Breaking down Profitability

12 10 2010

One of my favorite bloggers / writers, Seth Godin, writes about “When the long tail is underwater” on his Oct 10th blog.  He actually touches on a couple of interesting points, how much time and energy is created that generates no value, and how do we filter out all of this information to understand what is relevant.

Take for example the Droid/iPhone app market…Apps are everywhere, and try to do everything.  Apple and Droid both claim wildly unusable numbers of apps.  With all of these potential apps, ask your friends what Apps that they can’t live without and people get strangely quiet.  I had a few people respond Urban Spoon and one guy mentioned Wolfram Alpha.

Seriously, hundreds of thousands of apps out there and we can’t create a list of “gotta have” apps? Yes, I know there are hundreds of those lists.  Read one of those lists and ask yourself which one will you be using a month from now.

Sorry back to the point…Compare this to your company’s information:

  • How much data do you have?
  • How many reports do you have?
  • How much of it is relevant?
  • How much old stuff is out there that no one has any idea of its worth?
  • How often do you clean up the environment?
  • How quick do people respond?

AND how often do you hear people say… I don’t have the data?  OR I am not sure where I can find the information I need?

 

 





People, Process, and Technology

12 08 2009

In every BI vendor’s marketing material is the traditional People, Process, Technology venn diagram.  The promise is that leveraging the combination of the three will unlock enhanced results.

Traditional Venn

In order to use this for performance management, we need to rethink the original deisgn.  First we need a vision on how to bring these together and communicate what matters and how it will be done.  We also need to bring a focus on getting only the right things done and specifically not doing the wrong things.  Words (and diagrams) do little in terms of actions.  For us to achieve sustained performance, we need to understand and communicate which processes can create value (and which do not), what technology it will require, and a focused management process to ensure they get done in a timely manner.

Venn New

As you design your game plans, you need to make sure you are developing not only a plan but how success will be defined:

  • What is the desired outcome?
  • Who gets to define it?
  • How will it be managed?
  • What happens if it goes wrong?
  • Who would provide the best rational for the disenting opinion?




Price of Distraction

21 07 2009

Over the weekend, I was telling the story of Informix (now part of IBM) and the number of databases it tried to market and sell.  At one point in time, Informix marketed the following databases:

  • Standard Engine (SE) /OnLine 5 / IDS 7 / IDS 9 /RedBrick

It then aquired Ardent Software and added two more databases, UniVerse and UniData.  While the company was looking to build a data warehouse focused organization, the database was taking less and less focus.  There were a number of problems the company was facing.

  • There were not enough people at that time who could sell the complex technology well
  • The market was not really ready for the high end product
  • Each change in leadership elevated a different product to the forefront
  • A confused customer base
  • A skillful competitor in Oracle
  • A little SEC troubles

Informix itself is a great case study.  At one point, I simply asked the question “what if we sell OnLine 5 and SE to remove the distraction?”  Both OnLine 5 and SE were great products in their day, unfortunately those days were long past.  Both products still did somewhat well in the VAR space and were highly profitable the late 90’s.  My rationale was that we only made $10 million a year on each and most of that was profit.  We were shooting for the $1 billion plateau in annual sales and a $10 million product was a rounding error.

At the time I was the product manager for all of the legacy products, which accounted for approximately 50-60% of the companies revenues.  I answered enough requests for OnLine 5 and SE to understand that they were a distraction to the sales force.

Going back to the Seth Godin blog on “don’t sell to bar owners” this is a perfect example where the sales force was not equiped effectively enough to sell the product line.  And most importantly, the customer was confused into what they needed to buy.

  • Is your product strategy consistent and in line with customer needs?
  • Can your sales and marketing teams, concisely explain the positioning of each of the products?
  • Does the customer get what they need, or what the sales rep wants to push?
  • Do sales compensation plans align with customer need?

In the end, the lack of performance resulted in the company being aquired by IBM.  All companies reach stall points, make sure your don’t create your own stall points.  And if you do, recognize your actions and work to minimize the distraction and inconsistency.





Focus on Operational Performance Management

26 05 2009

When was the last time you discussed how your customers were performing?  Do you have a formula to determine their lifetime revenue potential?  And what it costs to serve them?  Does this determine how you segment and market to your customers?  Do your sales people use this value as a tool in the negotiation of price?

Basically how do you manage customer performance?

One of my clients was a credit card processing shop and what we found was that they were spending $4 for every $1 they were collecting from bad debts.  While it was not the whole story, it was evident that we needed to better understand the customer lifecycle.  This client did have specific marketing programs and processes, but they had not been challenged in quite some time and were common industry practices.  

What we find out when we look at commonly held beliefs is that their assumptions are no longer (if they ever were) valid.  We get into a groove of momentum that we find difficult to change our beliefs and behaviors.  We also lack a mechanism and the focus to understand which processes to look at.  One of the most critical to me is around customer performance.  

Ask yourself if you know which customers are driving profits and which are destroying them?  If not, this might be the best place to start thinking about improving insight and process improvement.





Continuous Improvement – 3 Acts at a Time

17 03 2009

One of the key items we seem to struggle with is creating a process for continued process improvement. We typically look for dramatic and immediate improvements and lack patience to see things through.

  • When was the last time marketing sat down to specifically improve its top three marketing programs?
  • When was the last time, sales management took the top three clients in each territory to lunch?
  • When was the last time you promoted your three top suppliers?
  • How do we create a mentality and culture of continuous action?

Simple, don’t think, just pick something and get it done this week. All too often we get stuck in a mentality of trying to figure how to improve everything at once, instead of tasking a bunch of good people with three things to do by the end of the week.