What Could we do Better?
Instituting a Management Improvement Culture in Your Organization
Find the Root Cause Instead of the Person to Blame
Good Process Improvement Practices
Management is Prediction
The Purpose of an Organization
Performance Without Appraisal
Manufacturing and the Economy
Practical Ways to Respect People
10 stocks for 10 years
Deming and Toyota
Curious Cat Management Improvement Articles
Institute for Healthcare Improvement
Management Improvement Jobs
Deming on Management
Management and Leadership Quotes
I am now using this blog to re-post some comments I make other blogs. For my full management blog see the
Curious Cat Management Blog
14 Plus Potentially 14 More Years for Copyrights Has Become 120 Years
Our Intellectual Property Laws Are Out of Control
Thomas Jefferson opposed all government-granted monopolies, but James Madison argued that while monopolies generally are bad, there is a place for patents and copyrights. In the end, the Patent and Copyright Clause (Article I, Section 8) empowered Congress "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."
The idea was that innovators would be rewarded with a short-term monopoly on their work. Afterward it would enter the public domain, hopefully sparking further creations or discoveries. In the early days the Constitution's "limited times" were quite limited: 14 years for patents; 14 years, plus a potential 14-year renewal term, for copyrights. And patents were strictly scrutinized to ensure that they represented real inventions. (Jefferson himself, when he was secretary of state, served as a patent examiner, so important did he consider this task.)
Nowadays the limited times aren't so limited. Copyright has been extended to the life of the author plus 70 years; corporate works (with no living person as "author") get a 120-year term. Patents are good for just 20 years, but there's far less scrutiny to ensure that they represent something truly new—a lot of "nuisance patents" are filed to provide bargaining chips rather than to protect actual creativity. Also, influential companies often get Congress to extend their own patent rights through special legislation. Does a century-plus exclusive right encourage invention more than a 28-year exclusive right? It's doubtful.
Sadly, we continue to damage society to provide government granted monopolies to large campaign contributors. And we allow our legal system to be subverted by companies threatening to subject others to abusing litigation without fixing the system to work for society instead of against the interest of our society. It is even worse that the USA continues to pressure foreign government to adopt solutions those paying USA politicians lots of cash want, at the expense of the citizens in those countries.
The copyright and patent systems must serve their public purpose or encouraging innovation and creation. The current system does the opposite. The system is doing great harm to our society (likely more harm than anything other than the broken health care system). We need to fix it. Sadly we keep electing fundamentally corrupted politicians that act mainly to serve those paying them the most and who have shown little interest in what benefits the country.
Related: New Deadly Diseases for Business
- Bad Government, Closed Access
- links to articles on the deadly disease of our broken patent and copyright system
- Intellectual Property Rights and Innovation
Labels: Deming, economics, leadership, society, systems thinking
Remembering George E.P. Box
George Box passed away last week and a long (1919 - 2013), rewarding and productive life
ends with "a last message from George" (quoting Cole Porter's song - Experiment).
“Experiment! Make it your motto day and night. Experiment, And it will lead you to the light …Be Curious, …Get Furious… Experiment, And you’ll see!”
The full text of the song is quoted in Statistics for Experimenters
(a book by George, my father and Stu Hunter on using design of experiments to improve). The song is included in the De-Lovely soundtrack
If you want to honor the memory of George, contributions could be made to
UW Foundation - George Box Endowment Fund
(link to donate - include George Box Endowment Fund in the box for instructions) US Bank Lock Box 78807, Milwaukee, WI 53278. This fund was started some years ago with the intention of assisting graduate students. It is a permanent endowment fund, so contributions to the fund are added to the principal and the annual earnings of the fund are used to support the fund purpose. The purpose of the fund is to support activities of the Statistics Department with a primary (but not exclusive) focus on activities of direct benefit to graduate students. Recipients will be selected by the Department faculty (or their designates) with input from Departmental graduate students."
(link for donating online), 5395 E. Cheryl Parkway Madison, WI 53711.
Labels: data, design of experiments, experiment, history, spc, statistics
Change is Necessary, But it has to be the Right Change
Pay Practices Say More About Respect for People Than Words Say
Lean Thinking Aids Innovation Even if Poor Management Labeling Itself Lean Doesn't
Response to LinkedIn discussion asking if lean and innovation can co-exist (closed access and I don't think LinkedIn understands how urls work anyway so links wouldn't help):
I would say we too often criticize lean based on very poor applications called "lean." Studying Toyota is what gave us the name lean. Toyota has significant investments over the very long term in robotics; they innovated to create the Prius (and still dominate the hybrid market) and invest in research on things including home building, biotechnology
and a thought controlled wheel chair
It isn't lean thinking that is the problem with long term thinking. It is normally other bad practices (having nothing to do with lean) that create these problems.
Sure plenty of places saying they are doing lean also have stupid practices like cost centers, short term ROI needed on everything, MBO... None of those are lean.
Innovation and lean can work great together
, as can other measures to improve the performance of systems (in this case systems around innovation).
Innovation comes from those close to the process and those outside the system. It isn't limited to one or the other.
Yes, lean thinking can be applied to new situations with specific adjustments. Lean software ideas take lean thinking and provide some common practices that are often useful for those involved in software development
Toyota was definitely a follower in applying lean thinking to software development not a leader. Which shows even a company doing as many things right, as Toyota does, has plenty of room for improvement.
Labels: information technology, innovation, lean thinking, Toyota
Informal, Subconscious PDSA Experimentation
is basically how babies and kids learn. They don't formalize the theory they are testing but their brain is doing it for them. If they touch the hot stove they learn hey touching that hurts. Most brains figure out hot feeling gets super hot if I touch what appears to be the source (even without a helicopter parent telling them). I don't want to be hurt again. Don't touch that hot thing. A bit old they connect the stove place as likely to be hot... Sometimes they are a bit lame and they fail to make the connections until they get burned a couple times.
Same thing with say putting food into their mouth. They try various ways of doing so with various levels of success. Eventually they find good ones. As kids get a bit older they have to modify the most effective ways of getting food to their mouth to make sure the big huge person sitting next to them doesn't stop them (factoring in "manners" as part of what is needed not just efficiency).
Kids really are amazing at doing "informal PDSA." But their are ways to get even better by realizing what you are testing consciously. Especially as systems get complex relying on your brain decoding everything behind the scenes (doing its own subconscious pdsa) gets less reliable.
Response to: PDCA – So Simple, It’s Child’s Play
Related: Encouraging Curiosity in Kids
- Keys to the Effective Use of the PDSA Improvement Cycle
Labels: experiment, process improvement, psychology, quality tools
Look First to Improve Your Performance and That of Your Sphere of Control
Improving the State of your Testing Team: Part One – Values
Typically, the first thing out of my test teams mouths when asked “how can we improve the state of testing here”, usually relates to something that other people should do. Very few people or teams take an introspective based approach to improvement, or state their management values, but the ones that do, typically have great success.
Being accountable for taking ownership of getting things done – upwards and downwards – is what people expect out of their leaders, and will move the test team higher up the value chain.
Several of the points resonate with me. The idea that so many find it easy to see how others should improve performance but seem surprised they should consider changes themselves is common. I also find the understanding that we run into many problems based on what we think we know (but isn't so) as important and something many people miss. This idea holds true for teams also: look to what we are a group can do to improve not just all sorts of changes other people should make to stop causing the problems we experience today.
In Dr. Deming's management view the second point is explored as part of the theory of knowledge
People do have to be responsible. I worry about "accountability" because so often it is managers designing and enforcing bad management practices which make good performance difficult and then use "accountability" to blame those in the system for the results of the system.
"the aim of leadership is not merely to find and record failures of men
, but to remove the causes of failure: to help people to do a better job with less effort." Dr. Deming
Related: Sphere of control
Labels: employees, managing people, process improvement, software testing
Long History of Lean Thinking in Government
This is my comment from a closed access Linked In group.
It is good news that a government organization is adopting lean thinking ideas, but this kind of thing has been going on for decades. My father wrote a short section in Dr. Deming's Out of the Crisis on applying these ideas in the City of Madison (early 1980's). I was involved in the Public Sector Network (federal, state and local gov in 1990's) that group joined ASQ and is now the ASQ government division. I was involved with the Federal Quality Network 1990s (federal government effort). I worked in the Office of Secretary of Defense Quality Management Office
1996-2001. I created and maintain the Public Sector Continuous Improvement Site
There have been many great efforts over the years. Sadly most fade away leaving behind the use of a few good tools and a bit better process thinking but that is about it. Executive comprehension of the better management methods seem to disappear quickly (the executives, in government [not all of them of course, some do great stuff], are also much more reluctant to embrace better management practices than others in the organization).
Doing More with Less in the Public Sector, A Progress Report from Madison, Wisconsin
Transformation and Redesign at the White House Communications Agency
by March Laree Jacques, 1999.
We have to expect more of our governments. Better management practices will provide more value at less costs - both of which are badly needed in the economy today.
Related: Managing Our Way to Economic Success Two Untapped Resources
- Focus on the Work: Pick Improvement Projects that Really Help Your Agency's Operations
- Using Quality to Develop an Internet Resource
Labels: government, history, lean thinking, management
Are Deming’s 14 Points Still Valid?
Are Deming’s 14 Points Still Valid?
Researchers and practitioners in quality management continue to honor Deming’s valuable contributions today, and in fact, my recent bibliometric analysis of the Quality Management Journal (to be published in the January 2013 edition) indicates that Out of the Crisis has been the most central and authoritative resource influencing quality management research over the past two decades.
But are Deming’s 14 Points still valid in the post-2008 economic era, where vibrant growth and globalization can no longer be expected to dominate the global economy?
Yes they are still valid. On points:
#1 - I think
this is definitely still needed and much underdeveloped today.
#2 - Dr. Deming's "new philosophy" framework presented a new view of his management system
; he found 14 points failed to convey the systemic nature. The points are fine, but the new view he presented captured what is still the best management system I know of.
#4 - I don't think size matters. Personal relationships are easier but also super fragile, that person leaves and your system is broken. Establishing a culture that supports suppliers
is harder but much more robust.
#11 - I do. Good book Free, Perfect and Now by Rodin
. This is a big deal to lots of committed Deming folks
. I agree those that just use some of Deming's ideas without the system or really thinking of him much don't pay much attention. Lots of software development folks realize this strongly (they lose respect for "suits" that think try to dangle goals and quotas in front of people). Related: the problems with targets or goals
, The Trouble with Incentives: They Work
by Gipsie Ranney.
Labels: Deming, leadership, management
People Leave Jobs When Frustrated with the Results of the Management System and Their Manager
So people join organisations, and leave Top Leaders!
I participated in a Twitter exchange following the CIPD’s report – along the lines of who is the biggest problem – rubbish leaders, managers, HRDs or organisations? But thinking it through, I would go for the leaders – as they have so much influence over the approach their line managers take.
there are clearly a range of factors involved in exit decisions and an individual's line manager is certainly one of these. But I do agree with the researchers, and therefore disagree with Gallup, in that I believe it is the senior leadership which
is increasingly the most important of these.
I think your focus on the nuance is where I would put my, granted non-expert, opinion. I believe what you say about the big impact executives/leaders have in setting and maintaining the management system. The direct boss I do think has a big impact. But it is true that much of the direct boss' impact steams from the system - if they are not a good manager that is usually a system results.
It is rare that the organization does a great job of selecting and developing managers and your manager is lousy and you want to leave. In broken systems (unfortunately many - which is why Dilbert connects with so many) often the direct supervisor becomes the focus of complaints but really they are largely at the mercy of the larger system.
Related: posts from my management blog on managing people
- Practical Ways to Demonstrate Respect to Employees
- Create a Climate for Joy in Work
Labels: employees, management, managing people, respect for people
The Right Culture Creates a Robust Management System That Delivers Over the Long Term
Rewards Don't Create the Employees You Want
What is a Project Manager?
Response to What is a project manager?
Often PM role is to cope with weaknesses in the current management system. While you might say just fixing the system is better I think that is often unrealistic.
I see the PM as someone shepherding the project which often means
1) making sure the pieces proceed properly to meet deadlines (making sure they, or whoever should, make decisions on what to do if things need to be done). I see the PM often making sure it happens but if the system has a good method that is working fine the PM just watches that. So if there is good agile software development, the process is working and things are done in order no big surprises sitting around… then fine the PM doesn't have to worry.
2) dealing with institutional issues so others can focus on doing their jobs. If the software developers are frustrated with whatever phb action, the PM takes care of it somehow… That kind of stuff.
3) improving the system - again this is best done by setting up the system so others can. This is a bit outside of the scope of the existing project. The PM (to me) is also responsible for making the system for delivering projects good. If something new is needed, look at putting it in place. Develop people as part of this. Again if management is doing their job this is happening. Often management isn't though, then I think the PM should. This is stepping a bit far from what most everyone else thinks though.
4) coaching people and arranging coaching. This is probably more for #3 than for meeting the current project needs, but it is also to meet the current project needs.
5) protect people from blame and give people credit. Again this is often just dealing with poor current management systems. Blaming people is ineffective. If there are failures figure out what is wrong with the system and improve. When people are trying to blame others (which happens a lot) don't let that be done and instead focus the thoughts on how to improve. In organizations where business managers run roughshod over others (developers, testers…) don't let them. In that case communication goes through PM. If the communication is good then it is better for the developers to communicate directly…
I see communication as part of #1. It is important. It becomes even more important as the organization fails at it. That is often my view the PM is to see where there is weakness and deal with it. Maybe it means getting more resources. Maybe it is assuring better test coverage is included. Maybe it means arguing this project needs to be scoped way down as it isn't a priority given the business needs… This requires knowledge of the organization, business thinking, software development (for software projects) practices, coaching...
My whole way of think is very Deming based. So I see improving the system as a big part of everyones role. It isn't surprising I see it that way for a PM too.
To me the main PM roles are
#1 manage the existing system to achieve the result for the project
#2 improve the existing system
Labels: employees, information technology, management, managing people, respect for people, systems thinking
Coaching: Don't be Too Timid
Beginning to understand the power of coaching – seeing the connection to respect for people
by Connor Shea
Coaching is less focused on specific content then it is on the person, and the relationship’s ability to empower the coachee to find capabilities and a self sufficiency they didn’t fully believe in or know they have.
This process keeps the understanding, ownership of the problem, and ultimately the action, in the coachee’s hands – increasing their ability to solve the immediate problem and most importantly, future ones.
I think the "lean" world
is in general too passive in coaching. There are plenty of times when you are coaching a specific skill (whether that is how to notice a problem in the operational definition [maybe just missing one altogether] that leads to bad data or how to create a flowchart...). The same thing is true for coaches teaching a big man a post move or how to improve free throw shooting.
I appreciate that very wise people can just ask the right questions and get the best results (I think this is really hard to do well and the reluctance to provide any judgement in coaching is often a much bigger problem than being too prescriptive).
I see this as the prevailing attitude in "lean" attempts: "this process keeps the understanding, ownership of the problem, and ultimately the action, in the coachee’s hands – increasing their ability to solve the immediate problem and most importantly, future ones." Doesn't that seem a bit like an artificial barrier in the system? Doesn't the system context include the coaches and support system for the organization as well as the individual? I don't think the most of the success or failure rests with the coachee. They are responsible. But, whatever the results, it is the whole system that succeeded or failed, not the coachee alone.
Related: Continual Feeding
- Building a Great Workforce
Right in What Way?
The Tyranny of Being Right
It’s such an easy thing to fall into: the desire, the need, to be right. It creates huge divides between us, drives us to say and do things that cause others to either disengage or retaliate. Later, we may console ourselves with the satisfaction of winning but it’s pretty much a cold dinner left on a table that’s been deserted by friends. And if the friends are important and powerful enough, it can even turn out to be more like a last supper.
The alternative is being wrong, of course, and that’s where I believe the problem lies. After all, if I am wrong, it can become a chink in the armor of my self-confidence and self-trust, and in the self-perceived, self-protected perfection of my reputation. One chink leads to another, you know, so that the possibility is all the armor might fall away and I’ll have to just stand there, both vulnerable and alone.
The way I look at it the "rightness" depends on the question. Normally as we live the decisions we make don't really address only 1 question. There is the question of what will be the least disruptive action. There is the question of if it is fair to change the rules for an employee in mid stream. There is the question of what should you spend your time on. There is the question of what you should do to help yourself. Etc. You can be "right" on 1 question and that same action can be "wrong" or problematic or dangerous for another question.
Often standing for principle may be taken as doing the "right" thing. Lets even say it is right when asking what is in the interests of the company. But it is certainly common that doing so is the wrong thing for your career (or any of a number of other way of considering what to do).
I do definitely have the desire to be right. But I understand it isn't as simple as being right from one point of view. It is finding the right answer that optimizes to overall success on many different fronts. Sometimes the right answer is to accept that the wrong decision will be made in the meeting today, because the things necessary to get the right decision are not worth the cost.
Related: Long Term Thinking with Respect for People
- We are Being Ruined by the Best Efforts of People Who are Doing the Wrong Thing
Labels: ethics, systems thinking
Are We A Few Heros or a Society
Drucker Institute tweet: "Does government tax policy “prevent and penalize” entrepreneurship? Weigh in!" On their post: Who Really Built This Blog Post?
President Obama, speaking to an audience last Friday, said the following: “Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business, you didn’t build that.”
In response, Romney, highlighting the line “if you’ve got a business, you didn’t build that,” has called Obama’s words “insulting to every entrepreneur, every innovator in America.”
To insinuate “that Steve Jobs didn’t build Apple, that Henry Ford didn’t build Ford Motor, that Papa John didn’t build Papa John’s Pizza,” Romney added, is “wrong.”
What do you think: What’s the best way for the government to foster entrepreneurship?
I think far worse than any of the taxes is the extremely bad job that has been done with the health care system. Deming noted this as one of the 7 deadly diseases over 3 decades ago and it is in much worse shape today. Costing twice as much as other rich countries with no better results is bad
. Since the costs are so large they are huge barriers to entrepreneurs.
Even worse for entrepreneurship though is the poorly designed system where 1 employees medical expenses can cause serious damage to small companies. And the poorly designed system that makes it difficult to get coverage for previous conditions - which greatly increase the cost (in risk) of changing jobs, starting your own new business…
The recent reforms did help some, but it is an extremely small step after 3 decades of failures and making things worse. There is so much more that needs to be done.
The costs and uncertainty related to health care are likely the most critical problem for entrepreneurs. Another contender is liability costs (yet another one of the decades old deadly diseases).
The next contender is the broken patent and copyright system
(which I think of as one of the new deadly diseases - along with excessive executive pay
I would put all of these far ahead of tax system issues for entrepreneurs. The biggest thing government can do is fix the 3 deadly diseases I mentioned above.
People like Jobs (and Wozniak), Henry Ford, Larry Page and Sergey Brin are extremely valuable to a society. They make great contributions. Thinking they are therefore the reason for Apple, Ford and Google's success is ludicrous. They contributed. They contributed a lot. Dump them in Mali when they were born and they would not have created those companies as adults.
Saying that society doesn't play a huge role is false (a failure to understand systems thinking).
Saying governments role is the same as societies also shows a poor ability to reason. The good things that Jobs, Gates, Bezos... are related to government in some ways but are much much more related to the entirety of growing a business in the USA.
Inside those companies many others helped make the organizations a success.
Certain individuals do have an amazing ability to create successful systems. Again they can't do it themselves. They need other people.
Granted a few of these leaders are extremely special. 95% of CEO's are decent at their jobs (or even not that good at their jobs) but replacing them with any of hundreds of other people would make little difference. But those CEO's all think they are more like Steve Jobs - they are not.
Labels: Deming, economics, health care, leadership, society, systems thinking
Always-On: Trivial Urgency
I think the problem is in expectations of responsiveness. People focus on the trivial "urgent" instead of the important, as Covey said
One of the issues I have with the complaints of "always on" is looking at my father
. He was always on for his whole life and had no downside. He loved what he did. He thought about it when he was taking a shower, or walking to work or having friends over for dinner or raking leaves in the yard. It never was a matter of being burdened by work. He was a professor and consultant.
I think it is a mistake to see the problem as always being on. Expectations of responsiveness to thee trivial urgent though I can see as a problem.
I think there is a difference between being also on and energized by your work (that is pretty much how I am, and my father was - I am working for myself, I can work whenever I want) and feeling burdened by being expected to be always on.
The problem is I keep reading about how thinking about work all the time is horrible for people. Well in my experience that isn't true (granted it is a small set of people). But it points to, I think, an issue that the "problem" is imprecisely defined and therefore inaccurate. I do think there is an issue expecting people to be available for trivially urgent matters.
Related: Carve Out Time to Think
- Circle of Influence
Labels: employees, information technology, management consulting, managing people, motivation, respect for people
Leadership: Taking Action When Others Are Unsure
When things go bad
Plan for the things you know can happen. Weather emergencies, hazmat spills, and fires come to mind. Rick Rescorla's plan for what Morgan Stanley workers should do if the World Trade Center was attacked, is one reason why that firm only lost six people out of almost three thousand on September 11, 2001.
Include some thinking about how you will know what you're facing. While the Port Authority officials were broadcasting "stay put" messages, Rick decided that an attack was happening. He activated his plan, marching his company employees down the stairs, two by two.
I can't recall now, but I think there are studies that show people will be lulled into not acting when a group of people is around (who are also not taking action). So something is introduced that if they were alone they would react (say leave the trade center, or investigate a seemingly risky piece of data). But if there is a group people become more passive - thinking the non-action by others means they are over-reacting. So they then don't react (thus re-inforcing everyone else decision not to act).
This is one of those times leadership really matters: someone not afraid to take action and potentially criticized for going against the consensus group decision to not act.
If immediately upon suggesting decisive action, people jump to support the idea it is likely they all would have done so alone but were intimidated by the non-acting group. Either that or they respect the leader and decide to support them while not sure it is really needed.
Related: Leadership is the act of making others effective in achieving an aim
- Leadership Leverage Points
- quotes on leadership
Labels: data, leadership, management, managing people, psychology
Forced Rankings of Employees are Foolish
Dysfunctional Internal Competition at Microsoft: We've seen the enemy, and it is us!
by Bob Sutton
This downside of forced-rankings is supported by a pretty big pile of research we review in both The Knowing-Doing Gap and Hard Facts, Good Boss, Bad Boss. The upshot is that when people are put in a position where they are rewarded for treating their co-worker as their enemy, all sorts of dysfunctions follow. Forced rankings are probably OK when there is never reason to cooperate...
Good thoughts as usual.
My thoughts are that forced ranking inside a company are bad (the golf example, I have no problem with). Inside the company I want the people (even responsible for different territories) sharing information. We want to constantly improve. We want the truckers (or wherever else), wherever they are, sharing the things they are doing to make themselves more successful. Then we want to spread what works (pilot testing them first, of course).
The system impacts are likely large. The bottom 10% (discussion, in post, of GE firing the "bottom 10%" every year) is due how much to those people just getting lousy luck from the system. A lot of it is, that is my bet. I do agree you might discover some people just are not cut out for their current job. Believing in respect for people, your first reaction should be fire. First work with them, often that works, but sometimes not. Then figure out where they could be useful.
The same lucky system effects are another reason forced rankings are silly. If you insist on such a thing, just make it a lottery that everyone knows is a lottery (Dr. Deming suggested this - facetiously). In case anyone really is thinking of this it is a stupid idea. It is just less stupid than other forms of forced ranking.
Interestingly I here is post from 2006 where the new Microsoft HR chief state that forced ranking was eliminated due to widespread understanding of how destructive such a practice was
In May, after barely a year as Microsoft’s human-resources chief, Lisa
Brummel swept away “artifacts of the past,” starting with the widely
disliked forced curve.
Related: Failed Practice: Forced Ranking (2005 post)
- Performance Without Appraisal
Labels: Deming, employees, management, managing people, respect for people, systems thinking
Profit = Market Price - Actual Cost or Price = Cost + Desired Profit
Comments on Google Nexus Q – Made in the USA
I agree with
"Deserved Profit = Market Price – Actual Cost"
"Price = Cost + Desired Profit."
But what I see glossed over by many lean folks when they present this is volume and the complexity involved. The iPhone could sell 10,000 (say, or some number anyway) at $2,000 in addition to an carrier subsidy. They can sell millions at a much lower price point. Market price is a movable thing (depending on volume).
Also the 2nd formula is fine for deciding what products to build (theoretically - you have to be guessing at the values). But it is totally fine to say we need a price of $350 for x product for us to decide to offer it.
The task is then to guess right. If $350 is not going to work you give up - or more likely go back to the drawing board. Can we make it better for just a bit more and then sell it for $400? Can we re-engineer certain things and lower the price to $250 and even if that means we had to get rid of the ability to use wifi will that work in the market?
It definitely can be sensible to say we can't make x for less than $400 - we are not pricing it at $300. It might mean we can only sell 10,000 instead of 30,000 if we priced it at $300. But since at $300 we are losing $100 a unit high volume isn't great.
I think "If the market price for a device like this is $100, then you have to engineer the total product cost so it can be profitable at that price." is very well said. Again volume is still a big issue.
Sometimes there are price cliff points - I can't imagine selling a tablet that isn't hugely better than the iPad on specs for more than the iPad price. So above that level the volume may be miniscule. But I think often there are not cliff points.
And the company does get to set the price.
The market then decides to buy or not, and buy in what numbers. Apple would probably sell very few iPhones for $3,000 more than they cost today. How many they would sell at $100 more or $100 less may change significantly but they would still be huge sellers at either of those prices. So that "market sets the price" idea is not 100% accurate (I don't think anyway). I do think the first formula is a better concept than the 2 formula. But it is something that is maybe 80% accurate? And the 2nd isn't totally worthless (it is just that it should be looked at more as a should we offer this product or not decision).
Pricing decisions also have big long term versus short term considerations. Apple has started pricing many things in a way which makes it really hard for competitors to undercut them. Apple, almost for sure could charge more for the laptops they sell and the iPad and iPhone. But if they did they make it easier for a competitor to compete on price. This pricing decision is an Apple decision not a market decision.
The market weighs in after Apple make the pricing decision.
But the price point for a kinda ok tablet at $199 - maybe will work? Fire seems to be doing ok, for a pretty small, kinda lame, really cheap tablet.
Apple has done well create products for prices much above what people thought was market price. It turned out people were willing to pay more for a great product.
You can notice that we are trying to sell this car for $35,000 and we are hardly selling any. Ok, lets make it $30,000 and see what happens.
When setting what prices you will try to sell for, looking at your costs is a perfectly sensible thing to do. Once the market tells you that you are off, you need to adapt to the market. It isn't super easy though. Often you can think the market failed to appreciate the value we offered because we messed up x feature and with y missing it was an issue and people will buy only black from Apple but they won't accept that from us (or whatever). What we need to do is fix those mistakes. The pricing given those mistakes the market sets below what we expected but that isn't really a pricing issue it is really a damaged offering issue. Eventually mis-understanding pricing may become obvious, but it often isn't.
Anyway, my main point is just that the "market price" isn't some easy thing to know. It isn't like looking up the freezing point of water. I do agree with the "formula" I just think the way it is presented is often not as useful as it could be.
Labels: business, customer focus, economics, innovation, lean thinking, management, systems thinking
Why Do You Ask?
Why Do You Ask?
In order to develop problem-solvers, we need to help our mentees identify and acknowledge the problem and ultimately, solve the problem. This requires the mentee to think, to engage, and to take ownership. The extract and tell method that is often employed by leaders doesn’t do any of that well.
Another useful reason for the question is to figure out the best response. Often the guess about what the person is asking for is fine, but the truth is that often an answer really depends on what the person is after. Why did car crash? We usually don't want to know that momentum carried it into a spot occupied by something else - if even that is "correct."
Usually people don't think when they get a question: (thinking: why? well x, why x, well y, why y, well z, why z, well a, why a - ah that is basically the root cause) then answer a, see what happened is x because of y because of z which was due to a.
Another example is if you ask where I want to go to lunch tomorrow my answer will be different if you are asking everyone (I can say my favorite choice) or if you are not sure and you know I know lots of places where should we all go to lunch tomorrow... The purpose of the question is important. Often we can guess it. But often we also guess wrong.
Labels: employees, lean thinking, process improvement