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Brian Millar of Brand Tacticians has an interesting article in Market Leader this month (Oct 2005) about Quality Curves.

Simply put, the curves plot the evolution of a product category and its brands by "quality" over time. What Brian found were two distinct groups - premium products which just keep improving in quality ( your BMWs, Michelin restaurants etc), and standard products which steadily reduce in quality in order to get cheaper over time. But the latter then hit an inflection point, a minimum price has been reached (eg KFC, McDonalds), and quality actually then starts to go up (eg EAT, Wagamama), until ultimately re-merging with the premium brand line.

The danger for many brands is that they get fixed by consumers at the point where they achieved mass-market acceptance; KFC and McDonalds will always be lowest quality/price, no matter how much they try and sell us wraps and paninis.

To get back up the curve you need to think about hygiene and motivation factors. Hygiene factors are the must haves - do them, but do them as simply and cheaply as you can. It's what we used to call value engineering - find out what features a customer really wants from a product and put your effort there - don't fret about the other stuff. Then with what additional capacity you have do the motivational things, the wow things, the things that will get your product mentioned and talked about in the market place. They may be peripheral (ice creams on airlines flights), or design/fashion/fetish orientated), but they're better value than "extra" features.

Remember though that this is a market curve - it's where the market goes whether you like it or not. So make sure you can position your brand and products, now and in the future, accordingly.

We love information economics. It was one of the fist models that really excite dus becuase it gave a pretty definitive way to define the "benefits" of IT projects. It's use though is not limited to IT, and it can be used to evaluate almost any business system or proposal.

Essentially IE identifies a hierarchy of where "benefit" can come from. At the highest level are Tangibles, Intangibles, Risk and Enhanced ROI (or synergys). Tangibles are about money - costs and revenues. Nothing woolly is allowed like "saves time", saving time is only a benefit if it lets you save costs, earn more, or reduces risk. Within cost and revenue specific are identified like delaying or avoiding cost, and accelerating or protecting revenue.

Intangibles cover things like competitive responsiveness, or manageemnt information. Risk should be analysed with a conventional likelihood/impact model. Finally Enhanced ROI brings in more adavnced concepts such as value linking and value restructuring. Purists should probably use scenario modelling to drive these three down again to cost/revenue/risk elements.

Ultimately IE gives you a monetary value for a project. This could then be compared across several projects using an NPV/IRR type method.

Of course we realise that not everything comes down to money, but for business ultimately that is what it is about - if you cast the net wide enough to include stakeholders, societal and environmental impacts - and IE can help you do that analysis.

We have a range of project evaluation models that can be used depending on the size and type of projects. IE is just our favourite.

The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.

The four elements of the SIVA model are:

- Solution: How appropriate is the solution to the customers problem/need

- Information: Does the customer know about the solution, and if so how, who from, do they know enough to let them make a buying decision

- Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be there reward?

- Access: Where can the customer find the solution. How easily/locally/remotely can they buy it and take delivery.

This model was proposed by Chekitan Dev and Don Schultz in the Marketing Manageemnt Journal of the American Marketing Association, and presented by them in Market Leader - the journal of the Marketing Society in the UK.

We like the model as it allies well with our thinking and out meta-models where we focus heavily on the customer and how they view the transaction, CORBA cost-benefit models, adoption models (see last month) the whole e-commerce environment. In fact we might even do a meta-model of SIVA to help you understand each of the elements in more detail.

So chuck out your 4 Ps and get SIVA instead.

It's not every day that family planning in the third world comes to the rescue of big business, but the Behaviour Change ladder has its routes in work done by Phyllis Tilson Piotrow and published in her paper "Health Communication - Lessons from Family Planning and Reproductive Health, Johns Hopkins School of Public Health, Center for Communication Programmes, 1997,".

In its original form, each step was further broken down into three of four specific actions or examples, but the top level model works well for any industry or endeavour.

Take FMCG maketing. First the custmoer needs to know we exist - by marketing or seeing the product or word-of-mouth. The they need to apporve, or have a favourable opinion of it. They must think its a good product and see its saliency to their needs - again a role for marketing or word-of-mouth, or maybe demonstrations and trials. Next comes Intention, they need to decide that they are going to buy the product - at this point we need to make the purchase as easy as possible. Then they put into practice - they buy. But we don't want things to end there. We want the customer to become an advocate of the product and to tell their friends about it, grow word-of-mouth and start the whole cycle again in lots of other people.

The ladder works just as well with software change issues - like say a company re-organisation. Employees need to be aware of the change, we then want them to view it favourably, we then want them to commit to the change, to help make it happen. Once it's happened they need to be happy to operate in their new role, and finally we want them to advocate the benefits of the change to other employees.

For a good overview of this model , and others from the public service sector visit the Communications Initiative, and in particular this summary presentation

The value snake is a useful way of comparing one product against its competitor, and can be used with the perception map.

For the given product category or service the main features that drive user perceived value are identified – ideally from customer research. Note that the emphasis is on customer perception of value, not on fact or provider perception.

Each of the products is then rated for each feature using a simple numeric score, e.g. 1 – 5. If unsure about how to rate your own products an option is to treat your product as scoring 3 throughout, then score others as better or worse than yours, and then re-normalise the data. Weights may be applied if desired.

The emphasis on perception shows that as well as actual performance vendors also need consider how they are perceived, and also what functions the user uses for evaluation – and how they can effect that decision.

The DPICT model is our own variation of the PICT model that we came across several years ago, but which still provides a useful way of looking at the e-commerce needs or capabilities of an organisation.

DPICT splits e-business activities into 5 main areas. Businesses should assess there needs against each space, and then buy or develop systems to meet those needs.

The Virtual Communications Space

The first step of client engagement is through the virtual communications space. How do you communicate with your clients, bring yourselves to their attention, inform them through email and your web site, and then continue the communications after purchase.

The Virtual Transaction Space

If the client decides to buy how do you handle the transaction? Do you provide secure on-line payment? Do you offer telephone or direct debit alternatives. How do you invoice the client? Can the client view invoices electronically?

The Virtual Process Space

With an order made, how is that order fulfilled within your organisation. Is it drawn from a warehouse, made to order, delivered on-site as a service? What quality steps do you need to go through? How much of the process is electronic and automated, and how much manual and paper based. And after delivery how do your support processes work? And what on-line view does your client have of all this?

The Virtual Distribution Space

This is how a product is delivered to the client. For "bits" type services (e.g. music, documents, software) the distribution mechanism can be totally electronic, but of course needs to take account of things like IPR and digital rights management. For "atom" products the distribution applications manage the interface to the delivery agent, typically enabling customer, supplier and courier to track an orders progress from good-out to the customer.

The Virtual Information Space

Information is vital to the success of organisation. How do you gather and collate management information from the complete process, and how can you distil this into high-level management reports that can provide a dash-board view of the business for everybody, from shop-floor worker to CEO and stakeholders?

A great way to understand the dynamics of any industry is to look at its value chain, and understand how cost and profit are distributed along its length.

On the chart above we show an items progression from raw material, through manufacture and wholesale/distribution to retail, and finally to the consumer. At every stage in the chain there are costs, and profits, and these are embedded in the price as the item moves up the chain.

Detailed, consistent breakdowns of cost and profit for a whole chain are hard to come by, but we are gradually capturing we can to develop a series of value chain models for everything from groceries to books and CDs.

Just to give you a flavour for some of the figures. In the beef industry the farmers (raw material producers price) is around 80% of the retailers cost (keeping cost and price separate is crucial here). In bread production the total chain profit is around 17% of the final consumer price. In groceries in general total chain profit is around 14% of the retail price. Costs in the grocery value chain split down to 15% of consumer price to the retailer, 38% to the manufacturers diect costs, and 32% for the cost of raw materials.

A value chain map can soon show wheer opportunities might exist to restructure the chain, reduce costs and capture the profit by eliminating intermediaries - the classic dot-com disintermediation and direct sell.

We always like to start at the top. A basic part of any strategy review is the PEST assessment - Political, Economic, Social and Technical. But what tools should we use to review the general economic situation and understand what is going on in UK industry as a whole.

To help address this issue we have pulled together our own top level UK industry model, primarily from the Treasury's "blue book", but also other sources.

The model shows the main component sectors, based on the high level SIC classifications. The size of block is important - the width is proportional to how many people that sector employees, the height is proportional to the output of the sector. This lets us see at a glance where the powerhouses of the economy are. Also sectors which are shown as wide and flat have a productivity (output/employees) below the overall average, whilst those which are narrow and tall have a high productivity. Output is based on domestic output.

Next we identified where the key flows are between the sectors. The percentage on the arrow shows the proportion of the sector's work that flows to another sector - using the domestic and intermediate consumption as it's base (ie excludes public sector, capital formation and export). Only major flows are represented.

Finally we put on the domestic market, showing not only how much of each sector flows to the consumer, but also what percentage of the household budget spend that sector represents.

Of course with anything like this trying to get consistent data is a real nightmare. WHilst the government publishes the SIC system, it then doesn't follow it to the letter and near randomly groups things together into fewer groups. It also then makes employment data available to a different granularity than the economy data, and most of the latter is in Gross Value Add (GVA) measures. We'll see if we can get more data to improve the accuracy and granularity of the diagram.

If you'd like more information on the model then please contact us.

Strategy Maps were derived from the work on Balanced Scorecard. One of the problems with early scorecard implementations was deciding what measures should go on the scorecard - what measures were really critical to the success of a business.

The aim of the strategy map is to "tell the story" of a company's strategy. The standard strategy map uses the same four perspectives as the balanced scorecard - financial, customer, process and growth, arrayed from right to left. Other perspectives may be more applicable in some organisations, eg the public sector or individual departments.

For each perspective the key "do wells" are identified - typically 3 or 4 for each perspective. These are the things that the business must "do well" in order to be successful. A number of techniques are available to derive these do wells.

The crucial element of the strategy map though is that these do wells are causally linked on the diagram. This enables users to see which do well is effected by which others.

As with a scorecard the most appropriate metric for each do well is chosen, and used to drive a RAG status for each do well.

Then the power of the map becomes apparent. If a do well is green, but all its input do wells are red or amber, then it is likely that it won?t stay green for much longer. Similarly if it has one input red and another that is green, it becomes obvious where the focus should be to correct the problem.

The one danger with the strategy map is that it is easy to end up with a "generic" map, one that would apply to almost any commercial business; profit is driven by cost and revenue, revenue is driven by sales and happy customers, sales is driven by marketing, and customer satisfaction by good quality work, and good quality work is driven by a well trained and happy work force. Users should ensure that the map contains at least some elements which are unique to the business - and serve to differentiate it from any other business.

Strategy maps are an excellent way of documenting a strategy, and communicating that strategy to others. From the strategy map, anyone should be able to get a clear idea about what the businesses strategy is all about, and how well it is fulfilling its strategy.

The balanced scorecard has become an incredibly powerful way of communicating targets within an organisation. It was developed in reaction to the over-reliance that many organisations were placing on purely financial measures such as PBIT and ROCE. The Balanced Scorecard, as its name suggests, encourages organisations to take a balanced view.

This balance is achieved by taking four different perspectives on a business, and ensuring that there are targets and measures set within each perspective. The perspectives are:

- Financial, measuring things like PBIT, revenues, revenue per employee etc

- Customer, measuring what the customer sees, feels and does, principally customer satisfaction, referrals, repeat business etc

- Process, which measures how good the internal processes of the business are, for instance productivity, quality, sales pipeline etc

- Growth, which typically picks up many of the ?soft? issues to do with HR, training and learning, as well as new products and IPR.

For each perspective it is usual to have between 2 and 4 measures. These may be a mix of lead or lag measure, but between them they should give a complete and balanced view of your business, and a balanced set of objectives for your staff.

Once the corporate scorecard has been developed, companies can then look to cascade it down through the organisation, creating departmental and even individual scorecards.