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

TECHMANAGE
March 1999, Volume 3, Issue 2

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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

Greetings and warm wishes for happy celebrations to all our friends and clients around the world during this Easter and Passover season.

HAPPENINGS


We've been pretty busy since our last newsletter (January).

I've had the privilege of giving two talks on leveraging Internet technology for research, marketing and work efficiency. The first was for fellow members of the Chicagoland Chamber of Commerce (Attracting More Visitors to Your Web Site) and in February for the Institute of Management Consultants Chicago chapter (Bringing Consultants into Cyberspace).

In addition, I had been asked to write (and just completed) three monthly articles for the Marketing Research Association's publication "Alert!" based on my talk "Three Indisputable Truths about Business Intelligence and the Internet" given at their annual meeting last November. The first article was just published in the March issue.

Yesterday (March 30) the Board of FamilyCare of Illinois voted to approve my Board membership. Chartered in 1858, its mission has held steady: to strengthen families; programs evolve with the needs of the times, expanding into elder care and other services for seniors in addition to its original focus on children and foster care.

Finally, my husband and I enjoyed two brief ski trips to the incomparable Rockies. Taken together, all challenging, all great fun.


Last issue we introduced the first in a series of lead articles on customer loyalty. We talked about customer loyalty being the result of delivering whatever it is that your customers value...that is, what is important to your customer, not necessarily what YOU consider to be of value.

This time we'll explore some tech-based ways to get your customers and prospects talking to you so you can begin building a knowledge base to manage your customer loyalty program.

In this issue:

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LEVERAGING TECHNOLOGY TO BUILD CUSTOMER LOYALTY

by Joanne F. Gucwa

Build customer loyalty by delivering customer value. No problem there. But here's a caveat: beware of putting the cart (setting up a process for understanding what it is that your customers value) before the horse (setting up a process for determining if you are successful, i.e. reaping increased customer loyalty). See the sidebar A BRIEF LOOK AT VALUING CUSTOMER LOYALTY.

In the last issue we suggested three approaches to understanding value from the perspective of your markets:

(1) Survey the customers you lose
(2) Encourage customer complaints
(3) Derive customer value indirectly

Each of these is a departure from traditional surveys. In reality, these three methods each hold far greater potential for getting to the underlying rationale for why buyers make the decisions they do than "tried and true" customer satisfaction studies. Due to the length of this issue, we will cover approach (3) in the next issue.

(1) Survey the customers you lose.
This is similar to conducting exit interviews of employees departing for greener pastures. Make it brief and be humble. This is no time for boasting how great you are, bad-mouthing the competition, or burning your bridges. As a matter of fact, by the very act of asking what went wrong, you are definitely in the courageous minority and may be actually REBUILDING the bridge.

Here is an example of how you might approach former good customers that defected...through a non-intrusive e-mail message. By modifying the words to fit your specific situation, you can use this "script" in several different media, e.g. telephone, fax or even a personal visit (if the customer is really important to you).

Hello Mr./Ms. former Customer,

We're sorry we didn't live up to your expectations and would very much value your honest feedback. We strive to make continuous improvements to our operations and ask for just a few minutes of your time to help us understand where we missed the mark.

Would you please tell us what the precipitating factor was in your decision to use another vendor?
Was this the most important issue, or were there other factors as well that influenced your choice?

If there were one thing you would suggest that we change or improve, what would that be?

Thank you for your feedback and past business. May we keep you apprised of our progress in the areas you mentioned?

Short, sweet, no groveling...just keeping the doors open.

(2) Encourage customer complaints.
Another exercise in humility that pays dividends your arrogant competitors will never see. How might you encourage customer complaints? Certainly not by boldly asking your customers "what's wrong with us?" (You knew that already, of course). But you CAN pave the way to valuable feedback by capturing opinions - positive and negative - at points when your customers are most likely to speak their mind: when your offer (and competing ones) are fresh in their minds. Here are two such times:

* While electronically registering their purchase. Naturally, you want to avoid setting off buyer remorse when they've just made a purchase from you. Here's how you do it.

In your registration form, include a double question set such as "What is your impression of our product?" with a multiple choice selection ranging from "absolutely exciting, unsurpassed" to "positively awful."

You know that if someone's bought your product, they're not about to give you a low score. On the other hand, by giving them a totally exuberant choice at the high end, you're subtly (or not) steering them to think that nothing is THAT good, and most will probably give you the score just under the highest one. Perfect! Now you ask the REALLY valuable question: "Why did you say that?" just as they're thinking how your offer might be improved. Leave it open-ended.

If you're serious about constant improvement, e-mail your customers a mini-survey about a month after purchase, asking how they like the product and "if there were one thing you could improve, what would that be?"

* Set up a short Web-based survey at your trade show booth. This is an ideal time to elicit feedback. Attendees are walking around, taking in the cornucopia of products and services surrounding them, their attention focused on your products and your competitive environment. Ask for some personal information to minimize flaming or silliness (alas, no system is foolproof!). And to thwart the efforts of your competitors to look over your booth visitor's shoulders, be sure that your monitors face away from the aisles. ;-)


SIDEBAR: A BRIEF LOOK AT VALUING CUSTOMER LOYALTY
What's the big deal about defining and measuring customer loyalty/retention? Just this. In a budget crunch, what's the first category of activities to be cut? Of course. The so-called "soft" programs that aren't able to demonstrate hard, bottom-line numbers resulting from them. Smart managers will correctly ask: Why bother doing something if its results aren't (or can't) be measured? The fact is that hard, bottom-line results CAN be seen from increasing the level of your customer loyalty (or decreasing their departure rate).

With this in mind, let's take a quick look at the four ways you can measure the success of your customer retention program (with thanks to a prospective client who reminded us of the fourth measure). They are:

(1) Amount of repeat business
(2) Greater share of a customer's mind and wallet
(3) Increased profitability
(4) Better benchmarks than your competition

(1) Amount of Repeat Business
Whether you're producing cars, computers, cakes and cookies, or even consulting, knowing which customers or clients come back - and how often - gives you vital information on what you're doing right. For the most part, repeat customers are easier to deal with and will often forgive occasional lapses that a first-time customer might not. When it comes to customers, familiarity breeds comfort, not contempt.

(2) Greater Share of Mind And Wallet
What this means is that loyal customers will (a) tend to spend more on your regular products and services; (b) think of you first when they have a need they think you might be able to fulfill; (c) be open to new products and services you may have to offer. This elevates your loyal customers closer to a partnership relationship with you, leading to:

(3) Increased Profitability
If you track all the costs it takes to service an existing customer vs. a new one, from advertising and promotional expenses and efficiency of doing business, you'll find substantial savings resulting from (a) elimination of introductory sales calls and distribution of expensive sales-oriented brochures; (b) less time spent in learning the customer's operations, likes, dislikes, et al. (c) their suggesting you to others who have similar needs - a great referral resource - as well as greater profits from their purchase of higher-margin value-added products and services.

(4) Better Benchmarks Than Your Competition
Your "churn" rate (percent of customers leaving for a competitor) may be less than it was last year, but if it is higher than what your competition is experiencing, you are still losing ground. This will eventually show up in declining profitability and market share.


Studies have shown that a mere half percent increase in customer retention results in between 10 and 30 percent increase in profitability, depending on industry. If you'd like to reduce customer defections, we'd be pleased to help you understand and build value for your customers.


Next time we'll discuss deriving customer value indirectly, thinking about the customer as "product" and knowing when "enough is enough" when it comes to sample size. In a future issue we'll talk about identifying the customers you should fire...you know, the ones who cause you grief, who you'd like to send to your competitors (it's the old 80/20 rule).

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What's a Customer Value Knowledge Base?

By Joanne F. Gucwa

RESEARCH is the process of gathering (or creating) data and information. It is the basic building block of decision-making.

In order to make practical use of this research, we need to ADD VALUE to the information we've accumulated, to make sense out of those mounds of numerical data and conceptual information we've collected. We do this by transforming it into actionable knowledge through sorting and analyzing the data, and then synthesizing important results in ways that reveal meaning behind the numbers...the knowledge base.

Finally, we need to DISSEMINATE THESE RESULTS to the people whose responsibility it is to create and implement the actions that will improve what it is you're in business for: o serve your customers.

In the last issue, Wallie Dayal laid the overall philosophical foundation supporting the rapid growth in knowledge management (KM) processes and technology tools. This time I'd like to provide the rationale and lay the next layer of the foundation you need before you begin building a knowledge management system.

This is a look at the basics - those of you with an established KM infrastructure may find this quite rudimentary. Revisiting the fundamentals is helpful, though, because even organizations with the most sophisticated systems have people who need to be reminded that KM is a vital strategic business asset and not just another tech tool (such as a word processor or spreadsheet program).

Just as it's important to know what it is you want to know when you set about acquiring data and information, it's also vitally important to carefully think through and define the end-point. That is, what information and knowledge do you need to serve your customers...faster, cheaper, better? Once you have answered this question in detail, then, and only then, should you begin to build the structure of your knowledge base.

Why is this preparation so important? You've all heard the warning about not leaping into automating what may be a flawed system...i.e. first fix the system, then automate. The same is true with knowledge bases. There are a lot of software vendors and consultants ready to assist you in building a customer-based KM system, but I've seen very few articles or sales materials that seriously address the issue of designing its structure. By the way, we are focusing on one application of KM here: your customers' values. While a complete KM system covers your entire business operation, focusing on customer values is a sizeable, but more-manageable piece and certainly the most logical...you don't want to spend resources collecting and assessing information that has no direct value to your customers, do you?

Here is what I suggest. If you do not yet have a customer value KM system in place, start by assembling and looking closely at all the customer contact information you DO have. These may include contact management programs such as ACT!, spreadsheets and databases with customer demographics and sales information, surveys of your customers, best practices databases and other files, electronic and paper-based (even sticky notes, Rolodex and index cards), and the knowledge resident in your employees minds and hearts. Yes, hearts too. After all, who is more valuable to your organization, the salesperson who knows all the technical details or the one who builds profitable business relationships?

Next, define a single business objective, perhaps "increase retention of profitable customers," and with appropriate team members classify each item of information by its relationship to that objective, e.g.:

  1. Increasing your revenues
    1. New product ideas to keep customers coming back
    2. Better marketing and sales processes, messages
    3. Improved customer service
    4. Market tracking (e.g. competitors, technologies)
  2. Decreasing (or at least containing) your costs
      Improved internal operations, including quality Phasing out whatever customers do not value

You will have other classifications that are specific to your situation, and chances are there will be information that is missing from your current resources (competitive analysis, for example). Don't make the common error of focusing only on the information you now have. You will need to identify what critical information may be missing and structure a way to obtain it.

Now that you have a categorized list of information and knowledge "points of light" you need to create knowledge maps (or taxonomies, for those familiar with library science) to categorize all the information into structures (or repositories) that will be intuitive enough to allow users to tap into the system according to their own needs. One map may be by department, another by function, a third by people, and so on. Links among the maps allows meta-level searching, ensuring that no resources will be missed, and "drill down" capability narrows the search to focus in on the appropriate information resources.

If you're a small organization or a division of a middle-market company, you need not pop for a sophisticated data mining or KM software system to begin building a customer knowledge system. If you're totally new to this area, you might first want to play with setting up common mini knowledge maps of your word processing, spreadsheet and other frequently-used application files. This is essentially creating nested folders, or mailboxes and folders in your e-mail program.

I use Info Select Version 5.00.14, a modestly-priced (under $100) software program as a linking mechanism among numerous files in multiple applications. It also has a rudimentary neural-type search function, whereby you can enter several key words or numbers when you can't recall exactly a word or phrase contained in a note or file; it offers traditional Boolean searching as well. With a little creativity, a small organization can cobble together a perfectly acceptable KM system at very little cost.

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Manufacturing Common Sense - A Follow-up

by Stan Gucwa

[You may recall my brother's earlier article describing how reducing inventory levels is like lowering the water in a lake that has hidden rocks: the lower the water level (inventory levels), the more rocks (problems) are revealed that were once hidden. This article builds on our focus on customer values]

I was transferred to an inner-city manufacturing facility where the unionized employees were there forever, most of them with twenty-five years plus seniority. Classic traditional manufacturing practices right out of the Pleistocene (or is it Mesozoic?): long production lines, batch production, everybody doing their own thing. I knew that trying to yank the process into the 20th century by brute force would be like trying to tell a plankton that it could evolve into a fish. Good luck!

Instead, first thing we did was to have a meeting with the entire production staff in the company cafeteria at 3:30 Monday afternoon, on company time. We chose 3:30 PM because everybody would realize that we weren't going to drag it out beyond quitting time. We explained that we were going to try some new production practices such as cross training. We also explained that in order to be more competitive, meet customer demands, etc., this was necessary and worth a try. There had never been any cross training in this plant before, and the response was...dead silence. Meeting adjourned.

This set the scene. Nothing more was brought up during the week but several employees stopped me during the next few days to ask subtle questions about what we were planning to do. "Just hang on. We'll elaborate at next Monday's meeting," I answered. "You mean we are going to have a meeting next Monday too?" came the question in disbelief.

"Yep, every Monday at 3:30 PM. Quality awareness meetings, and everybody is invited." A global E-mail was sent to every PC in the building with an invitation.

Wham! It was as though we detonated a bomb. And then salvos fly from every direction. "We're not inspectors! We do assemblies," claimed several individuals. "The inspectors and testers at the end of the line, that's their job to check for problems."

Sound familiar?

"Hold on a second. Think of it this way. If we can find a problem early in the assembly process, it's easier to fix than after attaching a bunch of pieces. We may have to take the assembly apart to get at the defect, fix it, and then put it back together again. That's double work, and that's expensive."

The change in their expressions said it all. For the first time, it seemed, our production crew was being given practical information that would lower their resistance to doing things differently. Hmmm. Better keep talking.

"The added expense of rework just adds to our overall costs. Factoring that cost into the product means we end up charging our customer for our lack of quality. If we can produce our product without this added cost, we can sell cheaper - cheaper than our competition. Now, cheaper than the competition...for a higher quality product...is good."

Now it's their turn. "That means the customer will continue to buy from us rather than go to the competition. That's good too. We get to keep our jobs."

Not a tough concept. Just common sense. But, you would be surprised at just how many companies don't communicate this to the shop floor.

OK, so now the seed is planted. We need to make a quality product without rework costs. But what, really, is a quality product? My challenge was to put it into a perspective that our assemblers could relate to.

"Do you remember a couple of weeks ago when several products shipped without a power cord? When the field service tech went to install it, he couldn't plug it in."

From one of the assemblers: "So, finish the day's work, go to the local hardware store, buy and cord and come back tomorrow to plug it in. What's the problem?"

Now to water the seed. "Suppose you order a new car. You're all excited about getting your new car. It comes in and it's missing a window on the passenger side. OK, so tomorrow the window comes in and everything is fine. Are you happy? Oh sure! Everybody you see from then on will know what dealership delivered your car with a missing window. You had to drive your old car for one more day. Just a bit of an inconvenience.

Our customer bought our machine to generate income. But when we missed delivery on a vital part of the machine, he lost a ton of money. More than a mere "inconvenience."

These kinds of stories are ones that everyone can relate to and realize the importance of producing a quality product on time. And believe me, they work. Morale skyrockets when everyone knows their opinions and suggestions are valued. Before you know it, everyone will be contributing ideas to help improve quality, increase productivity and improve the bottom line. Without any prompting. Without your resorting to corporate financial rhetoric. After all, who knows more about assembly than the assemblers? Common sense.

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Book Review: Successful Project Management

Author: Milton D. (Mickey) Rosenau, Jr. (CMC)

It's always a pleasure to review a book written by a fellow CMC (Certified Management Consultant). And it's always a good sign when a book reaches its 3rd edition...certainly a vote of confidence by the publisher (John Wiley & Sons, Inc.) that the work it's investing in has bankable potential.

Mickey writes with such clarity and the illustrations speak so well for themselves that you'll find your copy thumb-worn in a couple of months, even if you aren't directly involved in managing complex projects. (You will even find it a valuable resource for personal projects, such as planning a wedding or putting an addition on your house.)

O.K., this book is not exactly bedtime reading. What appeals to me is that its twenty-seven chapters break up the complexity of project management processes into self-contained chunks of practical techniques that you can learn quickly and use on a small project without excessively burdening your brain. Let me give you an example.

Chapter 7 "Scheduling Tools" starts out with an overview of scheduling methods. Bar and milestone charts are presented first. While easy to construct, understand and change (perfection isn't attainable, at least not in THIS lifetime), Mickey points out their inherent weaknesses, the most serious being that interdependencies aren't shown. For example, you need to compile a set of questions (and complete a lot of other preliminary activities) before you set about conducting a customer value survey.

You've all seen (or worked with) those intimidating construction diagrams that were laboriously drawn by hand and are now produced by various flavors of software. These types of network diagrams are a time-honored technique that come burdened with acronyms such as PERT, PDM and TSTETIL (time-scaled tasks with explicit task interdependency linkage...of course).

After a dozen pages presenting different styles, complete with the advantages and drawbacks of each network technique, a refreshing section called "Helpful Hints" comes along. How do you start a network diagram? At each end, with "lots of scrap paper" or different colored Post-it notes you can arrange according to departmental responsibilities, sorting out the dependencies in between. You can then transfer the diagram to your software program, or a clean piece of paper if you're using the paper and pencil method.

The whole book is like this. Whether you're grappling with strategic issues on, for example, which proposals to spend your efforts, or downstream issues such as estimating project costs and assembling a work team, Successful Project Management has a chapter written just for you.

You may purchase this book at discount from Amazon.com by clicking on the link below.

http://www.amazon.com/exec/obidos/ISBN=0471293040/technologymanageA/

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Quiz: General Electric's customer complaint database

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

[Usually a list of incredibly-valuable management-focused Web addresses]

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: Since 1982, General Electric has been collecting customer complaints into a database. Approximately how many potential problems and solutions has the company programmed into its call center?

We'll send those whose submit reasonable estimates (reasonable in our humble opinion, that is), our list of a dozen incredibly-valuable research sites that offer at least dozens - mostly hundreds - of links to additional sites.

Last issue's quiz, we asked:

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.

Answer: The "Top 10" most powerful companies, as listed in the Dec. 28-Jan. 4 issue of Network World are:

1. Cisco
2. Microsoft
3. MCI Worldcom
4. AT&T
5. Nortel Networks
6. Lucent
7. Intel
8. IBM
9. Compaq
10. Network Associates

[NOTE: with all the mergers and other changes going on, e.g. (Computer Associates announcement on March 29 to acquire Platinum Technology in the largest software deal ever - $3.5 billion - I'm not sure these rankings are still valid. That's the price we pay for living in a fast-moving world!]

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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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