Seven Business Tips for the Economic Recovery

It’s becoming increasingly clear that the economy is in the early stages of a recovery. Ignore the latest consumer confidence numbers (47.7 October Conference Board Consumer Confidence Index) and the unemployment rate (9.8% in Sept.) for a moment. Consumer confidence will recover as unemployment begins to show signs of easing – probably later this year into early next year. Employment is traditionally a lagging indicator. Businesses will only start hiring full-time employees when they have confidence that they will be able to keep them on.

The big question for companies is how they are preparing themselves for the recovery. A few thoughts as you prepare for the recovery:

1. Slow times ahead. Most expect the recovery to be anemic. Many see a difficult road ahead for inflation, employment, pay/income, interest rates, taxes, and other economic pressures. Consider how this will impact your operations in the future – customer purchasing habits, available growth financing, etc.
2. Changes for good. It may be difficult to separate the things that changed for the duration of the recession from those that changed permanently. For instance, some percentage of customers that switched brands due to lower-costs probably will not return. Customers that have learned to live without your product or service at all may not return. Either way, lost customers will need to be sold to again – just like new customers. You need to understand the fundamental shifts in your market.
3. Sow what you reap. What you did during the recession will impact how you engage in the recovery. If you treated customers badly – cut customer service, etc. – those decisions can come back to haunt you. Lost customers may be lost forever.
4. Don’t overreach. Be careful about overextending financially. Companies (and individuals) with resources may be tempted to buy up distressed assets. And it’s true that asset prices may represent the lowest prices we see in our generation; making this a real buying opportunity. However, sometimes those assets were distressed for a reason (they underperformed during lean times). They may not generate adequate cash flow for quite a while. Are you prepared to fund the operations, taxes, maintenance, and other costs until the asset can start producing? Does the asset really fit in your strategic plan? Or do you just feel like you should be buying because assets are perceived to be inexpensive? An apartment complex may appear to be cheap vs. 18 months ago, but if you don’t know how to operate an apartment complex and/or aren’t in that business, the overall investment may not make strategic sense.
5. You’re not alone. The competition will continue to be fierce. A bunch of hungry companies coming off a recession will be fighting for that business. Everyone wants to grow and get back to normalcy fast. You are not the only one. Marketing budgets will be ratcheting up quickly to increase market awareness. See today’s WSJ article about the swift increase in marketing in the technology sector – and among some well-known players like Microsoft and Google.
6. Employee defections. Consider any new employees you may have hired during the last year or so. Did they join because they simply needed a job (any job) – or are they potentially longer-term employees? Look at your employee roster. Do any seem to be underemployed? Often as a recovery progresses, job opportunities start to develop and employee defections rise. Consider who is important to your business and start working on a plan to retain them.
7. Links in your supply chain. How did your suppliers and other partners fair during the downturn? A few months ago they were all willing to bend over backwards to keep your business, weren’t they? How did you react? Don’t be surprised if over the next few months they begin to press you for more favorable terms?

As we (finally!) read more positive news each day, it’s easy to get swept up in the cheering. And now is definitely a great time to consider your next strategic steps. Are you ready?

Moving Search into Warp Speed

As I read about the beta launch of Wowd’s new real time search engine, I thought 2009 may go down as the year of the search engine battles. And, no not Google vs. Microsoft. Google feels old and static – only as good as its last web crawl of mostly static web pages. (There I said it!) And yet still most people would agree that Google is about the best out there. With maybe Microsoft’s Bing a runner-up. But 2009 is shaping up to be the year that search moved into warp speed – real time searching.

The time has come to move search engines into real time – to find a way to incorporate more real time information into search results. More web traffic is in alternative media such as blogs, micromessaging, video, and the like. These really need to be dropped into search results more effectively.

A number of companies are now actively tackling the issue. A number of search engines were released this summer – here’s a good overview of some of them from VentureBeat. And as VentureBeat said: “The issue for real-time search is figuring out the right balance between immediacy, popularity and relevance.” Most of these incorporate some form of social media tracking to surface topical trends. Not a bad idea; although it still feels incompletewhen you think about all the ways information gets dropped into the web now.

And here’s Doc Searls on yesterday arguing that live web search should encompass more types of media – such as more emphasis on better searching of the blogosphere.

It seems that no one has been able to hit a home run yet (and interestingly Google and Microsoft don’t really seem to be in the game) – but many are taking some really good swings. You should keep your eye on this market – and test drive some of these new tools.

Have you used any of these newer real-time search engines (Almost.at, Scoopler, Tweetmeme, OneRiot, DailyRT,  Topsy, etc.)? What was your experience? Do you have any other to add? I’d like to hear from you!

The Problem With Redefining “Innovation”

I read with interest Brian Reich’s blog at FastCompany.com on the difficulties of innovation – and how we might need to change the definition or our expectations of the results. I agree that innovation is certainly difficult to accomplish; and that we are often disappointed in the results. However, I don’t agree that changing the definition or our goals is the way to go.

I suggest that we merely recognize that change can happen at various levels within an organization:

• Operational/day-to-day improvements: Looking for and making changes at a day-to-day level. Changing the way a process or a procedure works, for instance. Example: Adding information to your company’s invoices to give customers more transparency into pricing.
• Strategic: Adding new products or services, entering new markets, or fundamental business model changes. These ideas are big enough to shift company direction and/or focus. An example would be an international expansion or Google’s entry into the operating system game.
• Disruptive: These are changes that fundamentally “change the game” – those that build a new industry, makes others obsolete, or fundamentally change the way things are done.  Think eBay, social media technologies, the iPod, or the PDA.

In my opinion, I think it’s just important to appreciate and value all these levels of change and improvement. However, innovation should continue to be limited to those changes that are truly strategic and “game changing”.

It is important to build a culture that welcomes change, innovation, and seeks out new ways of doing things – at ALL levels. This requires a culture that celebrates innovative successes (and even attempts that are less successful), encourages employees to generate (and share) ideas, and has processes in place that support innovation.

Another idea I would introduce into this discussion is for companies to look for ways to reach out and collaborate with customers at all these various levels. This can (1) generate ideas that may not get thought of otherwise and (2) raise the odds of success. You may have to select specific customers (or a good cross-section of customers) to get the results you want.

So, I don’t think we need to redefine innovation; just recognize that incremental change is important – but still look for and support the Big Idea.

I’d like to hear your thoughts…

Defending Your Online Reputation

This WSJ article on improving your online reputation in essence highlights three ways to combat negative online reviews:

1. Reach out immediately to dissatisfied reviewers
2. Flood search engines with content you can control.
3. Appeal to bloggers to review your company or your product.

In general, I agree with the author’s analysis – these are some practical tips for handling negative online reviews. However, they smell a little too defensive and artificial to me. They sound more like ways to hide or brush aside (or simply overpower) negative reviews rather than actually caring about customers opinion and making sure that a balanced set of opinions gets heard. This tactic typically backfires because it seems insincere.

I most agree with the first one. A business should always try to reach out and rectify a relationship with an unsatisfied customer. As I’ve said before in this blog the way a business handles a negative customer experience can sometimes lead to a much stronger long-term relationship. After all, most customers don’t expect you to be perfect. But, they do expect you to care about the relationship. If you don’t, why should they?

Also, I would add an Item 3a: Instead of (or in addition to) going to bloggers, ask your actual customers to rate you and/or your product. If you are indeed treating customers well, the positive reviews should quickly outweigh the negative and provide the reader a more accurate picture of your company, your products, and your customer experience.

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Please be sure to leave  comment and tell me what you think. Do you have any additional ideas? Do you disagree with mine? I’d really like to hear what you have to say.

The 8 characteristics of innovative organizations

In my years of observing many different organizations – of different sizes, different industries, and different stages of growth and development – I have noticed a few things about innovative organizations. These are the organizations that are always coming up with new ideas, new products, new ways to serve customers and add value. I have tried to boil these down to just a few characteristics.

1. Celebrate failure: OK, that’s not really accurate. No one really celebrates failure. But they do celebrate the attempts at successful innovation. They do not consider an idea that does not end up as a rousing success as “career ending”. And they always seek to learn from these pursuits. They encourage employees to introduce new ideas and to always look at what they are doing with an eye towards doing it better.
2. Supportive atmosphere: Innovative organizations provide an open environment with the freedom to kick around and explore ideas – even seemingly crazy ones. These offices often have white boards, flipcharts, markers, conference tables everywhere to encourage on-the-spot creativity. Meetings are usually not boring and sometimes include laughter as crazy ideas are discussed and debated.
3. Open culture: These organizations encourage people to get to know each other across the company. After all, it’s not just a marketing person, or a salesperson, or an engineer that will bring a great new idea to market. It’s a cross-disciplinary team working together.
4. Openness with customers: And I don’t just mean a once per year satisfaction survey. I’m talking about proactively inviting customers to talk openly about company performance and provide ideas and input into developing new products and services. Ask them to participate in product and service design, development, and testing.
5. Market knowledge: In innovative organizations, everyone knows who the organization’s target markets are, who their customers are (and their needs), and who their competitors are. They know the organization’s products and services and how they compare to those of their competitors. They keep abreast of market trends – and the leadership team actively helps them stay up to date.
6. Clear mission/vision: Employees of innovative organizations really understand the organization’s mission and vision – and can live within (and sometimes push the boundaries of) them. This is a result of a culture that involves them in strategic thinking. New ideas are “tested” against this strategic vision to see whether the new idea moves the organization closer to that vision.
7. Set employee expectations: Innovative organizations expect employees to come up with good ideas. Often it’s actually built into the hiring and measurement processes. These organizations look for ways to identify prospective employees who are not just experienced and technically competent in what they do, but also demonstrate a spark of creativity, a willingness to take risks, to offer ideas, and are comfortable in an open, creative environment. These are the people who are willing to be the first to draft a document that others will review, revise, and edit. These are the people who may begin a sentence with “This may sound crazy but what if we….”. Employees are encouraged to help recruit like-minded people.
8. Broad-perspective employees: Employees bring their different perspectives, their different talents, and different mindsets. They might come from differing backgrounds, different academic disciplines, even different industries. They are open to exploring and adapting new ideas – from almost anywhere. They also don’t feel constrained by what has been tried before.

I believe that an organization that can build this type of an organization will (more often than not) find success and lead their industry. I’d be interested to hear your opinons. Do you agree or disagree with my list? Should I add others? What has worked in your organization? Leave a comment!

Inspiring Leadership

Let’s begin with a contrast. Listen to the immortal words of JFK in 1962:

“I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth. No single space project…will be more exciting, or more impressive to mankind, or more important…and none will be so difficult or expensive to accomplish…”

Clear, concrete, and visionary, right?

Contrast that with the words of Norman Augustine (former CEO of Lockheed-Martin), chairman of the president’s independent blue-ribbon panel on spaceflight after their final public meeting earlier this week: (you can hear this line in the NPR story here)

“It would be difficult, with the current budget, to do anything that’s terribly inspiring.”

And this is the group that is charged with advising the president on the future of space flight.

Which one do you find exciting and visionary? Which one do you think is more likely to inspire people to pull together and achieve something great?

I talk and work with many organizational leaders each year. At some point or another, one of our discussions usually turns toward how to “inspire the troops”. Thinking back on about these conversations has made me consider what I usually tell them. It’s often something like this: Clearly picture your vision for the future and then share that picture with your employees, your customers, the media…anyone who will listen. Everyone wants to be part of a winning team that’s doing exciting things. People look for something beyond themselves and beyond just their everyday activities. Get excited and give them a bandwagon to jump on! Too often leaders lack passion and conviction about what they are doing…and then wonder why no one else has it.

Here are a few ideas:

• Tell an inspiring story – paint a vision. It’s important for an organization to be able to clearly see that future vision. You should be able to get in front of your organization and say “Picture this…” and then paint a clear, concrete, visionary picture of the future. Many leaders I speak with think they can’t do that, but I know they can. When I ask them to describe their vision to me in private, they can do it almost immediately. They know where they want to go. They are just too hesitant to say it out loud or to put it on paper. Often they feel that they need to be able to describe every step along the way before they commit. Don’t be uncomfortable with a lack of detail. Your stakeholders want to hear and “see” your vision – not hear every detail about how to get there. An important part of a leader’s job is to keep the organization pointed in a clear, long-term direction.
• Tell ‘em why. Why does this vision matter? What will it achieve? What’s its higher purpose? What’s the ultimate goal? Why would anyone want to help get there? Tie your vision to your organization’s mission. It’s not enough to describe a destination. It’s important to tell others what happens when they get there. It’s not enough to just describe a big, new facility as part of your vision. The important thing is to explain what you plan to do with that facility; how it helps your organization better achieve its mission. (We will be able to provide our customers more options which will help them achieve their goals. We will be able to heal more patients or treat more diseases. We will be able to teach more children.) You get the point.
• Turning back to the space program for a second. Do you find the president’s current vision – to return to the moon by 2020 – terribly inspirational? Do you sense a groundswell of national excitement? No? Why not? Well, for one, it’s been done (40 years ago to be exact!). It lacks purpose.
• Celebrate actions that help achieve that vision. Along the way, it helps to continue explaining your vision by supporting those activities that propel your organization toward it – and sometimes pointing out those that don’t. If your employees take the initiative and do something that supports that vision don’t hesitate to acknowledge it. If your team reaches a goal that is aligned with that vision, celebrate it.
• Really deliver it! Don’t hesitate to get excited. So many organizational leaders think they need to always be serious, staid, emotionless. You know what? Your employees, your investors, your management team, your donors – are looking for a little passion. If you are not passionate about the future, why should they be? If you don’t “feel it”, why should they? But, be genuine. You can’t manufacture passion. Your “excitement” will fade quickly and so will theirs. It’s about a true commitment to something big.
• Be honest and practical about the path to implementation. Leaders don’t simply work from a budget. They don’t wait for someone else to tell them how much they can spend. They define the budget. They drive budget priorities. They understand and respect the challenges that must be faced. JFK didn’t just say “let’s go to the moon”. He also talked about how the space budget must be increased and that the rockets that would take us into space would be “… made of new metal alloys, some of which have not yet been invented…”. Set practical, reachable interim goals. A vision challenges your team to creatively solve problems – with an eye toward that ultimate goal.

So this is my advice to leaders everywhere: Know your vision, be able (and willing) to describe it clearly, passionately, and with conviction. See what happens!

Please leave your comments about what you would add! I’d like to hear your thoughts. And be sure to invite others to read and comment!

How well do you know your customers’ customers?

By now most of us collect at least baseline customer knowledge. But the big question is what do you do to go beyond that? Think about it for a minute. When was the last time you were able to show your customers that you really understood the markets that they serve – the current trends, the needs, the key competitive factors, how purchase decisions are made? So, how well do you know your customers’ customers?

Here’s an example from my own business. For several years, we surveyed customer relationship issues for a growing software company on the East Coast. The company served medium-sized community banks and credit unions throughout the United States. I must admit that early on I learned only as much as I needed to be able to do our work effectively. Over time it dawned on me that I could better impact my client’s strategic decisions by really knowing the markets they serve, and I began doing more research and reading in this area. By knowing that there was a big push toward end-to-end solutions that integrated platform bank software with ATM, online banking, etc. , enhanced financial institution security measures were a growing issue, and competition from the large banks was growing – I was much more able to intelligently discuss the issues my client faced. I was able to proactively suggest the most critical research topics when we designed our customer research and was better able to interpret the results and suggest solutions. In short, I became a much more effective consultant to my client.

So how do you acquire that type of information? Actually it’s much easier than you might think.

• The best source is your own customers. Ask them to share what they know with you. Set up periodic discussions to get insight from them. Ask them what they read and what conferences they attend. Ask them to describe and compare their key competitors.
• Another good source is trade journals. Almost every industry has at least one – and sometimes they are low-cost or free. Also, subscribe to newsletters (especially online/email-based).
• If the industry has public companies then SEC reports (such as company S-1s, 10-Ks, and 10-Qs) are helpful as are industry analysts such as those with investment banks and research/forecasting organizations.
• Attend industry conferences – some of the same ones your own customers might attend. Of course, this requires a larger investment of time and money.
• Identify the 2-3 top blogs or online commentators and get in the flow of the conversations by asking questions and responding to discussion questions.

I guarantee your customers will appreciate the effort to become a better supplier/vendor to them. After all, you are demonstrating that you are proactively looking for ways to make them more successful. And you might be able to extend your sales into other organizations in that industry as you demonstrate your industry expertise.

I’d appreciate any other ideas you might want to share with our readers!

Making Research Fit in a Creative Project

The other day, I was talking with a friend who runs a marketing communications firm about the prospect of inserting market research into their creative marketing client projects. He seemed to agree with the premise that market and/or customer knowledge could improve the creative work they deliver by helping shape more effective message development. The problem, he says, is that by the time his clients hire his firm they are “ready for action” and would not want to wait a long time for research to get done. My response? It really doesn’t have to take that long at all. A research piece can be executed in a matter of days. That got me to thinking: Why does make research take so long? The answer is that there are key areas that can become bottlenecks in the process. Manage these and you can fit a very valuable research component nicely into a creative project, and it will yield intelligence that can help shape the direction of a creative project.

Here are a few hints:

• Stay on point: Know your objective and the purpose for your research. A well-defined, explicitly stated purpose statement should keep the questionnaire relatively short, targeted, and focused on the most important questions. Avoid the temptation to ask everything. Have the discipline to know when something is outside the scope of this particular inquiry. And know very early who needs to give final approval to any questionnaire. Valuable days and weeks can be spent waiting for a simple approval.
• Know who to ask: It seems like a simple thing to develop a list of people to contact (especially if the distribution is to existing customers), but this often is the biggest unexpected time killer. The answer is to define the audience’s characteristics and start building your list(s) very early. An organization with a well-controlled CRM system will likely have this at their fingertips (but that’s a story for another time…).
• Know when to say when: Often research is left open for much too long. Organizations are reluctant to close a survey because they might miss those next 10-15 responses. You should know how many responses you need to feel comfortable that their opinions are representative of the population (Now, don’t you wish you stayed awake in your college statistics class?). And when you reach that point, go ahead and pull your database of responses and begin your analysis. It doesn’t mean you can’t leave a survey open while you do your analysis. You can leave it open as long as you want. It’s just that when you reach a representative sample (within a margin of error you are satisfied with) the results from additional data points should not significantly change your results.
• Run the numbers quickly: This, again, is tied to knowing your objective (Are you seeing a theme here?). Knowing what you are trying to learn by your research will focus your analysis. And with today’s powerful spreadsheet and statistics software capabilities, getting your answers should be a breeze.

So, yes, market and customer research can take a long time – and sometimes a longer effort is appropriate and useful. However, it doesn’t always have to be that way. A targeted research effort, focused on the key issues, can provide all the information you need quickly without hindering the creative process.

Five Common Business Plan Flaws

I read with interest this Wall Street Journal article by Dr. John Mullins, an associate professor of management practice at the London Business School. Having seen (and written) a number of business plans over the years, I largely agree with his summary of the five key pitfalls that most business plans fall into. His five points can be summarized as this:

1. Lack of a clearly defined problem

2. Lack of market focus

3. Overly optimistic financial models

4. Overhyping the management team

5. Irrational exuberance

Dr. Mullins prescription for fixing these problems can be summarized in one word  (much-used in his article): “candor’. I agree with this because (1) it shows that the writer has done his or her homework and (2) is willing to have a frank and productive conversation about the concept’s true prospects and critical success factors.

The three main things that raise questions in my mind when I read a business plan are (1) the lack of market focus (2) the notion that no competition exists (and will not exist), and (3) no description of how your business is unique.

I can’t tell you how many business plan writers use big market numbers and then think that they are being conservative by only needing a small share of it to be successful. First, I know that if I define anything broad enough, the market can seem huge. If I want to open a doughnut shop I can describe the market by the number of doughnuts that are bought on a daily basis in my city, region, state, nation, or the world. Or better yet, define it as “breakfast foods” or “meals” and the market looks even bigger! After all anyone, anywhere can come buy my doughnuts on any given day, right? However, a realistic plan would describe the reality that most customers live and/or work within X miles of a shop like this, and my shop is located in a area with certain characteristics, and there is a lack of doughnut shops in that area, etc. Which argument seems more reasonable, more well thought out?

The second issue (no competition) is also troubling. Let’s face it, good markets draw competitors. So, if I’m sitting across the table from you and you tell me that you have a great idea and that there is no competition (and none will be forthcoming), I either don’t believe you or I wonder if your idea is maybe not such a good one. The key is to admit that there already is (or will soon be) competitors and describe how you will be different.

Which brings me to my final point – no uniqueness. If the business plan writer is candid enough to admit that competition exists in their market, then it’s critical to show how their business will beat them. This is fundamental to the  entire business! At its core, what will make your business different and lead to success? Your unique location? Incredible customer service? Products or services that no one else has? A certain way of doing business? Showing that you have spent considerable time and effort considering this all-important question and arriving at a realistic answer will go a long way in the eyes of a prospective investor.

Why are these three areas particularly problematic? First, it demonstrates that the individual isn’t approaching their business realistically enough to seriously study the market in enough depth to really understand it. Secondly, and perhaps more concerning, key decisions about operations, sales, marketing, etc. will be made with these issues in mind. If your market is too broadly defined, your sales team will lack prioritization and will have little success by trying to sell to everyone instead of using a targeted approach. Your brand will appear to have little meaning because it will be designed to try to be everything to everybody. And it will certainly be hard to compete when you can’t differentiate your business from competitors. In short, if you really believe that your market is “huge” and that you will have “no competitors”, then it’s going to be difficult for a prospective investor to see how you will be successful.

Do you agree with these business plan pitfalls? Are there others you would have included? Do you disagree with my assessment? I’d like to hear what you think!

What’s the Skinny on Using Feedback Incentives?

Almost all our market research clients ask whether they should use incentives in their feedback collection processes. It depends on the type of research being done.

For surveys, generally our answer is no. Why? They are often abused – people complete surveys with “junk” answers just to get to the incentive. And the number of surveys being completed might make a valuable incentive cost-prohibitive. And there is the issue of bias. Does a valuable incentive favorably change a respondent’s opinion of the company? Does a less significant incentive make them feel more negative? Maybe. Maybe not. The problem is you don’t know. You may have introduced bias into the study that you are not aware of.

If you do decide to use incentives, we have found that it is often better to enter a respondent into a drawing for something really valuable rather than providing an insignificant incentive. Instead of giving them two dollars or a coupon that they may not ever use (which, in my experience, companies often scrimp on anyway), enter them into a drawing for a $100 gift card or a truly valuable product. Then follow through and announce (without using names) that you have awarded them (i.e. “to Mary C. of Chicago, IL”).

Incentives are definitely appropriate for focus groups (and maybe for interviews as well). In fact, they are expected. It is a token of your appreciation for their time and attention. But, you should know that typical incentives can run into the $75-100 per person range depending on geographic location, time of day, length of discussion, etc. This can really add up quickly!  These can sometimes be offset by offering a quality product incentive (i.e. a tote bag, a relevant coffee table book, etc.) plus a smaller cash incentive.

The reason it works better in a focus group  or discussion setting is that you can control the exchange (making it clear that their responses have nothing to do with their answers) and that these interactions require a larger time commitment.

The upshot? In general we are not fans of using incentives in surveys – although we use them in focus groups. The best way to increase survey response rates are a combination of making surveys respondent-friendly (shorter, more relevant, clear language and question structure, etc.) and using gentle prodding and reminders. For surveys that you might use on an ongoing basis, using the feedback to drive organizational improvement will help response rates. If customers know their feedback will be taken seriously, they will be more willing (and even eager) to provide it.