Tuesday, April 03, 2007

Inside the box

The current competitive business landscape confronts two certainties. One, the cost of customer acquisition rises daily. And, two, the longer you hold on to that customer, the greater its value.

It seems simple enough; once you get a customer, you do what you need to do to keep it. But tension arises because this simple, straightforward business model is too often trumped by other demands and market requirements.

For example, the public markets’ are merciless on a quarterly basis, while long-standing customer relationships often have short-term ups-and-downs. Forced to choose forbearance or foreclosure, a good customer may get little slack when circumstances affect its budget.

Less objectively, but just as potentially upsetting is our own human urge to constantly be looking ahead for the next challenge, the next opportunity. We tend less to the bird in hand in favor of chasing the two in the bush. It is why the grass is always greener. We can get caught up in the chase and short-change current customers and colleagues.

The combination of market pressures and human nature can be deadly. It can lead to the misallocation of investment capital or a compensation imbalance (when we fall in love with people or markets). It can serve as a logical basis for throwing good money after bad or for seeing slow-growth as no-growth and under investing in standing customer relationships.

Putting a check on such behavior doesn’t get much time in an office because careers – especially public ones – are not made on caring and carrying forward as much as they are on winning and moving forward. “Victorious or on your shield” is an ancient standard that still resonates.

It may be, though, that the rise in competitive pressures that has pushed the cost of customer acquisition and the pain of their loss higher can lead to a bit more balance in the equation. It begins not with thinking outside the box, but inside it. Inside the company you have built and the customers it serves.

If there is value in keeping a customer and even greater value in continuing to improve productivity and margins. Surprisingly, keeping, strengthening and growing relationships is done in much the same manner as companies pursue new customers.

We seem willing to take the time to think through a prospect’s competitive landscape, understand the consumer, business or user value of a given product or service, assess the expectations of the market and view it through the lens of past practice, but we don’t often do that for current customers or clients. By not asking it of ourselves, we wait to be asked by our customers. And mostly, by then, it is too late to make a difference.

The trick might be to eliminate the distinction between a current customer and a prospect. After all, each needs to feel confident in your ability to deliver, each needs to be assured that our products and services are offering high-value and each wants our focus to be on them. The result just might be a sharper focus on opportunity, not just the new ones, and offers to our customers that more closely reflect the current landscape, not the one we mapped when we first made our pitch.

If we treated current customers as prospects and prospects as customers, it would have the added benefit of aligning our R&D, sales & marketing, co-op programs, compensation and management. This kind of outside-the-box thinking would put the focus where it really needs to be – inside the box.

Tuesday, March 06, 2007

Who are you?

A business built in the time of capitalism is, rightly, focused first on making a profit. That sounds naïve. Of course, a business is built to deliver a profit. Less time is spent on and less often asked is the question: How much?

“More” is too easy and too often the answer. It is an answer that draws little criticism and a lot of consensus. Answering the question in any other meaningful way opens the door to a set of more complex concepts of responsibility, ownership, long-term planning and personality.

Even these, though, are not as cut-and-dried as they may seem. Take responsibility. It can be responsibility for something (say, profits so as not to stray too far from what is safe) or for someone (admitting that employees, customers, partners, investors and others are each your concern).

Take ownership. On one level, someone owns the business trying to make that profit. But on another, is it possible for any company to succeed if people at every level do not feel ownership? It is often said that a company’s receptionist, the person who welcomes visitors and answers those who call, creates the first impression. What does the receptionist own – or, feel he owns?

Then there is long-term planning, which, in the modern era of public companies and those aspiring to be, is defined as anything scheduled beyond the end of the current quarter. The public markets are punishing to companies that do not deliver in the short-term. “Buy on the rumor, sell on the news” is an old saw that has cut many companies in two.

But personality? What does “who” you are have to do with how well you do? It turns out quite a lot, really. The negative has already been proved. Try to be something other than the markets expect and the response will be swift and largely negative. Think of the comic actor who undertakes a serious role, think of the airline that rolls up a set of acquisitions into a travel & hospitality holding company, think of a retail bank which begins chasing the higher margins of commercial borrowing, think of…well, the list is near endless.

The penalties are internal as well. Even though a foolish consistency remains the hobgoblin of small minds, a consistent approach, even to change, can go a long way in underscoring reputation, encouraging employee commitment and helping to more effectively decide where money ought to be spent to further everyone’s commercial interests.

In this way, corporate personality – or culture – is more than merely allowed to change and evolve; in fact, culture grows best in a firm that is growing. Culture and profit cannot come at the expense of each other; they are interdependent variables. They cannot – successfully or for long – be pitted against one another. And ignoring the care-and-feeding of either leads quickly to the dissolution of both.

The dynamic is most acute in a professional services firm where the products and services are largely in the vision and insight of the people who work there. Uncouple growth and culture and such firm’s lose the ability to attract, retain or grow those people. Without profit, they can’t be hired; without a consistent culture, they can’t be retained. And when either occurs, they can’t grow their careers or the company.

That’s why the answer to the question of “How much profit?” can’t just be an autonomic “More.” At some point, “More” creates an imbalance that, unchecked, leads to the end of culture and causes people to become, well, unstuck. The task facing managers is how to create the opportunity to grow the bottom line without losing sight of who you are.

Friday, February 16, 2007

Discretion is really the better part of business

When Falstaff said "The better part of valour is discretion, in the which better part I have saved my life" in Shakespeare's Henry IV, Part One he positioned himself as a leading business consultant of our day if not his own.

Discretion is more than a way to protect a personal or market position, it is an attribute than can expand them, even at it encourages trust. In the pre-digital age of Elizabethan England, it was pretty easy to be discrete. After all, there was little heard beyond earshot and the social hierarchy held (except, perhaps, at the Globe Theater) each to his own. As those barriers wore down over time and media has become ubiquitous, it now sometimes seems as if private thoughts are accessible in real-time to anyone interested.

In this kind of few-rules, no-barrier-to-entry, whatever-can-be-said-will-be-heard open air market, discretion has become an even more valuable attribute in business than it is among friends. That's because one may only need a few good friends to have a full life, but it takes a legion to build a business.

It begins with the "a ha" moment that triggers a business plan and leads to a search for seed money. At any point in the chain, saying too much or too easily can unravel the opportunity. Then with the money in the bank, there are people to be hired, space to be rented and distribution partners to be seduced. Again, at any point in the chain, the right thing said at the wrong time can alert competitors and stall a new initiative.

Finally, with product "rolling off the assembly line," attention turns to customer relationships, market expansion and business model "tweaks" that can drive growth on the top and bottom lines. It may be that the discussions that take place in advance of a decision on these matters are the most valuable. It is why the small groups that run most companies don't easily or often change their membership.

And the value of discretion does not stop there. When the subject is a potential merger or acquisition, when the business plan calls for shifting or building plants or, maybe especially, when hiring, firing or personnel re-assignment are on the agenda, if the conversation can’t be held in confidence, it will not end well. It will be too closely held, too quickly decided and too narrowly reviewed.

Of course, if discretion were common among us, all this would be less of a worry. But as we have moved to a fully-formed, information-based services economy, what each of us knows is the most important measure of our professional value and self-worth. Hard to keep that kind of light under a bushel.

Unless, of course, you are willing to protect the business you are helping to build. In fact, it is that last bit – “the business you are helping to build” – that is the essential element to discretion. And it has less to do with the values of employees than it does the values of the company.

Companies with a clear and valuable mission, a consistent and supportive set of values, a set of products and services to which the market clearly responds, a willingness to listen and act on what it hears, an equitable rewards systems that still recognizes individual contribution and a management track record of making all the right moves are staffed by among the most discrete people and teams. Until there is a slip or two in any quarter which becomes a cause for concern and, in turn, leads to upsetting the balance between personal ambition and corporate mission.

No wonder Falstaff drank.

Tuesday, February 13, 2007

Everything in Moderation

“User generated content” is this era’s hammer because the problem confronting companies, candidates, government and institutions is a nail aimed at the heart of public credibility.

Advertisers are losing their effect on consumers, government is losing its status among citizens, newspaper circulation is in a downward spiral and institutions created to promote an agenda have helped accelerate skepticism for all.

The concern has reached every corner of an economy built on making and selling stuff. If we believe less of what we hear, we are likely to buy less of what we are told we need – whether a car, a candidate or a charitable contribution.

Can’t have that.

So, if consumers or voters won’t believe what they hear from us, let’s get ‘em to say what they believe to each other. We’ll even let them say some bad things, too, because it will make the good they say sound better. At least, that’s the thinking and the underlying logic to the accelerating corporate commitment to a smorgasbord of technologies and communities wrapped up in what is being called “social media.”

The blogs, pod casts, viral videos, advertising produced BY consumers FOR consumers, web casts, user reviews and more comprise an array of technologies that make it easy for people to speak up. And, in the hope of finding a way to connect with consumers now that the old ways have been devalued, this array is getting the investment, interest and involvement it needs to root and grow. The question is: will it work?

Why have the “old ways” been devalued? Simply, all the “crying wolf” that has been done so as to be heard over an increasingly crowded, noisy, boisterous, multi-lingual marketplace has inured people to the inducements. We are less willing to listen let alone believe the offers, sales and solutions we are offered daily. Too many of them have fallen short of the promise, they have no credibility.

It is not that we have lost faith in what others say – the mediated content of newspapers, ads, reports and speeches – but we have narrowed the list of others to whom we will listen. Rather than reporters, professors, Senators, singers or actors, we are turning to people for advice.

The way we look for a doctor, dentist or accountant – by talking to people like us, near us who could speak from experience – is now the way we look for a car, a washer/dryer combination, a shave cream and a President. We still rely on mediated content to make decisions, but we are now relying on different moderators.

Smart companies and candidates recognize the trend and are trying to figure out a way to participate. Rather than being “the” voice of their products and services or programs and proposals, they are trying to instigate and moderate the conversation. They are seeking to participate without suffocating the discussion. And they are trying to showcase without co-opting the best of what is said.

Only in this way can credibility be encouraged, first as a spark and then as a viral fire. Even then it might not work. There is still some magic to moving a market, but it cannot happen without a willingness to promote a thing by letting go of its control; to participate in the back-and-forth without seeking to dictate terms; and working to moderate a conversation, warts and all, without trying to dominate.

Everything can be found in moderation

Tuesday, January 16, 2007

Work/Life Balancing Act

The long-running business dialog about creating, finding and ensuring a work/life balance for ourselves and our colleagues has little to do with how much time is spent at home or in the office. It is more about managing our lives and doing more, not less, of what we find meaningful. The evidence can be found by looking below the surface of what appears to be proof to the contrary.

The proliferation of digital devices and the ease with which each of us is connected appears to tilt the scales toward work. In fact, though, the persistent connection actually gives us more power to connect with those we chose than it allows us to be called upon by anyone with our number. After all, just because the phone rings, beeps, sings, chimes, buzzes or vibrates doesn’t mean it has to be answered. At least not right away.

Of course, each of us has responsibilities that often trump our desire for some downtime. But as the list of those responsibilities grows (on the strength of our success and the loss of others), rather than labor longer, our new digital tools (and toys) have cut the cord that in the past required we be in the office to get anything done. Even as the advertising touts that “anyplace can be your office,” it can also be your “home.” By removing location from the work/life balance equation, we open up a host of new formulae for such equilibrium.

The role model for an ability to exert a bit more control over our own lives can be found in the digital technology that seems to threaten it. Before the digital revolution, a communication -- mostly by phone -- was built on technology that required a continuous connection. What we said to each other was carried in whole, requiring the need to listen, ponder and respond in real-time. As the work load increased, that real-time demand began to eat into the "life" part of the "work-life" equation.

Digital technology makes far more efficient use of its network by breaking what we say, type or shoot with a video cam into smaller packets and reassembling them at the other end. Now communication doesn't have to happen all at once. It can be "time-shifted" and sent to us where we ever we are rather than to the phone or monitor back at the office.

Initially, the urge is to feel overwhelmed -- nowhere to run, nowhere to hide. But, over time, it becomes clear that thinking of your own day as digital (as Frank Perdue used to say, "Parts is parts") and not analog ("You've got to listen how 'cause I'm talking now") is freeing.

I can talk to a colleague as I leave the movies; I can buy my wife a birthday gift when the popular store first opens because I am connected. I can make a sale from the weekend house; I can test drive a new car without missing a new opportunity.

By thinking of my time as mine, by assuming my responsibilities and by managing my digital devices, I can make anytime "work" or "life" time. It is possible, it seems, to have both.

Easier said than done, but worth the effort.

Tuesday, January 09, 2007

The credibility of books in a digital age

A friend of mine wants to write a book. A book; 50,000 words on one topic, printed in ink on paper and in quantities only guessed at in advance of interest; then shipped through a distribution chain powered by fossil fuels; and arriving “in stores now” a year from now. A book in the digital age? What is he, nuts?

Not so much. Think of these:

...The advent of the internet did more than link people separated by great distance into small communities of interests; it made us more aware of the communities in which we live.

...It did more than assemble profitable markets from the far-flung bits-and-pieces too small to be addressed in the pre-‘net logistics paradigm; it allowed anyone with goods and services to find that market.

...It did more than give individuals the equivalent of a broadcast license; it led broadcasters and media of all types to thinks of themselves and their readers, viewers and listeners as individuals.

...And it did more than provide a way for individuals to be reached with commercial and personal messages; it undercut their effectiveness.

Each of these might seem mutually exclusive pairs, but at the base of each is a shared credibility. No market exists without credibility, no products are sold without credibility, no one hears what anyone says who has no credibility and it is not conferred by a asking for it.

Credibility, even, no, particularly in this digital age, is earned on the basis of a consistent commitment to the truth as you see it. Not a hidebound or unchanged dogma, but a living, breathing point-of-view. It really even need not be the truth (that’s pretty hard to pin down) or even most people’s version of the truth, but it better well be an honest assessment that can find enough market support to become a movement.

And just as our urge for security is embedded in our reptilian mind, credibility is recognized as the product of intellect, study, investment, insight, inspiration and review. In other words: a book. In the digital age, a book is an accelerant to a viral campaign, a platform for public speaking and a talisman that certifies that it is OK to listen whether in person, on a blog or podcast, or cited by another.

The evidence weighs a lot. At a recent seminar devoted to the practice of word-of-mouth-marketing, I came away with six books written on the subject. At a recent meeting devoted to the future of the web, I came away with three books on the subject. At a recent conference devoted to emerging business models, I got four books on the subject. And most of the authors were on hand to continue the discussion.

It is clear that books – devoted to ideas, offering insight to the inscrutable, outlining a step-by-step game plan for personal or business success – are as important today as ever. Even if no one reads them, their spines help stiffen our resolve to make sense of all things digital.

Friday, December 29, 2006

Hiring free agents (and others)

The noise created by the San Francisco Giants signing former Oakland A's pitcher Barry Zito for $126 million over seven years may seem to be a product of major league baseball's parallel universe; where salaries are viewed more as a way to prime the overall revenue pump than to reward personal productivity.

Sign a big name player, history shows, and the benefits begin before the games are even played. Season ticket sales go up, logo merchandise sales go up, fans' spirits rise and all to the benefit of obscuring what might still be wrong with the team overall. That will play out later, one the season starts.

But as specific as these elements seem to be linked to the idiosyncratic economics of major league baseball, they are just as much a part of the real world in which the rest of us live.

The factors leading to a decision to extend the offer, anticipate its effect on the team and calculate the added burden of heightened expectations among fans differs little from the factors that affect the way most businesses approach hiring. The persistent fretting of how new people change a culture, raise the already high demands of customers and change the economics of personnel by adding new people are key factors facing any business when it seeks to add to its team -- and at any level.

o When a colleague resigns, they leave a hole that must be filled. Even if it comes from within (and it should whenever possible), it creates a domino effect which merely moves the "hole" around.

o When opportunity arises, new resources -- people -- need to be added, not just anywhere, but in jobs and at a level that makes sense to the team already in place. The positive effect of expanding is quickly undone if it is perceived as coming at the expense of a current colleague's opportunity to advance.

o When good people present themselves absent a need or opportunity, there ought to be a way to add them to the team, with the understanding that the return on that investment must, in part, offer a short-term return. New colleagues who don't add to the mix come to be seen as a "bad bet" and, as they might say in baseball, bad for the clubhouse.

o And when we need to fill the special spot with a big-time performer, there is robust retained search industry to serve in ways quite similar to players' agents. These are the signings or hirings that get all the attention, but they are only a part of a proper mix.

Recruiting needs to be as persistent a corporate function as career development. Even here that there is only a little divergence between Major League Baseball and rest of business. The free agent signings make the biggest splash, but championships are won by developing talent in their extensive farm systems (of which college baseball is an affiliated part).

A new CEO, lured from a bigger or competing or better run company, can boost the share price, but it is the persistent recruitment and retention of quality people that will make the options pay off.