LogoTechnology Management Associates, Inc., Serving Business Needs in the Global Marketplace

TECHMANAGE
January 1999, Volume 3, Issue 1

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A free periodic e-mail newsletter
Joanne F. Gucwa MM CMC, Editor, jogucwa@techmanage.com
Technology Management Associates, Inc.,
http://techmanage.com
Global cooperation and friendship

A warm greeting from chilly Chicago to all our subscribers from around the globe in this first month of the new year. Our wish is that 1999 exceed all your hopes and dreams.

In the next several issues, we'll be re-casting a time-honored "Marketing 101" template into today's "Customer Value" strategic mold. We'll talk about how the intelligent application of technology can dramatically improve your bottom line through the dual impact of delivering customer value and streamlining your business processes.

Knowing what your customers value (many of them will have different values) will unlock the door to understanding what you need to deliver to each of them. Although omniscience is not a strong point among mortals, you can adapt the basic concepts of knowledge management for organizing the vast amount of information you already have (or can research) on your customers. This issue launches a multi-part series on knowledge management with a philosophical introduction by our guest author, Wallie Dayal.

In this issue:

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INCREASED PROFITABILITY BY BUILDING CUSTOMER LOYALTY

An introduction

You've probably encountered dozens of four-cell grids, such as the one below, that help categorize and assess alternative marketing strategies:

1
MARKET PENETRATION

Existing markets/customers
Existing products/services

2
MARKET INTEGRATION

Existing markets/customers
New products/services

New markets/customers
Existing products/services

MARKET EXPANSION
3
New markets/customers
New products/services

MARKET ENTRY
4

The two categories above the line (1 and 2) focus on serving your CURRENT customers and markets; those below the line (3 and 4) focus on acquiring NEW customers.

This model is helpful in defining relationships between new/existing customers and new/existing products; as a source of strategic direction, this distinction is becoming blurred as competition is forcing us to focus more of our attention on the customer, letting our customers tell us what products and services they want and how they want them delivered. We now recommend a business strategy model such as this:

A
Customer retention ->

(Loyalty)
B
Customer trust ->

(Partnership)
C
Customer acquisition

(Targeting)

where you enjoy repeat business with existing customers (A), provide new products and services to them (B), and leverage what you've learned from your existing customers to expand into new markets along with traditional branding and positioning strategies.

Seeking to grow your business by enlarging your customer base (C) is an important part of ensuring future profitability in a competitive environment. Keeping in mind that the cost of acquiring new customers can reach as high as ten times that of retaining existing ones, we'll start with a focus on picking the "low hanging fruit" of building customer loyalty (A).

CUSTOMER SATISFACTION? CUSTOMER DELIGHT? NO, CUSTOMER VALUE!

How does customer value differ from customer satisfaction? How can you use technology to determine what customers value, and then use technology to deliver that value?

Customer value is defined as that which customers view as being important to them. This is not necessarily quality, or price, or any other factor that YOU think is important or in which YOU have developed a particular competency. It is your customer who defines value. Let's take a look at the ever-present 4-cell grid.

1
NEED TO IMPROVE

High customer value
Low delivery/capability

2
COMPETITIVE ADVANTAGE

High customer value
High delivery/capability

Low customer value
Low delivery/capability

MAINTAIN BUT MONITOR
3
Low customer value
High delivery/capability

REDUCE EMPHASIS
4

WHAT IS OF REAL VALUE TO YOUR CUSTOMERS?

As them, you say? If you've ever done standard surveying, you know that people typically will rank EVERYTHING as being of critical importance to their purchasing decision. Feedback of this type is next of no value to YOU. Of course, they will say price is most important. And delivery, and the birthday card they get from your sales rep, and...

Here are three suggestions. We'll expand on all of them in the next issue.

SURVEY THE CUSTOMERS YOU LOST: they have little to lose; besides, they may be unhappy with their current supplier and want nothing more than to be able to return to your flock.

ENCOURAGE CUSTOMER COMPLAINTS: carefully consider the complaints you get; these are the things that matter! It's often much easier for your customer to just get up and walk away. Negative feedback is far more valuable to you than NO feedback.

DERIVE CUSTOMER VALUE INDIRECTLY: provide a list of issues and ask your customers to assign a number from 0 to 100 for each of the issues so that the total adds up to 100. This method is better than pure ranking (or even assigning a scale of 1-5 or 1-10) for two quite opposite reasons: some will assign numbers arbitrarily or without much thought; others will agonize over ranking when they view several issues as having equal importance. Asking your customers to distribute 100 points over a number of issues allows them to assign equal weights to several issues if they wish.


Our experience with e-surveys goes back several years; whether e-mail or Web-based, both the response rate and the quality of the responses typically is much higher than the mailed variety. We'd be pleased to help identify your customers' values and develop cost-effective strategies for increasing their loyalty.


Next time we'll talk about some ways you can leverage technology to engage your customers and prospects in meaningful dialogue.

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THE CHALLENGE OF KNOWLEDGE MANAGEMENT

by Wallie Dayal

Meaningful information, commonly referred to as knowledge, is a precious commodity. It rarely presents itself serendipitously. Rather, it must be mined and extracted like a precious metal and tended and cared for like a beautiful plant in a garden of weeds. Irrelevant information is ubiquitous, while relevant information is often hidden. If only foresight were as good as hindsight. Could the tender plant have been protected from the 'unexpected' hailstorm?

Not long ago, nearly every business executive was overwhelmed by an onslaught of seemingly meaningless data. Enterprising minds solved the problem by associating bits of data into meaningful information. But the same problem emerged once more. Instead of being overwhelmed by raw data, business is faced with an overabundance of information, which bombards every decision-maker and drowns many in an ocean of possibilities and indecision. Others are left at the mercy of snake-oil salesmen who sell promising solutions to every problem. The illusion of knowledge is fueled by information age tools that can extract, align and recombine data and information at amazing speeds. However, it is the information's relevance to us, and to our clients' strategies that is the key.

Knowledge management helps us make sense of a designated arena. Let me use a simple analogy to illustrate this point. The relationship between words, sentences, paragraphs and essays is analogous to data, information, knowledge and meaning. Although words and data are units of meaning in and of themselves, in isolation they are relatively uninteresting. The next level up, sentences and information are more useful because they represent simple units of thought and meaning, which can have a profound impact on the perceiver. Paragraphs and knowledge increase the power and context of these simple units of meaning by bolstering them with supporting arguments and associated facts. The reader can accept the paragraph as knowledge relevant to him or reject it as irrelevant information. Essays and wisdom frame the arguments within a larger context and offer insight, perspective and a definite point of view.

Effective knowledge management is an age-old quest. It is not a quick fix to a problem; rather, it requires constant attention and vigilance. It does not self-propagate, nor can it be delegated since packaged knowledge tends to revert to information. To most business people garbage in - garbage out is a familiar phrase. In the realm of knowledge management, a measure of wisdom has to be applied. Thus, garbage in - garbage out becomes wisdom in, knowledge out.

If we could only manage the information that is available to man, no question would be unanswered, no challenge unsolved. The organizing tools and databases of the information age are the high speed highways which can provide answers to a multitude of questions, but our ability to manage knowledge will always be limited by our capacity to master a body of information in relation to our shifting strategies and our continually changing point of view. How else could modern day re-discoveries of ancient remedies be explained? How else can we explain the impossibility of obtaining a US telephone number from our friendly phone companies for anyone whose city of residence is not precisely known?

EFFECTIVE COMBO: COMMON SENSE AND INFORMATION AGE TOOLS

Just a few short weeks ago, business executives paid homage to an annual new years resolution to rid the office of accumulated paper and electronic information that is no longer relevant. If prior year's cleanups had been aborted before completion, the accumulated paper debris of multiple years is equivalent to a trip down memory lane. Might have beens, pleasant and unpleasant memories come to mind and often, we discover valuable information we had, that we forgot we had. Self-recriminations surface: how stupid of me, this would have been so helpful just a month ago. As the wastebaskets fill to overflowing, an odd mixture of being glad to be rid of old ballast and of fearing that at least a portion of what lands in the dumpster or recycle bin will be sorely missed at some point in the coming year.

Since these departing documents and files last saw light, our strategies shifted, our client base changed, the marketplace moved to new platforms. Value to ourselves and value for our client services have realigned. The information has become useless even if we had asked ourselves the proper - 'why am I keeping this information?'-question before filing it away

Should I keep nothing beyond documents for immediate use you might ask? After all, wonderful electronic resources of all kinds are available. This is certainly an option and may work for many knowledge workers. For others, this type of direct access to information lacks the necessary context and relation to the physical world to provide the right kind of decision support. Most knowledge workers devise a knowledge management system suitable to their specific needs, interests and preferences. In most cases, this will include a mixture of hardcopy materials, electronic files and bookmarks of electronic resources that are organized by function and theme. Alas, no system is perfect, none meets all needs and even knowledge management pundits proclaim 'For understanding the business potential of companies, inexact measures are better than none at all. (Knowledge Management, November 1998) A solidly thought out organization structure for knowledge access and retention provides a distinct navigation advantage and is well worth the trouble. It provides access to basic units of knowledge which form the foundation for adding value to our services and our customers. Search engines, bookmarks, databases, electronic and physical reference material function as unique accelerators and can give us a relative advantage which we can further enhance by our personal preferences and adapt to our learning styles.

The ancient Romans set an example. To expand and manage their empire, they perfected the building of roads, solid structures of engineering with four layers of sub-structures. On the surface, the roads were ridged in the middle to allow drainage. The untiring engineering zeal which has taken shape in these roads, sections of which are functional 2000 years later provided a powerful infrastructure for conquest, control and civilization. Armies, governors, and tax collectors traversed these roads through the wilderness of the colonies. One of the greatest beneficiaries of these ancient roads were merchants. Solidly built roads no longer exposed them to bandits and robbers because their wagons got stuck in the mud or disabled in potholes. Because of its roads, Rome had a distinct advantage and it became a glorious empire in its time.

Frederic Hayek once said: 'practically every individual has some advantage over others because he possesses unique information of which beneficial use might be made.' It is the wisdom we apply to information that turns it into knowledge. Codified systems based on statistics, assumptions and expectations, often euphemistically referred to, as knowledge management systems are only imperfect components of such a system. How we use this information, how we link it with other knowledge is contingent on wisdom. And wisdom poses the question: is knowledge management, i.e. using all available information to best advantage even possible. If it were, every problem would have been solved long ago, every question would have been answered long ago. In such a world, who would be the customer?

Rather than succumb to the frustrating complexity of knowledge management, we could take pleasure in the never-ending challenge of managing our knowledge base and of taking advantage of the speedways through the global information-maze, of being reassured that this realm affords us the possibility for applying our unique talents which we can leverage with databases, search engines, reference books and paper to suit our needs in order to extract knowledge and value for ourselves and our customers.

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THINKING THROUGH THE PRIVATIZATION OPTION

Inge Fryklund, with a chapter by Margaret (Peg) Swanton www.tacticsinc.com
fryklund@tacticsinc.com
swanton@tacticsinc.com

Although it is written as "A Guide for Local Elected Officials" the clarity of the book's mapping out of the decision-making process for outsourcing makes for a broader application to private enterprise as well.

The flow charts, tables and brief cases richly demonstrate how, by following a logical stream of choices, managers will have the information needed to make a "side-by-side comparison of the three basic alternatives [to performing a specific function]:

  • the current process,
  • the redesigned alternative, and
  • the outsourced alternative."

Competitive pressures are forcing virtually all entities to constantly seek ways to wring waste out of their business processes. The process described is an excellent way to take the imprecision and often emotion-laden issues out of in-house vs. oursource decisions, regardless of organizational type.

You may order this $15 book directly from the National League of Cities at http://206.239.112.5/book/cgi/listproducts.cfm or by calling (888) 571-2939.

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Quiz: TOP CORPORATE POWERS

Each newsletter has a new quiz which offers an incredibly- valuable prize. ;-)

Here's how to play: copy and paste the question below into a new message; type in your answer with your name, title, company name and type of company (or work you do if independent) and send it to me at:

jogucwa@techmanage.com

Question: New definitions of corporate power are coming into being. In the past, financial measures were the sole criteria; now, additional factors are being measured. These include customer loyalty, executive leadership, market presence and technology. Tell us your vote for the "top ten" most powerful companies and we'll e-mail you our vote for the "top ten" Web sites providing the best information (not products) on knowledge management practices.

Last issue's quiz, we asked:

How many U.S. state and other regional offices are there in Japan?

Answer: According to John Hemmer, President of the American State Offices Association, there are 32 member states, 3 associate members and 1 non-resident member state.

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I hope you found something of value here that you can put to use directly or that might have stimulated some new ideas. We'd be delighted to hear from you...anytime.

Technology Management Associates, Inc.
(312) 984-5050jogucwa@techmanage.com

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