Competitive advantage is something that is determined by customers.
Can you measure it in a way that you can integrate with the
data contained in E.R.P., C.R.M. and other systems in order to generate high value information?
How does one go about measuring competitiveness?
In the last issue I outlined some key considerations in terms of the essence of competitiveness being determined by soft (gut) issues and suggested that these issues could be measured.
This was suggested in the context of the previous edition in which it was noted that the World Competitiveness Report had highlighted market focussed strategy, utilization of the human resource and effective management decision making as critical issues and it was mentioned that all three of these areas could be enhanced by effective use of information technology.
In this issue I take these items further and give an example based on an actual case of how one might measure performance in a way that can be captured into your computer based information systems.
Measuring Competitive Performance -- An Example Derived From Practice
It is one thing to recognize that "gut" response drives the buying behaviour of customers. It is another thing to measure this in a way that can be used to generate computer based management information.
The following approach is based on an actual example but is presented in such a way as to preserve confidentiallity.
To Get The RIGHT Answer, Ask The RIGHT Question
The previous discussion on soft issues will frequently result in intuitive agreement with the concept of measurement followed by a statement to the effect that the soft issues cannot be measured in a convenient way that makes it suitable for bulk technology based analysis and interpretation.
However, I would like to suggest that it IS possible to do this.
The first step to being able to analyse gut information is fundamentally associated with asking the right question. That is asking the question that will evoke the gut response.
The acid test of the right question may, in turn, be associated with a response like "we don't want our customers asking those questions". Which is an executive response I once encountered in response to the questions generated in the process outlined below.
Following are the steps that should be followed in order to put the measurements I have referred to previously in place. Variations of these measures can be used depending on the application (customer satisfaction, personnel satisfaction, etcetera):
Start by researching the gut buying drivers.
Formulate the critical question, such as "What is the real reason you buy our products?" (obtain expert market research assistance in formulating the question)
The buying drivers could be determined using questionaire based research but this approach is likely to get head knowledge rather than gut or heart knowledge.
I prefer to get a small but representative group of people in a room (five to fifteen in a session is optimal) and take them through the process outlined in the January newsletter:
-- seed the process with an appropriate presentation
-- brainstorm, summarize, synthesize and rate the critical issues in a workshop setting -- develop not more than seven points
-- evaluate further questions in order to better understand the overall context
-- run further workshops with other delegate groups until you achieve a representative result which converges on a consistent set of criteria
Keep in mind that the objective is to find the gut factors that drive the real buying response.
Some of the criteria may change for different departments within your organization but, if you really focus on the critical issues, many of the questions are likely to be the same.
2. Formulate The RIGHT Questionaire Questions (Semantics)
Convert the output of the research into critical questions to ask your customers.
The objective is to have no more than seven questions.
The wording of the questions is absolutely crucial.
People answer the question they understand you to ask them NOT the question you thought you asked them or that you wanted to ask them.
Engage the services of an expert in market research questionaire formulation who understands the nuances of words.
The semantics of the questionaire are absolutely vital!
When you get to the really fundamental questions really effectively worded the response of organization executives might well be "we don't want our customers asking these questions!"
If the work has been done right, the reality should be that these are the questions that your customers are subconciously asking themselves and the answers that they are getting are determining whether they buy from you / approve of you (non profit organizations), whether they will buy again or whether they walk away.
The questions may take time to find and more time to frame effectively but there ARE fundamental issues that have driven the strategic success of every organization. Knowing your organizations true strategic drivers may be a necessary prerequisite to finding the right customer or other critical success factor questions.
3. Design A Response Acquisition Method
How you acquire answers to your questions is vital to a successful outcome.
Placing keypads at service points where your staff can see what is entered is likely to result in a skewed response.
Rather use keypads in private locations or, more effectively, use attractively designed postcards with attractively designed post boxes within your facililities.
Also offer fax back and post back options.
Whatever technology you use to acquire the information it must be discreet and easy to use.
Coupling replies to some form of competition may be an option to consider but it may also skew the results towards a particular constituency within your customer group.
If the questions are intuitively valid and effectively worded you will obtain a statistically representative sample of replies.
My recommendation is post cards designed by a graphic designer in conjunction with promotional posters and other material designed to inform customers about the questionaire and how to reply to it.
Have a reply paid address and toll free fax number on the back of the post card.
The objective should be to continue with the SAME questions on an ongoing basis -- make the subconscious criteria conscious BUT make sure that you deliver a concrete and tangible response to the answers you get.
Cards can be issued to every customer or every n th customer (5th, 10th, etcetera) at the point of sale, included in delivery documentation, included with invoices or statements in the post, etcetera. The objective is to get a limited number of cards to a random sample of your customer base every month on an ongoing basis.
Remember that statistically you are only looking for a response rate of a few percent of cards issued in any interval, just sufficient to monitor the "pulse" of your customer base.
It may be worth validating the initial responses by a formal market research program based on the same questions.
4. Add A Unique Identifier When Practical
Depending on circumstances I recommend that you add a unique identifier to every card, this could take the form of a bar coded sequence number or some other reference number.
If practical modify your E.R.P. point of sale and other software so that the reference number is scanned or recorded before the card is given to the customer or posted to the customer. This will permit you to associate the card with the transaction and therefore with the person, department and location, etcetera providing the service / supplying the product, etcetera.
This will also allow you to link the results to the time of day, day of week and other information relating to the specific customer interaction.
Giving a card a discreet serial number, logged on your systems at time of card issue and linked to the sequence number in your data warehouse or other information repository opens up a diverse range of ways of looking at your transaction data that is otherwise not available.
If it is not practical to add a sequence number and log it then produce cards without this feature, you will still obtain great value. However, it is probably easier than it seems to add and log a sequence number. Give me a call if you would like to discuss it.
If you do put a code on the card, place it on the same side as the questions.
If you use terminals to capture replies it may not be possible to link the reply to the customer and transaction discreetly but capture whatever information is readily available such as location, time, etcetera.
5. Put A Data Capture Method In Place
If you do use cards there is questionaire interpretation technology that will process a scanned image of the card and read the results into a database with limited human intervention.
Cards that are dropped in a box at the point of customer contact or posted in can be fed through a scanner.
Cards that are faxed in to a fax server can be routed to the same interpretation software.
Alternatively, a simple software form can be created and an administrative person can capture the results manually.
6. Implement And Operate
Implementation of this solution should take place in the context of the seven critical factors for I.T. investment success listed in my book "The Critical Factors For Information Technology Investment Success" which can be purchased by emailing us at the above address. Referwww.jar-a.com for further information on the book.
Executive custody of this project is vital to a successful outcome.
7. Analyse, Interpret, Act And Monitor
As the data is acquired feed it into a database and, if a unique sequence number has been allocated, link the questionaire results to the associated data.
In the initial stages the data can be examined using a spreadsheet but, over time, as volumes increase there may be merit in investing in statistical software.
My recommendation is to run the questionaire process as a continuous low key process on a long term basis. If you do this you will eventually be able to undertake time series analysis on the data which will almost certainly open up some new views of the data and your organization.
Conclusion -- Measuring Competitive Performance
The above method can be implemented quite easily and relatively inexpensively as a means of measuring competitive performance.
In conjunction with this you could employ market researchers to undertake research to evaluate how your competitors stack up in reply to the same questions.
Provided you have determined the correct "gut" factors for your customers, comparing the results for your own organization with those of your competitors will give you a numeric measure of competitive advantage. To be really competitively strong you need to be about ten percent stronger than your competitors.
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Dr James A Robertson -- has been involved in the effective application of Business Information Systems, including but NOT limited to ERP, since 1987 and in the profitable and effective use of computers in Business since 1981.
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