Tuesday, January 4, 2011

Product policy which is logical and contextual

One of the mistakes that businesses make is:
1. Adopting dogmatic policies which are difficult to interpret
2. Remove the product policy discretion from staff

Consider the following negative feedback that Air NZ has experienced over the way it handled the flight of a child with chicken pox. Read the story here. It is silly to suggest that people should have travel insurance, and they ought to pay these costs. Why? It incentivises non-disclosure, and actually encourages us to deceive when:
1. The consequences are dire
2. It is easy for people to deceive
3. It conveys that you have no interest in the well-being of the passengers, and are only interested in off-loading responsibility onto others. This is a particularly bad policy given the consequences.

This is about Air NZ trying to justify poor, dogmatic policy (divorced from context) and high charges.
Andrew Sheldon www.sheldonthinks.com

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 www.sheldonthinks.com

Saturday, September 12, 2009

Easiest business to create

There are a lot of people who would like to engage in business but have no idea what to do. There are a number of challenges setting up a business. These include:
1. Structure: Business requires systematic, disciplined behaviour, to which many people are not accustomed. They prefer to be self-indulgent. If you are so inclined, the best thing to do is find a partner who can share the costs, and is willing to do the things you are loath to do. That will help, but at the end of the day, you might still be indulgent with respect to the things you like because somethings the 'business of making money' is not always the creative process you might have expected or hoped it to be.
2. Planning: Business is a conceptual undertaking. Conceptualisation is important in several respects. It will help you define and refine your service or product, it will help you anticipate problems, it will help you resolve those problems. There are two planning-related problems. People are either floating (i.e. not grounded), anti-conceptual or they are too conceptual, and inclined to suffer from 'paralysis by over-analysis'. Hence the importance of execution.
3. Execution: Some people are very good with execution, being able to manage many things at the same time, but they can tend to be anti-conceptual. They will work hard, and waste a lot of time because they failed to plan or conceive of a better way of doing things. Learning from experience is the least effective way to learn. Planning allows you to extend your knowledge before suffering results. Ensure there is a balance of planning and execution by having short, medium and long term plans.
4. Business objective: The next question is - what business? There are a number of factors which will determine your business endeavour. (i) Your value proposition - you need some value which differentiates you from other people. If you are lacking skills, you either go get those skills, or you chose a vocation for which you don't require skills, like making and selling doughnuts. (ii) Your resources - you will need to know the resources which you can invest in the business. The amount of money and skills will be particularly important, as well as any inventory required. The problem of course can reduce to money, or your credibility in terms of being able to raise money. The easiest businessses to start are online publishing, writing, consulting, etc because you need only a computer. The problem with this of course is that this permits a lot of people to enter the business, making it more competitive. This of course means that it will take you longer to define your value proposition, to differentiate yourself from others. (iii) Your relationships are another important element of your capacity to business a business. We don't have to recreate the wheel by doing everything ourselves. It might make sense to either out-source, subcontract, employ or partner with another person. The decision will depend on your financial resources, as well as other consideration such as relationship skills, revenue sharing, responsibility, partner commitment, etc. This is a big topic.
5. Results: This is a task which many people consider a waste of time. They think they know how they are performing from achieving the sales. They don't want to engage in the 'non-productive' task of analysing their performance. One of the mistakes is to over-simplify what might be construed as results. There are of course many facets to the business which need to be analysed in order to generate data which can be quantified and analysed to provide an assessment of results.
6. Business development: Markets are always evolving. We always need to be improving our business, so its important that results generate ideas to improve results. There are many sources of inspiration. e.g. Customer feedback, customer applications of your product, your own conception of market trends, competitors, problems in product application, etc.
Andrew Sheldon www.sheldonthinks.com

Thursday, January 31, 2008

Finding a business location in the Philippines

My girlfriend has been talking to me about a group of collegue guys who have got together to form a business. The 5 of them have together raised $2,000 each, thats $10,000 to develop food stalls in the Philippines. Their plan is to franchise the idea.

Of course I wish them the best. Its great to see young people motivated to achieve from such a young age. Its great that they have found a support base among friends at such a young age. That is of course a good way to start a company, and a good time. It seems a sensible strategy for several reasons:
1. They can share the responsibilities between 5 people
2. They can work or manage the business to make extra money if they need it
3. They can share business skills

The only problem I see is that the tendency for them to rely on 'friends' as a basis for setting up a business with limited capital might mean they lack coverage in certain skills, particularly if they are all studying the same subjects at university. The reason I pose this concern is because they have decided to move their reataurant from one part of a shopping mall to another part. They assumed that because other businesses were making money, so they should make money as well. Being so young, they will lack experience, but I would suggest the reason they are not making sales is not the location, but their value proposition. They are selling a meat & vegetable wrap for take away. I dont think people come to a mall for take-out food, they want to sit down, and not back at the office. They want to escape the office for 30-60mins, and even if they are not coming from an office, they are not going to eat a wrap standing up. The implication is that they have not well-located their business. They really need to be in the part of the food court where there are tables to sit down. Otherwise they need a shop rather than a stall. Apparently they were paying P22,000/month in the low traffic area, but now they are paying P30,000/month. Apparently they are earning P90,000/month, so they are not doing too bad.

Very easy business to set up and its a great area. Eating out in the Philippines for singles is actually only about 30% more expensive than eating at home if you are buying food from a shopping mall. Why? The shopping mall model is very lucrative because everyone wants to go to an air conditioned place. Surprising there is no Westfield here? Maybe there is alot of corruption? But I think the Chinese managers of these businesses is terrible. They are so anti-intellectual in implementation. Which is precisely I see as the problem for these students, though being so young and raised in Asia, you would tend to expect a lack of critical thinking skills. You always want a critical thinker in your business team. Such under-appreciated people!
Andrew Sheldon www.sheldonthinks.com

Monday, January 14, 2008

First thoughts on creating a business

The anti-conceptualists out there will start a business by finding a product and thinking I think there will be an opportunity for that. They will get a graphic artist to design a logo, set up a website, promote the site, and wonder why they have trouble selling, or wonder why they need to work so far for meagre sales. In their defence, can't they make sales by just copying everyone else.
This I have come to learn is the Asian approach to business. Business creation is about copying, building market share is about duplicating what has already been done. I see it all over Asia. That is why the western world is the creative centre of the globe and Asia is where its duplicated at low cost. This is done in a great many areas. For example:
1. Software code is copied and made the basis of a new product
2. Website stylings, products & services are copied and made the basis for a competitor. The difference - its cheaper and easier to copy than it is to develop original content.

You can't even sue the company because the company is an empty shell, the office is closed upon being served, and a new office is established elsewhere. Its so easy to avoid the legal system, to avoid being served with court documents. And at the end of the day, a great many companies just settle out of court.

Well thats one way of doing business I guess....but it makes you reflect on what is the function of business. The way you run your business will reflect your values, and if there is a disparity between the way you run your business and the values you espouse, then people will question your credibility. Of course many people are very good at managing perceptions. In Asia they have been doing it for centuries. Facts are illusive, people care more about perceptions. This was the basis of the 'village community' that has long since disappeared from western countries, and it will eventually disappear from Asian urban cities as well, as it is in Tokyo. Japanese business, before it became a create market place, used to copy western technology all the time. Note that now Japanese companies are very careful about the intellectual property they adopt overseas because they dont want 'their core values' copied by Chinese companies, as they were able to copy western technology. The west has not learned.

I guess there will come a time when consumers will be more critical thinkers and more discerning about the quality of service or product they buy. No doubt they are taking precautions today because of online fraud, but with increasingly commerce being done with foreign countries to secure cheaper services, might we expect this to occur.

You dont need to be original to create a business today. There are more resources online today than there was been anytime in the past to help you to set up a business, and a great deal of it is free, whether free advice from industry experts, online forums by enthusiasts or open source programs by online communities, there is a great many tools you can use out there for free.

A great many successful businesses just do something simple very well. In fact often its the orginator of a concept that doesnt make the money. The reason is that the originator spends their time trying to convince the market, its the developer of added value that finally gets the commercial benefits, along with copiers who expand with the market.

Creating a business

Creating a business can be one of the simplest things you can do, or one of the hardest. Determining the level of success you want will however require you to make some hard choices. Among the greatest follies I see people making when they set up a business:
1. Preparation: Diminishing the importance of developing a business plan or a business due diligence study. I find there are people whom are anti-conceptual. They look at university graduates and think they are 'too intellectual', and think life is about action. I would suggest Asian cultures such as the Chinese tend to act like this. eg. The way Chinese invest in businesses, its like throwing darts in the dark. I think its more about relationships, egos and deal making than it is about making money.
2. Disciplined: Not treating the business like a business - treating it more like an indulgence. They say that you should find your passion and turn it into a job. The problem is that most passions still require you to perform accounting, administrative and other tasks.
3. Contingency Planning: Failing to conserve their capital - living like their is no tomorrow - thinking they will make a profit in the first month. Its not even just about preparing for the worst, as if the worst depends only on you, it can also be a case of failing to plan for success. Cashflow problems can result because of success as much as failure, if only because customers decide to take a long time to pay your invoices.