Avoiding Management Myopia
Last week’s announcement that Virgin is entering the Australian home loan market in competition with the established Banks has generated considerable expressions of interest in the press – New entries into mature markets should never happen, but they do, why?

Entrants intend to provide a point of difference that will give them enough of an advantage over the long established players to establish a viable market position. They do so by offering better value to an attractive customer segment they discover, the opportunity occurs as established players deliver evermore focused offerings.

Entrants only occur when industry competitors are not continuously determining what customers perceive as value, and continually improving it customer offerings to meet those expectations.

Unfortunately, many actors in our economy do not do this; they remain myopic, insulated from knowledge of changes in customer preferences and therefore become vulnerable to new competition and imports.

In some industries, there is even a culture of adversarial relationships with customers, and a lot of external monitors are devoted to checking to make sure that the customer receives what he is paying for. The classic example of this is the construction industry, where the architect may be more concerned with the building as a reflection of his ability more than the customer’s needs, and where there is an infrastructure of quantity surveyors to ensure that the contractor does not cheat on materials.
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The pursuit of value is a concept that has become common in “management speak” over the last few years. Even the accounting profession is in the process of developing statements which attempt to reflect how value is added. In its purest form “value” can be described as the customers assessment of a product’s worth in comparison to its price, how much they are willing to pay for it. It is a complex concept to unravel as it has in its mix perceptions about comparative quality, suitability for use and the amount of satisfaction which will be gained from owning and using it.

As with improving quality, adding value requires an organization to undertake a process of continuous evaluation and improvement from the customer’s point of view. The best do this by establishing communications networks that feed back market and consumer research. More than just understanding its customer’s needs, company’s such as General Electric build a chain of communication partnerships with all of the entities it interacts with including suppliers, employees, media, competitors, government and any regulatory agencies. To be effective, these partnerships have to be real, and not just exercises performed for “Public Relations.” It requires a commitment from the entire organization, with everyone sharing in the responsibility for achieving it, not just some short lived project implementation team.

Sustained bottom-line success follows when customers are well served and understood, employees are fully involved, and actions are based on systemic data about processes, customers, competitors, and best practices exist in the areas of:

- Customer-Focus
- Employee-Driven
- Data-Based Performance

Many of the principles are rooted in common sense, and articulating them serves to convert them into targets to be aimed at, and against which progress can be measured.
This is the underlying culture which maintains General Electric’s position as the most admired company in the world. Since the concept of value goes beyond price and is ever shifting, the ability to compete by understand what is valuable overcomes the disadvantages of low economies of scale.

Understanding the concept of value for Australian’s is a fortification which can place our manufacturers at an advantage. It require a broadening of perspective, as even though the importance of state of the art equipment is clearly understood, the world outside the plant, that of market communication becomes ever more crucial.

If you, your management team and your company have not thought about how it can understand and combat market myopia, The Advisory Firm is able to lead you through a workshop on establishing a measurement process of effective 360 degree market communication.

Help us help you with an 'I'm blind help me see' workshop.

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Outsourcing's Benefits - Research and experience is proving its the way to go

An Accenture survey of American and European execs says the additional business controls generated by outsourcing are driving the trend to external providers.

Outsourcing wedged its foot in the door as a cost-cutting measure, Accenture notes in releasing the survey Thursday, 25% of respondents reporting first-day improvements in business processes.

The most frequently cited improvements in business control included a better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives.

The now mature outsourcing industry and experience with the process across a number of sectors has enabled the broader business benefits to be identified. While IT services continue to be the leading outsourced function, more companies are turning to outside sources for supply-chain operations, learning and training, human resources, accounting and financial services as well as customer relationship management. 43% of the 800 executives surveyed have IT outsourcing arrangements in place.

Supply-chain management was seen as the most rapidly rising area for outsourcing, as one time manufacturers switch their facilities to importing, with 36% of the respondents undertaking it.

Outsourcing multiple business processes brings the ability to adapt faster, to better contract performance and to access a wider range of business experience to bear, without the infrastructure overhead.

The trend looks to be long-lasting, with more than 80% of the survey respondents expressing commitment to permanent outsourcing of at least one key business function.

If you are moving towards outsourcing, you can request additional information on The Principles of Outsourcing by writing here.

Harvard Entrepreneurial Research - What the hell would they know?

Professor Joseph B. Lassiter III's research at Harvard explores entrepreneurial marketing in high-potential ventures. He describes entrepreneurial marketing as a mindset and a process. One that involves gathering specific evidence that convinces a specific group of individuals to act and react, exploiting breakthroughs, and overcoming setbacks.

The important element from Lassiter’s research looks at how actors perceive their ventures. Entrepreneurial marketers look ahead and say, "two or three years from now, this is exactly the customer and exactly the product, and this is exactly why they're going to be compelled to buy." They have a keen idea at the very beginning of the venture who their ideal customer is and what the ideal product is that they need to deliver. Then, they work back from that point in the future to the present, picking the customers who will buy and the subset of that ultimate product that they can actually build. They move from that initial starting point to their ultimate objective with remarkable efficiency.

These entrepreneurs understand both the ultimate mainstream customer and the immediate customer, because the bulk of the orders are going to come from the mainstream customers. Therefore, a key issue is who do you do business with initially who lets the venture start moving down the "right" product road map? Who do you do business with initially who can help you on the path of having the right product for that mainstream customer?

If you try to sell what you can't deliver, you get in trouble. If you try to deliver what a mainstream buyer will not ultimately buy, you get in trouble. So the issue is how to get started as you go to market.

The art in this process is recognising how you get from "today" to the mainstream market of "tomorrow," because you can't create that whole product at the start. Very often, that customer you would ultimately like to sell to is very reluctant to buy new, still-evolving products. So you have to get started with customers who have a desire for experimentation and who are not only willing but driven to try new things. If you think in terms of best practices, it's understanding the path to the mainstream market and being smart enough to, A) pick a good mainstream market and, B) assemble the people and partners who give you a disproportionate likelihood of getting there.

At the start, an entrepreneur usually has an idea of a product and a customer and the kind of features—usually technical or product features—and the operational advantages they'll convey to that customer. The entrepreneur either understands this opportunity from the product side of things—a kind of feature/advantage/benefit view of the world—or understands it from the customer's point of view: that the customer really needs a particular benefit. The entrepreneur asks, "How can I accelerate the rate at which my product moves into the marketplace?"

The answer is usually by recruiting the right people and partners around the core idea.

The key lesson is you need to have enough awareness of product alternatives that come from research into technology, and of customer needs that come from pressures in the marketplace, to see where opportunity will emerge. If you need to really drive to a new customer focus use a thorough Research and Development program designed by The Advisory Firm – which can be claimed in its entirety under the governments R&D tax rebate scheme.

If you would like to investigate this further click here and we can show you how.

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This Edition's contributors:

Drew Le Grand - 03 8610 2400
T.A.F. Chairman
drewl@theadvisoryfirm.com

Brett Galvin - 03 8610 2404
Judge, Jury and Executioner - (The Advisor, Editor)
brettg@theadvisoryfirm.com

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