Will You Add? - Business

Information As A Competitive Advantage - Part 3, Creation Of Customer Value Through Retention
Information for Customer retention The Customer expectations vis-?-vis service procurement can be captured by asking his/her preferences (e.g. a Customer may wish to have a product demonstration). Satisfying the Customer expectation, based on the information given, contributes to a positive Customer experience. Customer requests, preferences or comments on the service procured, represent valuable information and an opportunity to improve, for the Business. Complaints should also be considered by the Business, as an opportunity to improve. A Customer whose comment or complaint has been resolved satisfactorily, becomes a loyal Customer. All this information should be systematically gathered from all interaction channels, a challenging task which requires implementation of an integrated information system, deployed to all customer facing channels.Monitoring service quality indicators, is important in order to assure satisfactory levels. Information on the service quality levels, as perceived by the Customers, is very important, since it completes the internal information. The combination of internal information with information gathered by the Customer creates a complete view of the service quality levels. Information for customer loya

an Express, we have actively worked on changing organizational behavior and have made significant inroads over time, but it has not happened overnight. We have conducted cross unit investment reviews, sponsored an internal corporate portfolio management conference and even created a resource allocation simulation to visibly demonstrate the benefit of corporate portfolio management.

Bringing Corporate Portfolio Management to Your Organization If you think corporate portfolio management can be implemented in one month or one quarter, it is not for you. Corporate portfolio management is not a sprint and requires the will and heart of a marathoner. You will see benefits along the way, but it takes time to realize the full potential of a well developed corporate portfolio. But once defined and running, an actively managed corporate portfolio management discipline will pay immeasurable dividends. For American Express, we can point to stock price out-performance over our benchmark indices as well as our competition since adopting corporate portfolio management. Our resource allocation effectiveness also helps to drive our PE multiple (price to earnings multiple), which is significantly larger than our competitive peers.

Very tactically, the corporate portfolio management discipline has helped us understand what businesses we should exit and where we might want to invest more. It has enabled us to reallocate money across business segments for the first time which can be very challenging in large organizations. Most importantly, corporate portfolio management has become part of the DNA of the organization with finance and the business talking about their investments on an ongoing basis. Finance leads the corporate portfolio management effort but with significant and very direct input and interaction with the business. The chasm between finance and the business has been bridged by utilizing corporate portfol

Client Attraction Technique #3: Study the Competition!
One very powerful and cost-effective marketing strategy is to study the competition. This is an important exercise, as essentially it allows you to find out as much as possible about the opposition – how best they operate, what they lack and then how to capitalise on it!Study the Competition OfflineStart by reviewing the Yellow Pages, the Thomson Local or even go online to determine what you’re up against locally (and if applicable nationally). Make a list of the businesses you need to research, then systematically list the advantages and disadvantages associated with each company. Try to be as objective as possible.Some questions you might need to ask about the opposition include:* Where do they advertise?* Who buys from them?* What form of marketing seems to work best (or not) for them?* Do they produce a newsletter you could join?* What’s their background?* Do they try to appeal to all sections of your particular business sector, or do they have a niche market?Study Your Competition OnlineIf a competitor is consistently higher in search engine rankings than you are, work out how they got there. For example use www.linkpopularity.com to see which sites link to their website, as well as yo

Much has been written about how finance organizations can become strategic partners with the businesses they support. While purported experts point to a variety of frameworks, scorecards and key performance indicators, etc. as the keys to bridging the gap between finance and business, these trite 'solutions' have done little to make finance the strategic business partner it seeks to be. Worse yet, pursuing these ideas has put finance organizations on a treadmill where they expend energy and resources (e.g., money and time) ultimately to get nowhere while the issue persists. So if you are still looking for a silver bullet or quick fix to this seemingly incurable problem, stop reading now.

Given the time, money and effort spent, you may be a bit demoralized and even speculating that the finance-business chasm cannot be crossed. Paradoxically, the link between finance and the business has been under finance's proverbial nose for some time - resource allocation. A serious concerted effort to optimize an organization's resource allocation ultimately enables finance to develop the bridge between finance and strategy. This discipline known as corporate portfolio management works to actively manage the company's resource allocation as a portfolio of discretionary investments. All companies allocate their resources - very few optimize their resource allocation. Finance is uniquely positioned to enable this because they sit at the nexus of information and data required to undertake a corporate portfolio management effort. (Note: Corporate portfolio management is often referred to by different terms so as a point of reference, terms such as IT portfolio management, enterprise portfolio management, product portfolio management, project portfolio management, resource allocation and investment optimization are similar. In fact, these all are slices or subsets of corporate portfolio management.)

From Resource Allocation to Strategy

First, it is worth understanding the tie between resource allocation and strategy - they are the same. Where you allocate your resources is your strategy. PowerPoint presentations, speeches by senior leadership, strategy bullets nicely framed on a wall, etc. are all interesting and potentially useful, but they are not your organization's strategy. For instance, if your stated corporate strategy is to have the most engaged and loyal customers (this sounds good, right?), but you allocate all your investment dollars to acquiring new customers, your strategy is actually around customer acquisition. This is a very simple example but clearly demonstrates the dichotomy that can and often exists between a stated and real strategy.

A great article entitled "How Managers' Everyday Decisions Create - or Destroy - Your Company's Strategy" that recently appeared in the Harvard Business Review (February 2007) nicely articulated the connection between resource allocation and strategy and also pointed to the need for a corporate portfolio management discipline. "How business really gets done has little connection to the strategy developed at corporate headquarters. Rather, strategy is crafted, step by step, as managers at all levels of a company - be it a small firm or a large multinational - commit resources to policies, programs, people and facilities. Because this is true, senior management might consider focusing less attention on thinking through the company's formal strategy and more attention on the processes by which the company allocates resources."

The upshot of this is that if finance can enable the process to enable better resource allocation (which is strategy), they will have succeeded in becoming a de facto strategic partner to the business.

The Two Levers of Corporate Portfolio Management

So now the question turns to how to build a corporate portfolio management discipline and ensure its success. A successful corporate portfolio management effort is predicated on two dimensions.

1. Modern Portfolio Theory (aka the process) - This is what people generally think of when they think of corporate portfolio management. It is comprised of:

* Investment valuation - This includes defining what an investment is. It is worthwhile to take an expansive definition of what comprises an investment because this is not just capital expenditures (capex), but also should include operating expenses (opex). In general, 25-40% of an organization's expenses are discretionary and hence are investments. Investment valuation also requires consistency of valuation methodology which necessitates using driver-based models to create projections and also looking at past NPVs and ROIs to consider strategy and other qualitative aspects that drive investment 'value'.

* Portfolio allocation - This requires determining investment areas/themes and the associated allocations. Basically, what are my strategic priorities for investment and how much will go to each area? For example, 25% in customer acquisition, 20% in IT, 55% in customer retention. The allocation should also consider the risk profile of investments, e.g., 60% in low risk, 30% in medium risk and 10% in high risk.

* Portfolio optimization - This requires selecting the best investments to support the portfolio allocation and periodically rebalancing the portfolio to ensure consistency with desired portfolio allocations. The aim is to maximize strategic and financial return per unit of risk.

* Performance measurement - A key element of successful corporate portfolio management is capturing actual investment results to enable promise vs. performance. Doing this ultimately lets an organization improve ongoing investment valuation based on actual results and allows it to rebalance the portfolio based on performance achieved.

Most people with a finance background will recognize the above tenets of portfolio theory. The problem with most of the discussion of corporate portfolio management is that it assumes that people behave according to a theoretical/rational construct. While various experts like to offer platitudes saying things like, "Just manage your company's investments like you manage your own investments," they fail to realize that many individuals may not even manage their own personal portfolios as they should. They may know what they should do but emotions, intuition, and other external influences take them off this rational path. What often leads us astray in our personal portfolio is what leads us astray in an organizational setting - behavior. The challenge in an organization is magnified by the fact that it is hundreds or thousands of people whose behavior that needs to be considered. And so this is the second fundamental lever of corporate portfolio management - organizational behavior.

2. Organizational Behavior - In order to optimize one's corporate portfolio, the behavioral elements must be understood with:

o A data-driven mindset - Organizations often make decibel- or intuition-led decisions and corporate portfolio management, like 6-Sigma, requires data and analytical decision making.

o Silos removed - Corporate portfolio management success requires people thinking about what is best for the organization and not just what is best for "my world" - silos and organizational dynasties need to be broken down.

o Incentive alignment - People should be motivated by similar short- and long-term incentives.

o Accountability & transparency - There should be a willingness to share information and effectively create a marketplace for investments.

Moving organizational behavior is the larger challenge and this takes time to change. At American Express, we have actively worked on changing organizational behavior and have made significant inroads over time, but it has not happened overnight. We have conducted cross unit investment reviews, sponsored an internal corporate portfolio management conference and even created a resource allocation simulation to visibly demonstrate the benefit of corporate portfolio management.

Benefits of the LLC – Limited Liability Company
An LLC or limited liability company is a form of business registration that allows the owners of a business to protect themselves from some of the liabilities of being in business and at the same time receive some of the tax benefits of other more elaborate business registrations like an incorporation or partnership. In order to register a business as an LLC or limited liability company the business has to prepare articles of organization and file them with the state in which they wish to register their business.There are some fees applicable to registering a business as an LLC similar to registering a corporation. An added benefit is that you don’t necessarily need a lawyer to register a business as an LLC and this is especially useful for small businesses where both time and cash is at a premium. You can choose to get advice from a lawyer or an accountant about the choice of registering a business as a limited liability company but it is not required by law.As noted above some of the benefits of registering a business as an LLC include tax advantages and limited liability. In addition limited liability companies have much more flexibility when developing a management and ownership structure and the reporting requirements are far less under this form

urce Allocation to Strategy

The Two Levers of Corporate Portfolio Management

So now the question turns to how to build a corporate portfolio management discipline and ensure its success. A successful corporate portfolio management effort is predicated on two dimensions.

1. Modern Portfolio Theory (aka the process) - This is what people generally think of when they think of corporate portfolio management. It is comprised of:

2. Organizational Behavior - In order to optimize one's corporate portfolio, the behavioral elements must be understood with:

o A data-driven mindset - Organizations often make decibel- or intuition-led decisions and corporate portfolio management, like 6-Sigma, requires data and analytical decision making.

o Incentive alignment - People should be motivated by similar short- and long-term incentives.

o Accountability & transparency - There should be a willingness to share information and effectively create a marketplace for investments.

Keep Business Operations and Logistics Simple, Streamlined and Agile
Most of the entrepreneurs we interview in our consulting business have a very unrealistic conception of what excites and disappoints investors. The dream of many inexperienced inventors seeking to fund their opportunity is to build a substantial infrastructure. Their business plan identifies the need for factory space, equipment, staff, and many other fixed costs.Investors want to see a plan that maximizes return on investment. High fixed costs are the enemy of a great profit margin. When business turns down, and it always does at some point, fixed cost assets become liabilities and must be continually fed, even as income declines.Always present decision-makers with the most streamlined operations plan possible. Do not confuse grandiose staffing and equipment wants with actual needs. In today’s business climate, almost every possible service can be rented, leased, farmed out or performed by contract manufacture. A 25,000 square foot factory that is not running at 100% capacity is an under-performing fixed cost asset, especially if a private label manufacturer will provide the service at a competitive price. The cost to rent, power, insure maintain and staff the facility is ongoing and will be a drain on the bottom-line.Investors want to see a le

ld a corporate portfolio management discipline and ensure its success. A successful corporate portfolio management effort is predicated on two dimensions.

1. Modern Portfolio Theory (aka the process) - This is what people generally think of when they think of corporate portfolio management. It is comprised of:

2. Organizational Behavior - In order to optimize one's corporate portfolio, the behavioral elements must be understood with:

o A data-driven mindset - Organizations often make decibel- or intuition-led decisions and corporate portfolio management, like 6-Sigma, requires data and analytical decision making.

o Incentive alignment - People should be motivated by similar short- and long-term incentives.

o Accountability & transparency - There should be a willingness to share information and effectively create a marketplace for investments.

Brand Boring or Brand Buzz?
I heard an advertisement on the radio the other day that surprised me, not because they were saying anything noteworthy, but because it was so banal. It was a national company’s ad. They pay an ad agency to write and produce their commercials. There are so many words at their disposal, so many descriptions, so many emotional statements to attract customers, why would they use the trite phrase, “ knowledgeable, friendly staff to serve you”? Even if they couldn’t think of anything exciting, they could have used, “if you’ve got questions, we’ve got answers”, “we specialize in providing answers”…”specializing in premium products and effective solutions”.”Try and stump the staff with your questions, they love a challenge”. “We don’t have all the answers but we’ll help find solutions”Even if you don’t have anything new to say, you can still say it with style, create a connection to the consumer or create a buzz. Use customers’ experiences and what they have to say to create a unique message. There is a reason that a customer comes to you rather than the competition. You may have to ask a number of questions to get to the real reason. Even if the only reason is that you are closer than the competition..you can make a joke about it. You can brand your business with

e portfolio based on performance achieved.

2. Organizational Behavior - In order to optimize one's corporate portfolio, the behavioral elements must be understood with:

o A data-driven mindset - Organizations often make decibel- or intuition-led decisions and corporate portfolio management, like 6-Sigma, requires data and analytical decision making.

o Incentive alignment - People should be motivated by similar short- and long-term incentives.

o Accountability & transparency - There should be a willingness to share information and effectively create a marketplace for investments.

Brainstorming To Create New Ideas
Brainstorming is one of the oldest of the modern creative thinking techniques. Originally developed in 1941 by Alex F Osborn, it was first called "thinking up". Later Alex Osborn coined the term "Brainstorming". Brainstorming is primarily a technique of using ideas from a group of people to provide ongoing stimulation to that group in order to create more ideas. These ideas are then combined or developed into a practical answer to a challenge that was presented to the group at the beginning of the brainstorming session.One of the key concepts of brainstorming is that no criticism is allowed during the session. In fact, wild and unusual ideas are encouraged, in part because some of these odd sounding ideas become useful ideas and partially because these kinds of ideas can inspire other members of the group to come up with good ideas. Sometimes all a strange idea needs is some polishing. Part of the brainstorming concept is to build on other people's ideas.Often these brainstorming groups are an assembly of people with different backgrounds. These different backgrounds can enable the introduction of perspectives that might not usually be brought to bear in solving a particular problem. This can stimulate new ideas and can also allow the group to

If you are serious about making finance a strategic partner with the business, and if you finally want to make some forward progress after being on the treadmill for so long, corporate portfolio management offers you a solution to this intractable problem. It requires effort and patience, but, as evidenced by American Express, it can close the finance and business gulf and ultimately generate outstanding performance.

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Doesn't it just irritate you when you finally decide to start your own business and you spend hour after hour doing research and getting prepared just to have someone close to you chuckle at you for stepping out on that limb?

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Will You Add? - Can Finance Really Become a Strategic Partner to the Business?

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