Issue 27, Wednesday 6th September, 2000
Made in New Zealand - twice winners of the America's Cup
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"The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant."

Max De Pree, CEO of Herman Miller Inc
quoted in Managing the Dream by Warren Bennis



Award is a free fortnightly email magazine with the tools, techniques and best-practice models that deliver high performance in the new economy
In this issue
START - Firestone!
Ten Minute MasterClass 1 - How infrastructure became a sexy word
Fast numbers - 146.8m in the US
Ten Minute MasterClass 2 - from what? to now what!
QuickPoll results - we'll go with the majority
HELP - give prof Evans a hand
Quick case study - Cisco Systems' on-line numbers - numbing!

eZzay - curse words of the new economy

Sixty Second Snapshots
>> Analytical problem solving
>> On target to achieve nothing
>> Call center sweat shops
>> ISO-Busting revisited
>> Managing 'absence'

Resources - heaps. Go look
Postscript - Firestone - oops!

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START
If quality has anything to do with fitness for purpose, then at least some of Firestone's US-manufactured tyres are not 'quality' products; with 60, maybe as many as 80, road deaths attributed to catastrophic tyre failures. They're recalling them, so presumably even Firestone agrees. Yet the firm is ISO 9000 and ISO 14000 certified. Does that mean that all ISO certificates are meaningless, or just that Firestone's are? And wouldn't you hate to be the audit firm who signed-off the three blighted plants!?
Ten minute MasterClass® 1 – How infrastructure became a sexy word
Or, how the new economy learned to love supply chain management
Until a few months ago, says Erick Schonfeld at eCompany.com, much of the e-business excitement was about the prospect of hundreds of internet marketplaces cropping up in industry after industry – a stampede of business-to-business exchanges that was going to produce new corporate eBays; centralized B2B hubs for every single transaction of entire industries.

But maybe we're not ready for B2B marketplaces and the merciless relationships they imply – transparent prices, paper thin margins – Schonfeld wondered. Whatever; venture capitalists and Wall Street have lost interest. Now the clamor is for operations that have the technology and expertise to electronically fuse the critical parts of one company to another, parts such as purchasing, sales, and accounting. The hot new word du jour is infrastructure – a once geeky term reserved for engineers and government bureaucrats.

Getting B2B to work is turning out to be pretty hard – as has integrating the supply-chain and manufacturing systems of different companies through these exchanges. It might happen one day, but a lot still needs to be done. And anyway, it's not entirely clear that companies want to deal with more than, say, fifty suppliers, in which case an exchange linking up buyers and sellers becomes unnecessary. The fifty are already known.

Perhaps more to the point, modern corporations – those champions of free enterprise and capital markets – are actually set up more like units of a planned economy than a free market. Relationships with other economic entities are highly controlled, and any attempt at variation is squashed. Predictability is a high virtue. The unstructured, 'raw in tooth and claw' B2B environment is still a bit too risky for comfort!

But regardless, the pre-B2B realities are being swept aside by the internet. According to Geoffrey Moore, author of Crossing the Chasm and The Gorilla Game, modern organizations perform two kinds of activities: Those that give them a competitive advantage – their core competencies; and those that must be accomplished to keep the wheels turning – their context activities (logistics, finance, procurement, for example).

In the old economy, context activities like support services stay in-house because it's not cost-effective to outsource them. In-house transfer prices are lower.

The internet is changing all that, and it's the new 'infrastructure companies,' the application service providers (ASPs), and the B2B internet service providers, that are the new 'context' stars. ICG Commerce, for example, an Internet Capital Group start-up, will outsource organizations' strategic purchasing. They are expert buyers and can get better prices than most individual companies.

If a company's market cap is directly related to how well it delivers on its core mission, and Wall Street continues to focus on quarter-to-quarter numbers, then it stands to reason that corporations will off-load the invisibles when it makes sense (and the technology allows them) to do so. And then maybe the Web will finally help old-line companies become more efficient – and more valuable.
Fast numbers
Internet users, July 2000: 146.8m in the US, 28.3m in Japan, 19.5m in the United Kingdom, 7.6m in Australia and 1.7m in Singapore. Source – Nielsen
Ten minute MasterClass® 2 – From What? to So What? to Now What? Best practice in customer and market knowledge
Sometimes, so much information is available on customer preferences that it can be a challenge to go from the 'what?' of market research to the 'so what?' and the 'now what?'

This 'what triad' is at the heart of new qualitative research techniques, according to Neil Canter of the Business Insights and Analytics Group of Information Resources Inc., based in Chicago.

New approaches to qualitative research, focusing on the 'so what', augments the abundance of data from, for example, scanners, supermarket loyalty cards, web-based surveys, and government research, he says.

Enhancing insights gained from focus groups and random questionnaires with methods borrowed from cultural anthropology and ethnology, the new approaches use environmental surveillance, for example, to understand the subtleties of customer choice. Cameras installed in stores and customers' kitchens gather records of regular habits that reveal patterns that guide decisions to buy and use products. Other techniques include asking customers to keep food diaries or take photos illustrating particularly satisfying food experiences.

A combination of qualitative and quantitative research allows companies that apply best practices in determining customer needs and wants to develop new products keyed to precisely targeted markets. Using this two-pronged market analysis, Norpac Foods Inc of Lake Oswego, OR, spent 11 months whittling down 30 new product ideas to a single line of mixed vegetables, packaged in various combinations to accompany specific meats. The Just Add line appeals to consumers who want to be able to create flavorful meals by adding chicken or beef to a packet of frozen vegetables.

Disciplined market research replaced a more hit-and-miss market-testing strategy that Norpac formerly used to test new product ideas and provided a convincing reason for the farmer-owned cooperative to continue asking 'so what?' in its product development process. The investment in data gathering allowed this firm to forgo high costs of marketing and advertising support and slotting fees, the allowances paid retailers to provide shelf space for trials of new products.

Sources - Arthur Andersen Global Best Practices® knowledge base and Getting to Know You, by Paul Rogers of Prepared Foods, June 2000.
QuickPoll results
Last issue we asked whether this eZine was too big already, and 40% said yes. Or about the right size, and 50% thought so. Or whether it could be even bigger, and 10% said it could. We'll go with the majority, and top out at about 3,000 words.
HELP!
James R Evans, Professor of Quantitative Analysis and Operations Management at the University of Cincinnati has asked for YOUR help with a research study that focuses on Baldrige Category 4; specifically, measures and practices that your organization uses to analyze performance.

“This is a non-commercial research project,” Jim says, “to improve understanding of current approaches across a broad spectrum of industries, the impact of such approaches, and needs for better education in using them. This study arose from my experience as a Baldrige examiner for the past seven years, recognizing that many organizations typically score lower in this category than others."

It's web-based and easy to complete. Go directly to the survey here.
Quick Case Study® - Cisco on-line
James Robert Crow reported to the Deming Electronic Network (August 24, 2000) on a recently attended Cisco Systems program on using the internet. Some examples:
- By answering 83% of customers questions via the internet, Cisco needs 1,000 fewer people and saves $330m annually, with a 25% increase in customer satisfaction.
- Customers place 87% of all orders – $41b worth – on-line every day with less than 1% error, saving Cisco $57m annually. In many cases the orders go directly to a Cisco supplier who ships to the customer. Cisco simply sits in the middle and makes the mark-up.
- Cisco has moved much of their training to the internet, reducing the time to train 24,000 employees in ISO 9001 from 4 months at a cost of $1.4m to 5 weeks at a cost of $16,000, with a 93% pass rate.
- Supplier-controlled inventory has yielded $175m in annual savings, a $269m annual revenue contribution, 25% faster new product time to volume, with 55% of product fulfilment by supply partners, and a 45% reduction in supply chain inventory.
- Associates [aka employees] have direct access to their own personnel files. If a person has a change of address, gets married, or whatever, they pull up their own personnel file and make the change on-line. Cisco has a 3% annual staff turnover, this and other innovations are saving them $75m annually. They have the highest industry productivity at $690,000 per employee.
- Expense reports are done on-line with a 48 hour turnaround, and charges on a major credit card are paid directly to the card company.
eZzay - curse words of the new economy
When a venture capitalist hears the word niche, TheStreet.com's James J Cramer says, he thinks something like, 'Get this stupid moron, who is wasting my time and has no vision or clue about what real business is, out of my face right now or I'll call security'.”

Cramer's been getting a lot of correspondence from companies that share the same characteristics – specialty vendors of products without the money to expand by bricks and mortar, but with a clientele that is definitely not regional. Businesses that don't have enough profit or people to expand into many cities, selling a product that can be conveyed quite well on the Web. They are, in a word, niche.

“Here's the problem,” he says, “in the world of start-ups and venture capital, there are certain curse words, certain things that you can never say, that violate all the rules, that are cardinal sins. And the number one violator is to say that you have a really profitable 'niche' opportunity.”

But most businesses start out as niche businesses and grow. Sam Walton didn't start out with 500 stores. Home Depot didn't blanket 50 states. Walgreen was a regional company. Cisco was once small biscuits. Yes, these businesses scaled. But they were good businesses that got to try out on home field first.

Trouble is, says Cramer, we're now discovering in the dot-com world that many of the start-ups of the last five years may have been good niche businesses that were forced to scale so as not to get kicked out of the building by the VC's security guards. Some of the casualties (Value America, Living.com) made no sense big or small, but others, left to their own devices, might have, in two or three years time, developed into interesting buyout candidates for a Yahoo!, a Lycos or an America Online (ssss), three businesses that have scaled into big revenue with profitability.

“In retrospect, he says, “it seems unbelievable that six months ago all that mattered was size, market share and scalability. Now, however, all that matters is profitability, and for the niche operators, that's Catch 22: Their niches are showing. They can be profitable only by being smaller, leaner and less growth-oriented.

But there's one problem. The stock market has tainted these companies. It has made it more difficult for them to swallow the medicine, take the write-offs, do the firings, because of the glare of being public. So they struggle to get to profitability while still trying to please the growth honchos.

Those that rein themselves in and become the dreaded niche players will ultimately reward their shareholders more than those that continue the masquerade and wind up in Chapter 11.

And those that keep thinking that you can grow like wildfire and scale like mad and grab massive market share and maintain financial discipline and be profitable without laying off people or cutting expenses should ask themselves one question, Cramer says: “'Do I work at Yahoo!?' If the answer is yes, then you'll do fine. If the answer is no, I think you should ready your resume. It could come in very handy in the coming months.”
Sixty second snapshots
Brutally short summaries of material too valuable to junk

>> SSS 1 – Analytical problem solving
John E Jones in the September 5th UKHRD, a training-oriented discussion list, says ”you could easily build a course on problem solving around The Practical Decision Maker: A Handbook for Decision Making and Problem Solving in Organizations. Drs Tom Harvey, Bill Bearley, and Sharon Corkrum (find the publisher at http://www.TECHNOMIC.com, search for books under Education, then use Find to locate Practical), have developed a unique handbook that contains all the major tools that structure decision making and problem solving. The book will help leaders who need to create consensus out of discussions, and to build a common movement towards the future. It addresses real, practical needs in a complex world. It will provide skills and insights to those who have the courage to lead.

>> SSS 2 – On target to achieve nothing
“On Sunday 27th August,” John Seddon writes, “the Observer [a British Sunday newspaper – not a tabloid! Ed] published an article about what is wrong with targets. Get it from John's web site. “Since the publication of this article,” he says, “I have had a number of discussions with people in public sector organisations who are concerned about the [UK] Government's use of targets. If you have concerns, illustrations of the current madness or you just want to let of steam please e-mail me."

>> SSS 3 – Call center a sweat shops
Reporters covering of the opening of new call centers/centres often ask "Will this be a sweat shop?" and are told "Oh no, we train our people properly and we look after them well". And that, John Seddon says (Vanguard News, September 2000) is usually as far as the conversation goes.

The next question, he says, should be "Will you be measuring the workers on calls per man per day or call duration and that sort of thing?" If the answer's yes, then it'll be a sweat shop alright.

Why? Because those are the measures that define a production environment; they are at the heart of the philosophy that led to alienation and industrial strife for the whole of the last century. People who work in call centres know these measures are arbitrary, they have little to do with the work. To survive these people learn to 'cheat'; often they prosper by 'cheating' to win prizes.

Call centre managers focus on measures because they think of calls as units of work. Wrong, Seddon says, and a fundamental mistake. In any call centre there are two kinds of calls, 'value calls' – about helping customers, and 'failure calls' – about things the organisation has not done, or has done wrong, for the customer. Failure calls can be 25-75% of all calls. To improve service and reduce costs, should you focus on the activity of your staff or the nature of calls coming in? Which way of behaving would be most likely to engage your staff in improving the work?

>> SSS 4 – ISO-Busting revisited
John Seddon (yes, yes, it was newsletter week), who is also the most celebrated of the ISO-Busters, is to republish his book In Pursuit of Quality: the case against ISO 9000 to coincide with the launch of ISO 9000:2000. Chapter One “charts the history of ISO 9000 to understand just how we went wrong,” he says. Downloading chapter One free from Vanguard Consulting's web site at http://www.lean-service.com/6.htm (in Systems thinking and ISO 9000). The book will be published by Oak Tree Press (Dublin) in November. ISBN 1-86076-173-9

>> SSS 5 – Managing 'absence' UKHRD, 24th August 2000, from Paul Hobbs of The Thinking Consultancy.

”During my earlier career,” Hobbs wrote, “I worked with an airline that is now the 'worlds favourite'. At the time a department that did the catering for short haul flights had real problems with casual sickness. One employee had clocked up over 40 days off and still had his annual 'merit ' pay increase! It was not his fault! So why should he lose pay?”

The most telling excuses, Hobbs said, were 'it was my turn' and 'I had Monday off sick because I came in on Sunday for overtime'.

”We went in, almost as a hit squad, to sort out the area,” he said. “We had a one-to-one with all who had over 35 casual days off sick. We did not question their condition(s) but sympathised with them. We told them that, for their own health, we were going to reduce the stress involved in their work. We took them off shiftwork and did not allow them to work overtime for three months.

”What a tonic. It went round the base like a dose of salts and the sickness record improved overnight.”
Resources – PRM
From ON THE FRONT LINE (an e-newsletter on Customer Relationship Management, Sign-up , v3.27, August 24, 2000
>> PARTNER RELATIONSHIP MANAGEMENT Keeps Manufacturers and Distributors in Sync. Internet-based PRM software has emerged as a valuable tool to improve communication with dealers, coordinate lead generation, and offer technical support. http://firstmoves.com/view_magazine.asp?id=60
>> BACK TO BASICS: What Do Your Partners Really Need? The Internet did not cut out channels, but instead moved lower-value activities online to improve efficiency. In the new e-World, what is the role of channel partners and what do they need from you? http://www.varbusiness.com/columns/columns.asp?ArticleID=18932
>>GM TEAMS WITH DEALERS to sell cars online. In a bid to keep pace with third-party online car brokers, General Motors Corp. in Detroit today launched a joint venture with participating dealers to offer vehicle sales, pricing and competitive information online. http://www.computerworld.com/cwi/story/0,1199,NAV47_STO48550,00.html
>> OF B2B PROPORTIONS: Streamlining and Automating. B2B is losing its sex appeal almost everywhere. B2B is pretty much just business -- and business is, well, boring. eMarketplaces aren't the place to be, B2B will ultimately be about automating existing relationships. http://ecommerce.internet.com/solutions/ebusiness/article/
Postscript
So who is Firestone's ISO 9000 registrar? According to Quality Digest's database the three plants (Decatur, Illinois; Oklahoma City and Wilson, North Carolina) are all registered by Lloyds Register Quality Assurance (LRQA).
Oops.
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In recent issues
Competing for the future - Hamel is THE MAN, embrace innovation!
Women and leadership - for real progress ... give men the nappies
Quick case study/Jennifer White - on picking winning teams
tompeters! - new economy DNA. Flaky? Irresistable! The survival kit
Snapshots of the new economy - from Seybold to Subramanian
eStrategy - best, first, fastest, lastest ... just watch out for Wal-Mart
A better way - but don't try this at home
Gen II - who wants to be a CEO
Interested in hiring a coach?
Give us a call. We'd love to talk to you about it! Or any other proposals. Here's Malcolm Macpherson's resume.
Next issue 19/20 September. Reader contributions warmly received!

Copyright © 2000, Macpherson Publishing
All rights reserved. But if you found this eZine useful we strongly encourage you to email it intact to a business associate, friend or acquaintance. Award and EDGE FIRST are trademarks of Macpherson Publishing. Contact us at macalex1@xtra.co.nz; visit our web site at www.baldrigeplus.com. 2,993 words, formatted in HTML
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