Saturday, June 19, 2010

Developing a functional business

Business in the West is far better in developing countries. The reason is that they tend to have operating manuals for staff to review before they start work, and they offer hands-on support. This is less well-developed in Asia, and the attention to detail is less apparent.
Utilities in the Philippines are less reliable than most countries. Residences are frequently subject to brown-outs or failure of internet connections. These disruptions or a desire for a change in one's working environment, or the desire to interact with others whilst you work, make the local cafe an appealing place to go. My partner and I love to spend our days there.
Living in the Philippines its apparent to me that business people do not develop a business model. For this reason I want to suggest some things:
1. Develop a business plan. Make sure you identify all your customer values, and what differentiates your business values (i.e. value proposition) from your competitors.
2. Know your customers. Anyone who has read the story about McDonalds knows that the company is not simply a fast food seller, its a real estate business selling franchises and leasing property. A cafe need not be a place where you go to meet friends or relax. The food or coffee might be incidental. The value might be clean toilets in a developing country, it might be the food, it might be the wifi, the comfortable seating, the air conditioning, the ambiance, the music, the lighting, the quiet, the people, the friendly staff, the proximity to work, shops or child care. The value of these factors will depend on what your competitors are doing, and the issues are evolving as we speak. Consider that more people are working from home than ever. This is a boring, lonely way to work, so many people are ending up in coffee shops, and its not for the coffee. If its not for the coffee, then if that is your the basis of your value proposition, then you are missing out on prospective revenue, and possibly hating your customers for it, or resenting someone else. Talk to your customers...better still observe their behaviour and ask them about it. Don't ambush them...but you do need to ask them. You need to decide if you can target a particular type of customer, or if you can broaden to other types without alienating another. You might be a coffee shop during the day, and a jazz bar at night. If you can swing that - great!
3. Develop a detailed operations manual. Start with customer value's in mind and developed detailed operating procedures. It is important that everyone knows there place, where they stand, what is their value, and that there are clearly defined lines of responsibility. There needs to be contingency planning when things go wrong, and staff need to be ready for them, whether its a shortage of coffee, a power failure, a robbery, etc. In Asia, when things go wrong, they go really wrong because there is no contingency planning, and no lines of responsibility. I recall flying from Bali to New Dehli. My flight was delayed, so I missed a transfer. The ground staff told me my baggage was loaded even though it wasn't. If that is your model for dealing with customers it can reflect on you...even if you are not directly responsible. Do you think angry customers will care...they want someone to blame. I blame Garuda and Cathay Pacific, even if they were not directly responsible. These contractors or partners were within their field of influence. As far as I was concerned, these were the only 'business parties' I saw involved. I don't know their contractors. I was reassured every day that my baggage was coming.... I finally received it on the last day of the conference...which I attended in my Bali pants. Clearly customers have to plan for failure as well.
4. Develop a pricing model. This particular coffee shop did not have a suitable pricing model. You should not be resenting customers for not buying your product, and they should not be feeling extorted to pay unreasonable prices because they did not want what you offered. Know the values of customer and establish a suitable pricing plan. For cafes, if you offer a high fat, high sugar cakes only menu, then you are going to be alienated by their menu. If they still come to your shop for something else, like Wifi, then that is a point of value, you might need to charge for. Customers expect to pay for services. If they are unreasonable they will go elsewhere, so you need to know the relative (i.e. competitive) and absolute (i.e. real) value of your products.
5. Training staff is the first step. After you train staff, try making them a customer if that is realistic. i.e. For a coffee shop, why not have the trainee read the manual in the coffee shop, so they can reflect on the service, and realise what is important. Friendly staff is not the same as 'empathetic staff'. Make sure your staff know the difference. Make also sure your staff know the company's hierarchy of values. i.e. In Japan, a hotel deferred dealing with an annoyed Japanese customer for my sake, a foreigner (less likely to return), and I was only there asking street directions. Should should have asked me to wait. Criticism to staff should be incorporated into the operations manual. Every little thing. i.e. In the case of this coffee shop, I made the following complaints: Too cold, annoying flies in the room every day, replaying music (good music, but played continuously for a month or more), the coffee would overflow when I placed the straw in because they did not pop the lid (straw) orifice.
6. Feedback is important. More important than asking people for feedback is how you ask for it. Some people like myself will give it, whether you want it or not. Others will feel bad making critical remarks, so they will tell you what you want to hear. Only critical feedback is valuable. How many times have I read customer surveys I know were designed by some manager or divisional VP trying to impress his boss. They will ask questions in a certain way which does not elicit criticism and they avoid all discretion to criticise for other issues. This is what the banks do to justify their actions.
Andrew Sheldon