Return on Investment is the basic calculation made to assess any investment, but too often gets complicated by all sorts of assumptions and forecasts.
In these days of rapid prototyping, access to A/B testing tools using the web, and the logic of many small bets in the innovation process rather than a few large ones, the calculation becomes less important if you follow the simple rule:
“Keep the “I’s” small, and nobody will bother you too much about the “R”
Out with the old mass market advertising and business model, and in with the new.
I shave, it costs a fortune, so much that I switched to disposable shavers without all the fatuous claims and high prices of the big brands. Each morning when I look in the mirror to shave I see a 60 year old bloke, a bit worse for wear, the square jaw rounded by too much living, extensive forehead, and none of this will be changed by using a 5 dollar blade instead of one that costs 50 cents.
However, I never saw the disruptive marketing opportunity demonstrated by this story about the Dollar Shave Club, but it is blindingly obvious when pointed out, in this case by my e-buddy Bill Waddell.
What other categories are so ripe for change?
Shampoo & conditioner, household cleaners, personal hygiene, are the three that jump to my mind, all associated with vanity.
The FMCG business model has changed, and for high value products that are easily mailed, like shavers, is breaking. A few categories are yet to have their margins decimated by a combination of house-brands and direct e-sales, but it will not be too long. Anything that can be sourced via the web, where the savings are sufficiently significant to off-set the inconvenience of having to remember to make a few clicks on your device, is at risk.
The fancy, expensive nonsensical advertising appealing to vanity rather than real consumer benefits, that support these products has had its day.
What a great phrase to start a debate around the board table, often heated, as most still see the two as a trade-off, the better the quality, the higher the cost.
How much better to beat the bean counters at their own game by quantifying it:
Quality cost = the number produced outside specification X the total cost of rework & disposal.
Simple. The cost of quality calculated, and how often will you find any added short term cost during production will be dwarfed by the costs of managing the out of spec production.
A while ago I helped a mate move flats. He had only been there about 5 years after becoming a “bachelor” again after his family grew up, but the significant amount of clutter accumulated was unanticipated, and surprising. All sorts of proposals, manuals, brochures, old gear, and stuff that at some point passed the “might be useful one day” test had accumulated, and the clean out released lots of space, and a recognisable organisation for the remainder.
It occurred to me that businesses are the same, they accumulate all sorts of organisational and personal clutter that takes up valuable space and time, creating blockages and “work-arounds” in processes, effort that would be unnecessary in a cleaned, disciplined environment.
An aggressive clean-out of physical stuff, but more importantly redundant processes and rules from time to time would deliver significant productivity benefits, at very little cost.
Years ago as a senior manager in a large organisation, part of the monthly routine was to write an APP report: Achievements, Problems, Plans, kept to an A4 page, used as a scene setter for the more detailed monthly report.
At the time it was a pain in the posterior, generally done at the last minute, with the objective of getting it done, rather than communicating the context of the rest of the report.
In short, a squandered opportunity.
How much better it would have been to use the APP as a summary of the context and detail of the functional responsibility I carried, something that had performance measures built in, and that was useful. In time it may have evolved into an A3 type report that I have more recently been using as the core tool of project planning, but the attitude that it was just a pain eliminated the opportunity to be creative and constructive with it.
How many good ideas are being squandered in your environment?
Last week I spent over 2 hours on the phone to Optus trying to fix something they had stuffed up, the third try, after speaking to their techies and emailing the bloke who “signed” a form letter to, thanking me for taking on the service they stuffed up. Annoying? no, bloody irritating, being shuffled around their departments, nobody taking any responsibility for the stuff-up, but reciting how important my call was to them.
With the emphasis on speed nowadays, how quick is the connection, how rapidly fulfillment happens, how quickly the email is answered, we are used to “quick” and when it does not happen, we get angry very quickly indeed.
Clearly Optus are cutting costs, employing people in their call centres who have no authority to fix a problem, or even suggest a solution, and anything not on the printed frequent question/appropriate response list gets shuffled elsewhere. They wasted a lot of time, across several departments, and I wasted a couple of hours, and need a new head gasket. No wonder these Telco’s have a lot of customer churn, how easy it would have been for the first person to whom I spoke to be allowed just a little bit of initiative and it would all have gone away in 5 minutes.
It may cost a little bit of money to enable staff to deal effectively with customers, but how much would be saved in time, customer churn reduction, and reducing the advertising and deals necessary to attract the annoyed customers of other Telco’s to come to them to replace those leaving?
This is a challenge for every organisation, as the speed of things increases, the expectation is the effectiveness of the response will increase at the same rate, and it doesn’t, so we get pissed, and everybody wastes time, effort, resources, energy and perhaps most importantly, hard won brand loyalty.
What a waste.