Determing the Cost of Solving a Problem

About 6 months ago, I purchased a new BlackBerry phone. As I used it, I noticed there was an inordinate number of double-typing – in typing “how are you?” it would spell out, “hhhhooww arrre youuu?”

I just assumed it was my poor typing.

Finally I decided to do a quick Google search to see if anyone else had reported the same issue. It turns out that there is a problem with that model phone manufactured during a certain time period that was causing the issue. I then called my carrier, and sure enough, they will exchange the phone (for a slight fee as it is out of warranty).

What lesson we can draw from this situation?

You sell a product that turns out to have a problem. Do you try and contact all the purchasers and tell them to return the product for another? Or do you wait until those who report it contact you, before exchanging it? Most small businesses won’t have an issue the scale of a cell phone manufacturer, but there will be cases where you need to determine the right strategy.

Here is a set of criteria for making this decision:

• Contact: Can you contact the customer?
• Scope: How widespread is the issue?
• Danger: Does using the defective product harm the consumer?
• Cost: What is the cost of the solution (or continuing use without solving)?
• Reputation: Will not acting harm your reputation?  What is your reputation with consumers?

Let’s apply the criteria to some cases.

A restaurant serves something that can make the customer sick.

• Contact: will you be able to contact the customers who may have eaten the bad food? Not easily.
• Scope: do you know how many meals were served? Yes, of the x number of meals served, you should have a pretty good sense of how many included the bad food.
• Danger: how dangerous is the food? If it is just rotten, then of those who eat it, some may get sick, some may not. If it is extremely dangerous – then you have a greater cause to act on.
• Cost: usually if someone is sick the restaurant will pay doctor visit, or at the least a free meal.
• Reputation: if some people get sick, will it affect your restaurant?

Often, a restaurant will just wait and see who comes in a day or two later – most food pathogens take 24 hours to germinate, and if the customer complains they were sick, do something to recompense them.  But if you were a small local restaurant with a very supportive and regular clientele, you may decide to call those people you remember ate the bad food and let them know.

Apple’s iPhone has an antenna issue. You may remember back when their latest phone seemed to have a problem where holding the phone in a certain way meant calls were dropped or not completed.

• Contact: Could reach all the users, since they are phones.
• Scope:  All new versions of the phone had this issue.
• Danger: No danger to any of the users
• Cost: If they’d had to replace all the phones – high, especially in roll out with new phone.
• Reputation: People generally have a high opinion of Apple. If Steve Jobs felt it not a big issue, then the users might give him the benefit.

In this case Apple gave away free cases for a while, management came out strongly on the issue, and generally the issue petered out.

So in my cell phone example -

• Contact: Can you contact the customer? While in some cases it may be difficult to contact the customer, in the case of mobile phones it is quite easy.
• Scope: How many phones are we talking about? If it is 10,000, that is very different than 500 in terms of cost to replace.
• Danger: Does using the defective product harm the consumer? Will the user be harmed by using the product? In the case of my phone, it was annoying, but not dangerous.
• Cost: Unknown, but I would imagine the cost would be pretty easy to calculate (# phones x cost of replacement body + shipping).
• Reputation: Will not acting harm your reputation?  What is your reputation with consumers? I think we can all agree that cell phones are rather balky devices and we have low expectations regarding their operation.

From the above, the cell phone manufacturer determined they would let the customer call, and when they do, then replace the phone.  

I happen to believe this was a mistake, mostly on the grounds of reputation. BlackBerry owners generally are business users, not consumers. As such, they are already disposed to the strengths of the BlackBerry – reliable, email, voice mail. Since typing on the physical keyboard is why I use a BlackBerry, a typing input problem is a real issue.  Also, I bet that they could know which business users are most important – those that use the Enterprise server edition. Why not replace those phones? Since my company allows Apple iPhones to be used for business email, I stick with the BlackBerry for its keyboard.

What would you do?

Recommending your Customers

My wife and I were shopping at Barnes & Noble bookstore this weekend and when we got home, I noticed in addition to our receipt and books, our bag contained a short slip printed after the receipt that gave us 4 recommendations for other books, based on our purchase.

I am not sure how long they have been doing this, but it is a great means to engage your customers further. The recommended books were not extraordinary (they were on the same level as the recommendations you receive from Amazon), but as their algorithms become better, this will be very helpful. Moreover - why not allow you to scan the book you are interested in the store, and have it give you a list of available books (rather than waiting until you've completed browsing and are checking out.)

The reason I go to a bookstore is to buy books that are in stock (I can always order online if not) - so give me those choices!

The same process could be used by smaller retailers as their POS systems become more sophisticated. If I purchase the same products regularly, why not offer me the option to purchase additional items that are liked by people like me.

The unobtrusiveness of the paper in the bag is also nice since I can choose to review the titles or not (without being "sold" on the books).

When the Audience responds

At the beginning of each Entrepreneur Breakfast, I ask any new attendees to stand up and give their name, company and what it does. This morning because our speaker had to leave early, I skipped that part of our introductions. As the breakfast came to a conclusion, I still had not asked new attendees to introduce themselves.

One of our regulars asked, "aren't we going to have new attendees introduce themselves?"

Great question, and something I should have done. I was more heartened that he asked it. When your customers understand what you are doing so well - that they respond this is how it should be done - you've done a good job in creating a community.

Consider when someone takes their friend to a favorite restaurant. The regular will carefully explain how the restaurant does what it does well, tasty dishes, service. The regular brings the new person into the community of that restaurant. As the restaurant owner, you cannot buy better marketing than this.

When the audience responds, you know you are reaching them!

Same thing,...only different!

In his book, "Save the Cat", Blake Snyder describes how to write a good movie screenplay.

One of his pieces of advice has to do with the theme of the movie (what the movie is about). He says it's helpful if the movie is the 'same thing,...only different.' The idea is if someone is considering what movie to go watch, he needs to be able to fit it into his mental map of the type of movie it is, before he'll go see it.

When working on your business idea - you can use the same type of advice. What is your business like, and yet, different from other businesses?

One of our clients at the Center for Business Development, The Physician's Agency is a great example of this rule. They provide an agent relationship for new and current doctors. Their business model is like an agent for a football player or other sports star. It is different from that business by concentrating on doctors, not athletes.

When explaining their business model, people quickly catch on to what they are doing - and if it is relevant to them. It also makes it easy to say 'what do they do?'.

How about your business: is it the 'same thing,...only different'?

Pawn Stars Secret to Business Success

I must admit it is (a little) heartening when I read a news article whose point of view substantiates the advice we provide business owners.

An article on CNN about Rick Harrison of the tv show "Pawn Stars" describes his secrets of success. The article lists five secrets -

1. Set yourself apart
2. Know how to negotiate
3. Offer something no one else does
4. Treat every customer well
5. Embrace social media

and gives examples of each (his example of social media is to have the fans design their t-shirts, which not only created traffic, but also saved him money!)

Still visiting the Center for Business Development is much easier than going to see Rick - no bouncer at the door, no throngs of other customers and no funny nicknames for the staff!

Quality v. Location

I have noticed recently that the quality of small business marketing material has increased dramatically. Whether through the printing and layout of menu's online, to business cards, to simple logo design - the overall quality is quite good, especially given the costs associated.

What remains poor, generally, is the location - where the marketing is targeted.

I have had more than one business owner tell me he is on Facebook, has his own Twitter feed, great logo and design, etc - but no clients!

Part of this is due to the quality being something you can purchase/obtain without much difficulty. There are hundreds of qualified web designers who could make you a website - just figure out what you want to spend!

But knowing where to locate that marketing can't be easily purchased. It falls back to simple leg-work and doing the market research to know who is the client, where is he located, what does he want to buy/learn/enjoy - and how are you going to reach him.

The good news though is that this research can be done without a large amount of money, just time and effort. Since most small business owners have an overabundance of effort, this means they have the capability to actively understand their market.

The bad news is that the ease of purchasing quality of marketing material gives the pretense of understanding the market.

Where are you spending your time?

Crossing the Rubicon: No Excuses

An interesting article regarding Steve Jobs and his management style notes that Steve uses a parable to describe the difference between a VP and underlings:

Jobs imagines his garbage regularly not being emptied in his office, and when he asks the janitor why, he gets an excuse: The locks have been changed, and the janitor doesn’t have a key. This is an acceptable excuse coming from someone who empties trash bins for a living. The janitor gets to explain why something went wrong. Senior people do not. “When you’re the janitor,” Jobs has repeatedly told incoming VPs, “reasons matter.” He continues: “Somewhere between the janitor and the CEO, reasons stop mattering.” That “Rubicon,” he has said, “is crossed when you become a VP.

(Excerpt quoted from a MacStories report, accessed on May 11, 2011.)

Great story, great quote.

I'd like to turn this on its head a bit - and ask, "as an owner (manager/boss), are you giving your employees the circumstances, the opportunity, to make it so?"

Here is another story from Apple about Tim Cook.

Tim cook arrived at Apple in 1998 from Compaq Computer. He was a 16-year computer-industry veteran - he'd worked for IBM (IBM, Fortune 500) for 12 of those years - with a mandate to clean up the atrocious state of Apple's manufacturing, distribution, and supply apparatus. One day back then, he convened a meeting with his team, and the discussion turned to a particular problem in Asia.

"This is really bad," Cook told the group. "Someone should be in China driving this." Thirty minutes into that meeting Cook looked at Sabih Khan, a key operations executive, and abruptly asked, without a trace of emotion, "Why are you still here?"

Khan, who remains one of Cook's top lieutenants to this day, immediately stood up, drove to San Francisco International Airport, and, without a change of clothes, booked a flight to China with no return date, according to people familiar with the episode.

Now if Khan had to fill out 15 forms before he could leave, get preapproval from HR for being out of the office, use the 'corporate' carrier, and could not get any money to work from - how would he have been able to 'do whatever it takes' to make it so? For "no excuses" to mean something, the VP has to have some capability to make things happen.

You have to trust your employee (VP level or not) to get things done (and get out of the way). If you want them to 'cross the Rubicon' then just like Caesar they have to have their own legion (their own power) to do just that. And organizations are petrified of releasing that level of control.

Apple's advantage might be that they do a better job of clearing away those things that keep their VPs from being able to go out and act (without excuses). What about your company?