Feb 2, 2011 | Communication, Customers, Management, Marketing, Sales
Opportunity cost is a concept well understood, and often used in a theoretical sense, but not often is it translated into something easily understood.
In a store just before Christmas, I was tossing up between two brands of domestic coffee machine, that appeared pretty similar in all but price, the better known brand being substantially more expensive. The sales assistant sensing my indecision, and perhaps thinking I might do more ‘research” and he would lose a sale solved the dilemma by asking, “would you rather have” X” brand, or “Y” brand and 20kg of coffee beans?”
That turned the theoretical “opportunity cost” although I had not considered it in these terms at the time, into something tangible that had a value relevant to the purchase, and made all the difference…… I took the “Y” brand machine and with the saving, bought some exotic coffee beans.
Jan 30, 2011 | Management, Strategy
A couple of years ago working with the CEO of a family company as it struggled for commercial sustainability in an increasingly hostile environment, we came up with a 3 part package by which to judge all the competing priorities that were on the table.
- There had to be a measurable outcome which was going to be hard to achieve, but not out of reach in an 18 month time-frame.
- The results when achieved would be meaningful in the context of their competitive and strategic environment, not just financially sensible.
- The results needed to be visible, in that way contributing to the internal “momentum” of the business.
Two years on, and the business is going well, and the simple three part test has become a key component in decision making at all levels. The deliberate exception is the strategic discussions with much longer time frames, but even then, the tool often provides a framework that informs the discussion, usually leading to a conclusion about which issues require some resource to develop a quantitative base for future decisions.
Jan 26, 2011 | Management
Being in a position of senior management offers the opportunity for the exercise of power, and as we know, power corrupts. But why should it be so, and how can we protect ourselves, and our colleagues from the adverse impacts of power poorly exercised?
It seems that as power increases without an equal balancing force, active regulation, or my preference because the regulators by default also have power , transparency, the normal person starts to lose the perspective that comes from accountability for their actions. They start to dismiss the behaviors that led to them being considered for the senior position in the first place, a paradox of power that is as old as human society.
Jan 20, 2011 | Demand chains, Management, OE, Operations, Strategy
Some time ago I mused that perhaps the worm was slowing if not turning, in relation to local manufacturing, rather than buying in from China as the default option.
The crisis in the US, far worse than anything in this country, had to lead to structural change in the US economy, as the sort of structural change necessary usually only ever occurs when there is little option but to change, as continuing on is simply not an option.
It seems the swallows are appearing in the US, the early trendsetters are thinking twice about the downside of “offshoring”. Loss of IP control, sovereign risk, long and inflexible supply chains, transaction costs in the supply chain and management, and so on.
It makes economic and social sense to manufacture amongst the network of services and capabilities required to be sustainably successful, rather than taking the short term apparent cost reduction that really ends up costing more.
With China suffering increased inflationary pressure, their western export markets tightening wallets, an undervalued currency, and increasing domestic pressures around human rights, pollution, and the distribution of the new wealth, something has to break, somewhere. Wise businesses appear to be weighing the costs and benefits of offshoring, Vs building local capability, considering the long term benefits of development of clusters of innovation and service providers, and lean operations including shortened supply chains, and coming to the conclusion that some things are better done locally.
It will take a long time for the tide to turn, and it will turn very selectively, as many commodity, low value, low technology items will always be cheaper from a low cost environment, but the manufacturing that adds real value will start to trickle home.
Jan 11, 2011 | Management, Uncategorized
A great irony amongst the many I see, is that the skills required to produce a right answer are exactly the skills you need to recognise what a right answer looks like.
Put another way, our incompetence in a field masks our ability to recognise our own incompetence.
This irony has been observed by many, Charles Darwin and Bertrand Russell amongst others, but was systematically investigated by two Cornell University psychologists, and has become known as the “Dunning-Kruger effect“. The obvious corollary is that knowing what you do not know is usually a sign of intelligence.
Dunning and Kruger demonstrated this effect is as prevalent amongst educated people as it is amongst those with seemingly less training that may enable them to see their own weaknesses.
In today’s connected and service oriented developed world, this effect when combined with a slick presentation, and loads of self confidence can be a real trap for the unwary, just look at those sprouting financial and stock market certainties just before the GFC hit.
So, next time you hear or see someone sprouting stuff you do not understand, no matter how slick it may appear, make sure you rectify that lack of understanding before you put your hand in your wallet, alternatively, get the hell out of Dodge.
Jan 3, 2011 | Management
New year usually signals it is time for one of the most misused management tools to be pulled out of the box again, the dreaded performance appraisal.
Done well, a system to manage the performance of employees, and their managers is one of the most powerful tools to optimise performance, as it encompasses change initiation and management, culture evolution, project implementation, personnel development, strategic and tactical development and implementation, all the stuff we talk about regularly, but often do not get around to doing.
It is easy to put aside hard things, who has never seen some of these practices used, but amongst the thinking that often gets done in this quieter time of the year, it would be wise to review your own systems, perhaps we should rename them “Performance Optimisation” system, rather than performance management.
