08 November 2011

Finding Common Ground Between CFO and COO–Part 7


In Part 1 and Part 2 of this series, we introduced the following two diagrams as a pair:

From Failing to Leading From Failing to Leading-2

This first is a generic statement of dimensions as “effectiveness” and “differentiation.” The second diagram restates these dimensions in terms familiar to anyone who has seriously touched upon constraints management or the Theory of Constraints. Here the dimensions are “Increasing Throughput” and “Breadth of Market through Irrefusable Offers.”

The concept was first introduced by Dr. Eliyahu Goldratt in his book It’s Not Luck. Later he clarified by saying, that a Mafia offer is “an offer [your trading partner] can’t refuse.”

But what, exactly, is an “irrefusable offer” (aka: “unrefusable offer” or “Mafia offer”)?

Irrefusable Offers

The concept behind the “Mafia offer” or the irrefusable offer is that it is an “offer you make to your market—your prospects and [or] customers—to make them desire your products or [and] services” [Theory of Constraints Handbook, p.604] so much that they simply cannot refuse to do business with you. And, to be effective, the offer must be one that your competition cannot or will not easily copy.

Rephrasing that statement using Toyota’s definition of quality, it means making an offer where the customer anticipates an experience and results that far excel anything else in the marketplace. Getting to this point requires the CFO and COO to understand the various market segments that they serve in fresh, new ways.

A good starting point to is to ask: “What is some part of my market or industry has a unique need—or a unique combination of needs—that is not being met by any of our competitors?” In order to gain this insight, the CFO and COO should begin to see how they can blur products into services and services into products.

Un-Refusable Offers

Between you and your target markets sit several “customizable” options—the augmented product. For example, your market may be office supplies—rather generic. But the way you deal with that generic market can become a dramatic differentiator and lead to the creation of irrefusable offers.

  • Product  - Consider the selection, quality and variety of your product offerings.
  • Connection – Consider that the experience of doing business with a sales representative in person is different from doing so over the phone; a paper catalog is a different experience than buying on-line; even the quality of the on-line experience can make a difference (e.g., What does your Web store remember about your customers’ preferences in products, delivery methods, and so forth?)
  • Speed – Buying a product that is delivered same-day is different that buying a product that is delivered tomorrow or next week
  • Other intangibles – Taking credit cards for payment is a different experience than custom billing; Offering payment terms on major purchases is different from a one-size fits all policy on payments; Personalizing products—colors, sizes, quantities, imprinting, etc.—all change the customers’ experiences and results; ad infinitum

Beyond those augmented product options, today’s sophisticated trading partners are looking for even more, and rather than seeing these as insurmountable challenges, the CFO and COO should be joining forces to find ways to make some or all of these things happen.

  • Customizable – More and more products and services are being made customizable to the customers’ specifications and desires.
  • Upgradeable – Customers almost always see more value in products where the life-cycle is extended through built-in or optional upgrades. Consider, for example, smartphones and other mobile devices where the operating systems are automatically upgraded with little or no user intervention. Consider those products now being offered with guaranteed trade-in values at the end of a normal lifecycle. Consider those products that a modular, where the customer can start with the “basic” (lower cost) model and extend the product’s capabilities over time by purchasing add-on functionality.
  • Online – Even greeting card companies are now offering “smart” greeting cards that are interactive with online services. This drives the customer experience into completely different realms when compared to the simple card-and-envelope. Consider the ability to now offer interactive online training to accompany a product or service purchase. The training need not be limited to only how to use the product or leverage the service. Why not consider customized training about how to best apply the product/service in a particular industry (for example) to increase profits for your customers?
  • Anytime access and response – Firms are now offering online knowledgebases to help their customers get more out of the products and services their customers buy. But some have gone a step beyond. Some firms now proactively monitor their customers’ online activities on their website and, when it seems the customer may be having difficulty finding the solution to their problem, a remote agent offers interactive real-time customer support 24-hours a day, seven days a week.
  • Learning, anticipating and filtering – As your customers interact with your firm, your firm needs to be constantly learning so that your firm’s response will anticipate your customers’ future needs and filter out those elements that are clearly of little or no use (at present) to your customers. It is wonderful if a hotel chain places in the guests’ rooms a complementary snack for members of its rewards program. But it is even better if, over time, the hotel chain learns that a particular guest prefers chocolate chip cookies to peanut butter cookies and Perrier to spring water, so that no matter which hotel the guest visits, his or her favorite snack is always what is provided.

[To be continued…]

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