Tuesday, January 29, 2013

Motivation and Product Design

Reflecting on the economic motivation that drives consumptive and productive activity.   Economics itself is based on a particular view of human nature - that each individual serves their own self-interest - an a peculiar focus on strictly material outcomes.   It occurs to me that this is myopic, and that it leads us to ignore the psychological needs that can outweigh the functional needs, and arguably precede them.

That is, the value we take as consumers is a combination of functional or "real" needs and psychological or "imaginary" ones: the physical need to be protected from the environment leads to the economic action of purchasing a coat, but the physical need alone would be satisfied by the cheapest coat that is sufficient to maintaining warmth.   The psychological need for status leads to the purchase of a very expensive designer jacket, even if it is not sufficient to the physical need.   More often, consumers consider both needs in finding a coat that is both serviceable and fashionable at a price point between the extremes.

Considering the difference in price between the cheapest functional coat and the most expensive one, or even the cheapest functional coat and the one most consumers purchase, it would be difficult to deny that the percentage of our economic behavior driven by functional needs is very small, and that which is undertaken to serve psychological needs is quite large.

Of course, for these motivations to result in an actual purchase requires a situation in which the consumer has sufficient capital to serve his desires and the market provides an array of options from which he can choose.    That is, actual purchases are constrained by budget and availability, so having little money and few choices may mean that they must take what they can get - but it does not change the motivation of the consumer: the fact that someone cannot afford something or it is not in stock does not mean they do not want it, and would not purchase it were it available and affordable.

As such, the constraints are valid but largely incidental.  In markets where there is sufficient consumer wealth and sufficient supply, consumers seek to serve both functional and psychological needs in their purchasing decisions, and the majority of spending in terms of aggregate amount is in pursuit of psychological needs.

With that in mind it seems ironic, and more than a little dysfunctional, that producers in the marketplace are disproportionately concerned with the lesser of the two motivations: they make products better in a functional sense (the efficiency, durability, or addition of features that improve and enhance its suitability to the basic physical needs the products address_ while completely ignoring that functional need is a small factor in the appeal to the consumer.

Granted, that for most rational consumers the functional need is a "must have" and the psychological need is a "nice to have" - and so the functional needs cannot be ignored, but once they are satisfied they are no longer considered and their pursuit to excess of need becomes irrational and somewhat silly.   Perhaps it can be argued that the functional need mutates into a psychological need: there is no functional need for a vehicle whose top speed is above 85 mph (given a speed limit of 70, plus a little more for passing or evasion), but believing a sports car is capable of going over 200 mph provides a psychological stimulus to a consumer who will never drive at that speed.  Given that the top speed of a vehicle is seldom mentioned in advertising, the number of customers who seek to serve that need is rather few, but each of them will pay a significant premium for a capability they will never use.

It's also worth noting that psychological needs are seldom connected to physical attributes in more than a superficial way, giving marketers a great deal of latitude in associating psychological values to products that have no definite (or even plausible) method of delivering them.   There is nothing about soda pop that is capable of making a person more attractive to the opposite sex, but a great deal of advertising that suggests exactly that.

But I've likely digressed: returning to the notion of functional and psychological benefits, they are served by different functions on the supply side: product designers make them more functional, marketers make them more psychologically desirable, and where conflict arises between the two, the resolution can be identified by considering the degree to which customers value (as demonstrated by the price they are willing to pay) one versus the other.

I am left with the sense that this is not very well considered in the design of many products and achieving the proper balance is neglected in their marketing as well.

Friday, January 25, 2013

Customer Experience and Ethics

I decided to steer clear of a forum discussion in which customer experience was being categorized as a “moral imperative,” largely because I have a knee-jerk reaction to that particular phrase.   People who claim that something is a moral imperative ...
  1. Have a vague sense something is important but can’t explain the reason it should be so
  2. Do not understand the concept of “moral imperative” at all
The notion of moral imperative places a discussion outside the realm of rationality, diverging from philosophy and entering the realm of religion.   Much of this is the work of Kant and his attempt to identify a categorical proposition –  and whose failure did not seem to dispel the notion that "just because" is an acceptable basis of morality.

Suffice to say that customer experience can be considered a derivative of ethics, but in a rational way: it is an ethical corollary that verges on an axiom.  That is to say that a firm is defined as such by its purpose – which opens quite another can of worms: whether a firm exists to serve the interests of its investors or those of its customers.  

The customer-first partisans need no further reason.  If it is taken as axiom that a firm exists for the benefit of its customers, then the only argument left is procedural – what actions are most suited to accomplishing that purpose, and which benefits to the customer are to be prioritized.   That is to say that  there can be no argument that the customer experience as a whole is important, yet potential disagreement over what elements of "experience" are most important.

The investors-first partisans are satisfied with the proposition that a firm can be ethical, in that it satisfy its fiduciary responsibility to its investors, by generating a profit without serving the interests of its customers – though it does require ignoring every other consequences of actions undertaken to achieve that goal, which departs from ethics and degenerates into effectiveness.

Functional ethics, which cannot hide itself in the abstractions of dialectics, can neither ignore nor classify as “side effects” or “collateral damage” the harm that is done by pursuing a single narrowly defined purpose.  It must consider the environment in which an action is undertaken and its impact on all stakeholders.  As such, even if we accept the perspective that customer experience is only important insofar as it renders the desired benefit to the investor, retaining the customer over a longer period of time and extracting from him a greater revenue is not directly required, but conditionally required.

But neither is the customer-first partisan able to ignore the interest of the investor entirely if he, too, adopts a long-term perspective.   The immediate need of the customer does not require service to the interests of the investor, but the long-term need of the customer does - insofar as his need is ongoing, a condition of his consumption is the sustainability of the source.

As such, the arguments based on opposing premises arrive at a conclusion that is logically similar:

  • To serve the long-term interest of its investors, a firm must satisfy the needs of its customers
  • To serve the long-term interest of its customers, a firm must satisfy the needs of its investors

As theses of the same argument, this would seem a tautology - but as they are conclusions of two separate arguments, it indicates a compatibility or alignment of interests, or functional symbiosis.

Monday, January 21, 2013

Loving the Customer in the Right Ways

The English-language word "love" is a nebulous concept, and conversations that suggest a firm should love its customers tend to meander off in an unproductive direction, but it does seem to merit closer consideration. With that in mind, this may be a silly and punctilious meditation, but here goes ...

The concept of "love" is difficult to discuss in terms of the word itself because this single word encompasses a number of different concepts that are related to the same range of emotions. If memory serves me well, the Greeks had at least six different words (I may be forgetting a few) that signify different types of love, which may help to focus and differentiate a bit: eros, philops, storge, agape, telema, and caritas.

Eros (Passion and Sexual Desire)

The notion of love as a purely sexual desire is likely the least appropriate, and the most distracting, to a customer service situation. I mention it first as a means of getting it out of the way and getting on to more appropriate matters.

At the same time, eros has a presence in any human interaction, including customer service: customers buy more, tip more, and feel more satisfied when they are served by a person they find to be sexually attractive. A restaurant with great food and homely waitresses will do much less business that one with mediocre food and attractive ones (consider Hooters and the other "breastaurant" chains that have experienced significant success).

Companies discriminate in favor of sexually attractive people - given two candidates for a position or a promotion who are equally qualified, the more attractive of the two will be chosen or, in some instances, a more attractive but less qualified candidate will win over a less attractive and more qualified one. As offensive as that may be to our sense of reason and morality, it is undeniable.

But this may be a distraction: there are situations in which sexual attraction can be leveraged, but it is generally in a subversive way, with knowledge that it is inappropriate. As such it bears no further consideration. Think about it, have a chuckle, and move on.

Philios (Loyalty and Brotherhood)

The notion of love as a sense of kinship and brotherhood is somewhat useful, but has drawbacks. Primarily, it requires the customer to be a member of a group in order to be served well by the business, and implies that anyone who is not a member of the group is unwelcome or will at least be treated as second class.

Some firms leverage this in order to serve a niche market or a specific demographic. A retailer that serves the needs of women, a minority-owned business, a christian hardware store, and a "cop bar" all pull upon the sense that the firm is "run by X to serve X" and that you're not buying from a stranger, but someone who is like you in some significant way.

Philios in the general sense (every man is my brother) is good principle of morality, to treat people as if they are your own family or friends, customers, but in a service situation the love of all mankind is too nebulous to have much value as a guide to interaction.

Storge (Respect and Reverence)

The idea of treating a customer as if they are a person of importance, to be respected and revered just because of who they are, is far more pronounced in some cultures than in others.

In contemporary American culture it's not very pronounced, and while there does seem to be some sense that the customer is to be revered, some Americans take objection to being treated with deference. Some people still insist on being called "sir" or "ma'am" whereas others react as if they had been offered an insult.

I've not seen any formal research, but a few informal website polls show that it's split about 50/50. And it's with some irony that one of these polls offered cross-tabulation against demographic factors to show that the people who most demand deference are the people who least merit it: a college drop-out with a slightly above-average income is more likely to insist on being called "sir" than an affluent person with a graduate degree. Go figure.

With that in mind, storge is sometimes necessary to customer service, but it's largely superficial: you don't actually have to respect the customers in order to serve them, but you must pretend to respect them and go through the various superficial gestures and rituals to feed their desire to feel important.

Agape (Appreciation)

"Agape" means a sense of appreciation that is not attached to a specific quality or purpose - a love for mere existence. The term has been co-opted by the christian and protestant religions and to some degree subverted to suit their agenda, but in the basic sense, they have it right: it is the love of all mankind, friend and enemy alike, which seems to blur a bit into the general notion of philios.

Some pretension of agape is present in the notion of "customer appreciation," but it is to some degree disingenuous: a firm does not appreciate customers merely for their existence as human beings, but with a much more mercenary intent.  Instead, it appreciates them for the sake of the money they give to the firm. Companies "love" their people who buy their product and speak well of them to others, but do not extend the same sentiment to those who shop their competition and speak critically of them.

I haven't seen much suggestion that a firm should extend respect to individuals who are indifferent or hostile to the brand - except in the reminder that people change: today's non-buyer may become a customer in future, and a critic's sentiment may change. But there's a wide gulf between tolerating them and loving them.

Telema (Desire to Possess)

The concept of telema is the least specific of the six, and as such bears the least fruit. It would be accurate to state that a business desires to have customers and customers desire to have products, but this simplified version of the relationship seems utterly unenlightening.

In philosophical discussions, telema seems to be the catch-all category of love, and if it is included in the discussion at all it is relegated to the love of objects. To say that "I love my car" does not imply any of the other concepts of love, which seem to be reserved for feelings we have toward human beings.

It would seem that telema does have impact on the design of products or services to make them desirable to the customer, exploring the inexplicable desire to discover an explanation that can be served. I haven't been able to find the etymology, but I suspect it derives from the same root as "teleos," a moral concept that regards actions as a means to an end, such that the desire for an object is derived from the purpose to which it is intended.

I don't discount that there may be some sense of telema in the customer service situation - but I am struggling so much to connect the dots that I don't expect that I can provide a plausible suggestion.

Caritas (Protection and Goodwill)

Caritas seems to me the form of love that is most applicable to customer service: it is the kind of love that leads us to wish to protect an individual from evil (or harm) and provide assistance to them in accomplishing the good.   To "care for" someone in this seems the very nature of service.

To have caritas toward the customer entails serving their interests: to provide to them products and services that help them to solve the problems they face, or to help them to achieve the goals to which they aspire. This seems to be central to the purpose of any firm, and central to the reason that a customer seeks out a provider.

It could be suggested that caritas is feigned, and that the primary motive of a firm is to make money, and that serving customers is a necessary evil to accomplish the main goal ... but I disagree. If you consider the mission statement of most companies, and accept that it is a genuine statement of their motivation, few firms place profitability above service, and most recognize that profit is the result of successful service.   But that is not necessarily so, and becomes another and much larger argument.


That's about as far as I care to take this meditation at present - and I am satisfied with the conclusion that caritas is a more specific and appropriate consideration of the way in which a firm should "love" its customers. While other concepts of love may be applicable to specific situations, caritas seems the most suitable in a broad sense: every firm should tend to the benefit of its customers, to protect and aid them.

Thursday, January 17, 2013

Quiet Leadership

I recently read David Rock's book on Quiet Leadership, knowing in advance that it is considered highly controversial in terms of its use (or misuse) of neuroscience in the context of organizational management.  I'll refrain from wading into that debate: my purpose was not to validate the scientific accuracy, but to consider how his theories apply to the customer-supplier relationship.

I expect I'll be doing a lot of that in 2013, as one of my current interests is considering the balance of power in that relationship.  One of the most significant changes in the marketplace is the increasing competition, such that a customer offered a "take it or leave it" proposition is far more likely to leave it, and that suppliers can no longer count on the ability to herd customers into their shop and squeeze them through their internal procedures - a shift that occurred a few decades ago, but to which most firms still do not seem to have adapted very well.

In that sense, the theory of leadership Rock presents is very salient.  The core of his thesis is that the traditional method of management, using threat to demand mindless obedience from the workers, is no longer applicable and never was particularly effective; and that to achieve optimum performance, management must leverage the intelligence of their teams and encourage them to think.

In the marketplace, suppliers never did have formal authority over their customers, but seemed to act as if they did.   By virtue of limited competition, the supplier of any good recognized that they could still use threat (withholding the benefit of the product) to encourage the behavior they desired to elicit from consumers (buying the product).

This power was significantly diminished at the onset of competition, though it remained skewed in favor of the supplier: the customer who refused to accept orders would undertake the additional inconvenience of having to seek out an alternative - to do the necessary research to find an alternative, and to undertake the effort to do business with a competitor.

For brick-and-mortar retail, the cost of switching might require a customer to drive a little further, or accept the waiting period if they ordered from a catalog or Internet vendor.   This is still true in many industries today: consider that online grocery never did catch on because of the additional cost, time, and risk to the consumer.   But for many industries, that is changing.

Dragging myself back to the book: the approaches described in terms of influencing the behavior of employees correlate.   Especially when introducing a new product, a new channel, or even a new supplier, it's necessary to consider the existing mental framework a customer has in terms of the behavioral pattern they have already adopted, or expect to adopt, in order to satisfy a need and appeal to their cognitive processes and a deeper level.

That is to say, rather than commanding customers to buy a product, suppliers must gain permission to enter into the process of determining how to satisfy a need, guiding the customer gently toward the recognition of value.   My sense is the author might pale at this, as marketing is more geared toward convincing the customer "buy this specific product" rather than "consider which product will best suit your needs" and accepting that the customer might choose a different vendor.

But then, marketing at its best is about matching products to needs rather than just pushing boxes, and when we come to the recognition that the product we sell does not fit the needs of the consumer, it is the product rather than the consumer that should change.   So in that sense, exploring the mental framework of the customer might lead us to discover opportunities for product improvements.

My mind is clouded with topics that are spinning off of the mark -it's unlikely I'll bring this meandering to a tidy end and am likely to become frayed further.

Sunday, January 13, 2013

Data Snacks and Data Meals

An author referred to the use of mobile computing as "snacking on data," which struck me as a clever metaphor, and then bounced around in my head and expanded to other digital channels.   I have to get it out of my head, and this seems like as good a place as any ...

Mobile: The Snack Bar

The original metaphor seemed an apt way to describe the mobile channel and the ways in which users approach it: a few bites of data to satisfy puckishness, but not a full meal.

My sense is that this metaphor is important to keep in mind in the face of the "shovelware" approach that is being taken on the mobile platform by some firms, in that they don't really consider the value of the medium as a thing unto itself, but consider the mobile device to be a portable computer that should have the full range of capabilities as any Web site.  That's entirely the wrong approach.

When mobile is done well, it gives the user a few bites that can be eaten out of hand while on the go.   You wouldn't want to build a financial plan or attempt to rebalance your portfolio on a mobile device, and it's doubtful the platform could even be used to make a well informed decision to buy or sell a single security - but if you're waiting in line or walking from one place to another and you feel the need to check your account balance or the price of a given stock, it's good for a quick bite to tide you over.

Voice/Store: The Full-Service Restaurant

Carrying the restaurant-format analogy to other media, it seems to me that the voice and store channels are more in the nature of a full-service restaurant, an eatery in which there is a broad menu of choices for consuming a sumptuous multi-course meal, conducted by a waiter who is there to answer your questions and offer suggestions.

The extension of the metaphor seems particularly apt in that regard: people who do not feel confident in making choices without advice need the kind of interactive help that only another human being can provide, and their visit or call indicates a willingness to spend a considerable amount of time.

Retuning to the financial services example, this may be an instance in which you call or visit a financial advisor to take on a larger task of considering your portfolio strategy or carefully weighing the merits of a given investment option.   It would be silly and excessive to have to call or visit to get a data "snack" - inconvenient to the patron and an annoying to the establishment.

Website: The Kitchen 

I'm not sure if the Web channel is analogous to a restaurant at all: if a dining metaphor is to be used at all, it would be likely more of a kitchen where there are a stock of ingredients, equipment, and supplies that you will use to prepare your own meal.  It provides much more than you need for the task at hand, including specialty tools you will use only once in a while - but having them available when needed is worthwhile.

In terms of assistance, there is no waiter and no cashier - there may be a rack of cookbooks to which you can refer when you need ideas and advice, but that is most often ignored.  The kind of person who steps into a kitchen is confident in their ability to prepare their own meal.

Back to the financial services example, the Web has the same capabilities as the brokerage that you would call or visit - arguably more because it is a self-service medium in which you will need the resources that are normally available to the advisor/broker who would normally assist you.

In fact, the reason that a user would prefer to visit the kitchen is because he does not want any "assistance" - as he knows exactly what he wants, any help or advice would be unwelcome meddling and interference.   There is also the notion that it is cheaper to do it yourself (backed by commission structures that discount Internet trading) and more convenient (there is Internet access in the home), though admittedly not as immediate (you must go home, or unpack your notebook in a place that has access, to use it).

As for contrast to the mobile channel, it seems reasonable that a person might go to the kitchen for a snack, or to a Web site for a quick bit of data to satisfy momentary curiosity ... but this seems a secondary motive that does not make full use of the capabilities, and for users with both mobile and internet, a slightly less convenient way to get a few bites of information.

Tablet: ????

In the interest of being comprehensive, I'd like to include the tablet, but I'm not quite sure how it fits.  It could be my own lack of insight into the medium, but it's also possible that those who provide services on the device haven't quite figured it out yet, either so it seems to be in flux.

It doesn't strike me as a particularly good "snack bar," as it's a rather cumbersome device that can't be used on-the-go except in the nature of a laptop (stop, sit, unpack, and eat), and because it can generally be used for a broader array of purposes, it would seem to fit into the "kitchen" category of a personal computer.

So is the tablet analogous to a lunchbox?  A picnic basket?  A chuck wagon? The only thing that seems certain is that it's not a full-service restaurant, but an acceptable analogy completely evades me.

Wednesday, January 9, 2013

Considering Long-Term Costs

As a consumer, I have a habit of looking to the long-term cost of things.  I'd like to say that the meditation that follows was some sort of epiphany, but it's been with me all my life and I have the sense it serves me well, and frustrates the salesmen who try to get me to ignore certain things when considering a purchase.  I also have the sense that thinking in this way has led me to be a better advocate for consumer experience, but more on that later.

What's got this on my mind is a rash of door-to-door sales of pest control services.   Various companies, national brands and local operations, are sending people door-to-door to offer ongoing maintenance services that include quarterly visits to "treat" the interior and exterior of the house to discourage bugs from moving in, along with as-needed service at no additional cost in case the maintenance treatments don't work.   It's only $49.95 per month to never have to worry about pests.

The first thing that comes to mind is: I don't have a bug problem that's worth $49.95 to deal with.  Every so often, maybe once in six weeks, a spider will find its way in, and we once had a few wasps in a vent, but that's it.  I've likely spent less than $50 over the past five years to deal with the issue, and am not fearful that it will suddenly become a problem, as the salesmen insist could happen at any time.

The second thing that comes to mind is, how much would I have spent on their service to deal with this non-problem if I had been paying them all along?   Five years is 60 months, at $49.95 per month, is nearly $3,000 - applying the same math to the degree of the problem (one bug every six weeks), that's 43 bugs, or about $70 per bug.   I pay about that much for a pair of sneakers - which means that every time I saw a bug, I could have crushed it with a brand-new sneaker, and then thrown the shoe away, and still paid half as much (given that sneakers come in pairs) as to pay exterminators for this service.

Admittedly, I'm beginning to revel in the absurdity of this comparison - made all the more silly by the fact that it's entirely accurate.

The point being that "only" $49.95 per month adds up to quite a lot of money over the long term.    Right now, I have an extra $2,900 in my bank account because I chose not to purchase this service, and if I stay here for another twenty years, it will come to $14,500.   That's quite a lot of cash.

Moreover, this isn't an isolated incident: there are many products or product options I have declined in spite of a modest, or sometimes insignificant, monthly cost.    I don't think it's an exaggeration to assess that there are at least three things I've decided to do without that cost about $50 per month, and at least half a dozen or so service features that would have cost $10 or less per month - which comes to $210 per month, or $2,520 per year, or $12,600 over the past five years.    As a consequence of this meditation, I'm likely to root out a few other needless things whose modest monthly cost is nibbling away at my income.

I'm also likely to be a bit more difficult at work, advocating for the customer.  When sales or product management proposes to offer the customer an additional feature for ten dollars a month, to raise the question of lifetime value to the customer.   If we expect to retain their business for 20 years, it's thousands of dollars.  Are we really giving them good value for their money when we offer add-ons like this?   And would they buy it if they really knew the long-term cost?

Sadly, I think the answer to the latter question is "yes."    I don't have the sense that many people work out the math, or would be motivated to reconsider even if they did.  I've had the same discussion with colleagues who seem like reasonably intelligent an sophisticated people in general, but who insist on paying for a personal cellphone even though the company has indicated that employees are allowed "limited personal use" of their company-issued ones.   Work out the math for them, tell them they will be wasting over six thousand dollars over the next five years, and their response, quick as a reflex, is "yeah, but it's only like a hundred bucks a month."

There really isn't a cure for this sort of stupidity, and if one company doesn't take advantage, likely another one will.   But at that, I'm likely going into a cynical state of mind and should find something else to think about before I become completely sour.

Saturday, January 5, 2013

Would the Real Economy Please Rise?

I have been reading on economics again, and it's led me to more confusion than clarity, particularly in terms of the level of real economic activity that occurs within contemporary society.   That is, much of economic activity consists of actions that do not deliver any real value to society in terms of prosperity as a result of production and consumption.

I don't mean that in the brainless, anti-capitalist sense.  To my way of thinking, capitalism is a means by which people in free markets interact - people produce things that are desired by other people, and the capitalist system allows buyers to elicit signals, by their willingness to buy quantity at price, that are sent to the producers who can then respond by providing what is demanded, where buyers are willing to pay the costs of production and provide a reward in the form of profit for producing that which is most wanted and undertaking the risk inherent in productive activity.   All activities are voluntary, as opposed to economic systems in which there is centralized control and a bureaucracy that is out of touch with the nature of demand and the requirements of production make arbitrary decisions, and suffer no consequences.

The real economic activity in any system is the production of consumable value - so to swing back to the point, any action that creates something that can be directly consumed is productive, and arguably any supporting service (furnishing supplies to the producer, transporting goods to the consumer, etc.) may fall into a gray area, but can be reasonably subsumed into valid economic activity because its absence would mean the producer would be unable to produce and/or the consumer to consume the value inherent in the goods.

What I mean buy "actions that do not deliver any real value to society" are activities that are wholly unrelated to consumable goods - specifically, in terms of investing or brokering second-hand financial instruments.  The initiation of securities provides capital that is injected directly into productive activity.  However, when investments are sold from one investor to another, there is no capital provided toward the actual production of consumable goods, nor is the act of production or consumption enhanced in any way.  Payment is made for the license to consume, or to collect a share of the profit/interest.  The factory makes the same amount of goods, regardless of who owns it.

To get back on track (again), consider this example:  A farmer who needs funds for planting and tending his crop sells the a bushel of wheat, to be delivered at the harvest, for $20.  He does not presently have wheat, but in future shall, and the buyer in such an arrangement is aware of the risk and has made a rational decision to accept the offer.  Unless he intends to hold the right and consume the wheat himself, he is motivated to purchase because he anticipates in a vague way that the value of wheat will rise, and he stands to profit by the difference, and the difference itself seems a reasonable reward for the risk he is taking that the wheat will not ultimately be delivered.

The person who buys the right to have this bushel for $20 sells it to another person for $21, who sells it to another for $22, who sells it to another for $23, then to another for $24, and to another at $25.  When the harvest takes place, the person who takes delivery of it has paid $25 for the wheat, and we can fairly say that $25 is the market price.

The notion that the farmer has lost $5 in profit is a distraction, and likely unfounded or at least unjustified: he has no grounds for being upset that he might have sold his wheat for $25/bu instead of $20/bu if he had instead sought other means to finance his production at the onset.  But he did not do so, and accepted the risk of lost profit by naming his price, and got the price he asked for what he willingly sold.   He otherwise would not have been able to produce anything at all.   So let's set that aside.

What is of greater concern to me is that measures of the total economic activity will reflect $135 in activity - the ultimate buyer and consumer of the wheat generate $25 worth of real value (a tangible product that satisfies a human need was produced and consumed), with the remaining $110 representing transactions that do not generate any real value (the right of consumption passed though several hands).

And so, I'm left to wonder: how much of the nominal volume of economic activity in a market represents real economic activity (the production of goods that deliver a benefit in being consumed) as opposed to the amount that represents no real value, only the right to receive value being passed from hand to hand?   And does this not create the illusion of prosperity when the volume of goods being produced and consumed is a small fraction of the overall economic activity?

Perhaps I've misconstrued the way in which measurements of economic activity are calculated - but I don't think that to be the case - and I strongly suspect that the privation that exists even within seemingly wealthy economies is deeply concealed by nonproductive transactions that bloat and distort the perception of the actual level of value-generating activity.

Tuesday, January 1, 2013

Models for Strategy Development

In my earlier rumination on applying the models for strategy development to customer experience problems/opportunities, my consideration of existing models seemed a bit abrupt: "Do a Google Search." That's likely a just and adequate response in the context where the process itself is incidental, but it does merit further consideration.

And so, I've looked into a number of such systems and what follows is an attempt to consolidate the research.

Framework: The IDEA Model

In spite my general disdain for models based on acronyms, the "IDEA" model (identify, define, execute, assess) seems to be the best in terms of providing a high-level framework.

Other models that provide a more detailed approach seem to follow the very same pattern, breaking down some of the steps into sub-steps for more granular consideration, and making each of these four basic tasks into five or more sub-tasks.

Identify the Problem

Strategy development seems to begin with a problem (something that exists has gone sour), but the same methodology is also applicable to exploring opportunities. The difference seems to be that problem solving is backward facing and deals with hard data (what has caused sales to drop by ten percent), whereas opportunity exploration is forward-looking and often deals with hazy estimates of what might be (what might we do to increase sales by ten percent).

The first step in the identification phase is the recognition that a problem or opportunity exists, resulting in a succinct statement that defines the desired outcome. Second, is the validation of the problem. Much effort is wasted in pursuit of imaginary problems or those whose impact is trivial (less than the cost of solving or pursing them).  Next is an analysis of the problem or opportunity, to uncover all relevant information about the phenomenon in whose context the problem is assumed to exist. Ultimately, this arrives at a well-considered analysis of cause and effect.

Some methodologies include the statement that immediate action should be taken to mitigate the damage until a strategic solution can be implemented. I have the sense this is wise (you don't want the patient to bleed out while you're diagnosing their condition) but can also be destructive where a tactical action taken in a panic worsens the damage for lack of understanding the problem, or where it obfuscates the strategic solution.

Define a Solution

The definition of a solution is often broken into a few different tasks that are intended to ensure that various options are explored (we do not simply jump on the first thing that comes to mind) and carefully evaluated before committing to a single solution.

The first step is to consider the root causes of the problem and brainstorm a wide array of ideas that could possibly address the problem. This is generally a free-form discussion in which anything goes, so as not to stop the flow of ideas. The next step is to evaluate each idea in terms of its effectiveness in addressing the problem. Given that the initial brainstorming will result in a large number of poorly considered options, many of them will need to be winnowed away. Following that is a more detailed analysis of each idea, primarily based on the cost and availability of resources to address the problem, and weighing the likelihood of success against the cost of success.  Ultimately, these steps are geared toward identifying which of the ideas to purse, with the note that it may be multiple promising actions rather than a single best solution.

A few systems return to brainstorming at this point to discover the possible side-effects of a proposed course of action. This seems highly advisable, given that focusing on the benefits of undertaking a course of action often fail to recognize the full measure of the consequences.

Execute the Plan

Surprisingly little is said about the execution phase. It's not clear to me whether this is because the nature of execution is highly idiosyncratic, or because it is assumed that the actions to undertake are spelled out in the definition problem and all that's left is to simply follow the plan that was created. Either seems likely, and entirely reasonable as to why this phase lacks more granular definition.

A few of the systems included a prerequisite step to execution: selling and socializing the plan, by way of change management. This is an excellent point, too often overlooked, as a plan can be starved for support or even attacked by those who are devoted to preserving the status quo.

There were also a few discussions about evaluation during execution, as some problems may not become evident until the gears are started in motion. In theory, the development phase would have gone perfectly so that nothing is unexpected - but in practice, stuff happens, and it's critical not to be so egocentric or myopic as to disregard the possibility of adaptation as exigencies arise.

Assess the Results

The last phase also lacks much detail, as it also seems entirely mundane - an for the same reason, it is often neglected and rituals arise of people going through the motions without considering whether they are actually having any positive results.  Assessment generally looks back to earlier phases, to reflect on what the plan intended to accomplish, and then considering the actual results to see if they matched up.

Some systems also consider adaptation to be part of the assessment phase, though this does not seem sensible: where problems are noticed, or where a plan does not seem to be having the intended results, there's too great a temptation to tinker with the solution without much deliberation.

For most systems, the assessment phase spins up an entirely new problem-solving process, and this seems the more sensible approach: rather than to merely assume a negative result can be corrected on the fly, consider it as a problem unto itself, implement a tactical adjustment if necessary, but ultimately consider it to be part of the status quo that represents a fresh approach and a repeat of the process.


This has been rather a long post, but at the same time seems somewhat superficial - and the result is some general groundwork that likely needs further consideration and elaboration.