Friday, June 25, 2010

Sample Genius

Anyone who has read much about Sam Walton, the founder of Wal Mart will know that he loved merchandising.     What is merchandising though?  BusinessDictionary.Com has this to say in regards to Merchandising.

Activities aimed at quick retail sale of goods using bundling, display techniques, free samples, on-the-spot demonstration, pricing, shelf talkers, special offers, and other point-of-sale methods. According to American Marketing Association, merchandising encompasses "planning involved in marketing the right merchandise or service at the right place, at the right time, in the right quantities, and at the right price."

I summarize this in my mind as "enticing people to buy (lots of) your stuff".  There are of course many different ways to do this.  For instance, putting your product or service on sale, advertising and setting up a display if you are a retailer.  A variation of the display idea that I really like is the demo/sample tables that at places like Costco & Trader Joe's.

One of the less talked about motivations to buy a Costco membership is all the free samples you can partake of while shopping.  I really like the variety and the fact that they seem to do a good job of training the people behind the table.  Not only do they generally manage to offer up the samples without seeming pushy, they also know the products and are able to answer questions.  In some or perhaps all cases the people doing this job probably work for the company that makes the products being offered.

On several occasions my wife and I have purchased products after trying a sample.  The fruit bars at this display were winners for us and we brought a box home. Will this be a long term thing?  It wouldn't be the first time we've become repeat purchasers of a product we sampled at Costco.

Trader Joe's 
I'm a big fan of Trader Joe's. They have great prices and all sorts of really cool stuff that is either difficult or impossible to find anywhere else.  Our local store has a table at the back where they demo products. Recently they did something I hadn't seen before.  They demo'd a salad that used four different products that they had for sale.  The picture above shows the "recipe" and the items themselves were displayed as well. We tried the sample, liked it and ended up purchasing all of the items to make the salad for the Friday night potluck my wife and I attend regularly.  It turned out great and received several positive comments.  What more can you ask for?

Final Thoughts
Everybody likes free stuff.  Food and drink items are especially enticing as we get an opportunity to try before we buy and impulse purchases are a big part of the grocery shopping experience.  The concept of combining multiple products into a composite item struck me as very clever.  Rather than buying just one item we bought several.  As this was a salad there was a chance we'd get creative and substitute or purchase additional items. I suspect Sam Walton would have approved of this approach

Trader Joe's is famous for their store brands, so this is much easier for them to pull off than most retailers since they don't have to deal with potential fallout from external vendors over their choices or pairings.

Tuesday, June 22, 2010

The Good Manager

This is a topic I've given a lot of thought to.  What makes a good manager?  I have some very specific criteria for judging.  These criteria can basically be broken down into three categories; Vision, Leadership & Operations.  It is not uncommon to find people in positions of authority who are exceptional in one or two of these categories.  It is very rare to find a person who excels in all three.  Sadly it is very common to find people who show little ability in any of the three in positions of authority, particularly at the lower levels of a company.


To me, the most fundamental of the three is Operations.  Has an individual mastered the skills they need to manage the day to day activities of the portion of the company that they are responsible for?  On a superficial level these skills will vary widely depending on the industry and level of authority but the underlying aptitudes needed to have success in this area are pretty constant.  Do you have a good understanding of what your part of the company does?  Do you know how it fits in with the overall business of the company?  Do you understand the various processes that drive value creation within your area?  Are you good at anticipating potential problems and solving the crises of the day?  If the answer to all of these questions is yes, than you are probably operationally sound.


I break this down into two sub components.  Charisma & Procedural.

Do people naturally like you?  Are you able to walk into a room and instantly be the center of attention?  Does your winning smile let you get away with things that most people would get in trouble for?  If the answer to these questions is yes, congratulations, you have the charisma to be a good manager.  This is probably the most important factor in the success one will have.  A lot of people have gone a long ways based purely on their charm.  That being said, you are a lousy manager if this is all you have going for you and you will eventually do a lot of harm if you haven't already.

Procedural leadership is probably the most underrated and least visible attribute of a good manager, and below the upper levels it is by far the most important.   Do you keep in touch with the people who work for you on a regular basis?  Do you run interference for them when they run into trouble?  Do you discipline them appropriately when they need it and provide praise when they have performed above and beyond what is normal?  Do you mentor them?  When there is a conflict between two or more of the people who report to you do you sit down, listen to all sides and make a judgement in a timely manner?  When you do make that judgement do you make sure that the parties involved adhere to what you have decided?  Do you provide clear guidance and then get out of the way?  If you can answer some or all of these questions in the affirmative than you're probably a pretty good manager.  If this is your primary area of strength you are likely also very undervalued by your company.


Finally we come to Vision.  Vision is potentially useful at lower levels of companies but becomes increasingly vital as you move up the corporate ladder.  We live in a constantly changing world.  Technological advances and competition from other companies means that any  business that isn't thinking one or two steps ahead has a good chance of waking up one morning to the realization that they are in serious trouble.  Hollywood Video is gone and Blockbuster shows signs of being very close behind them.  Both companies made a lot of money at their peaks and have/had been around for less than thirty years.  There is an important lesson to be learned here.  Do you embrace change?  Are you constantly trying to figure out ways to make things better/faster/cheaper/more relevant?  If you are in an established company do many of your co workers dislike you and work actively to subvert everything that you attempt?  If the answer to some or all of these questions is yes than odds are you are strong in Vision.  As a general rule people hate change.  Change threatens the established order and most people feel more comfortable in an environment they are familiar with.  They will resist change as long as they can, even when it is clear that the environment around them is changing such that their current situation is increasingly unsustainable.

Final Thoughts

All to often people end up in management because they have the right degree from the right school, or because the only way to get an all star individual contributor proper monetary compensation is to make them a manager.  There are many other equally poor reasons for making somebody a manager.  Sometimes these choices even work out.  Frequently however such individuals have a negative impact on employee morale and productivity.

Based on my professional experience this is an area that most companies haven't given a lot of thought to.  Having a well defined and articulated set of expected competencies for management should be on the list of things to do for any business that wants to give itself the best possible chance of being around for the long run.

The image at the top of this post came from

Saturday, June 19, 2010

Is IT a Cost Center?

First of all I'll issue a disclaimer.  I've worked the majority of my career in the IT field in many different capacities including management.  On the one hand this probably makes me a bit biased in answering this question.  On the other hand it also makes me very well informed.   If you're inclined to dismiss me because of my technical background then also keep in mind I am an MBA.  Now that I've ruined my credibility with the technical crowd as well I'll move on to answering the question posed in the title of this post.

I'm going to eliminate the suspense and answer right now.  No.  

OK, now that I have that out of the way I'm going to explain my reasoning.   Recently I've been on a certification binge.  In the past I wasn't a fan of certifications, primarily because most of my early encounters with certified individuals in various technologies were less than satisfying.  More often than not it turned out that while they were good at taking tests, they were lousy at actually doing productive work.  Since that time though most certifications have improved significantly in quality and the value is much more obvious to me.  For this reason I'm playing catchup, working my way through the lower level technical IT certifications so I can get to the more advanced ones.  To that end I've just started studying for ITIL foundations.  I'm currently reading "Foundations of IT Service Management based on ITIL V3" and came across a great quote.

"IT's role is no longer just supporting, but has become the baseline for the creation of business value."

"Creation of Business Value", sounds great doesn't it?  Substitute "Shareholder" for "Business" and we have the definition of the purpose of any business. 

IT is a cost center in the same way that Product development, Sales and Marketing are cost centers.  All are integral to the success of a business.  You clearly want to keep your costs under control but you don't want to make decisions about how much you spend on any of these functions based purely on lowering your costs.

Furthermore if you look at where much of economic growth has come in the last twenty years you'll find it is centered in the area of IT.  Google, Yahoo, Amazon, YouTube, Facebook, Twitter, etc.  Information Technology is the engine of commerce and business.  In developed nations the trend is towards almost everyone being on line all the time.  In emerging nations this is still somewhat true.  More importantly in the case of emerging nations is the opportunity that Information Technology is providing for these countries to take a different path to economic prosperity than the one that developed nations took.  Given the scarcity of resources and the environmental cost associated with the traditional path to economic development this is a very good thing.

Companies that view IT as a cost center are taking a very myopic approach.  Any budgeting decisions made in regards to a companies Information Technology component must take into account the real place IT has in todays world as an equal player with the other more traditional business components. Companies that do not take this approach risk cash flow hypoxia.

Thursday, June 17, 2010

Traveling On The Cheap

I find I'm getting more frugal as I get older.  One of the great things about the Internet, at least from the consumers perspective is that it provides many opportunities to save money if you know where to look and can be a little flexible.

I'm on a short vacation right now.  I didn't do a lot of planning in advance and what little I did do has been mostly blown out of the water by changing circumstances.  Since I knew this could happen based on prior experience I didn't bother to book a hotel for tonight.  This is good, as my planned one night stay turned into two midway through today.  Since my only real requirement was to be somewhere in the Portland Oregon area I was able to go onto Travelocity.Com and get a room at a three star hotel for $55 a night.  I have a king sized bed, free breakfast, free Internet and am less than a hundred yards from a very good restaurant.   The standard Internet rate for this place is twice that.  Why was I able to get such a great price?   Because I was willing to commit to purchasing two nights before I knew where I'd be staying. Why would a business be willing to make this kind of deal?  Well, in large part it has to do with the kind of business a hotel is.

First of all hotels have very high fixed costs and relatively low variable costs.  Put another way, the costs for the company running a hotel are only slightly higher  if the hotel is full than they are if it is empty.  Additional guests are going to use more power & water but those costs are minimal when compared to staff and facility costs.  The second thing to keep in mind is that the value of a hotel room drops to zero at midnight.  If nobody has rented it the hotel will see zero revenue for that room on that day.

When you combine these two facts you get an intriguing possibility.  What if you were a hotel with a bunch of empty rooms?  If you could get even a buck or two for each of those rooms you would be ahead of the game revenue wise since your costs would hardly change at all with each additional occupant.  And if you have a restaurant or other for fee services/facilities you just might get some additional revenues that way as well.  The problem of course is that you don't want everyone waiting until the last minute to book at 50% or less of your normal rate.  Yes, your costs are fixed but you have your reputation to consider and your shareholders interests to protect; and thus it is a balancing act.

So, on the one hand you want to fill those empty rooms, even if it is at a rate significantly lower than you normally charge.  On the other you don't want to cheapen your brand and encourage people to game the system.  Travelocity isn't the first to offer a service that meets the needs of everyone in this scenario reasonably well.  At Travelocity it is called the "Top Secret Hotel (TM)".  Basically you tell them generally where you want to stay, how nice a hotel you want to stay at and they give you a list of choices.  These choices do not have names, just some very general details as to where they are and how nice an experience you are likely to expect.   You then pick your choice, pay your bill and Travelocity tells you where you are going to be staying.  This works for the hotel as they don't advertise that lower rate, you only get to see it after you have paid.  It works for the consumer because they get the lowest possible price.

Hotel's aren't the only travel related business to do this of course.  Most businesses in this sector have the same general dynamic.  Empty plane seats aren't bringing in any revenue either.  You can also find entire vacation packages at steep discounts if you're willing to be flexible.

Of course if you wait until the last minute and have very specific requirements you are going to pay a premium.  That's just the way these things work.  So it pays to either be early, or be flexible.

Tuesday, June 1, 2010

No Chair For You!

Recently my wife and I stopped off at one of the national chain bookstores while on our way back from running some errands in San Francisco. I'd brought my Netbook along and was going to do some web browsing since I didn't really need anything. The bookstore had a cafe but we'd just had lunch and I didn't want anything. I noticed signs by the cafe tables that said they were for customers of the cafe only and that there were chairs throughout the store. This seemed like a reasonable way of doing things so I set out to find some place to sit.

The bookstore had two floors and we'd come in on the second. I found several places on both floors where there was room for the comfortable chairs generally found in these kinds of places but there wasn't a single one anywhere in the store. I did locate a handful of hard wooden chairs though, all of which were occupied. I eventually ended up finding a place out of the way where I could sit on the floor and do my web browsing. On the plus side I was able to hook up to a free wireless access point from an adjacent business.

The store in question was in a nice mall, but was located close to some fairly run down neighborhoods. I'm going to go out on a limb and guess that the store manager(s) felt that they needed to discourage people from loitering to avoid potential problems. I'd only been in the store a couple of times before and hadn't been looking for a chair so I don't know how long this had been going on.

My observations are as follows...
  1. At least fill the empty places that should have seating with merchandise so it is less obvious that you don't want people hanging around
  2. If you aren't going to provide comfortable chairs and you don't have extra merchandise than at least provide enough uncomfortable chairs. The store wasn't even all that busy at the time
  3. Being located near a business with free wireless Internet takes some of the pain out of sitting on a hard concrete floor with a very thin layer of carpeting laid on top