As Adam Smith argued in The Wealth of Nations, the price of a product should not exceed the cost of producing it in the long run.
Otherwise, profit opportunities would include rival sellers to enter the market.
And entry would continue until increased supply would drive prices down to cost at a common level across all vendors.
Yet practise seems to contradict this principle as different buyers appear to pay substantially different prices for essentially identical products and services.
Sunday 16 November 2008
Sunday 2 November 2008
How can I increase my ability to understand complex problems?
"SO WHAT?" - is a very simple but powerful framework for extracting the maximum amount of information from a simple fact.
Starting with a fact, ask the question: “So what?'” - i.e. what are the implications of that fact? Keep on asking that question until you have drawn all possible inferences.
An example:
Fact: It rained heavily last night
• So What? - The ground will be wet
• So What? -It will turn into mud quickly
• So What? - If many troops and vehicles pass over the same ground, movement will be
progressively slower and more difficult as the ground gets muddier and more
difficult.
• So What? - Where possible, stick to paved roads. Otherwise expect movement to be much
slower than normal.
Starting with a fact, ask the question: “So what?'” - i.e. what are the implications of that fact? Keep on asking that question until you have drawn all possible inferences.
An example:
Fact: It rained heavily last night
• So What? - The ground will be wet
• So What? -It will turn into mud quickly
• So What? - If many troops and vehicles pass over the same ground, movement will be
progressively slower and more difficult as the ground gets muddier and more
difficult.
• So What? - Where possible, stick to paved roads. Otherwise expect movement to be much
slower than normal.
How can I be more creative in my problem solving?
Here are some tools to increases creativity:
"Reversal Tool" - To use it, ask the opposite of the question you want to ask, and apply the results.
An example:
Goal:Improve the response of our customer service centre.
Reversal: “How would I reduce customer satisfaction in our customer service centre?”
• Not answering the phone when customers call
• Not returning phone calls
• Have people with no product knowledge answering the phone
• Use rude staff
• Give the wrong advice
• ...
Solution: After using Reversal, you would ensure that the appropriate staff members were handling incoming phone calls efficiently and pleasantly. You would set up training programs to
ensure that they were giving accurate and effective advice and so on ..
We can use this Reversal Model to define the KPIs to improvement.
"SCAMPER" - SCAMPER is a checklist that helps you to think of changes you can make to an existing product to create a new one. You can use these changes either as direct suggestions or
as starting points for lateral thinking.
S - Substitute - components, materials, people, features
C - Combine - mix, combine with other assemblies or services, integrate, features
A - Adapt - alter, change function, use part of another element
M - Modify - increase or reduce in scale, change shape, modify attributes (for example, color)
P - Put to another use
E - Eliminate - remove elements, make as simple as possible, reduce to core functionality
R - Reverse - turn inside out or upside down
A - Addition - Add new features
"The 5 P's Reframing Matrix" - A simple technique that helps you to look at business problems from a number of different viewpoints. It relies on the fact that different people with different experience approach problems in different ways. What this technique helps you to do is to put yourself into the minds of different people, to imagine the solutions they would come up with.
• Product perspective: Is there something wrong with the product?
- Is it technically correct?
- Is it attractive?
- Is it well priced?
• Planning perspective: Are our business plans or marketing plans at fault?
- Are we approaching the right markets?
- Are we using the right sales strategy?
• Potential perspective: If we were to seriously increase our targets, how would we achieve these increases?
- How would we raise sales?
• People perspective: Why do different groups of people choose one product over another?
- How do customers see the product?
- Are they convinced that it is reliable?
- Why are they choosing other products?
• Professionals perspective: How would a doctor, engineer, lawyer, teacher ,.. look at this?
"Provocation Objective" - This works by moving your thinking out of the established patterns that you use to solve problems. State an impossible and "stupid" goal. Then determine what steps would need to be taken in order to achieve it.
An Example:
The owner of a video-hire shop is looking at new ideas for business to compete with the
Internet.
Provocation Objective: “Customers should not pay to borrow videos”.
• Consequences: The shop would get no rental revenue and therefore would need
alternative sources of cash. It would be cheaper to borrow the video from the shop
than to download the film or order it from a catalogue.
• Benefits: Many more people would come to borrow videos. More people would pass
through the shop. The shop would spoil the market for other video shops in the area.
• Circumstances: The shop would need other revenue. Perhaps the owner could sell
advertising in the shop, or sell popcorn, sweets, bottles of wine or pizzas to people
borrowing films. This would make her shop a one-stop “Night at home” shop. Perhaps
it would only lend videos to people who had absorbed a 30-second commercial, or
completed a market research questionnaire.
"Reversal Tool" - To use it, ask the opposite of the question you want to ask, and apply the results.
An example:
Goal:Improve the response of our customer service centre.
Reversal: “How would I reduce customer satisfaction in our customer service centre?”
• Not answering the phone when customers call
• Not returning phone calls
• Have people with no product knowledge answering the phone
• Use rude staff
• Give the wrong advice
• ...
Solution: After using Reversal, you would ensure that the appropriate staff members were handling incoming phone calls efficiently and pleasantly. You would set up training programs to
ensure that they were giving accurate and effective advice and so on ..
We can use this Reversal Model to define the KPIs to improvement.
"SCAMPER" - SCAMPER is a checklist that helps you to think of changes you can make to an existing product to create a new one. You can use these changes either as direct suggestions or
as starting points for lateral thinking.
S - Substitute - components, materials, people, features
C - Combine - mix, combine with other assemblies or services, integrate, features
A - Adapt - alter, change function, use part of another element
M - Modify - increase or reduce in scale, change shape, modify attributes (for example, color)
P - Put to another use
E - Eliminate - remove elements, make as simple as possible, reduce to core functionality
R - Reverse - turn inside out or upside down
A - Addition - Add new features
"The 5 P's Reframing Matrix" - A simple technique that helps you to look at business problems from a number of different viewpoints. It relies on the fact that different people with different experience approach problems in different ways. What this technique helps you to do is to put yourself into the minds of different people, to imagine the solutions they would come up with.
• Product perspective: Is there something wrong with the product?
- Is it technically correct?
- Is it attractive?
- Is it well priced?
• Planning perspective: Are our business plans or marketing plans at fault?
- Are we approaching the right markets?
- Are we using the right sales strategy?
• Potential perspective: If we were to seriously increase our targets, how would we achieve these increases?
- How would we raise sales?
• People perspective: Why do different groups of people choose one product over another?
- How do customers see the product?
- Are they convinced that it is reliable?
- Why are they choosing other products?
• Professionals perspective: How would a doctor, engineer, lawyer, teacher ,.. look at this?
"Provocation Objective" - This works by moving your thinking out of the established patterns that you use to solve problems. State an impossible and "stupid" goal. Then determine what steps would need to be taken in order to achieve it.
An Example:
The owner of a video-hire shop is looking at new ideas for business to compete with the
Internet.
Provocation Objective: “Customers should not pay to borrow videos”.
• Consequences: The shop would get no rental revenue and therefore would need
alternative sources of cash. It would be cheaper to borrow the video from the shop
than to download the film or order it from a catalogue.
• Benefits: Many more people would come to borrow videos. More people would pass
through the shop. The shop would spoil the market for other video shops in the area.
• Circumstances: The shop would need other revenue. Perhaps the owner could sell
advertising in the shop, or sell popcorn, sweets, bottles of wine or pizzas to people
borrowing films. This would make her shop a one-stop “Night at home” shop. Perhaps
it would only lend videos to people who had absorbed a 30-second commercial, or
completed a market research questionnaire.
Subscribe to:
Posts (Atom)