Archive for May, 2008

Take A Fresh Look

I wrote in a previous post about several articles in the recent innovation-themed New Yorker issue that I found particularly interesting. The first, which dealt with the Japanese principle of kaizen, can be read here, but now let’s turn to the second article, which is based on the theory that big ideas aren’t as rare as most of us think they are. Titled “In the Air” and written by Malcolm Gladwell, it examines the process of idea generation, the process of multiple discoveries and our romantic notions of “genius.”

As many might already know, there is fairly well documented history of simultaneous discoveries. Marconi & Tesla with electricity; Newton & Leibniz with calculus, there seems to have been at least six different inventors of the thermometer and nine claimants to the invention of the telescope. And this list is just a fraction of the number of significant discoveries all made “multiply” over the centuries.

But what really grabbed my attention was the story of Nathan Myhrvold, a former Microsoft engineer who wanted to create ideas. His thought was that by bringing together clever people from different backgrounds and with different interests, he would assist in the creation of innovation and insight. His goal is ultimately to have develop an idea far enough to patent and then sell the rights to other companies for development. But what struck me was how applicable this approach is for small, independent businesses.

We all struggle with the issue of having to be the sales manager, marketing director, customer service dept., plus dealing with our “real” business–being creative! So how about letting a few outsiders in to take a look at your business; and offering to do the same for them? Go to your favorite locally owned businesses: a restaurant, a clothing boutique, a plumber, etc.–all of whom you admire for some aspect of their business. Explain that you want to start a brain trust–local companies working together to the benefit of all, and see what types of innovations and insights you can generate for each other. Be willing let others into your process and your decision-making, be interested in what they have to say and offer, and able to to offer constructive insights of your own on their issues and concerns. 

Because while there are very few true geniuses in the world, there are great many very clever people. And the history of scientific insight shows that a genius is not a person who does what no one else can; he or she is a person who does what it takes many others to do. “The genius is not a unique source of insight,” writes Gladwell, “he is just an efficient source of insight.” So start your own genius sounding board today!

22 May 2008 at 3:06 pm 1 comment

Separating Facts From the Fear

One of the simplest, least expensive and most effective techniques to generate new business is one that most people are absolutely intimidated by: Picking up the phone. Let’s take a minute to think about that. Why do most of us dread having to call a prospect for the first time? Is it because we’ve been told it’s impolite to ask for what we want? Is it because “dialing for dollars” seems so crass? Is it because talking to strangers feel “pushy”? I truly think there is some level of societal training that happens somewhere in our brains that makes “telephone terror” such a common issue.

I’ve found a couple of ways to get around this. The first is explaining to myself, that sooner or later you’re going to have to talk to “them” on the phone, and not just talk, but pitch. It matters only slightly if the person on the other end is someone you met at a networking event, a social event or even a referral. A minimum of information was exchanged and now you need to make the call to move this business relationship forward. So putting it off only makes whatever initial contact you might have had weaker. 

The second is that I have come to realize that I invent worse situations and worse scenarios in my head than ever take place on the phone. In my head I’m ready with a whole set of negative outcome scripts:  I’m bothering them, I’m interrupting them, they’re going to despise me for calling like this, they’re going to hate what I have to offer, etc. The reality is, I dial and I either reach them or not. If I do, I say my piece, they say their piece…and that’s typically as bad as it gets!

Now, imagine instead if I started going into these calls with the idea that the person on the other end wants to talk to me, is interested in what I have to say and needs what I have to offer. So if you believe in the value of your products and services…that should be the reality of how to approach these phone calls.

I don’t think anyone will argue with this approach: Belief informs action and action informs results.

In these iffy economic times, isn’t it worth the effort to challenge your beliefs about why you hate “cold calling” so much? Shift your focus from imagined negatives to the actual benefits you have to offer, pick up the phone and tell someone about it!

14 May 2008 at 6:55 pm Leave a comment

The Power of Social Proof

I live in NYC and I love to try new restaurants. But no matter how enticing I make it sound, if my boyfriend and I show up at place and it’s empty, he refuses to stay. He’s offered me two main reasons for his reluctance to be the only table in the joint.

1) When places are that slow, service is usually either overly solicitous
or incredibly negligent. From experience we know that to be true, so
no matter how great the food, it’s just not a very nice meal.

2) The psychological issue of “Why are we the only ones here?” “What
do other people know about this place that keeps them away”? He just
can’t get over that barrier. 

It’s that second factor that demonstrates the power of social proof. People feel more comfortable doing business with companies and people that are successful. An empty restaurant “feels” wrong to most of us, and so we’ll stay away. Now obviously someone always need to be first table of the night and many times we will walk into an empty restaurant because we know it and we trust what our experience will be. But to take a chance on something unknown AND unproven…that’s much tougher.

Unless you have a retail location, leveraging the power of social proof for your design business is bit more subtle. Testimonials on your website from multiple clients; a portfolio that illustrates the range of your experience and most importantly, legitimate referrals that you follow up on. These are all methods to show your prospects how many other people are doing (or have done) business with you. 

People are most comfortable doing business with those they know, like and trust. Social proof adds to the trust factor. A strong referral is an introduction you can’t afford not to follow up on. And the like part? That’s up to you!

13 May 2008 at 4:11 pm Leave a comment

Developing Your Innovation Muscle

I just came across another interesting piece on innovation, in The New York Times business section, and it also references kaizen, the Japanese technique of small, incremental improvements, that just mentioned in a previous post on innovation. But this article focuses more on how to make changes in your thinking and your way of approaching problems, challenges and new information, in order to foster innovation and creative flexibility.

“The first thing needed for innovation is a fascination with wonder,” says Dawna Markova, author of The Open Mind. “But we are taught instead to decide…and to decide is to kill off all possibilities but one. Innovation is…exploring the many other possibilities.”

Markova and her partner M.J. Ryan the executive consulting firm Professional Thinking Partners work with what they call three zones of existence: comfort, stretch and stress. Comfort is all your existing thought patterns and processes; stress is when a challenge is so far beyond your current experiences as to be overwhelming; but stretch-where new activities feel awkard, unfamiliar, but interesting-is where true change occurs.

“Whenever we initiate change, even a positive change, we activate fear in our emotional brain,” writes Ryan in her book This Year I Will… “If the fear is big enough, the fight-or-flight response is set off and we’ll run from what we’re trying to do. The small steps in kaizen don’t set off that instinctive response.” Instead you keep thinking, wondering and innovating.

This idea of continuous mental stretching also turns out to be good for your health. Researchers who asked study participants to do something different every day-listen to a new radio station, park their car in a different spot-found that they lost and kept off weight.

As creative professional we’re used to applying this kind of thinking to our client issues…how to disguise an awkward window, unify an odd space, we’re always searching for something new, interesting, innovative and inspiring. But we’re quick to fall into habitual patterns within our own business.

So, take a look around at your business and your business habits. Do you see any small, gradual changes you’d like to make? Let us know.

12 May 2008 at 4:22 pm 4 comments

Demystifying Fees: A pricing panel recap

I attended a pricing panel discussion today that was part of the Brooklyn Designs show. I wasn’t able to stay for all the Q&A at the end, but still managed to jot down some interesting notes. To see who was on the panel check out the description here. 

Following are some the comments I found to be most interesting. I’ve put the comments into quotes, but these are all really paraphrases of the notes I took!

“I used to bill Net 30 for purchases, but I realized my customers didn’t really 
get that. They couldn’t tell if that was a good deal for them, or a good deal
for me. Customers understand retail, so I now do my purchase pricing
in a Less Retail format. It’s actually more profitable for me and makes them
happier because they can immediately quantify the value.” 

“I can’t remember what seminar I it was, but several years ago I went to
a pricing presentation and one of the notes I took was that everyone
should go back and raise their fees 3%. Main reason: it’s not a big increase
but by the end of the year it will add up.”

“Fixed fees may seem cut and dried, but often become problematic. No
matter how well you think you’ve defined your scope of services, detailed
the project in a letter of agreement or contract, it’s 99% certain there will
be changes, revisions, delays, or other issues that will mean additional
non-projected work. Which means you have to go back to your client for
more money. That’s a situation which is never good for the relationship.”

“In commercial work, a common fee structure is a percentage of the build-
out costs. I’ve moved away from this because it causes trouble. There are
always going to be cost overruns and now the client is faced with having to
pay more to complete the job and pay you more based that…to them it feel
like they’re paying twice for other people’s problems. Again, a good way to
damage a client relationship.”

All in all, it was a pretty interesting discussion. One of the panel members has a current rate of $300/hr and charges overseas clients $350/hr! Of course, the old line about “not even a surgeon charges that much” came up, but I was thinking about that on my subway ride to the office. Most designers are independent practitioners, that hourly fees goes to cover all types of overhead that most surgeons (and many high-paid lawyers) do not directly have to account for. Meaning, the rate a lawyer at a leading law firm charges includes overhead charges, yes, but those costs are also disbursed in the rates of the jr. lawyers, the research assistants, etc. The fees are all there, but the shock of one $300/hr individual is spread out over the billable hours of several $75/hr and $150/hr other players.

And let’s face it: It costs a lot to run a business these days. Deb and I were just commiserating on the high costs of workman’s comp (not to mention all the other necessary business insurance policies) AND the fact that insurance audits seem to have become ever-more frequent.

When you look at it that way, $300/hr isn’t that much to charge to cover all the overhead (office rent, utilities, software, insurances, sampling, etc. for the main expenses) plus have enough to re-invest in your business, plus enough to pay your vendors, contract workers, etc. PLUS and most importantly, pay yourself! Because how many hours in a day or a week do you have available to bill? Certainly not eight hours a day, five days a week.

It was definitely an interesting hour! What do you think? Is $300/hr crazy or wonderful?

Note: I know I wrote yesterday that I would follow up with the second part of The New Yorker innovation piece, but I thought the pricing info was too good to sit on. I’ll get to the innovation piece next week.

9 May 2008 at 4:26 pm 1 comment

Just a Little Bit

The New Yorker magazine this week carries the theme The Innovation Issue and although I haven’t finished it yet, there are already two pieces that have captured my attention. The first is by the magazine’s regular financial/economic reporter James Surowiecki, titled “The Open Secret of Success”. It’s a short, sharp little overview of Toyota’s much analyzed, widely copied production systems.

The ostensible reason for taking another look at something that has seemingly been studied to death, is the news that Toyota appears to have finally stopped G.M’s seventy-seven year run of selling more cars than any other company in the world. And while Surowiecki dutifully recounts the history behind Toyota’s production system, he reserves most of his praise for the company’s kaizen or “continuous improvement” approach. 

He writes “[Toyota] rejects the idea that innovation is province of an elect few; instead it’s taken for an everyday task for which everyone is responsible…Toyota implements a million new ideas a year…Most of these ideas are small-making parts on a shelf easier to reach, say-and not all of them work. But cumulatively, everyday, Toyota knows a little more and does things a little better than it did the day before.”

I love that last line! Because I think it’s such a fundamental, yet often overlooked, reward of running a business. Every day you learn, every day you apply what you’ve learned and every day you and your business are a little bit more knowledgeable, a little bit more skilled, a little bit more difficult to compete against. It’s not a lesson for only huge multi-national companies, it’s a lesson for everyone.

Check out the entire article available on The New Yorker website. Tomorrow’s post will be tie in another aspect of this article with the second piece in the issue I admired.

7 May 2008 at 3:16 pm 2 comments

Perception and Pricing

Earlier this year researchers from the Stanford Graduate School of Business and the California Institute of Technology published the results of a study on the effect of price relative to preference in the Proceedings of the National Academy of Sciences. Not typically a widely reported on publication, but the outcome of the study caused many in the mainstream media to sit up and take notice. As covered in the New York Times, The Economist, CNet and others, Antonio Rangel, along with Baba Shiv and John O’Doherty conducted a very interesting wine-tasting.

Participants in the study were presented with two glasses of wine and given no other information other than that one wine was $5/glass and the other was $45/glass. Using functional magnetic resonance imaging (fMRI) they documented that the part of the brain that experiences pleasure becomes more active when the drinker thinks he/she is enjoying the more expensive wine. Of course, both glasses of wine were from the same bottle.

“What we documented,” said Shiv, “is that price is not just about inferences of quality…but that price changes a person’s experience with a product.”

The researchers ran different variations of the test, for example, when one wines was said to cost $10 a bottle it was rated less than half as good as when people were told it cost $90 a bottle, its true retail price. Moreover, when the team carried out a follow-up blind tasting without price information they got different results. The volunteers reported differences between the three “real” wines but not between the same wines when served twice.

Rangel, having only studied consumer reactions to wine pricing, is hesitant to extrapolate too much, but says he believes that the bias toward higher prices occurs in many areas. And history has certainly shown that conspicuous consumption and waste are an important part of many societies.

There are many instances of this price-placebo effect, and many companies throughout the years have used it to their advantage. One my favorite, all-time examples is the L’Oréal slogan “Because I’m Worth It”: The L’Oréal products cost more than the other haircare and make-up options on the shelves, but extra cost was rendered incidental by the branding. And while there are many considerations to keep in mind when pricing a product or service–your local market, demand, profit and revenue goals, etc.-it important to realize the additional information and now, clearly, experience value, that pricing plays in terms of branding and positioning.

What’s your take on this? Do you think you’re in a position to bump your prices and improve your customers’ experience?

6 May 2008 at 6:34 pm 1 comment

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