Market share, another question of Quantity Vs Quality

Market share is probably the most commonly used non financial measure, almost everyone uses it who can access even basic market and competitive data.

The rub comes when you consider who is in the share.

A simple share number can disguise high customer churn, high costs to service, and significant investment in customer acquisition to counter the churn, all of which costs money.

The same share made up by a loyal customer base will deliver much better profitability, so having a way of discriminating between customers with differing levels of profitability should be a crucial underpinning of marketing activity.

Making money in the connected “post copyright” era.

The digital age has made the notion of copyright as an enforceable protection of an income stream outmoded. How then do you make money out of an idea?

In the past, people created stuff to be heard (or read, or seen) and that meant you could make money, because people were prepared to pay for the privilege.

In the present, and presumably, into the future, stuff is being created and everybody who chooses can hear you, for free, so the question becomes how do you make money from something you give away.

The answer is tangled up with what people do with what they hear for free, the value they can add in other ways than just flogging a single copy of a book, or CD.

Science fiction writer, blogger and all round interesting character   Cory Doctorow  has his books  on his site, free to download, just click and there it is, saving in Australia at least $23.99 on a purchase. You can also order a hard copy, signed if you want it, and see the other stuff he has written, and get an opportunity to  be exposed to his views.

As a writer, his objective is to get over a point of view, as well as making a living, and that happens any time someone reads his words.  “Free Books” attracts them to the site, and often they end up buying, something, even if it is only into an idea. Most people prefer to read a book, so often an engaged reader will buy a copy of a book they have read for free, and they refer others to the book, buy it as gifts, and generally act as apostles for the specific  book, and the body of work.

A number of headline bands are following the same strategy, download the music for free, and come to the concert, where they will sell you a seat, merchandise, an experience you will remember, and a place in the “triiibe”, the term coined by Seth Godin and explained in his book which he initially gave away, but has subsequently inhabited the best seller lists as a result of the value of the ideas articulated. That book gets referred to in places like this, and sales sometimes result, sales powered by the initial freebie, and the power of an idea.

Charles Darwin’s birthday and innovation.

 The 200th birthday of Charles Darwin, author of seminal publication, “The Origin of Species” is attracting a lot of attention.

Management thinkers for some time have used many of Darwin’s concepts as metaphors for management challenges, and as the “connected” world expands, the application of his theories to management generally and to the evolution of the infrastructure and applications on the web particularly become more numerous, almost daily. One of my favorite quotes comes from Darwin’s work, I have used it consistently for 20 years when talking about innovation, and it remains as valid to management today as it was to the thinking behind “The Origin of Species” when it was written in 1859 after his 5 year voyage on the “Beagle”.

“It is not the swiftest that survive, nor the most powerful, but the most adaptable to change”

Working Capital Productivity

Operational management is becoming harder pressed to find reductions in the working capital required to keep the operations running, with the constant option of outsourcing, “off-shoring”, consolidation, and so on as the price of not running hard enough. Working capital numbers over time are a good measure of the cost awareness of your operation, but do not really address how productive the working capital is, for that you need a denominator in the equation.

Working capital is: Accounts recievable + inventories – accounts payable. If you add a denominator, you can get a measure of the productivity of your investment in working capital:

Working Capital Productivity= Working Capital/net sales.   How much better to measure the productivity of the investment rather than just the amount of the investment.

Working Capital Productivity, transaction costs and Demand chains

I recently wrote about the productivity of working capital, and my view that the productivity of the capital was a revised calculation that all businesses should consider.

Clearly, the best way to increase the productivity of the capital required to run the business, is to reduce the cycle time of processes in the business. Use inventory quicker, collect debts quicker, increase the throughput productivity of operational assets, reduce those activities that do not add to the customers experience.

All of those factors are internal to the business, and mostly we are pretty aware of them.

The emerging opportunity increasingly recognised by successful enterprises is the necessity to increase the collaboration between the sequential value adding points in a demand chain, by reducing the transaction costs that occur between firms in the chain. In effect, “Lean” for the supply chain, by reflecting the customers demand patterns back through the chain.

This is the core of the success of Toyota over 40 years, and as the world recession recedes, the enterprises tht emerge from the chaos will be different to those that went in, and there will be a far greater focus on transaction costs through the chain.