Chapter 11: Keep the Tape Measure Handy
Step One: Recognize How Measurements Can Help Your Company Identify and Understand More About Irresistible Forces
Experience teaches you to recognize a mistake when you've made it again.
Many irresistible forces go totally unnoticed by the organizations they affect. This chapter shows you the value of continuously measuring all important aspects of an enterprise's environment in order to detect, quantify, and track those forces. When it comes to irresistible force management, only constant assessment of the factors that can determine your success or failure will keep you current and on track.
Lights, Camera, Action! Recognizing the Importance of Measurements
In the movie, The Truman Show, Jim Carrey stars as a character who lives his whole life from birth on a television set that he believes is the real world. By carefully observing that certain circumstances occur in too-predictable patterns, he eventually realizes that he is on camera. If it hadn't been for noticing the strange occurrences around him, the young man would have missed the most irresistible force in his life, the will of the director. Using his newly found knowledge, he decides to leave the set and join the rest of the world.
So it is with irresistible forces in your world. Success in dealing with them must begin with perceiving them. Since human beings normally pay little conscious attention to 98 percent of what's going on around them, it's not surprising that executives miss important shifts in irresistible forces. Measurements are powerful tools for drawing attention to significant changes. By assuming that virtually anything can change and placing measures on your enterprise's environment to monitor that assumption, a business can much improve its potential for grasping shifts in irresistible forces.
Set Sail: Let the Wind Blowing from Any Direction Speed Your Journey
Enterprises that detect the arrival and departure of irresistible forces can more easily adapt to using those forces to their advantage. For sailors, the wind is a key irresistible force. Because the winds are often light in Newport, Rhode Island, anyone who had the right sails in place and positioned properly when the breezes shifted gained a large advantage during the America's Cup trials there. Historically, canny captains scanned the clouds and the waves for any clue about what the wind was going to do. However, in one of the last America's Cup events in Newport, the approach to anticipating the wind was taken to the ultimate. A team set up a weather station adjacent to the course to measure and forecast the shifts in the breeze. That information could be conveyed to the captain five to six minutes before the shifts occurred. One year the information proved decisive. For the next America's Cup trial in Newport a few years later, every competitor used a weather station.
Let's Shop Until the Trend Drops
Businesses are finding that real-time feedback can be extremely valuable to their success. Consider mail-order shopping. Let's say you bought something from a catalog a few years ago and nothing similar since. When the catalog seller thinks it may be time for you to replace this item, you may be prompted to do so the next time you call to place an order. If you then say you're interested in buying the same item again, the catalog representative can refer to your computer record and describe what you bought before, ask how it suited you, and tell you about current items that might be acceptable replacements.
If you make any casual comments while placing your order, such as your color preference or the size of your family, those bits of information can be logged into the computer record. Then other related purchasing suggestions could be made. You may be asked if any of your family members has a special occasion coming up for which you'll need a gift. More probing questions will elicit what that person likes and what kind of gifts you like to give. If you then do buy a gift, chances are you would be reminded to buy that person an appropriate gift at the same time next year for that special occasion.
If an overview of customer interactions shows the mail-order company that a new trend is developing, such as changes in customer tastes, the firm can quickly shift its purchasing to emphasize those items that will be in more demand by consumers and reduce the acquisition of items that will be in less demand. By identifying which items are looked at as well as which are actually purchased, orders placed over the Internet can give even more information to the mail-order provider.
Clearly, measurements can help you anticipate conditions so you can correctly outfit and position your enterprise to get the most benefit from those conditions.
Identifying Irresistible Forces by Taking the Measure of Your Environment
When you visit your primary physician, someone takes a number of vital measurements including your height, weight, temperature, and blood pressure. From this information as well as the results of any testing that was done prior to your visit, your physician draws a baseline for comparing your current state of health with your past, how you compare to others in your peer group, and what would be desirable for you in the future.
Similarly, a business needs to sample its history, current situation, and desired future along a number of dimensions. These perspectives include understanding what is happening with customers, employees, suppliers, those who help distribute the products or services, partners, investors, regulators and the communities in which you operate. Just as a fever can alert a physician that an infection may be present, shifts in trends affecting these audiences can likewise warn your business to the presence of important irresistible forces.
Take Me to Your Users
The best uses for many products are often revealed only after the products have been tried out in different ways by customers. For example, consumers discovered that Arm and Hammer baking soda makes a good deodorizer in the refrigerator. Church & Dwight capitalized on this application through advertising and greatly improved sales of its product. Many intended uses also turn out to be unimportant. Consider that relatively few sports utility vehicle owners regularly drive their SUVs on unpaved surfaces. Optimizing that feature, then, would probably add costs while not improving sales very much. The successful and unsuccessful experiences of those who use your products or services constitute forces that you ignore at your peril.
In many businesses that sell through a distribution channel, no one has direct contact with those who actually use the products. Observing what customers do with a product can be a real eye-opener. Jell-O's marketing and test kitchen personnel spent some time in kitchens watching parents and their children making Jell-O. Many parents mixed up highly concentrated Jell-O and then used cookie cutters to create shapes their children could play with as well as eat. This observation led to the famous Jell-O Jiggler program that improved Jell-O sales.
The first semimoist dog food, Gaines Burgers, was produced in the shape of hamburger patties. The competition quickly noted that users typically broke up the patties into bite-sized pieces, especially for smaller dogs. The competition then launched a semimoist dog food that resembled uncooked ground beef and was packed loosely so that the dog owner could simply open the pack and pour out the contents. No more messy handling! Users switched in droves to the more convenient form of the product, which, incidentally, was also less expensive to produce than the patties were.
Let's move on to the car lot. Buying a car has always been like a wrestling match. The buyer is pitted against the salesperson who, naturally, wants to sell at the highest possible price. The buyer often fails to negotiate on price, or does so poorly. But an irresistible force is building up. Rather than feel like helpless victims in a macho bargaining process, many people simply want to pick out a car and be sure that they get a fair price. Voila! Saturn comes along and offers that opportunity to all, and soon Saturn dealers are outselling Chevrolet dealers in similar locations by more than five to one (despite having a limited model range).
Car buying services have sprung up online. You indicate what kind of car you want to buy, and dealers who have or can get that car for you in your area bid for your business. With no negotiating involved, you simply pick the lowest bid. Use of these automated services has exploded. Now that's a 2,000 percent solution for car buyers and the Internet intermediary!
They are responding to the same irresistible force that is helping the Saturn dealers: the purchaser's desire for no-stress car buying at a fair price. This irresistible force in the car business has probably been around for quite awhile, but no one noticed the opportunity it held until recently. Talking to customers just after they bought their cars and thinking about what they said would have turned up this opportunity long before now.
Go to the consumers and distributors directly and pay attention to what they have to tell you as a start to recognizing the irresistible forces in your industry.
Supply and Demand
Suppliers are an often-ignored source of information about irresistible forces. Your firm's suppliers know a lot about what you're doing wrong, but may seldom tell you. Why? Because usually no one in your organization wants to listen. Supplies are commonly bought against detailed specifications through purchasing agents. Such purchasing agents usually don't have the knowledge or the authority to change the specifications to something more appropriate. Their job simply is to get the specified product, at the right time, and at the lowest price from reliable suppliers. And those who designed the product that requires the supplier's component are normally as happy as the proverbial clam, confident in their belief that the product's design couldn't possibly be improved. From the designers' point of view, for a supplier to suggest a change is tantamount to criticism or even an attack on their competence.
Why do suppliers often have a superior view of what you need? Whatever else is going on, the suppliers usually know more about the alternatives than you do. For one thing, they may be supplying several companies in the industry, and know that the component purchased by your competition works a lot better and is cheaper. For another, suppliers know a lot about the trade-offs in cost and performance that go into one specification versus another. The supplier may be in a better position to judge trade-off than you since your purchasing agent wants the lowest possible component price. The supplier may sometimes be able to give you a more expensive component that will work better and allow you to use less expensive components or have lower assembly costs for other parts of your product. As a result, the cost of the entire product is greatly reduced.
You can turn the situation around and encourage information sharing with your suppliers by offering incentives, often called "gain sharing." Let suppliers know that if they'll share improvement ideas with you, you'll reward them with a share of the benefit you receive as well as make their position as your supplier more secure. You'll probably also have to encourage your own people to listen by having them share the profits resulting from the cost savings.
Nobody Does It Better
Recognize that your competitors' actions, both effective and ineffective, can be one of your biggest sources of irresistible force information and help give you the insight to develop a competitive edge. Take Kentucky Fried Chicken (KFC) and Church's Fried Chicken. In the 1970s, KFC's largest competitor was comparatively quite small, and so would have been easy to ignore. But Church's had several interesting characteristics: The company had a higher profit margin (profits divided by sales), charged lower prices, enjoyed higher sales per restaurant, and provided customers with larger portions than did KFC. Many of KFC's successful profit improvement programs in the 1970s had their beginnings in the competitive benchmarking studies of Church's that revealed the sources of those characteristics.
Having a methodical competitor that always operates the same way makes it easier to analyze its actions and take advantage of what it demonstrates about existing irresistible forces. Procter & Gamble (P&G) once had a highly predictable pattern. P&G's competitors from different categories occasionally exchanged notes on what had worked to derail P&G's marketing programs. More and more companies learned that you could tell when P&G was about to enter a geographically limited test market with a new product. If the market test didn't pay off according to P&G's plan, its brand managers would retire for more study (for up to two years) before making another move. If the competitor hit that test market with everything it had, it had a good chance to deter P&G for awhile. The relative high cost of defending the test market was much less than the cost of defending against a wide-scale product expansion, so it was well worth taking the chance. Eventually P&G changed the way it test-markets products to avoid this vulnerability.
Until Death Do Us Part
Partners are also an important source of information about the identity and direction of irresistible forces. A partner may do more business than your company does in another part of the world where the forces come into play sooner. For instance, the best way to see the future of outsourced overseas software development at the start of the twenty-first century is to visit India, where this activity has become a major industry supplying companies around the world.
Global operations increasingly involve multiple partnerships to accomplish specific purposes. The forces that make such partnerships necessary are the rapid development of an interlinked world economy, the formation of rival alliances using partnership forms of competition, and the need for skills or resources that exceed the capabilities of any one organization. Even Coca-Cola, the global soft-drink powerhouse, is heavily dependent on its partnerships with local bottlers, in which the Atlanta giant often has significant investments. Partners also provide useful perspectives into the complexities of operating globally by exposing you to how local irresistible forces differ. The partners reflect and respond to the local cultures and values within the framework of a worldwide organization.
Working with partners also exposes your business to more irresistible forces, such as the needs for a common purpose, coordination, and effective communication. A partnership-driven enterprise is much harder to make work than any other form of organization because any one partner can scuttle the foundations of success. If a partner loses interest, or priorities change in his business, the partnership may soon dissolve due to a lack of commitment or change of direction. Operating a partnership is more like running an organization primarily staffed with volunteers, like Habitat for Humanity, than an ordinary business. You have to keep maintaining everyone's attention and support in order to succeed. Some say that the partnership organizational form is itself an irresistible force that every enterprise needs to master in order to prosper.
Governments have the ability to set and change the rules by which your company operates. Consequently, most managers do monitor for shifts in these mandates. You will need to be judicious, though, in preparing to react to changes that the news media might suggest are forthcoming. Government action doesn't always match up with such reports.
For example, in the 1970s it was widely expected that Senator Edward Kennedy of Massachusetts (the nickname, "Taxachusetts," stems from the unusually high tax burdens imposed on the Commonwealth's citizenry) would be able to push through national legislation establishing government-run national health care. Of course, such legislation hasn't been passed yet; but the likelihood of its occurrence back then was considered by many to be so strong that dozens of major companies dropped out of the health insurance industry at the time. The decline in competition due to the threat of the legislation became an irresistible force in favor of those who remained in the business. The winners in circumstances like this will be the enterprises that measure the impact of possible, as well as actual, changes in laws and regulations. Those who recognize that the subjective perceptions of future occurrences can strongly influence the holders of those perceptions can certainly gain a competitive edge.
Deregulation at the national level in the United States has provided a similar fair wind for those who were nimble in aligning themselves to take advantage of new opportunities. As described in Chapter 2, deregulation of broadcasting allowed broadcasting companies to become much larger and more profitable, and opened up improved ways of serving customers. Deregulation in the airline industry has made it easier for new companies to start up and, in the telephone industry, has made possible the success of newer long-distance carriers like MCI WorldCom.
The privatization trend in Europe has been a similarly important irresistible force. As long as many firms were state-owned enterprises, political considerations (such as maintaining employment and keeping prices low) dominated decision making. When the public took on ownership directly through purchasing shares, these organizations began to act more freely like traditional for-profit enterprises.
Every business has some level of contact with the communities in which it operates or where its employees live. In some cases the enterprise has a large impact on its local communities through the spending that the firm and its employees do locally, through volunteer activities to support local well-being, and sometimes through its own impact on the cleanliness of air and water near factories.
Community relations can be a powerful force for or against an enterprise. For example, in California's many congested cities there is often a tendency to legislate and set regulations that make growing a local business slow and costly. As a result, many of California's fastest growing businesses do much of their expansion outside the state, even when they plan to remain in the United States.
Interestingly, a less prohibitive stance concerning environmental regulation is gaining popularity in the United States. Citing local relevance neighbors affected by discharges of pollutants often favor solutions that are more flexible than those pushed by government legislators and regulators. This irresistible force has changed the way that pollution problems are solved. Typically, all affected parties now meet to share information and to find a solution with which everyone is comfortable. Where enterprises have developed trust with their neighbors, the resulting savings in avoiding federal regulation can be worth tens of millions of dollars while creating happier neighbors. Chemical companies have been particularly successful with this approach.
Neighbors can play a role in other ways. If the local community attracts and retains outstanding people, your enterprise's ability to employ a skilled labor force is enhanced. You'll be able to choose from people who already live in the community and to attract others interested in moving to that community. Some residential communities are considered so desirable that people will work for less money just to be able to live there. This attractiveness can be an irresistible force in your favor.
Researchers like Rosabeth Moss Kanter (in World Class, Simon and Schuster, 1995) have pointed out that the most successful companies and suppliers in an industry congregate in geographic clusters. The more companies that move into such clusters, and the more competition there is, the more successful the companies will be. A 2,000 percent solution for you is to determine if you are making the most out of having your enterprise operate in the most competitive and effective geographic clusters.
Measurements can be used to assess virtually anything in your environment to get information about irresistible forces. Once you recognize the importance of measurements, you can begin to take specific actions to avert stalls and initiate new thinking habits for irresistible force management. This section can help you learn what areas you should have measurements in, how to start measuring, and what to do with what you learn. You can then build on this experience in Chapter 12 to create even more focused and beneficial measurements.
Compile an Irresistible Force Inventory
Irresistible forces are easily dismissed or ignored, so you need to make a conscious effort to focus on and track them. Your starting point should be an irresistible force inventory. Irresistible forces are like the wind, constantly shifting in direction and intensity. The inventory can also help you by providing a baseline against which you can measure the force and its changes in the future.
What irresistible forces are affecting your company now? Answer this question by making a list. Using a computer will make it easy for you to add notes to your list in the future. Consider the question from the point of view of those who use your products or services, your customers, distributors, partners, employees, suppliers, competitors, governments, and the communities in which you serve and operate. Add another dimension by reflecting about those times when your enterprise was unusually successful or had disappointments. Were there irresistible forces at play on those occasions? What were they?
What do you know about these irresistible forces? You should pay special attention to identifying what you believe are the causes of these irresistible forces. If your customers use your product or service may want more convenience and quality, inquire further to ask about the underlying motivation. Maybe deadline pressures require that your products and services do more for them in less time. Again, what is driving these pressures? Always look beyond immediate causes to determine if there are other forces that you can turn to your advantage.
It will also be helpful for you to note when the irresistible force began, how strong the force is now, whether the force seems to be getting stronger or weaker, and how the irresistible force is affecting your company. If you have ideas about how the irresistible force may affect your enterprise in the future, make note of those thoughts, too.
Use Measurements to Check Your Perceptions of Irresistible Forces
It's very likely, as you begin the unaccustomed process of analyzing the irresistible forces in your inventory, that your initial conclusions now will be inaccurate or out-of-date. Measurements can help refine your understanding of the forces affecting your enterprise, as well as their relative importance.
How can you measure or assess the nature, strength, direction, and impact of each irresistible force? You must find the important clues about these forces so begin by considering more measurements than you may actually need. These measurements should include as many dimensions as possible. For example, how does each irresistible force affect users, customers, distributors, partners, employees, suppliers, competitors, government, and communities? How is the influence different for your various products and services?
You'll need to use both external and internal measurements to get a complete perspective. For example, government data may give you a handle on what is happening to a certain category of customer (such as those defined by a Standard Industrial Classification [SIC] code) that is of interest to you. Industry data may be helpful for perspectives on competitors, customers, and users. Your own market research may be very valuable for adding business- and product-specific perspectives concerning competitors, customers, and users as well. Be sure to also gather data on users of competitors' products for comparison.
You may be surprised by how many valuable measurements are available. Most businesses capture very few measurements about their irresistible forces. Even those that are captured may be stashed inaccessibly in different parts of the organization so that they may have never been seen together. Make sure that effective communication and evaluation of the measurements and their meanings are part of your measurement program.
How do the irresistible forces differ from your own and your company's initial perceptions of these forces? If you are like most people, you'll find that many of your perceptions about irresistible forces are off-target to some degree or another. In addition to analyzing how perceptions differ from the actuality, it's important to understand why those misperceptions have occurred. Were your perceptions once accurate, but circumstances have since changed? Are your perceptions based on interaction with your largest customers, who are not typical of everyone who uses your products and services? By answering these kinds of questions, you'll learn a lot about the strengths and weaknesses you and your business have in developing information about your enterprise's environment.
Pick One Irresistible Force to Study in More Detail
Continue your exploration of how measurements can help you address and use irresistible forces to your advantage. Focus either on the force that is having the biggest impact on your organization or on the one that you are most interested in better understanding.
How many measurements can you find for the targeted irresistible force? The purpose of making this detailed examination is to give you and your colleagues experience in seeing how measurements can extend your ability to use irresistible forces. If you do this investigation well, you should find more than triple the number of measurements you have uncovered so far. For example, if your customers have customers, find measurements concerning them. You can do the same for suppliers, partners, and competitors.
Using the expanded list of measurements, how many more irresistible forces can you find? Powerful and inexplicable trends usually have other forces behind them. Without looking for the causes of the irresistible force you've identified, you could miss these other important forces.
If you find this detailed study to be valuable, pick another irresistible force and repeat the process. Keep repeating the process until you no longer uncover any important benefits.