Monday 27 August 2018
Marketing Myopia- HBR
Marketing Myopia
At some point in its development, every industry can be
considered a growth industry, based on the apparent superiority of its product.
But in case after case, industries have fallen under the shadow of
mismanagement. What usually gets emphasized is selling, not marketing. This is
a mistake, since selling focuses on the needs of the seller, while marketing
concentrates on the needs of the buyer.
In this widely quoted and anthologized article, first published
in 1960, Theodore Levitt argues that “the history of every dead and dying
‘growth’ industry shows a self-deceiving cycle of bountiful expansion and
undetected decay.” But, as he illustrates, memories are short.
The railroads serve as an example of an industry whose failure
to grow is due to a limited market view. Those behind the railroads are in
trouble not because the need for passenger transportation has declined or even
because that need has been filled by cars, airplanes, and other modes of
transport. Rather, the industry is failing because those behind it assumed they
were in the railroad business rather than the transportation business. They
were railroad oriented instead of transportation oriented, product oriented
instead of customer oriented.
For companies to ensure continued evolution, they must define
their industries broadly to take advantage of growth opportunities. They must
ascertain and act on their customers’ needs and desires, not bank on the
presumed longevity of their products. In short, the best way for a firm to be
lucky is to make its own luck.
An organization must learn to think of itself not as
producing goods or services but as doing the things that will make people want
to do business with it. And in every case, the chief executive is responsible
for creating an environment that reflects this mission.
Friday 24 August 2018
A MUST READ ON STRATEGIC INTENT
https://hbr.org/2005/07/strategic-intent
The link will take you to this HBR article with is an award winning article on Strategic Intent by
Gary Hamel and
C.K. Prahalad
The link will take you to this HBR article with is an award winning article on Strategic Intent by
Tuesday 21 August 2018
Difference between CSFs and KPIs
The Difference between Critical Success Factors and
Key Performance Indicators
What actions are critical to the success of your business and which
effects are the most important?
If you’ve ever seen the acronym KPI or CSF in a business context, you’ve
seen a shorthand to those two questions above. KPI stands for Key
Performance Indicators, whereas CSF stands for Critical Success
Factors. Some people use them interchangeably or confuse them, but they’re
two totally different concepts.
The easiest way to understand them singly and in contrast is by
understanding that CSFs are the cause of your success, whereas
KPIs are the effects of your actions. Thus, there’s a tight
relationship between them: if you’ve properly identified your CSFs and have
been executing on them AND you’ve properly identified what your KPIs are, you
should be meeting – or getting close to meeting – your KPIs.
If we drop the lingo, basically, we’re asking “what must we do to be
successful?” (CSFs) and “what indicates that we’re winning?” (click to tweet –
thanks!) (And, if we’re Charlie Sheen, “how can we tell if we’re
bi-winning?” Alas, there’s only one Charlie Sheen. Duh!)
The use of KPIs can be strict or loose. Using them strictly means that
you set a baseline, i.e. “$10k sales of this product line in a month is our
baseline KPI;” in this use, if you get $10k sales in that product line, you’re
meeting your KPIs. Using them loosely means that you’ll be watching data trends
to determine whether you’re performing better, i.e. “we’ll be watching the
sales data from this product line over this month since it’s a clear indicator
of our performance.” Both ways of using KPIs have their uses; the more
uncertain you are of the relationship between your CSFs and business momentum,
the looser you’ll want to use KPIs.
The key part of KPIs is that they help you limit the amount of data you
have to make sense of. The actions you take in your business often have many
different effects, but not all effects are equal. For instance, gross revenue
is almost always a KPI for every business, regardless of what stage of business they’re in, because one
of the evergreen goals of a business is to generate profit. Because different
actions and decisions may cause a drop in profit, sometimes profit isn’t the
right metric to track because it will lead myopic decisions. In general, what
we pay attention to grows, and KPIs help us pay attention.
These acronyms formalize and test our intuition, as well as getting us
to really analyze the causes and effects of our business momentum. For example,
many business bloggers posit an increase of traffic as a KPI and thus endeavor
to do the things that increase traffic (informally making those activities
CSFs), only to find out that an increase in traffic doesn’t actually affect
their COV matrix(
Cash flow , Opportunities and Visibility ). Brick-and-mortar business owners
posit more people in the store as a KPI, only to find out that people aren’t
actually buying anything while they’re in there and they need to rethink their
sales process. I could go on, but you get where this is going.
So, over to you:
·
For this month, what are your goals as far as COV( Cash flow ,
Opportunities and Visibility ). goes?
·
What are the KPIs that relate to those goals?
·
What CSFs will get you there?
·
Bonus: review some of your past activities that you thought were CSFs.
If you did them, did you see a positive correlation between those CSFs, your
KPIs, and your COV goals?
Key Result areas
Determine Your Key Result Areas
Your key result areas are those things that you absolutely, positively
must do to fulfill
your responsibilities and achieve your business goals. There
are seldom more than five to seven key result areas in any job or in any
business. Your job is to determine what the key result areas are for your work,
and then to develop a plan to complete them and continually improve in each
area.You begin by asking yourself this question: What have I been hired to
accomplish? Why am I on the payroll?
Again, think on paper. If you are in charge of a business unit or department, why does it need to do to justify its existence? What are you and your team expected to accomplish to fulfill your responsibilities to the company? Do you know for sure? The natural tendency of many people is to focus on the activities of each day instead of the end results expected of them. You can soon become so busy with the daily activities of the job that you lose sight of the results required altogether.
Again, think on paper. If you are in charge of a business unit or department, why does it need to do to justify its existence? What are you and your team expected to accomplish to fulfill your responsibilities to the company? Do you know for sure? The natural tendency of many people is to focus on the activities of each day instead of the end results expected of them. You can soon become so busy with the daily activities of the job that you lose sight of the results required altogether.
Be Clear About Your
Key Result Areas
The best way to
refocus on results and not activities is to determine your key result areas and
then make sure that everyone above you, at your same level, and below you is
crystal clear about what they are.
A key result area has three qualities:
1. It is clear, specific, and measurable. You can determine exactly if the result has been achieved, and how well.
2. It is something that is completely under your control. If you do not do it, it will not be done by someone else. If you do it, and do it well, it can contribute significant value to your business and to your career.
3. It is an essential activity of the business. A key result is an important output that then becomes an input to the next key result area, or to the next person.
A key result area has three qualities:
1. It is clear, specific, and measurable. You can determine exactly if the result has been achieved, and how well.
2. It is something that is completely under your control. If you do not do it, it will not be done by someone else. If you do it, and do it well, it can contribute significant value to your business and to your career.
3. It is an essential activity of the business. A key result is an important output that then becomes an input to the next key result area, or to the next person.
For example, in
selling, a key result area is prospecting—finding new, qualified, and
interested prospects to talk to about your product or service. Identifying and
contacting new potential customers is an essential key result area of the
salesperson.
Once new prospects have been found, the next key result area is developing trust, rapport, and credibility with those prospects so that they will be positive and open to learning about your product or service. These are additional key result areas in selling each one of which flows directly from completion of the previous one and concludes with getting resales and referrals from happy customers. There are key result areas in every job, and for the business as a whole. Your job is to determine exactly what they are for you, set schedules and measures for their completion, and then work on them every day.
As an individual, make a list of your key result areas. Your starting point, again, is determined by your answers to the questions: “Why am I on the pay? What have I been hired to accomplish?”
Once new prospects have been found, the next key result area is developing trust, rapport, and credibility with those prospects so that they will be positive and open to learning about your product or service. These are additional key result areas in selling each one of which flows directly from completion of the previous one and concludes with getting resales and referrals from happy customers. There are key result areas in every job, and for the business as a whole. Your job is to determine exactly what they are for you, set schedules and measures for their completion, and then work on them every day.
As an individual, make a list of your key result areas. Your starting point, again, is determined by your answers to the questions: “Why am I on the pay? What have I been hired to accomplish?”
Set Clear
Priorities
Many problems arise in a business for a variety of reasons. First, neither the individual nor the boss is clear about the key result areas and the outputs required for the success of the business or department. Second, people are not clear about the priorities among key results and are easily distracted into doing things of low value. As management consultant Benjamin Tregoe once said, “The very worse use of time is to do very well what need not be done at all.”
The definition of key result areas is the critical determinant of managerial effectiveness. This is because 80% of the value of what you do will be determined by 20% of your activities. In some jobs and positions, it can be that 90% of what you do is represented by 10% of your work. If you don’t know what the top10% or 20% of your activities are, there is no way that you can perform to distinction. If you don’t know what your key result areas are, your natural tendency will be to spend more and more time doing things of less and less value.
One of the best questions you can ask continually is, “What can I, and only I do, that if done well, will make a real difference in results” If you don’t do this particular job or task, no one else can do it for you, and productivity and performance will begin to slow down in your department. But if you do it, and do it well and quickly, it can make a real difference in productivity and results.
Find the Right People
For example, a key result area of the manager is recruiting and staffing; finding the right people for the right jobs. As Jim Collins wrote in his book Good to Great, top managers are those who “get the right people on the bus, get the wrong people off the bus, and then get the right people in the right seats on the bus.”
Your ability as a manager to find the right people, to interview and select them carefully, and then to put them into the key positions in your area of responsibility is something that only you can do. If you don’t do it, or do it poorly, no one else can do it for you or change it. But if you select the right people and put them together with others to form a right-performance team, you can make an extraordinary contribution to your business.
Key Results for Staff Members
Once you have answered the question for yourself (Why am I on the payroll?), your next question is, “Why are my staff members on the payroll?”
Again, think on paper. Make a list of each of the people who report to you. Then, under each name, make a list of the key results they have been hired to accomplish, in order of importance, if possible. It is amazing how few managers are really clear about the most important tasks and activities required from each person who results to them.
Help Them to Get Important Results
You owe this information to your staff. You owe your staff members the opportunity to achieve levels of elite performance and the chance to do their jobs to distinction. This is only possible if they know exactly what their most important jobs are, and how you will measure those jobs. When you give people a clear description of their job function, plus a measure of performance, you allow them to focus and concentrate on getting the most important results for themselves, and for the company.
So, give your employees a target to aim for, a standard toward which they can aspire. Only when your staff members have clear goals and priorities on their activities can they perform to distinction, and get you the results that you need to achieve at excellent levels yourself.
Many problems arise in a business for a variety of reasons. First, neither the individual nor the boss is clear about the key result areas and the outputs required for the success of the business or department. Second, people are not clear about the priorities among key results and are easily distracted into doing things of low value. As management consultant Benjamin Tregoe once said, “The very worse use of time is to do very well what need not be done at all.”
The definition of key result areas is the critical determinant of managerial effectiveness. This is because 80% of the value of what you do will be determined by 20% of your activities. In some jobs and positions, it can be that 90% of what you do is represented by 10% of your work. If you don’t know what the top10% or 20% of your activities are, there is no way that you can perform to distinction. If you don’t know what your key result areas are, your natural tendency will be to spend more and more time doing things of less and less value.
One of the best questions you can ask continually is, “What can I, and only I do, that if done well, will make a real difference in results” If you don’t do this particular job or task, no one else can do it for you, and productivity and performance will begin to slow down in your department. But if you do it, and do it well and quickly, it can make a real difference in productivity and results.
Find the Right People
For example, a key result area of the manager is recruiting and staffing; finding the right people for the right jobs. As Jim Collins wrote in his book Good to Great, top managers are those who “get the right people on the bus, get the wrong people off the bus, and then get the right people in the right seats on the bus.”
Your ability as a manager to find the right people, to interview and select them carefully, and then to put them into the key positions in your area of responsibility is something that only you can do. If you don’t do it, or do it poorly, no one else can do it for you or change it. But if you select the right people and put them together with others to form a right-performance team, you can make an extraordinary contribution to your business.
Key Results for Staff Members
Once you have answered the question for yourself (Why am I on the payroll?), your next question is, “Why are my staff members on the payroll?”
Again, think on paper. Make a list of each of the people who report to you. Then, under each name, make a list of the key results they have been hired to accomplish, in order of importance, if possible. It is amazing how few managers are really clear about the most important tasks and activities required from each person who results to them.
Help Them to Get Important Results
You owe this information to your staff. You owe your staff members the opportunity to achieve levels of elite performance and the chance to do their jobs to distinction. This is only possible if they know exactly what their most important jobs are, and how you will measure those jobs. When you give people a clear description of their job function, plus a measure of performance, you allow them to focus and concentrate on getting the most important results for themselves, and for the company.
So, give your employees a target to aim for, a standard toward which they can aspire. Only when your staff members have clear goals and priorities on their activities can they perform to distinction, and get you the results that you need to achieve at excellent levels yourself.
What is a KPI?
Measure your performance against key business objectives.
Key Performance
Indicators – Definition
A Key
Performance Indicator (KPI) is a measurable value that
demonstrates how effectively a company is achieving key business objectives.
Organizations use KPIs at multiple levels to evaluate their success at reaching
targets. High-level KPIs may focus on the overall performance of the
enterprise, while low-level KPIs may focus on processes or employees in
departments such as sales, marketing or a call center.
What makes a KPI
effective?
A
KPI is only as valuable as the action it inspires. Too often, organizations
blindly adopt industry-recognized KPIs and then wonder why that KPI doesn't
reflect their own business and fails to affect any positive change. One of the
most important, but often overlooked, aspects of KPIs is that they are a form
of communication. As such, they abide by the same rules and best-practices as
any other form of communication. Succinct, clear and relevant information is
much more likely to be absorbed and acted upon. KPIs are an
effective tool to help build better performing teams.
In
terms of developing a strategy for formulating KPIs, your team should start
with the basics and understand what your organizational objectives are, how you
plan on achieving them, and who can act on this information. This should be an
iterative process that involves feedback from analysts, department heads and
managers. As this fact finding mission unfolds, you will gain a better
understanding of which business processes need to be measured with KPIs and
with whom that information should be shared.
What is a SMART KPI?
One
way to evaluate the relevance of a KPI is to use the SMART criteria.
The letters are typically taken to stand for Specific, Measurable, Attainable, Relevant, Time-bound. In other words:
- Is your objective Specific?
- Can you Measure progress
towards that goal?
- Is the goal
realistically Attainable?
- How Relevant is
the goal to your organization?
- What is the Time-frame for
achieving this goal?
How to define a KPI
Defining
a KPI can be tricky business. The operative word in KPI is “key” because it
every KPI should related to a specific business outcome. KPIs are often
confused with business metrics. Although often used in the same spirit, KPIs
need to be defined according to critical business objectives. Follow these
steps when defining a KPI:
- What is your
desired outcome?
- Why does this
outcome matter?
- How are you going
to measure progress?
- How can you
influence the outcome?
- Who is responsible
for the business outcome?
- How will you know
you’ve achieved your outcome?
- How often will you
review progress towards the outcome?
As
an example, let’s say your objective is to increase sales revenue this year.
You’re going to call this KPI your Sales Growth KPI. Here’s how you might
define this KPI:
- To increase sales
revenue by 20% this year
- Achieving this
target will allow the business to become profitable
- Progress will be
measured as an increase in revenue measured in dollars spent
- By hiring
additional sales staff, by promoting existing customers to buy more
product
- The Chief Sales
Officer is responsible for this metric
- Revenue will have
increased by 20% this year
- The KPI will be
reviewed on a monthly basis
Being even SMARTER about
your KPIs
The
SMART criteria can also be expanded to be SMARTER with the addition of evaluate and reevaluate. These two steps are
extremely important, as they ensure you continually assess your KPIs and their
relevance to your business. For example, if you've exceeded your revenue target
for the current year, you should determine if that's because you set your goal
too low or if that's attributable to some other factor.
Top 22 questions to
use when designing a key performance measure
Review these questions when building out your key business performance
measurement systems.
Performance measures should:
1. Be derived from
strategy
2. Be simple to
understand
3. Provide timely and
accurate feedback
4. Be based on
quantities that can be influenced, or controlled, by the user alone or in
co-operation with others
5. Reflect the
“business process” – i.e. both the supplier and customer should be involved in
the definition of the measure
6. Relate to specific
goals (targets)
7. Be relevant
8. Be part of a closed
management loop
9. Be clearly defined
10.
Have visual impact
11.
Focus on improvement
12.
Be consistent (in that they maintain their significance as time goes by)
13.
Provide fast feedback
14.
Have an explicit purpose
15.
Be based on an explicitly defined formula and source of data
16.
Employ ratios rather than absolute numbers
17.
Use data which are automatically collected as part of a process whenever
possible
18.
Be reported in a simple consistent format
19.
Be based on trends rather than snapshots
20.
Provide information
21.
Be precise – be exact about what is being measured
22.
Be objective – not based on opinion
Business
Metrics
A Business
Metric is a quantifiable measure that is used to track and assess
the status of a specific business process. Every area of business has specific
metrics that should be monitored – marketing metrics can include
tracking campaign and program statistics, while sales metrics may
look at the number of new opportunities and leads in your database, and executive
metrics will focus more on big picture financial metrics. Learn more: Business
Metrics.
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