Upsizing Your Organization

Basic Business Cents

With all the talk going on today about downsizing, isn’t it time to think about upsizing? In my experience, you either grow or die. If you continue conducting your business as you have always done, the world will pass you by, at an ever-increasing rate.

Dr. Noriaki Kano stated in his October 17, 1994 paper titled, “Attractive Quality Creation”, stated:

“To survive, a company must win against competition in the world market. Needless to say, it must strengthen its cost competitiveness by perfecting its quality improvement efforts, downsizing and differentiating its existing products and services…. It is obvious, however, that the path of continuous downsizing eventually would lead to a company with no employees…. Therefore, to continue to survive and prosper, a company also needs to develop new products and services, create new markets, secure employment, and upsize the organization.”

We have moved from the Industrial Revolution to the Digital Revolution in which we are experiencing dynamic changes in communication and management techniques. It is, without a doubt, the most exciting period in all of the history of mankind. If we can learn how to be the masters of our own destiny through proactive efforts on our part, we can be the benefactors of the change instead of the debris.

A professor emeritus from the University of Minnesota in economics, Dr. Tor Dahl, has said that there are only two things that really matter in business; cost effectiveness and a monopolistic advantage. Cost effectiveness is attained by first identifying and charting work processes and then removing waste and rework from them. Finding the niche that will provide a monopolistic advantage is another challenge.

Some years ago most consumers had very nice manual 35 mm cameras that took great pictures if was everything set right. The problem was that most were not professional photographers and occasionally erred with the settings. The manufacturers were busy refining to the nth degree the perfection of these cameras. Konica Camera could not grow by competing with the major manufacturers and decided on a radical move. They took their engineers out of their labs and sent them to photo development shops where film was being processed and asked them to collect data on problems with photos the consumers were experiencing. This data showed some high reoccurrences of out-of-focus, underdevelopment, and a surprising find, blank film. Many people were loading their film incorrectly and were surprised when they found nothing on their film. All those wonderful photo opportunities were missed!

Armed with this data, the engineers went back to their labs and designed the automatic camera. Perhaps the photos were not quite as sharp as they were with the old cameras but at least the consumers could rely on getting pictures. Konica did not find a long-lasting monopolistic advantage as the other manufacturers quickly followed suit, but they did create a whole new market that could be shared. They did this by using a process to collect data on the unmet needs and even the unarticulated needs of the customers. As stated earlier, the world does not stand still and now the digital camera has created another revolution.

It is obvious that we will need to continue our efforts to increase cost effectiveness forever, but equal efforts need to be made continually to increase volume for our business by developing an advantage, which will result in upsizing. We are, in effect, downsizing our existing business as products/services become mature or stale with the cost effectiveness techniques. At the same time we are upsizing our new business to give us the needed monopolistic edge and thus constantly reinventing our business.

The Only Question You Need to Ask to Grow Your Business

Basic Business Cents

Most customer satisfaction surveys aren’t very useful. They tend to be long and complicated, yielding low response rates and ambiguous answers. In short, it is difficult to take definite action to improve the performance of your operation using the typical approach to this tool.

In our recent columns, we talked about satisfying customers is not enough; satisfied customers will switch when something better comes along. We need to move beyond satisfaction to delighting customers and creating loyalty. We also talked about how to identify those “delighter” features that move us into leadership positions. Now the question is, how do we test to know that we have succeeded?

Harvard Business Review published an article about this subject by Frederick Reichheld in 2003 titled, “The One Number You Need to Grow” and Business Week published a follow-up article by Jena McGregor in 2006 titled “Would You Recommend Us?” They said to keep the survey simple so people do not mind responding and focus on what is really important.

We said what is important is to develop loyal customers who brag about us and recommend us to their friends. So the only question that really matters is, “On a scale of 0-10, how likely is it that you would recommend this product/service to your friends or colleagues?” The scale range is from 0 (not at all likely) to 5 (neutral) to 10 (extremely likely). That cuts to the core of what is important in a hurry.

Then ask a couple of open-ended questions to get guidance for improvement--”Would you please expand on the reasons that prompted you to provide this score?” and “Please list suggestions to make this a better experience.” I have found that since you are only asking one survey question that does not take up much of the customer’s time, he is more willing to offer constructive comments to help you.

Scoring yourself with this system gets interesting. The 9 and 10 responders are considered loyal or delighted customers. The 7 and 8 responders are considered neutral or satisfied. The 6 and below are considered dissatisfied customers and are really giving you negative feedback. The percent of the total giving you a 6 or below is subtracted from the percent giving you a 9 or 10, which provides a score that can be used to compare and track progress. It is possible to get a negative score and very difficult to get a high positive score, but this simple survey really puts focus on what is important. Most of us would agree, the best way to attract new customers is referrals from existing customers. If we absorb the comments from the open-ended questions and act on them, our scores should continue to improve and our business will improve right along with it.