Friday
Dec152000

Developing Your Sense of Timing In Business

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Everyone knows that timing is important in life. Can you think of a single human activity where timing isn’t an essential component? Timing is fundamental! Timing is everything! PERIOD!

Webster’s defines timing as “Selection or the ability to select for maximum effect of the precise moment for beginning or doing something.” And everyone knows that moving at the precise moment is critical in business.

In most business schools and business publications, the importance of timing is stressed but unfortunately, no one delves very deeply into the subject because no one has been able to explain or teach how to develop your sense of timing. Until now!

So, how do you develop your sense of timing in business? How do you increase your ability to move at the exact time required by your business for success?

Success in business comes from satisfying customers’ changing, personal needs and wants profitably. And the way to do that is to engage in an iterative and intuitive process fueled by learning from paying customers.

What is this intuitive and iterative process?

Most simply, the process is attempting to develop a business model that satisfies your customers’ needs and wants, testing the business model in the marketplace, learning from that test and then refining the business model to more accurately fulfill your customers’ needs and wants. And then you must go through this process again and again and again.

It is important to understand that when you implement your business model, you are actually testing the assumptions upon which the model is based. And you do that by creating a business model that allows you to generate the information you need to make better and better assumptions—who your customers are, what they need and want and how well your business model is satisfying those needs and wants. In other words, when you “open for business,” you gather as much information as you can from your real customers. Then, using that information you compare it against your assumptions. Wherever your assumptions are not valid, you revise your assumptions and modify your business model. Then, you repeat this process again and again and again.

Think about it, if you had “perfect” information, you wouldn’t have to make assumptions since you’d know your customers precisely and, therefore, you would know exactly how to satisfy them. However, since no one has perfect information, when you start a business you have to make assumptions and assumptions are not facts. Your business has not started. You do not have any feedback from paying customers. And if you’re an existing company, no matter how long you’ve been in business, you still have to interpret that information and the information is always changing because customers and their needs and wants always change.

As with any process, you will want to identify specific predictive metrics that you can track and use to allow you to assess whether your business model that is based on your assumptions is achieving the results you desire. To use a simple example, you might decide to use the frequency of the cash register ringing as the metric to track how well your customer acquisition process is working. Obviously, if the register doesn’t ring frequently enough, you’re not attracting customers and thus some of the assumptions you made about how to attract customers aren’t valid and need to be changed.

The key question is—how much time does it take for you to realize that your assumptions are right or wrong? That is, how many rings do you have to hear before you decide to change your assumptions, or stated a better way, how long do you have to wait between rings before the silence tells you that you have to change your business model?

The length of time it takes you to decide that an assumption is valid or in need of change determines how much information you take in and therefore is a measure of your sense of timing. But knowing that exact moment, that exact point in time in which to take action, is based upon a combination of intuition and experience: skills you can’t go to school for. And that’s because you need to feel it. That’s right, the way you know when it’s time to do something is when you feel it in your gut—literally. How many times have you done something and later been asked why you did it and you responded by saying, “It felt right!” And you meant it. In your gut you had a feeling and you acted on it. And that’s because a feeling is your intuitive sense of something and timing is simply when you put your intuitive sense into action. However, while you are developing these skills, at the very least, you can make sure you have the right information and most exact metrics available to you in real time so you can make the best decision possible given your current level of intuition and experience, that is, your current sense of timing.

Fortunately, today, there is a new breed of entrepreneurial company that is developing systems which are web-enabled, browser-based platforms that are capable of effortlessly automating your company’s business processes and intelligently tracking your key data points and metrics providing the right information, to the right people, at the right time. Many of these systems can send data to wireless devices, such as cell phones, PDAs and pagers so that you can in a sense “hear” your cash register ring. This new breed of software is easily adapted so that it can match your organization’s desired operating environment and provide you with the capability to alter your business processes “on the fly,” based on understanding gained through the real-time information they generate.

As a matter of fact, during a luncheon conversation we had with an entrepreneur, we thought we heard his cell phone beeping. When we told him to feel free to answer his call, he surprised us by saying it wasn’t a call. He had set his cell phone to buzz EVERY TIME a customer ordered from his Web site. We couldn’t believe it. Here he was 3,000 miles from his business and he was listening to his cash register ring. He knew how important timing was and was doing everything he could to stay in constant touch with the metrics of his business. You don’t have to walk around with a cell phone buzzing every time your business makes a sale but you do have to pay very close attention to what your business is telling you through the information it produces.

There’s an old saying that’s relevant here, “You need to love your business.” Why? Because the more you love your business, the more you’ll stay in constant touch with it and the more you’ll be able to feel its pulse. The metrics of your business are its pulse. Like a mother feeling the pulse of her child, her sense of whether the child is sick is very accurate based on her love for and her constant attention to her child. Her love and attention make up what we can call her child raising experience and the combination of her love, attention and experience are what develops her intuition. It’s the same in business. Your love, attention and experience will develop your “gut feeling” about your business. If you don’t love your business; if you don’t pay constant attention to it; if you don’t have experience with every aspect of it, your gut feeling is never going to grow.

The good news is everyone has some level of gut feeling and by going through the iterative process of building your business and feeling the pulse of the critical metrics for YOUR business, you can develop your intuitive sense of timing and build a successful business.


© 2000 The Rhythm of Business, Inc.

Jeff Shuman and Jan Twombly are the co-founders of The Rhythm of Business, a Newton, MA consulting firm that helps build customer loyalty and grow profitable businesses in the networked economy. They are the authors of the forthcoming book, Collaborative Communities™: Partnering for Profit in the Networked Economy (Dearborn 2001). Shuman is also a professor and director of Entrepreneurial Studies at Bentley College in Waltham, MA and the author of The Rhythm of Business: The Key to Building and Running Successful Companies (with David Rottenberg, Butterworth-Heinemann). This article was written with the assistance of Rottenberg.

Wednesday
Nov012000

The Only Sustainable Competitive Advantage

Over the entire history of business analysis, the conventional wisdom has been that if you have an idea for a business and the idea is good and you implement the idea correctly, the business will succeed. If the idea is bad or you fail to implement it correctly, the business will fail.

The conventional wisdom is wrong.

In reality, no matter how good a business idea is, no matter how well the idea is implemented, as soon as you open your doors for business, you will find your business has to change – not just minor adjustments and small shifts in marketing or product design but radical change. Customers you never thought of will want your product, and customers you counted on will want your product in an entirely different form or, perhaps, not want your product at all.

In short, those people who succeed in business are not so much visionaries who devise products and services no one else has ever thought of and that millions of people suddenly desire. Rather, they are flexible, information-alert individuals who understand what their customers tell them and who can quickly respond by shaping their business to profitably provide that exact product and service.

This process (which is not as easy as it seems to implement) means that business and business thinking flow in cycles. Every cycle begins with an idea or assumption based on an initial level of understanding. The idea or assumption is put into practice. Then, the business environment, primarily in the form of the customer, responds. After that, based on the response, a new idea or assumption is created. This cycle repeats and repeats as any business grows and develops.

The chief skill is not being right in the initial idea or assumption. No one is ever completely right with their first assumptions. The skill is in the ability to gather information from the response and then incorporate that information into the next idea or assumption which will necessarily be closer to what the customer needs and wants.

It is the knowledge of the process through which that stream of innovative business models flows and the ability to translate that knowledge into effective action that is the only sustainable competitive advantage. Monopolies, patents and other market protections and advantages all eventually end. The slower the introduction of technology, the longer competitive advantages last. But in a time of rapid technological innovation such as our own, it quickly becomes clear that the only truly sustainable competitive advantage is your ability to implement the iterative process of building a business.

Click on the pdf icon to download the complete article, including the diagram of the rhythm of business process Jeff Shuman first wrote about in his 1998 book, The Rhythm of Business.

As you can see, the vertical axis reflects your level of understanding of both your customers’ needs and wants and the business model best able to satisfy those needs and wants. Also shown are the starting points for your level of understanding. The horizontal axis tracks the critical time, money and other resources. The object of the process is to get to the point shown as The Ideal Business – the balance point – where your business profitably satisfies its customers’ personal needs and wants better than anyone else in the world. And it needs to get to that balance point as quickly and inexpensively as possible.

The iterative nature of the business building process is represented in the diagram by repeating cycles. A cycle is comprised of four distinct steps.

  • Step 1 Planning – This step identifies the business model best able to validate your critical assumptions and determines the business and information infrastructure and the resources needed to carry out your plans as quickly and for as little money as possible.
  • Step 2 Preparation – In this step you do everything that has to be done to prepare to “open for business.” This includes identifying potential customers, developing your product, hiring a team, building relationships with the partners you need, putting in place the infrastructure, developing a profit formula, and obtaining financing.
  • Step 3 Interaction – This step involves bringing your offering to the marketplace and interacting with your customers. Giving your customers an opportunity to actually purchase what you sell is the only way to tell if you are really able to satisfy their needs. So, no matter how long you’ve been in business, every time you interact with your customers you should consider that you are “testing” your business model’s underlying assumptions.
  • Step 4 Analysis and Refinement – In this step you evaluate the results of the customer interaction carried out in Step 3, and based on that analysis, refine your understanding of your customers’ needs and wants and your business model. It is in this step that you learn which of your assumptions are right and which need to change. It can be tempting to skip this step. It can also be fatal.

The positioning of Step 1 in Cycle 1 on the business building process diagram reflects your beginning the business building process. Step 2 is where you are preparing to interact with your customers. Step 3 is when you actually interact with your customers (i.e., you are open for business), and Step 4 is when you analyze the information gathered in Step 3 and then refine your assumptions about your customers and your business model. As you can see from the business building process diagram every cycle follows a rhythm – as you try out new assumptions, test the assumptions, analyze the results of the tests, and then develop better and better assumptions of your customers’ needs and wants and the business model that profitably satisfies those needs and wants.

The steps are shown in a linear fashion to reflect the order in which your thinking should progress at any given time, rather than becoming distracted by the many varied activities your company may actually be engaged in. In other words, except when you’re in your very first cycle, (referred to as a pushcart cycle) all of the steps may be in play at once. But your thinking needs to move sequentially as indicated in the diagram. For example, in one product line you may feel you have gathered enough information from paying customers interacting with your business (Step 3) to move on to the next step: analysis and refinement (Step 4), even though the company is (you hope) continuing to interact with paying customers (Step 3); and other product lines are in the preparation stage (Step 2); and still other product lines are in the planning stage (Step 1).

Business Building Block #2 – Customers

Underlying the thinking of many corporate executives and entrepreneurs is the belief that their companies need to, not only be better than the competition but, to use the jargon of war, to destroy the competition. In fact, many businesspeople frequently use terms such as destroy, strategy and tactics that are borrowed from military lingo. It’s not that using these war metaphors is wrong. Business does sometimes feel like a battle. The problem is that with repeated use, metaphorical images take on a life of their own and can influence decisions and actions more than we realize.

Unfortunately, war metaphors ignore the most important aspect of business – satisfying the customer. Business is not about beating the competition. In fact, you can beat your competition and still not satisfy your customers, leaving room for another business to steal customers from you and your competition. For instance, if you and a competitor are in the manufacturing business battling each other on price, another manufacturer could win your customers’ dollar, if what your customers really want is faster turnaround time or higher quality.

Of course, you should identify your competition and analyze what they do well and try to do better. You need to do that in the process of building and running a business. But if your main focus is on being better than your competition, you are focusing on the wrong thing.

Satisfying your customers is the only way to achieve lasting success and realize the full profit potential of your business.

Business Building Block #3 – Information

The value of information appears when you gather, process, and connect it, so that you can get the right information to the right person at the right time. Connecting the information is like the game of “Connect the Dots.” When you connect the dots, you see a picture. When you connect the information, you see a pattern. The fewer the pieces of information you need to connect to see the pattern, the more quickly you can act. This requires you to get the right information to the right person at the right time.

Business Building Block #4 – Timing

The length of time it takes to decide that an assumption is valid or is in need of change is directly related to how much information you gather and how quickly you can process and connect it, and is therefore a measure of your sense of timing (knowing the exact moment in which to take action). Your ability to process and connect information in turn is based upon your talent, your experience, and your dedication to your business. Your talent, your experience, your dedication, and your timing together form your intuition.

The “Xs” on the business building process diagram reflect the transition points in your thinking. It is important to know that when to take the next step is where your intuition comes into play. Keep in mind that there are two aspects to each business building cycle: The knowledge aspect consists of knowing that the process is comprised of cycles and that each cycle has four steps; the intuitive part of the process consists of the understanding of when to take the steps (i.e., your sense of timing).

However, while timing is always to a certain degree intuitive, it can, in a very real sense, be taught, and in an equally real sense, developed.

Monday
Oct302000

Entrepreneurs Love to Hear the Cash Register Ring

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In most business schools and business publications, the importance of timing is stressed but unfortunately, no one delves very deeply into the subject because no one feels competent explaining or teaching how to develop a sense of timing.

However, while timing is always to a certain degree intuitive, it can, in a very real sense, be taught, and in an equally real sense, developed.

Consider this example. Imagine an old fashioned grocery store. It’s Saturday. The grocer’s out back, checking the stock. A high school kid is working the register. The store is small enough so that the grocer can hear the register even from the back room. It makes that nice old-fashioned sound. Ka-ching. Ka-ching. Ka-ching. Suddenly, the sound stops. The silence grows. The grocer wanders out from the back room to see what’s wrong. The kid’s still at his post, leaning on his hands, enjoying the break because the stream of customers is gone. The grocer immediately grabs a marker and some white cardboard and writes up a couple of unadvertised Super Saturday Specials and hangs them in the store windows. A few minutes later, the kid stops leaning on his hands and the ka-ching, ka-ching, ka-ching of the cash register is once again heard. Satisfied, the grocer returns to the storeroom.

That’s timing.

Here’s a quick updated version of the same story. During a conversation with an entrepreneur we were working with, we thought we heard his cell phone beeping. When we told him to feel free to answer his call, he surprised us by saying it wasn’t a call. He had set his cell phone to buzz EVERY TIME a customer ordered from his Website. We couldn’t believe it. Here he was 3,000 miles from his business and he was listening to his cash register ring! Clearly, the key TRUTHS of business still hold.

Of course, in both the old and new story, the entrepreneurs are really doing much more than listening to the cash register. They are, in fact, developing their ability to actually FEEL their business. Let’s take a closer look at what we mean. Sure, every evening the grocer ran a summary of his cash register transactions: A printout of the total number of sales, how many dollars of business he’s done, the breakout of cash versus charges, the department, etc. But, as useful as that data is, in and of itself it doesn’t tell the whole story. Or for that matter, it really doesn’t provide the grocer with his most important information: The flow of his business on a real time basis that he can react to and change. Although the information in his cash register printouts is valuable, it is at the END of the day. The ringing cash register provides the timing information at the moment he needs to react to it that is missing in the printout. By consciously being aware and listening to the time interval between rings of the register, the grocer can literally hear the implicit rhythm made by the ring followed by silence followed by the next ring. In that way the length of the silence between rings is, in many respects, more useful than the ring itself since it allows him to actually hear the patterned flow of the ka-chings. That is, he can physically hear the rhythm of his business.

When the grocer stepped out of the storeroom to see what was going on he was literally taking action based on the rhythm of his business. He didn’t have to wait until that evening when he ran the totals and saw that sales for the day hadn’t reached the level he expected. Instead, he took action in real time just as soon as he sensed the changed rhythm. And that’s the point. Over time, the grocer is developing his ability to actually feel the rhythm of his grocery store to grow a profitable business.

Again, while the grocer example is simple, every business must identify and track its specific predictive metrics to allow it to assess whether its business model is achieving the results desired and, if not, to iterate its business model. In our simple example above, the frequency of the cash register ringing is the metric that tracks how well the customer acquisition process is working. Obviously, if the register doesn’t ring frequently enough, the grocer is not attracting customers and thus some of the assumptions he’s made about how to attract customers aren’t valid and need adjustment.

The rhythm of business is not something mystical and magical. It is not a theory or catchy metaphor thrown out to sound good. Rhythm is real and you need to feel it if you want to be successful.

So the next time you hear a cell phone beep or buzz, think about that cash register ringing.

Friday
May262000

A Business Pattern for the Networked Economy 

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Sir Francis Bacon was right… Knowledge is Power! Consequently, one of the most profound implications of the rapid shift to the networked economy is the unparalleled access to knowledge everyone now has. As a result, customers really do have the power to expect to get exactly what they need and want—where, how, when and at the price they want to pay.

In other words, customers are now able to say to companies that they will do business if and only if it is “under my terms.”

This has changed everything.

But while empowering the customer was always expected to be a major benefit of the networked economy, businesses generally have yet to understand how to integrate a knowledgeable and thus powerful customer into their business model.

First, businesses need to understand the critical role the customer now plays and encourage their collaboration not only in defining the channels of communication, product testing and problem solving, but also in the personalization of product and solution development. The networked economy is defined by the choices I (the individual customer) want you (the business) to make available to me, rather than what you chose to make available to me.

Secondly, and even more importantly, every business must recognize that technology allows customers to be joined in self-identifying virtual communities. In certain instances they come together on their own. At other times, they can be choreographed. In fact, you might already be a member of several dynamic customer communities based on your interest in such things as adventure travel or baseball, baroque music or human resource management. Even prison wardens can form a community of like-minded needs and wants.

And all of the businesses that want to be members of a community and participate in its economic activity must organize themselves to satisfy the needs and wants of the specific group of customers that form the core of the community. This organized cluster of companies results in what we call a collaborative community. Simply put, any business that is involved in the making and/or delivery of the products and services to the customer is not just part of a linear value chain, but can be part of a dynamic, interconnected, collaborative community, where each member benefits by focusing on profitably satisfying the needs and wants of the customer group that defines the community.

In order for a collaborative community to work, it needs to be able to satisfy the needs and wants of each customer on a personalized basis. And that requires one of the members in the community to function as the choreographer in the dance with the customers. Since the knowledge of the members and the customers is scattered about the community, someone must bring it all together. While any company can be part of the community, only the member with the ability to understand the customer is able to effectively assume the role of choreographer.

Simply stated, the choreographer is the keeper of the collective knowledge of the customer and helps translate that knowledge into the understanding each member of the community requires in building their own profitable company.

Better information flowing to everyone in the community results in satisfied customers and profitable companies. In essence, the collaborative community affords each member transparent access, all the way from product design to product delivery.

So despite all the earlier attempts to cut members out of the value chain, a critical assumption is that the composition of the community should and will change only when it leads to an increased ability of the community to profitably satisfy its customers.

Enough assumptions! The plain fact is that the companies that will be successful in the networked economy will value their business from the point of view of the end customer and will use that perspective to see the patterns in the knowledge their community generates.

Friday
Aug071998

Sitting in the Customer's Chair

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Is your attention focused on pleasing yourself or your customers? For too many entrepreneurs, surprisingly, the answer is they’re bent on pleasing themselves.

To help you understand what we mean, let’s take a look at James, an entrepreneur friend of ours. He was getting ready to open his new business – an 11,000 square foot beauty salon and day spa. In his salon, he had set aside an area for 19 manicure and six pedicure stations. Obviously, he was thinking big. Setting up the area was really pretty easy. All he had to do was decide where to place the worktables and the chairs for the manicurists and the customers.

James had invited us along to take a look at his place and we watched with interest as he picked up a manicurist’s chair, placed it where he wanted it, then sat in the chair and looked around. After a few seconds, he got up, moved the chair slightly and again sat in it. Satisfied, he then carried over the worktable and the customer’s chair. After the first station was in place he went over and picked up the second manicurist’s chair and went through the same routine. After he had done this about five times, we stopped him and asked why he was careful to sit in every manicurist’s chair. He responded by saying he sat in the manicurists’ chairs so he could evaluate whether they would have an enjoyable view. Since the manicurists’ would be sitting in the chair for 8 to 10 hours a day, he wanted to make work environment as pleasant as possible for them.

Clearly, by sitting in each manicurist’s chair he was really getting into the details of his business, but was he sitting in the right chair? In addition to sitting in the manicurists’ chair, shouldn’t he also have sat in the customer’s chair? James didn’t think so. When we asked how he decided which chair to sit in, he reminded us that he had been a hair stylist for years and that gave him an understanding of what a long work day it was for a manicurist. “Her customers were only going to be in the chair for a few minutes,” he said.

One good honest way to look at your business is explained in a rule we learned from a business associate we’ll call John. John has what he calls the Four Foot, Four Inch Rule. John had made an investment in a new bicycle retail store. When John was considering the investment he read the business plan, met with the entrepreneur, and looked at all of the standard things outside investors look at. He felt that the entrepreneur had done a great job of figuring out a really exciting business concept – the store would have an inside circular track for customers to actually test bikes on – and the entrepreneur was so enthusiastic and knowledgeable about bikes, John felt the business was sure to be a success.

Well, shortly after John made his investment and the store opened for business, his daughter needed to get a new bicycle seat and carrying rack. Naturally, John took his daughter to the store he had invested in. The salesperson that waited on them didn’t know John and didn’t know that he had invested in the business. And, unfortunately, not only was the level and quality of the service disappointing, the store didn’t have the seat or the rack they were looking for. They left very unhappy and John very nervous about his investment.

But John didn’t leave completely empty handed. He had his Four Foot, Four Inch Rule which means you must always look at a business from two viewpoints. First, you look at it from four feet. That is the view entrepreneurs and investors most often take – looking at the concept, the numbers and the management team. While it is obviously an important view, it is nonetheless focused on the big picture – on the customers, on how the business is going to satisfy those customers, and on who is going to run the business. But as important as that view is, you must also look at the business from four inches. From the level of the details. You need to look at the business from the customers’ perspective. Up close and personal. You need to put yourself in the place of the customer to see what your business problems are and if your business is in fact satisfying your customers. And unless you take that up close view, the perspective from four feet might lead you to the wrong conclusion.

As it turned out, the store and its personnel were adept at catering to bicycle enthusiasts but lacked the interest and the skills to serve the general biking public. In a few short years, the business failed (as did our friend’s beauty salon).

These two stories bring home an important point. A business must always be looked at from many perspectives. Is this the kind of business you want to be in? You have to love it in order to succeed in it. Second, you have to look at your business from a business perspective. Is this a business that you and potential investors are willing to risk money in? Is the business going to make a profit? Third, you have to look at your business from the perspective of your employees. Good employees help make a good business and there’s nothing wrong with wanting to make an employee’s day more enjoyable. But for every business, the most important perspective is looking at the business from the customer’s point of view. Yes, every business begins by imagining yourself as the customer but you are only one person. You can’t run a successful business by only pleasing yourself. You have to look at your business from the perspective of your paying customers – customers who may have very different likes and dislikes than you! Business is a dance, a rhythm, and your customers always lead.

So, which chair would you sit in?