Thursday, January 31, 2013

Use Cross Functional Teams to Implement Organizational Change


Use Cross Functional Teams to Implement Organizational Change

Culture change may be necessary for organizations to adapt to changing environments. If old value networks (processes, procedures, communication channels and protocols) govern, then survival in a changing market place becomes more difficult.

Old value networks are a dilemma that is the result of dated value networks becoming part of a “hard wired” approach to problem solving within the industry. These are “hard wired” in the sense that they are part of the culture and very difficult to change. "Hard wired" often times prevent the ability for organizations to innovate.

Most companies require innovations to create new revenue and profit streams for growth and long term success. Innovation is needed for developing new products or finding new markets for current products. Either approach requires new strategies and is based on innovative thinking. For new ideas to be incorporated into the “muscle” of the organization may require a “rewiring” of the "hard wired" portions of an organization’s culture.

This “rewiring” requires participation by all of the organization’s functional groups (Finance, Marketing, Sales, Production and Human Resources) and becomes difficult if it is at odds with the “hard wired” thinking.

Cross-Functional Teams at Corpus Christi Caller-Times

Cross-functional teams can provide options to “hard wired” approaches to problem solving and promote buy in across the organization.

Beginning with my first assignment to review the market position of the Corpus Christi Caller-Times and to make recommendations on actions needed, I looked to a cross-functional task group for solutions. An assignment that might change things across an organization was daunting, and it was clear to me that I did not have enough knowledge of the organization’s functions to determine the impact of any potential changes. A task group comprised of individuals from across the organization would help combat inertia from “hard wired” approaches and would allow any new approaches to appreciate organizational constraints, weaknesses and exploit organizational strengths.

Information presented to the task group showed the market was comprised of a growing number of small businesses that didn’t need and couldn’t afford to have their advertising in the newspaper, which was distributed to subscribers across south Texas.

The financial data showed the economics of running the newspaper presses. Because the presses were large and required a significant work group to run, products produced needed to be printed in substantial quantities. This meant a high variable or direct cost and would require significant revenue streams. These revenue streams would not be possible to generate from the growing number of small businesses that wanted to focus on the immediate markets around their business location.

Presented with this information and with some study of what was being done in other markets, the task group suggested that a group of limited circulation products be developed for small businesses. A local commercial printer would print these products on smaller presses. Advertising pricing would be lower due to reduced costs, and distribution would be in several zones. Each zone would cover a specific area of the city where a group of businesses and their potential customers were located.

What was revealing about the task group approach was the immediate buy-in by each of the participants into finding a solution to a business challenge. From this buy-in came real problem solving and the willingness by the representative of each functional group to take recommendations back to their people and discuss how implementation could be achieved. I again think this goes back to some of the theories on human motivation. There was no carrot or threat here; only the creation of a group that provided acceptance, status and recognition.

In the end a very successful group of products were introduced. These products allowed the Caller-Times to strengthen its market position for years to come.

Cross-Functional Teams at the Houston Chronicle

A program known as marriage mail affected the Houston advertising market. Marriage mail is a program that allows advertisers to combine their advertising circulars in one mail package and share the mail costs. Marriage Mailers, a small direct mail operation in Los Angeles, first used the concept.   Advo, a direct marketer established in 1929, bought Marriage Mailers in 1979 and began rolling out the program nationwide.

Until the introduction of marriage mail, advertising circulars were primarily distributed by newspapers and represented a very profitable revenue stream. Newspapers at the time did not feel the need to lower their rates for circular distribution because they felt they had a superior delivery system. Some retailers felt otherwise and began using the marriage mail concept, and over the next 20 years, newspapers lost the majority of grocery inserts to marriage mail.

Houston had become one of ADVO’s most profitable markets to the detriment of the Houston Post and Houston Chronicle. In 1993, I was charged with creating a mail product for the Houston Chronicle that would compete with ADVO.

Since the project would require support from across the organization, I decided to create a cross functional team to put together a response. This team met every Friday morning for the remainder of my tenure at the Houston Chronicle. By early 1994, we had created a product that was delivered to newspaper subscribers in the newspaper and to the remainder of the market through the U.S. Postal Service. Due to the mix of delivery, we were able to offer full market coverage at prices less than those offered by ADVO. The program was in full swing across the Houston Market in 1995, and by late 1995 all of the key retailers had abandoned ADVO and moved to the Chronicle’s program.

The task force met each week to review the prior week’s performance and address any new issues that arose. Over the following seven years the program, which became known as ChronDirect, was embellished to allow specific address delivery at marriage mail pricing and demographic and psycho graphic market delivery programs. The production department determined how to reduce mailing and distribution costs to insure new entrants would not be able to match the service or the price. Today ChronDirect remains the most successful advertising distribution vehicle in the Houston market.

It is clear to me that no individual could have developed and implemented this program. It is also clear to me that cross functional task groups can provide real employee engagement and job satisfaction while helping the organization grow.

For me, it has been reaffirmed that the ability to change the culture of an organization must be rooted in a focus on a business outcome and implemented by cross-functional teams.

Thursday, January 24, 2013

What Drives a Consumer's Decision to Buy?


Understand the Reasons Customers Buy Products

To develop a successful marketing strategy requires a solid understanding of the market, the customer and the job a customer hires a product to do.

Clayton Christensen gives the example of milk shakes being used in the morning as a breakfast substitute for people on their drive to work and in the afternoon as a reward mothers gave to their children after school. In his example the milk shake had been “hired” to do two different jobs by two different customer groups. Clearly price alone could not describe the different jobs the product was “hired” to do nor could it describe the value of the product to either group. In the case of milk shakes characteristics that would need to be included would be the availability of the product and price as it relates to alternative products.

To measure the considerations a customer must make regarding the purchase of a product it is important to use a process that measures what is influencing the decision. Influence can be the result of tangible and intangible product characteristics as well as environmental factors.

Tangible characteristics would include size, weight, and other physical properties of the product. Intangible characteristics would include guarantees, customer service, and ease of understanding how to use the product or product training and so on. Environmental factors can include influence of friends or social pressure.

Measuring these characteristics helps understand the real job the customer has hired the company and its products to do. GWR Research developed a process to describe and measure these characteristics.

To help describe product characteristics we created  “Consumer Adoption Drivers”  (CAD). The CAD list is as follows:

1)    Group Influence Intensity – relates to peer pressure exerted on customers
2)    Perish ability – the length of time the product is deemed useful,
3)    Psychological appeal – status associated with the product
4)    Price sensitivity – the need for the customer to budget for the purchase,
5)    Relative Price Influence – the attractiveness of other products as a substitute when price is a consideration,
6)    Frequency of Purchase – The frequency with which the customer purchases the product,
7)    Search Time Intensity – the amount of time invested in the search for the “right” product,
8)    Tangible Differentiability – physical differences between products,
9)    Intangible differentiability – non-physical differences between products (guarantees, relationships with company, branding etc.),
10)Technical Complexity – the need for training before a customer can use the product. This may be a factor in determining the type of sales force that will be required.

The table below arranges each “driver” next to a semantic differential. Using a fairly simple research survey, customers can rank the “drivers” as being of high, low or no importance. Analysts can use questions that elicit responses for each CAD descriptor.

Dimension
High
Low
None
Group Influence Intensity



Perish ability



Psychological Appeal



Price Sensitivity



Relative Price Influence



Frequency of Purchase



Search Time Intensity



Tangible Differentiability



Intangible Differentiability



Technical Complexity





Customer Survey Process
Using focus groups to get a qualitative feel may provide a good start to identifying customer groups according to CAD.

For critical strategic decisions, customer group surveys should be large enough to provide results with a high level of statistical confidence.  For these surveys the survey groups can be divided into three categories (Key customers that account for the majority of the business, Under potential customers that account for expenditures on like products but with competitors, and nonusers). The Key customer and Under-Potential customer categories may require a census to provide statistically significant findings. Nonuser categories are likely large enough to use random sampling techniques.


Questionaire Design
The questionnaire used in the customer survey should provide several questions for each “driver” using a semantic differential.

For example a question for Group Influence Intensity might be:
Would you say that the influence the people you work with have an influence on the type of automobile you purchase? Is the level of influence high, moderate or low?

By quantifying the semantic differential for each driver, a ranking chart can be developed to analyze the responses.

Analysis of the data
Using the example of luxury automobile consumers, an example of the CAD analysis is shown below.

                        KEY CUSTOMERS  - LUXURY AUTOMOBILE CONSUMERS

GII
Perish
Psy. a
Price
RPI
FOP
STI
TD
ID
TC
High
+

+









+
+


+



Low

+




+

+


+










+

None















UNDER POTENTIAL CUSTOMERS – LUXURY AUTOMOBILE CONSUMERS


GII
Perish
Psy. a
Price
RPI
FOP
STI
TD
ID
TC
High

+


+


+
+


+
+

+




Low
+




















+

+

None












For the Key customer categories of this company, Group Influence Intensity was considered high as was psychological appeal, search time intensity, tangible differentiability and intangible differentiability.

One could then assume that a marketing strategy that used individuals viewed as peers in ads would have a positive effect on this category. Additional strategic components could be creating a strong brand image and a focus on unique product attributes.

For Under potential customers, perish ability, price and frequency of purchase also are important factors. A successful marketing strategy here might incorporate product reliability (long life) and resale value.

The CAD analysis approach to developing marketing strategies improves the ability for marketers to understand what influences a customer and their product purchasing decisions. It also helps understand what a customer is hiring a product to do. In the example above it appears that key customers are using the purchase as a means of maintaining their social status. Under potential customers are also hiring the car for social status reasons but want to be assured that the product is a good value to perhaps fill the need to be viewed as a smart buyer.

The marketing strategy that is subsequently developed would align the 4Ps of marketing around these findings for each customer segment.

Thursday, January 17, 2013

How Do I Change the Culture in My Organization?


Tie Culture Change to Business Outcomes

 By Gary Randazzo

As a manager you may find that your organization has flaws that are hampering performance. These flaws may have become a “hard wired” part of the organization’s culture and to move the organization forward you need to shift or remake the culture.

Larry Bossidy, former chairman of Honeywell International, writes that most organizations attempts to change culture fail because they are not tied to improving business outcomes.

Culture is the result of management practices and philosophy that is developed over time. Everyone in the organization knows the culture and most abide by the attitudes and approaches that define the path to success in the organization.

I can recall working in a very successful, very large newspaper organization that was entering into the commercial printing business. They were making some headway but not the kind of growth they had envisioned.

The newspaper was located in a big city and the commercial printing opportunities were significant. One challenge was the presses owned by the newspaper. The presses that printed the newspaper used the letterpress process, which didn’t produce the quality provided by the offset process used by commercial printers. To address this the newspaper purchased a printing company that had heat set offset printing presses. This not only provided offset printing it allowed even higher (near magazine) quality printing.

While this provided an advantage, this printing press was only economically viable for large press runs. This limited the ability to sell smaller print jobs. To address this the newspaper used smaller commercial printers to print the jobs sold by the newspaper’s sales staff.

This is where culture got in the way. The newspaper had an approved list of two or three outside printing vendors that could be used. These printers had long standing relationships with the newspaper. Their prices were well above market prices thereby limiting the sales to those in desperate need or who were not knowledgeable of printing prices. At times, the newspaper would bundle advertising with printing and discount the advertising to offset cost of the printing. Since the newspaper was the primary advertising vehicle at the time, this approach generated a respectable amount of revenue but provided less profit than just selling advertising.1

This approach was the result of a culture that emphasized the newspaper’s leadership position in the marketplace. Basically, it said to staff and ultimately to the market that the newspaper set the rules, not the marketplace. All too often a request made by a customer was simply turned away due to lack of capacity or inability to meet the customer’s needs.

There is a huge chasm between identifying the need for a cultural shift and actually causing a cultural shift. We knew we needed to change because there was a lot of business that was going to competitors. We were primarily concerned with winning back grocery advertisers that used to insert their circulars in the newspaper but had moved to the mail. In so doing grocers had found printing vendors would give them high quality printing, low prices and good production support.  To move forward we would have to significantly change our culture to one that was focused on the customer.

Clearly, the only way we were going to change culture was to have a significantly positive business outcome directly related to a change favoring a focus on customer service.

We were fortunate that circumstances arose that allowed us to test the water a bit. We sold a very large contract that required the use of new outside services. A Vice President showed his displeasure and lobbied to use the old approach. Using the old approach however, would mean cancelling a very profitable, multimillion-dollar contract. It was ultimately decided that it was in the company’s best interest to fulfill the contract. This opened the door to try this approach on several other advertisers.

Over the next year or so our commercial printing revenues doubled and our profits improved at an even higher rate. More importantly we were able to position ourselves as a provider that could meet virtually any printing need.

As an example, late one Monday morning we received a frantic call from one of our largest advertisers that they needed a circular delivered by mail and it needed to be in consumers mailboxes by that Thursday. We said that it wouldn’t be a problem, just tell us where we needed to pick up the circulars and we would deliver them to the Post Office.

She told us that the circulars hadn’t been printed. We said it might be a little more difficult but we would drop by and pick up the artwork. She then told us that the artwork wasn’t ready. Further, when we sent a production manager to collect materials as they were produced we found that scanning the artwork was slowing the process.

The production manager called one of the printing vendors and alerted them of the situation. Scanning was dropped in favor of a flatbed camera.  This and a few other production process changes allowed us to get the customer’s circular into their customers’ mailboxes on that Thursday.

This kind of service led to the ability to advise customers on all of their advertising and ad production needs. We found ourselves providing photography services, digital imaging services and direct mail services.

By tying the needed change directly to business outcomes, the newspaper was able to change its culture from one focused on past practices to one focused on customer needs.