intimate sensitivity to and awareness of our customers may cause us to make decisions that the metrics can not assure us will be good decisions. Going with your gut is inadvisable when determining the safety of an electronics device. But it's an essential part of the toolbox when working with motivation and relationships.

Haenlein, M., Kaplan, A.M., & Schoder, D. (2006). Valuing the real option of abandoning unprofitable customers when calculating customer lifetime value. Journal of Marketing, 70, 16.


(c) 2008.  Andrea M. Hill]]> At the heart of the matter is the idea that marketing resources are scarce and must be carefully administered. Well, all resources are ultimately scarce, though there is no doubt that marketing resources can be expensive. Because executives have a difficult time measuring and proving how effective their marketing dollars are, it feels better to cut them than to worry about spending indiscriminately. The Administrative Answer to Wisdom at Work tag:ruminations.hill-management.com,2008-02-13:672d680c-0daf-453e-b77a-e11954b0421a Andrea Hill 2008-02-13T20:30:22Z 2008-02-13T20:08:00Z In Theory of Constraints, Eli Goldratt teaches that business policies are frequently behind business dysfunction. In fact, he names policy constraints as the primary culprit behind business bottlenecks. Though my last company was not particularly policy heavy, this teaching still held true, as a few times each year we would discover some policy getting in the way of exceptional service or smart decision-making.

Now that my transition from corporate executive to consultant is complete, vigilance against policy constraints is one my the primary activities. It is amazing, and sometimes disheartening, to discover how awry an originally well-intentioned policy can go.  

The larger a business grows, the more difficult it is to manage communication among all of its constituents. Managers are the primary instigators of policies. Managers need policies because they can not be all places at all times. They fear two things – they fear subordinates simpling makes a decision (and possibly making the wrong one), and they fear the opposite problem of nobody being willing to do anything until the manager comes back. When I first arrived at my last company, an entire department wore t-shirts that said "We'll all know when (insert name here) is back." That's pretty broken!

But even in more functional environments, well-meaning managers create policies that are intended to guide behavior. In some cases, the policy is intended to hold people accountable, such as policies that require all shift changes be approved by a manager. I don't believe policies keep anyone accountable, because accountability is something an individual chooses regardless of external pressure. You can't make someone accountable. You can point a finger at them, or you can ask them to take responsibility, but accountability is an individually chosen perspective. Southwest Airlines – with their 33,000 employees – allows their employees to switch shifts with a co-worker without managerial approval. Consider how much time managers save by not having to sign off on (or even discuss) all those shift changes! Their ability to ditch the policy is based on hiring accountable people in the first place - proving that the inverse of enforced accountability is more cost and time effective.

Policies may serve the purpose of creating a situation where the rules are clear and therefore the consequences of not following the rules are also clear, but they can also create a situation that is rife with politics, negative creativity, and games. The Civil Rights Act of 1964 introduced remedies against Quid Pro Quo sexual harassment and Hostile Work Environment sexual harassment – both policies that were needed and welcomed by working women (and men) across the country. But those "policies" have been distorted repeatedly, leading to overly-stringent corporate sexual harassment policies that terrify men and effectively neuter the workforce (if you want to read a great book on this topic, read Heterophobia: Sexual Harassment and the Future of Feminism by Daphne Patai – it's excellent). These corporate policy reactions are due to abuses of the policies, overweening HR departments, and faint-hearted corporate law departments. The end result? Dysfunction.

Some policies are unavoidable. Federal labor law policies are an example of that. But just because something is a federal law doesn't make it a desirable policy. Look at all the money and lives wasted on enforcing an absolutely unenforceable drug policy - nobody is accountable, though we tax payers continue to pay the accountants. If policy constraints are costing us at the corporate level, what are they doing to us at the level of national government?

It is desirable for an environment to operate on sound principles rather than rules and policies to the greatest extent possible. I don't think that all policy can be removed - that's utopian. But I do think that much of what we try to govern with rules is situational and the rules have to be shoehorned to fit the situation. Sound principles will serve diverse situations much more effectively than rigid policies, and the system can continuously adapt itself accordingly. In the meantime, all of this policy dysfunction is part of what's keeping me in a job.


(c) 2008. Andrea M. Hill

]]> Some policies are unavoidable. Federal labor law policies are an example of that. But just because something is a federal law doesn't make it a desirable policy. Look at all the money and lives wasted on enforcing an absolutely unenforceable drug policy - nobody is accountable, though we tax payers continue to pay the accountants. If policy constraints are costing us at the corporate level, what are they doing to us at the level of national government? You Can't Tell Me What to Do! tag:ruminations.hill-management.com,2008-02-06:4c55d062-b681-48e7-b7d6-61b56809c63a Andrea Hill 2008-02-06T13:18:35Z 2008-02-06T13:13:00Z People get confused between order and chaos, creativity and noise. Maybe not all people, but a certain category of people suffers from this malady more than others (besides teenagers, I mean). That category is entrepreneurs who have grown their business past the up-and-coming stage and are now faced with the established-business phase.

I can understand how this happens. The entrepreneur is an idea guy or gal. They are turned on by a business concept, and they throw themselves happily and energetically at the task of turning the idea into cash. In the process, they take on any role that must be filled, they try out crazy ideas that happen to work, and they work insanely long hours. Because they don't have any money to begin with and they're constantly afraid of losing what they've gained, they take a long time to hire anyone and they do so sparingly.

As the business matures a few interesting things begin to happen. The first thing is determining the answer to the question exit or keep going? If an entrepreneur is very lucky, if they have built a firm foundation, and if they want out, they may be able to sell to someone else. At that point any self-respecting entrepreneur does it all over again with a new product or service.

If the entrepreneur does not want to exit, doesn't have something saleable, or can't find a buyer, they keep going. Changes begin to happen that are very small at first, but over the years they add up. The entrepreneur (or their spouse) gets tired of working so many hours. Customer demands begin to require better, faster attention. The requirements of some of the disciplinary areas of business – whether it be marketing, finance, operations, or IT – become too challenging for the entrepreneur (yes, anyone can learn how to do QuickBooks, but the accounting function of a business is generally beyond the scope of most non-accountants). So the entrepreneur begins to hire experts in specific areas in order to avoid messing up something they don't understand and more importantly, to advance the business beyond their personal abilities to do so.

Once you hire some people, they begin to hire more people. There are a number of good reasons for this. The first is that the people the entrepreneur has hired do not want to work 60, 70, or 80 hours per week. Many entrepreneurs struggle with this. They think "Well, I do it. What's wrong with everyone else's work ethic?" The problem with everyone else's work ethic is that they are not paid to work 60, 70 or 80 hours per week. And there are very few entrepreneurs who make the ultimate reward of working 60 - 80 hours per week worth the trade-offs. So, the people the entrepreneur hired, who are working 40-50 hours per week, hire other people who will also expect to work 40-50 hours per week. And as the business grows, more people are needed. Even with efforts designed to improve efficiency and assist the business in growing staff at a lower rate than the growth rate of sales, a growing business will hire more people.

Here's where the confusion between chaos and order, creativity and confusion begins to cost. The entrepreneur is generally a person who dislikes any restrictions on their freedom. They don't want a boss, they don't want to follow rules, and they don't want to be told what to do. Creation of systems is not their strong suit. Not only that, but they resent any system to which they are subjected. But the dynamics of communicating and planning with 3 people are significantly different than the dynamics of communicating and planning with 20 people. And the challenges expand exponentially with each doubling of the workforce. Systems, the very thing renounced by the entrepreneur, are necessary to grease the wheels of a group of people trying to work together effectively.

I don't believe bureaucracies are effective, so please don't assume that I am advocating for their perpetuation. Many management improvements have been introduced in the past 20 years that reduce bureaucracy, nearly all of them related to a matrixed organizational approach.

No, the tools I am advocating are the tools that systematize what can be systematized so workers have more energy and time left for creativity. Things like project management approaches, new product development systems, and content management disciplines solve for the most common causes of miscommunication and mistakes. What are those common causes? They are 1) assuming all of the people who need information have the information, 2) accidentally leaving out people who need information, 3) failing to pass on the relevant information to the next decision-maker, 4) failing to put disciplines in place that guide and monitor time spent on tasks, and the big one 5) failing to recognize early enough when the goals and objectives are not clearly understood or even shared.

When I consult for entrepreneurs I invariably encounter some version of this problem. The entrepreneurs who have hired me like the idea of enhanced planning and communication, but they always balk when they realize that they, too, must use the systems that are being put in place. What they resent is any restriction on their personal operating approach. What they complain about is that things are getting "more complicated," that "creativity will go out the window," and that "all these systems will cost us a fortune."

Despite much talk about Microsoft losing its entrepreneurial edge, they were awarded 1,687 patents in 2007, up from the mid 600s in 2004 and the mid 700s in 2005. That's one patent for every 46 people on their international payroll that year. IBM received 3,148 patents (one patent for every 113 employees), Samsung 2,725 (one patent for every 93 employees), and Intel 1,865 (one patent for every 55 employees). There is no doubt that a small organization can react more quickly than a large organization. But how are these entrepreneurial firms measuring their current creativity? One measure – patents per year per employee – would suggest that anything less than one patent per year per 46 employees would be unacceptable, if your goal is to compare the relative creativity of a small process-free organization with the relative creativity of a process-encumbered organization such as Microsoft.

If current creativity isn't up to snuff, there is a strong possibility that lack of procedure to enhance communication and planning is getting in the way. Yes, when an organization commits to following a project management discipline, there are steps that must be taken that did not exist before. But what people fail to consider is all of the steps that will disappear – the steps of correcting communication mistakes that have gone unnoticed until the project is well underway, correcting information sharing mistakes that have led to product development errors, correcting interpretation errors that have led to creating features that customers do not want or do not need, and the list goes on and on. Each failure in communication and planning must be accounted for at some point in the process. Implementing processes such as project management and product development disciplines simply account for required communication and planning steps up front, leaving the organization with more time and resource to do the creative work.

Anyone who has ever raised a teenager knows that it's not difficult to confuse simple communication requirements (call if you won't be home by 10:00, let me know where you are going) with unreasonable restrictions on personal freedom. But our goal as human beings is to get past the hormone-laden years of adolescence and into a mature adult frame of mind. We should have the same goal for our businesses.


(c) 2008. Andrea M. Hill ]]> Here's where the confusion between chaos and order, creativity and confusion begins to cost. The entrepreneur is generally a person who dislikes any restrictions on their freedom. They don't want a boss, they don't want to follow rules, and they don't want to be told what to do. Creation of systems is not their strong suit. Not only that, but they resent any system to which they are subjected. But the dynamics of communicating and planning with 3 people are significantly different than the dynamics of communicating and planning with 20 people. And the challenges expand exponentially with each doubling of the workforce. Systems, the very thing renounced by the entrepreneur, are necessary to grease the wheels of a group of people trying to work together effectively. The Power of No tag:ruminations.hill-management.com,2008-02-01:8ead9230-f4c9-4a47-b8e3-6df31226c096 Andrea Hill 2008-02-01T12:57:56Z 2008-02-01T12:43:00Z Deciding what to do consumes an inordinate amount of time. We seek solutions to every type of problem. Want strategy? Look at dozens of business books and guess which concept will work best. Want personal productivity? Evaluate every planning system and choose the best. Want great employees? Profile, inventory, build competency models, interview, and nab the best. Recognizing excellence is critical, but what if there is a step that comes first?

For every idea we accept, for every employee we hire, and for every idea we pursue, there are dozens we turn down. Yet we orient our systems towards identifying the best. Well, the best only comes along once in any campaign. But the worst, the mediocre, and the good-but-not-so-great come along a dozen times. So learning to recognize when to say no is more important than knowing when to say yes. Eliminate the choices that won't work and save your resources.

I read a book a few years ago called "High Probability Selling" by Jacques Werth. Werth takes the no approach with sales. Rather than training salespeople to persuade prospects to buy, the High Probability Selling approach assumes lots of people want to buy. It suggests great salespeople should excel at eliminating lousy prospects quickly, so they can focus on the high quality prospects. 

HR departments review piles of resumes. The typical approach is to screen resumes with the inquiry what skills do we want, and who has them?  But it can be powerful to start by asking what things do we know we don't want, and eliminate those candidates first. One entrepreneur immediately disqualifies a candidate if their only past experience is consulting or investment banking. As he explains, "I don't have time to train someone in how to turn analysis into results. If someone has only worked at analysis jobs, I know to pass them up." Knowing when to say no streamlines his first cut at hiring.

This applies in personal life as well as business. Most people say yes too often. A clear sense of personal priorities helps you know when to say no. One executive realized he was missing out on quality family experiences. He made his family a priority by adopting a habit of saying no to project and job offers that didn't allow enough family time. By making it a non-negotiable point, he was able to instantly disqualify opportunities that conflicted with his goals.

Try turning your decisions inside out. Find out whether you can identify no criteria in various life categories, and evaluate how starting with no could make a difference in your life.


• To which job candidates will you say no?
• To which projects will you say no?
• To which invitations will you say no?
• To which leisure activities will you say no?
• To which intrusions on your time will you say no?



(c) 2008. Andrea M. Hill

]]> Good decision-making is often defined as finding the opportunities that are the closest match to the characteristics and end results we desire. This approach consumes a lot of time. What if you started with elimination steps first? Could you speed up your decision-making and improve the quality of your overall effort? All Dressed Up But Don't Know Where You're Going tag:ruminations.hill-management.com,2008-01-31:ac361d20-e163-4861-96f4-2a05bf30ebbc Andrea Hill 2008-01-31T14:52:10Z 2008-01-31T14:47:00Z Once upon a time, there was a new medium called the worldwide web. The people who knew how to use it were the same people who had been using the actually-not-so-new medium for some time – researchers, programmers, and tech geeks. When people who did not fit into those three categories developed interest in the worldwide web, they turned to the programmers and tech geeks who knew how to use it. And thus was born a strange world of websites that had little commercial value, websites that were weak (or downright awful) in their design sensibilities, and websites that failed to connect to the non-virtual brands with which they were associated.

Thankfully another category of folk became interested in the web – graphic designers. They became interested in advance of their usual partners-in-crime, the marketing folk. So the web improved visually, but not operationally. Because we al