Thursday, December 18, 2008

Return on Effort

Most business school programs focus on the financial aspects of an business endeavor, and most specifically tend to focus on one simple parameter: Return-on-Investment, or ROI. Specifically, ROI is determined by calculating the profit (or gain) from any investment or expenditure, subtracting the cost of that investment or expenditure, and dividing the difference by the cost of that investment or expenditure.

While this is a great metric for determining actual expenditures’ returns, it does not really bode well when dealing with intangibles such as services, or activities such as sales, marketing, accounting, etc. A long time ago (30 years ago) I started measuring to a different metric, Return-on-Effort, which took into account how much time, energy, additional assets (such as people), and change any new project will cost and weighed those "costs" against how much easier, faster, or more efficiently you could perform the process by expending that additional effort, to which a formula evolved that will give you a good idea on what ROE is all about. 

Of course, you HAVE to quantify what the 'value' of the effort is, and that is the hard part.  A good starting point is to calculate YOUR time and everyone else's at $1,000 per hour. 

When determining how to increase sales, improve market awareness, reduce costs, or go into different markets, keep this Samuel Clemens quote in mind, “If you have a difficult task, give it to a lazy man. He will find an easier way to do it.”  The quintessential essence of Return-On-Effort!


Friday, December 5, 2008

An Automobile Parable

A Japanese company (Toyota) and an American company (Ford Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.

Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.

Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.

They advised, of course, that too many people were steering the boat, while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team's management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the 'Rowing Team Quality First Program,' with meetings, dinners and free pens for the rowers. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The pension program was trimmed to 'equal the competition' and some of the resultant savings were channeled into morale boosting programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year's racing team was out-sourced to India.

Sadly, the End.

Here's something else to think about: Ford has spent the last thirty years moving all its factories out of the US, claiming they can't make money paying American wages.

TOYOTA has spent the last thirty years building more than a dozen plants inside the US . The last quarter's results:

TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.

Ford folks are still scratching their heads, and collecting bonuses.

IF THIS WEREN'T SO TRUE IT MIGHT BE FUNNY



Monday, December 1, 2008

Nano Marketing

One of my colleagues, Patti Hill, former CEO of PR Firm Blabbermouth, and now PenmanPR, asked the question about the value of having "nano" inside. She points out that the consumer marketplace has become rich with nanotechnology-based or enhanced products from sunscreens to water repellent and stain-resistant clothing, gum, car wax, sporting equipment, heat-resistant windshields, consumer electronics, and nanoparticle-laden cosmetics. Do consumers really care?

This goes to the heart of what I always talk about: technology v. benefits. Having "nano" means nothing unless there are concrete benefits of having nano technology. Also, nano has become so generic (like quality, value, etc.), that it really does not mean anything anymore.

Now, if you are using nano-technology to improve something, or invent something new, it could be considered beneficial (ie. WiFi capable printers).

The big mistake that technology companies always make is assuming people understand the technology they are selling. You HAVE to make sure that you sell benefits and experience.

Friday, November 28, 2008

Financing's Trail

"Financing is the art of passing currency from hand to hand until it finally disappears."
--Robert Sarnoff

Friday, November 7, 2008

Marketing the Message

Please forgive me, but this was written in November of 2008, but is still true today. It tells of how marketing can make the difference of failure and success in a presidential election. I hope you will head the lessons learned in your marketing plans. So, like it or not, marketing your message is really, really, important.  

Now that I have had a little time to digest what just happened in this historic Presidential race, I cannot help but notice how much marketing and messaging played in selecting our 44th President. I am not saying that the organizational skills, enthusiasm, and funding did not help. They most certainly did. But what was the catalyst that got all that good stuff going for Barack Obama? It was marketing and messaging.

Maybe the best candidate did not win. Maybe McCain was more qualified, had more experience, and was more centrist. But it was Obama who was better able to determine what Americans perceived of this abilities than McCain. The difference was that Senator McCain never told you how choosing him would make your life better, where Mr. Obama was able to market himself as someone who had your best interest at heart. It did not matter if it was true or not, what was important was whether you believed it or not. 

Another interesting fact is that the messaging was different too. McCain was about telling you how bad off you would be choosing Obama, but not how good you would be choosing him. Obama stated that you are already bad off, and by choosing him, your life would be better. Also, Obama was selling you hope, freedom, and change. Were McCain was selling fear.

As part of the messaging, Senator Obama never mentioned that he was a leader, but he did mention that he had leadership qualities: he listens, evaluations, assesses, decides, and acts. Senator McCain on the other hand talked about how he is a maverick. This messaging is very confusing if he was looking to be a leader, as everyone knows, mavericks usually make poor leaders as the like going it alone, rarely consider the concerns of other people, do not listen well, and take unusually high risks.

Finally, any good marketing plan as a call to action or a strategy to follow. Over my many years of observing people, I have found that in times of stress or crisis, people tend to follow a person with a plan. Senator Obama talked about his plans (not if he could deliver them, but about them); where Senator McCain had no plans of his own, but also talked about Obama's plans. Essentially ceding the fact that he had no plan.

In small words, this election was not about ideology, or race, or religion, or age, but about who executed the best marketing campaign. That my friends goes hands down to President elect Obama.

Monday, October 6, 2008

Timing is Everything

While I was working in product marketing, I always heard people talking about “time-to-market,” and how important it was to get products to market as quickly as possible. Instinctively, this sounds good, but in reality what is important is “timeliness to market.” What that means is that you need to get your product to the market just before the market starts to develop.

I am reminded of a parable that was told to me by a great mentor while I was at Texas Instruments concerning timing. It was called Unfolding a Rose.
A young student, whose wife had just bore him a baby girl, was walking with his wise Teacher in a garden, explaining his loss at understanding life, his daughter's purpose, and how was he, who knew nothing, expected to shape a new life.

The old man simply plucked a rose bud from a large, very old vine. "Here, open this without tearing or damaging any petals."

He tried as the Teacher had bid him; yet, but he could not unfold the rose without damaging it, no matter how gentle and careful he was. "Sir, I cannot do this with causing harm."

The elder man pulled down an open rose and deeply inhaled, "This one did fine on its own, without our help, did it not?"

The student simply nods. "My good friend trust in God, have faith in the order of the Universe, for the rose bud will unfold as is its nature.”

The elder Teacher puts his arm around the young father's shoulders, "Let your little girl be the rosebud, nurture her, love her, and give her what she needs to grow, she'll unfold in time, as I did long ago, and as you are now..."

While you cannot expect products to sell themselves, the parable is poignant because if you release products when the market is ready, it seems like everything unfolds just as you planned it. The trick is timeliness.

Tuesday, September 16, 2008

How To Deal With Setbacks

I am often asked how do you come back from a major setback, or how can you keep pursuing your dream of success. It is not always easy, but there is a Chinese story I like to reference when I tell people to keep going. I have listed it below. My advice, "Just be bigger."


"Become a Lake" - a Taoist-Chinese story
An aging master grew tired of his apprentice complaining, and so, one morning, he sent him for some salt. When the apprentice returned, the master instructed the unhappy young man to put a handful of salt in a cup of water and then to drink it.
 
"How does it taste?" the master asked. "Bitter," spit the apprentice.

The master chuckled and then asked the young man to take the same handful of salt and put it in the lake. The two walked in silence to the nearby lake, and once the apprentice swirled his handful of salt in the water, the old man said, "Now drink from the lake."

As the water dripped down the young man's chin, the master asked, "How does it taste?" "Fresh, refreshing," remarked the apprentice.

"Do you taste the salt?" asked the master. "No," said the young man.

At this, the master sat beside this serious young man who so reminded him of himself and took his hands, offering, "The pain of life is like a handful of salt; no more, no less; the amount of pain in life remains the exactly the same.

However, the amount of bitterness we taste depends on the container we put the pain in. So when you are in pain, the only thing you can do is to enlarge your sense of things . . . Stop being a cup. Become a lake."

Thursday, September 4, 2008

Blow Me Down

This is a link to T. Boone Picken's dream of moving this great country off our addiction to oil. It all starts with wind (Lord knows the politicians have enough of it).


View my page on PickensPlan

Friday, August 29, 2008

The Power of 'AND'

I have been fortunate to be helping two startups over the past few months. I think both of these startups have a great chance because they are combining two disparate things into a new service or product. One thing that I have noticed about successful companies (both startups and giants), is that those which tend to be successful employ the “Power of ‘AND’.” This means they take traditionally mutually exclusive characteristics and then combine them into a new and novel way.

Examples include Southwest Airlines (low cost fares with on-time, high quality service), Wal-Mart (low prices with large selection), and Apple (high technology with high styling) to name a few. That is not to say that companies that do not use the 'power of and' are not successful, it just seems like the odds for success tend to tilt towards people and companies who can pull this feat off.

Ronald Reagan was able to combine a forceful, “hawkish” leadership, with the everyman personal touch. So much so that he was framed as the “Great Communicator.”

George W. Bush’s team understood this when he came out with the “Compassionate Conservative.” He was saying that he was trying to open the tent to everyone. Now, saying one thing and doing another will get you an approval rating in the high 20’s, so be sure you walk the talk. But still, if you can pull it off, look at how you can combine things like:

Feature Rich and Simple to Use
Low Power and High Performance
Light Weight and Solid Build
High Performance and Great Fuel Efficiency
High Style and Value Pricing
Rugged and Stylish

You may ask is there any imperial evidence that the 'power of and' can help me or my company? Well, in Richard Tanner Pascale’s Managing on the Edge, a study was conducted involving 43 highlighted companies in the book In Search of Excellence five years after the original research was conducted. Pascale discovered that 14 companies retained their “Excellent” rating while 29 did not. His conclusion to the key factor that distinguished the 14 from the 29 was that they managed the 'power of and' better in what he called “managing contention.” In Built to Last, Jim Collins and Jerry Porras call it “The Genius of the ‘AND’.” Use of the 'power of and' existed in 18 “Silver” companies that outperformed the stock market from 1926 to 1990 by a factor of 2, and in 18 “Gold” companies that outperformed the stock market during that same period by a factor of 15! In Collins’ next book, Good to Great, elements common to all of the 11 selected companies are described in terms of the “AND” they manage either explicitly or intuitively.

So the Power of AND can not only help you create a better product or service but a more profitable future as well. The question is...how can you harness that power for yourself and those you work with?

Friday, August 22, 2008

Consulting Lesson

Many business owners get stuck at times and feel the need to hire a consultant to supposedly turn the situation around. Here is a timeless lesson on how consultants can make a difference for an organization.

Last week, we took some friends out to a new restaurant, and noticed that the waiter who took our order carried a spoon in his shirt pocket. It seemed a little strange. When the busboy brought our water and utensils, I noticed he also had a spoon in his shirt pocket. Then I looked around saw that all the staff had spoons in their pockets. When the waiter came back to serve our soup I asked, "Why the spoon?"

"Well," he explained, "the restaurant's owners hired Andersen Consulting to revamp all our processes. After several months of analysis, they concluded that the spoon was the most frequently dropped utensil. It represents a drop frequency of approximately 3 spoons per table per hour. If our personnel are better prepared, we can reduce the number of trips back to the kitchen and save 15 man-hours per shift."

As luck would have it, I dropped my spoon and he was able to replace it with his spare. "I'll get another spoon next time I go to the kitchen instead of making an extra trip to get it right now." I was impressed. I also noticed that there was a string hanging out of the waiter's fly. Looking around, I noticed that all the waiters had the same string hanging from their flies.

So before he walked off, I asked the waiter, "Excuse me, but can you tell me why you have that string right there?" "Oh, certainly!" Then he lowered his voice. "Not everyone is so observant. That consulting firm I mentioned also found out that we can save time in the restroom. By tying this string to the tip of you know what, we can pull it out without touching it and eliminate the need to wash our hands, shortening the time spent in the restroom by 76.39 percent.

I asked "After you get it out, how do you put it back?" "Well," he whispered, "I don't know about the others, but I use the spoon."

Lesson #1: Watch out when hiring consultants
Lesson #2: Not all improvements are really improvements
Lesson #3: Humor is a great teaching tool

Tuesday, August 5, 2008

Potent Quotables

List of quotations that are insightful, thoughtful, and timeless. This web site has a listing of quotations I have found inspiring, intriguing, intuitive, and thought provoking. Hopefully, you will find them the same.  Search for Author in search bar at the top of the page, or by categories below.

Sunday, August 3, 2008

Where Will Your Next Idea Come From?

You know, the BIG NEW thing nowadays is creativity in the workplace. Companies of all sizes are asking how can we come up with new ideas, or get our employees to be more creative, or somehow come up with more ideas on how to solve problems...And that's the rub! The more you try to FORCE creativity, the less creative you are..but have you ever noticed how children have NO PROBLEM with being creative? In any case, I thought this little story about how a father sees his kids seeing the world might shed a little light on the subject.

Through Their Eyes - author unknown
When I look at a patch of dandelions, I see a bunch of weeds that are going to take over my yard. My kids see flowers for Mom and blowing white fluff, you can wish on.

When I look at an old drunk and he smiles at me, I see a smelly, dirty person who probably wants money and I look away. My kids see someone smiling at them and they smile back.

When I hear music I love, I know I can't carry a tune and don't have much rhythm so I sit self-consciously and listen. My kids feel the beat and move to it. They sing out the words. If they don't know them, they make up their own.

When I feel wind on my face, I brace myself against it. I feel it messing up my hair and pulling me back when I walk. My kids close their eyes, spread their arms and fly with it, until they fall to the ground laughing.

When I see a mud puddle, I step around it. I see muddy shoes and clothes and dirty carpets. My kids sit in it. They see dams to build, rivers to cross and worms to play with.

I wonder if we are given kids to teach or to learn from?

When Adversity Hits

You know in business as in life in general, adversity hits. We are all met with adversity from time to time, but how we handle it makes us or breaks us. As Ben Johnson once said, "He knows not his own strength that has not met adversity." So in saying, I thought this little story about how some friends' adversity changed them might shed some light on how you might handle the next hurdle you come across.
Four friends went fishing. They found a perfect campsite in a pine grove next to a river that shimmered with promise. As fast as they could, they set up their big tent, stowed belongings, and set off eagerly down the river with their rods and reels.

When they returned to their campsite a few hours later, tired but happy, they stood open-mouthed in disbelief. There was a big empty space where their tent had stood. It was gone!

A quick search showed that everything else was still there -- stove, tools, food, sleeping bags, etc. Their stunned confusion soon changed to anger and a storm of questions: Why did someone take the tent and nothing else? Was a tent all the thief needed? Did they interrupt him so he couldn't finish the job? Or would he soon return for more?

Fortunately, they still had their Coleman stove, frying pan, and eating utensils -- all the tools they needed to cook their fish and eat it. And they still had their sleeping bags against the chilly night air. Over dinner and late into the night, they sat around the campfire, debating the significance of the missing tent.

At peace at last, they climbed into their sleeping bags, gazing up at stars instead of canvas. Being city people, they rarely got to see stars up close and personal. That night they slept more deeply than they had since they were babies. They had realized that life is inexplicable.
All of us have sudden changes in our life that are the equivalent of having the tent stolen from over our heads. We invest ourselves heavily in a project that fails. We lose a job, become ill or go through a life crisis. But as long as we still have the basics such as courage, faith, friendship, the ability to care and laugh and hope, we still have the tools we need for life.

The thieves of life can't steal our enthusiasm and curiosity, our ability to care and love and be loved. We have to make a choice to give those up willingly.

The moral: Someone will steal your tent every single time! Expect it, and be grateful that you still have the basics. Look up and enjoy the stars like the fishermen did. You may find new joys and opportunities that you never noticed before. In business, you will sometimes have your tent moved. How you react will ultimately determine your success or failure.

Friday, August 1, 2008

Pipe Dreams?

Marketing is mostly about perception, and that perception, good or bad, is developed by the quality of a product, the company’s innovation, price and ability to serve its clientele. So when all things are considered equal quality, pricing, workmanship, etc. , a company’s image is enhanced essentially by how it treats its customers. Nordstrom’s is renowned for its customer service, often going far beyond expectations. A friend of mine reminded me recently about a scene in the movie Mr. Mom where Teri Garr proposed a give back from the tuna fish company. Yes, that was fictional Hollywood. Still, image a CEO of a large American oil company getting on TV and saying that 'we understand that America is hurting, and we have just recorded record profits, and to show our gratitude, we would like to rebate our loyal credit card customers who have been with us throughout the years with a 10% rebate?' Yes, this may cost a few hundred million dollars in cost, but as they say “the goodwill would be priceless.” In one fell swoop you would achieve numerous things. First, the public would no longer vilify your company. Second, you would get a Wow factor as being the first to really try and offset the huge cost increases in gas. You would also been seen as the most innovated company around, but coming up with a solution that government cannot do. And most importantly, your company would be perceived as really caring for the customer. Most big oil companies hope to move the market share needle a few percentage points, but image being able to more it 10% to 15% in one week? It might be perceived as a gimmick, but it would not be risky. Why? First off, the amount of free attention, publicity and ink would more than off the expected cost. The news cycles would keep your company front and center for weeks. You would be on the cover of over 25% of all business magazines. This 'event' would be talked about for years after as the “Great Rebate!” Secondly, you will get new customers. Gasoline is a commodity. All things being equal, a motorist will look at your company as really caring about them and when comparing apples to apples, will choose the company that they perceives help them. Lastly, in the herd, you are now the lead steer. Other companies will now have to follow you, and followers never get the same attention as leaders. As I often say, differentiate or die.” Here is a easy way to differentiate. Market is about dream and desire fulfillment. Just image the impossible dream?

Friday, July 11, 2008

Water for Fuel?

My son sent this video clip to me some time ago. Even though I am an engineer, I do not why no one has picked up this opportunity to convert water into fuel? Maybe I am missing something here? Is it really expensive to convert an engine? Is it too volatile? Or is it just too simple to comprehend? In any case, I hope this guy gets his patents soon and starts bringing it to market. I sure as shoot will invest.


Wednesday, July 9, 2008

The First Idea May Not be the Best Idea

One thing I have found out is that your first idea about a product or service is usually not your best idea. As a general rule, be prepared to change your original idea in order to hit the moving target you planned on hitting. Some notables on this rule are Intel: It started out as a memory company, and its original numeric processor was made for factory automation, not the PC. Motorola: started out making radios receivers for automobiles. MCI: It started out as a radio network for truckers. Google: It started just looking up the number references to a particular thesis.

Part of the reason why this happens is because when you start your product or company, you are only guessing what your potential customer might want or need, or how they will use a product. When you first release your product or service, you are trying to solve a problem or fill a need that you think needs to be solved or filled. Your perception of that need might not be totally accurate, or the need might have changed substantially since you conceived the idea.


Also, you might have just bee
n looking a one particular problem, and have been oblivious to an adjacent one that holds a much bigger, profitable market. So, no matter how well you research and test your market, you will have to come to the realization that things change, and that what you cooked up in the lab and how it is recieved in the market may be miles apart.  So, in order to be successful, you will need to change as well. In the modern day vernacular, this is called a pivot (more on that later).

With so many unknowns out there, it is amazing (and extremely) lucky if you hit the market (target) dead on. Usually, products take months if not years to develop, and the one constant in life is change. But it you do to hit that target dead on on your first try, kudos to you. For everyone else, it will be back to the drawing board to see how your original idea might need to be altered in order to get to the goal of macromental growth.

Tuesday, July 8, 2008

Knowledge versus Know-how

Once, I was asked to help an existing company recruit some sales help by their VP of Sales and Marketing. They needed someone who could grow a new software product they were developing, and who had both a technical expertise and business savvy about them. We had narrowed down the field to two people. One guy was in his forties, and had a 15-year track record of substantial sales and marketing experience and success. He actually was an electrical engineer, who during his career had migrated into sales and marketing. He understood the product perfectly, and both the VP and I felt that he would be an excellent fit. He was driven, self-assured, personable, and hungry.

The other candidate had just graduated from a pretty prestigious MBA B-School program, but did not have any direct selling experience. He did know all the latest buzzwords and jargon, and was very knowledgeable on all the latest strategies in selling. I felt that while this guy was personable and knowledgeable, he did not really have any real sales experience and would not be able to carry the load of this new position.  He 'knew' a lot, but he did not yet prove he could do a lot. 
 
Needless to say, the CEO of the company was more impressed about this guy's pedigree than actually what he could do for the company, and the guy with knowledge but no know-how was hired. Fast-forward 1 year. The guy they hired was an absolute disaster. He could not and did not sell anywhere close to the quota he established. The other guy went on to help another startup grow to $25 million in sales in the SAME time period! Why did this happen? The company that ended up hiring the wrong guy eventually went out of business and was backed by some pretty prominent investors.

So, if you where in that position what would you do? But first, let me ask the question another way and in a different scenario: baseball.  If you have bases loaded, two out, one-run down, in the bottom of the 9th; who would you rather have in the batter’s box, a guy who is a perennial all-star, has 10-years of major league experience, has been an MVP a few times, and is hitting .330? Or someone who knows everything about the game of baseball, every statistic or every player, and the odds of any player hitting off any pitcher; but who has never seen a 90 mph pitch? Simple, yes! Everyone will answer that question correctly, but the majority of people hiring someone for a sales or marketing or engineering job will not. You cannot substitute know-how for knowledge when you need real execution. Most people are afraid to hire a person who knows how to get things done. Instead, they often think they are taking the 'safe bet' and hiring someone from a prestigious school.  That is why as companies grow, they usually grow worse.


As the saying goes, “I would rather surround myself with a few very talented people, than with a plethora of mediocre ones.”  Even though what someone has done in the past is no indication of what they can do in the future, it is better to know that a person has the know-how than not.

Saturday, July 5, 2008

What you don't Know you don't Know

I promised that I would try to give some practical advice on how to improve your business in simple to understand concepts and ideas. One of the most pressings issues for any company is how to increase sales profitably with the least amount of effort, or something I call 'Return on Effort.' Most people believe that the best way to grow a company is to either get your existing customers to purchase more or to get them to tell their friends and acquaintances to purchase from you. While repeat business is much easier the get than new business, and referrals can help you grow, you are at best looking at incremental gains. It is like fishing in the same pond trying to catch different fish. What most companies would like are macromental gains and in sales and profits. In order to get to the lofty goals, you are going to have to abandon some old held beliefs, and move far enough away from the safe harbor so as to no longer see the shore.

First, I have to diagram what I am talking about (click on image above). Draw four progressively larger, concentric circles, with the smallest being “What you know you know,” the next largest titled “What you don’t know you know,” the third largest “What you know you don’t know,” and the last being much, much larger circle titled “What you don’t know you don’t know.” If you look at the diagram, you will notice what we know, either as an individual or company, is pretty small in comparison to the infinitely large what we do not know we do not know.  Even with "big data" we still now know what we do not know, which is a start.

Most companies and individuals like to operate in the sphere of what they know they already know. They conduct surveys with customers they already have to see how they the purchase and discover their likes and dislikes. Essentially, this type of market research just reinforces the beliefs (be they right or wrong) you have come to accept as truths about the types of customers you should be selling to. This is similar to driving looking in the rear-view mirror.

A few brave individuals will try to expand their horizons and knowledge (and customer base) by venturing to discover what might be in “adjacent ponds” and discover what they once knew and have forgotten or what they know but have not yet realized. They will do a little research of customers who look very much like the customers they have now, or whom they think should like their product or service.

The hardest thing you will ever do is to take that step into the unknown, but in order to really make any type of impact, that is exactly where you have to go. I cannot imagine what would have happened (or failed to happened), if the founders of this country (Adams, Washington, Madison, Franklin, Jefferson, Payne, Lafayette, etc.), had NOT taken that first fateful step. They ventured into the space of “what they did not know what they did not know.”

Closer to home, I look at a few notables: Apple and Microsoft to name a few. What is interesting is that both of these companies MISSED the Internet revolution when access the world wide web was virtually an unknown entity! During the time that the Internet went from being just an oddity to a mainstream event, Mac lost 50% of its market share, and Netscape became the darling of the industry. To give Microsoft credit, they did regroup rapidly to put out a browser to compete with Netscape, and actually due to their leverage already in the PC market, was able to muscle out Netscape. Incredibly, Microsoft missed out again with open sourced software when Linux came to the fore. Again, this was something Microsoft did not know what they did not know, and instead choose to ignore it.

To Apple’s credit, they did jump out into the unknown with the iPod / iTunes. They did NOT know that iTunes would be such a hit (it now accounted for 80% of their 2010 stock valuation). It is sort of amazing to see Apple move (almost over night) from a failing PC manufacturer, to the leader in the digital media world. They accounted for 25% of ALL music sales worldwide in the last 3 years. Essentially, they began to operate in a industry the did not know. Credit to the late Steve Jobs, here doubled down with the iPhone, essentially once again going where he did not know what he did not know, mobile phones.

If you look at the most successful companies that have emerged from the advent of the Internet they have been companies that created something that no market data could have shown them: eBay, craigslist, PayPal, Amazon, Facebook, and Twitter.  They essentially went where no one had gone before, and reaped the benefits of getting unknown customers.  

Bottom line is: Go to where you do not know what you do not know. That is where you will find all your opportunities.

Thursday, June 26, 2008

It Costs Nothing but is Invaluable

It costs nothing, but creates much.
It enriches those who receive, without impoverishing those who give.
It happens in a flash and the memory of it sometimes lasts forever.
None are so rich that they can get along without it, and none so poor but are richer for its benefits.
It creates happiness in the home, fosters good will in business, and is the countersign of friends.
It is a rest for the weary, daylight for the discouraged, sunshine for the oppressed, and Nature’s best antidote for trouble.
It cannot be bought, begged, borrowed, stolen, or coerced for it has no earthly good to anybody until it is given away.
And if you should meet someone who is too tired to give you one, can you please leave one of yours?
For no one needs it as much as those who have none to give.
Smile!

Monday, June 23, 2008

What is Marketing (and why most people do not know)?

Someone once quipped that you can learn everything you need to know about marketing in a day, but it will take you a lifetime to master. I could not agree with this statement more. Most people see a portion of what they think marketing entails, and conclude that they understand how to market their product or service.

Most people erroneously see marketing as either public relations, advertising, or product packaging or a combination of all of these. What they fail to realize is that marketing is some much more than anyone of this tactical objectives. Marketing’s real objectives include reducing the friction in sales, improving brand awareness, and maximize your return on effort of promoting your products or services. (look for another blog on what return on effort means).

Marketing’s ultimate goal is to create a plan of action and to ACT on that plan. If conducting business is very much like warfare (see Sun Tzu's “The Art of War”), then marketing is responsible for development of the battle plan. And that plan needs to take into account both the long and short view of the battlefield. That means it needs a listing of objectives, needed resources, terrain, enemy strength, positioning and desired outcomes. This plan needs to formulate both the strategic and tactic actions that will ultimately lead to the capitulation of the enemy (gaining market share). 

 
Unlike warfare, business is not a zero-sum action. While a battle plan’s success is measured in victory, a successful market plan uses a variety of metrics to measure success. Success to the marketing plan can be measured in new clients, increased profit, customer retention, margin dollar increases, etc. In order to do any of these effectively, you will need to research your market, customers, pricing, competition, and placement. You will need to determine the best delivery channels (i.e.: retail, direct to market, distribution, etc.) to maximize your margin dollars, and at the same time determine what is the best product mix to minimize your costs.

Marketing is as much a science as an art, and sometimes the objective in a good marketing plan is not to be the biggest, just the best. Still, to go back to why people get marketing wrong. Mostly because they try to make marketing more understandable, they just focus on advertising, or communications, or pricing, or product placement, and not on the whole gestalt of what marketing encompasses.

One thing is certain; the more you know about how to market, the more your realize there is more to know.

Wednesday, June 18, 2008

Your Customer's Customer

Many moons ago, while working at Harris Semi- conductors and a marketing manager, I had a disagreement with my boss about who ultimately paid our salaries. When I told him, “Our customers pay our paychecks; and actually it is our customers’ customers who paid our paychecks,” his retort was that he paid my salary. My boss felt that is was marketing’s job to convince our customers of what they wanted, preferably that it would be what we were trying to sell. Hard to believe that this guy got his MBA from the Sloan Business School!

I knew it then, and it has been proven to me over and over again that my boss was wrong (although I did get sacked for not only this disagreement but many others). What is important then is still important now. In sales, it is NOT what you are selling, what is important is the problems you are solving for your customer. The number one problem customers will face is what should they make to satisfy the needs and desires of their existing and potential customers.

So, if you really want to be successful in marketing, positioning, and selling your product or service, you better know what your customers' customers need. In order to know your customers' customer’s needs, it is mandatory to research their markets, competitors, pricing, and future trends. In having and sharing this information and insight you are offering yourself as a resource and differentiating yourself in the marketplace. The upside on this is that your are not concerned with what your competitors are doing, because you are too busy making profitable sales with your customers. On the downside, it does take more mental effort to be successful, but successful you will be.

Bottom line, STOP selling and START solving.

Tuesday, June 17, 2008

Persistence

Nothing in the world can take the place of Persistence.
Talent will not; Nothing is more common than unsuccessful men with talent.
Genius will not; Unrewarded genius is almost a proverb.
Education will not; The world is full of educated derelicts.
Persistence, grit, and determination alone are omnipotent.
The desire and ability to press on has and always will solve the problems of the human race and divide those who achieve from those who might have been.


Monday, June 16, 2008

Nickel and Diming

During my early business life I was always struck by the fact that “expensive” hotels charged extra for everything, local calls, internet, movies, newspapers, breakfast, etc.; at the same time, more affordable hotels included everything. Although these less pricey hotels did not have marble foyers or linen tables, they did offer things that a very young, weary, traveler wanted: a clean room, safe & quiet environment, and some perks.

For the exorbitant prices you paid at the high-end hotels, everything should have been included. What they should have done is given rebates back for things you did not use instead of nickel and diming us to death.

I read an article in INC Magazine about a judge who was invited to a very expensive restaurant in the Washington, D.C. area. Even though it was a long drive, the ambiance was top notch, the food excellent, and the service superb. Still there was something that ruined the whole experience: He was charged $1 for ice in his $7 mixed drink. It was not the fact that the meal was about $75 per plate, but the fact that he was nickeled and dimed for the extra dollar (instead of just charging $8) infuriated him so much that instead of talking about how wonderful everything was at the restaurant, he only talked about the $1! Needless to say, he never went back to that restaurant.

I see the same thing starting to happen in the airline industry. American Airlines is charging $15 per bag, $3.5 for snacks, and $7 for meals. Incredibly, sodas and water are still free. What American should do is just charge a higher fare and rebate you for what you do not want or use. (Please read my earlier blog about Freedom and Choice). This will put the power of purchase in the hands of the consumer, and you may be surprised that more people than you know are willing to pay extra for extra services. I know for a fact that the purchase rate on a plane is under 2%. Just image what great things could happen is you just trust your customers to do the right thing?

Anyway, what this has done to me is make me look at Southwest and JetBlue. I have always preferred American, but with this nickel and diming, I think the differentiation that American once had is now only a memory.

So remember, do not nickel and dime. Instead, charge what you think your service or product is worth, and then if possible unbundled it. By unbundling, you take out features or services in EXCHANGE for a reduction of price. It becomes a win-win for you and you customers by sharing the purchasing decision, and giving more freedom and choice to your perspective purchaser.

Sunday, June 15, 2008

Freedom and Choice

Recently, I returned from a trip to Washington D.C. with my 15 year old son Jordan. It was amazing to see how many incredible individuals have gone before us to make this the greatest country in the world. As I was able to take in all of these individuals, a repeating pattern began to emerge. What really made these individuals great was the central fact that they believed with all their being extending freedom and choice to ALL individuals.


After this eureka moment, I then started to realize that these are the same two reasons why some companies are successful in good times and bad. Two cases in point: Southwest Airlines and JetBlue. Southwest’s motto is “Your are free to move about the country,” and they have always tried to be the no frills people centric airline. Yes, they did not have first class, but they gave the customers what they wanted (freedom) and choice of low cost fares. JetBlue also realized that Southwest was leaving open the “high-end” choice segment, so they offered EXACTLY what Southwest was offering but at a slightly higher price AND with a lot more perks (seat assignments, no center seats), but again at a choice point that exactly hit consumers sweet spot.

Another way of looking at Freedom and Choice is looking at the power of “AND.” JetBlue looked at the market and asked, “What if we combing first class AND low cost?” Essentially, combining features of the more expensive airlines, such as American Airline’s First Class with those of a discount carrier, such as Southwest’s low cost fares?

Looking at other notables who have employed the “power of and” you have to include Wal-Mart, Target, Virgin Atlantic, Apple, Google, eBay, Linux, Cisco, Hyundai, GE, and Procter and Gamble. Note: Apple and Google are starting to move away from the Freedom and Choice model, and are starting to be perceived as trying to control their markets. Look how the world perceives Microsoft, and how Freedom and Choice will eventually lead to Microsoft’s demise.

(Prediction: Obama will win the Presidential contest NOT because he is a better candidate, or more qualified, nor because he is African-American. He will win for the same reason that Reagan won. He brings the promise of Choice and Freedom. How is not as important as what, and What is the power of AND. If he stays on message, he may well carry over 55% of the popular vote.)

Anyway, how can any of this help you or your business? Well, ask yourself. Is what I am doing really helping people, and if not, how can I give my customers more freedom and more choices. This is NOT to say that you offer all things to all people. THAT is a recipe for disaster. What I am saying is that you FOCUS on offering MORE of what people really want, and if possible, things that until you can along, might have been mutually exclusive (like high quality, and affordable pricing; or like overnight letters and ground package delivery; or more taste and less filling).

So remember, are you on the side of control or on the side of freedom. People in general love the freedom fighters (cue “Braveheart,” “Star Wars,” “Mad Max”). We naturally abhor being constrained, and as Thomas Jefferson once said, “I have sworn upon the altar of God, eternal hostility against every form of tyranny over the mind of man.“ Make this your motto in business, and you are almost guaranteed success.

Monday, June 2, 2008

Why Image (your brand) is Everything

When you think of great brands what comes to mind? Starbucks? Apple? Nike? Coke? Mercedes? Hermes? Everybody talks about wanting a great brand, but so few people understand what actually makes a good brand.
 
First, what is a brand? A brand is what speaks to a consumer when there is no one there to speak for it. Essentially, a good brand is your ever-present salesman. It is the voice inside a customer’s head that tells it that is a good / valuable / well built / sporty / classy / etc. product or service. A poor brand will do nothing but make your potential customers look for your competition.

It is an absolute fallacy to think that all you need for a great brand is a cool or catchy name, or that endorsements “make” your brand, or that technology can sell your brand. First and foremost, you have to have either a product or service that delivers on the promise of your brand.

And now the hard part, what is your brand’s promise? What is the story behind whatever it is you are trying to sell or do or accomplish or help with? If you think about i
t, most good brands have a pretty narrow focus with a well-honed story behind the brand, and they DELIVER on that story.

There are many cases where a good product will have a horrible name. In that case, the adage “give a dog a good name” will apply. Poorly labeled products or services make it more difficult for consumers to recall or remember your name, and essentially puts distance between your product and service and repeat or initial business.

The corollary, of having a great name and a poor product, cannot be fixed by branding. Eventually, no matter how you package it, consumers will figure out that a name alone does not a brand make.

So, when someone says what’s in a name, essentially it could be everything.

Wednesday, May 28, 2008

Why start a blog called the Profit Prophet?

Wow, this is a question we all ask, but are not sure why we do it. I am starting this blog for two reasons: 1) Is to impart some (albeit small) amount of wisdom that I learned during my 20 odd years as an engineer, marketeer, salesman, in operations, and business development; 2) To attract other liked-minded individuals to this blog to ask questions on how to improve their business by eliminating the friction most companies have in selling their products or services. This friction is caused mostly by a total lack of strategy. As the saying goes, "In the land of the blind, the one-eyed man is king." Hopefully, my one eye can help some people out there.

OK, why the profit prophet? Back when I first stared out at Texas Instruments some 25 years ago, I got the reputation of only looking at deals that involved profit margins, not gross revenues. This was so contrary to the prevailing mindset at TI, that people soon thought I would be terminated. But my boss (Jim Watson, who went on to run TwinStar Semiconductor) had faith in me. Eventually, my focus on profits rather that filling fabs got me the label as the Profit Prophet. I did not think much about it then, but actually it was a good name, and one I will continue to use in my blog.