Archive for the 'Strategy' Category

From a host preparing for a dinner party to a country constructing a new national stadium, we all tend to underestimate how long things are going to take - an error that’s been dubbed the ‘planning fallacy’. According to Ola Svenson, contributing to this proclivity for tardiness is our inability to accurately decide between time-saving options.
Consider these increases in speed for a 100km car journey. Don’t work out the detailed mathematics. Rather, for both pairs, just make an intuitive judgement about which jump in speed will make the largest difference to your time of arrival (i.e. save the most time):
a) Travelling at 50km/h instead of 40km/h.
b) Travelling at 130km/h instead of 80km/h.
a) Travelling at 50km/h instead of 30km/h.
b) Travelling at 130km/h instead of 60km/h.
If you’re like most of the participants in Svenson’s study, you will have assumed that option (b) in both pairs is the most time saving. In fact, for the first pair, the time saved is equal (allowing for rounding off), and for the second pair, option (a) saves more time. From analysing participants’ judgements, Svenson found that people seem to be mistakenly comparing the ratios of the two changes in speeds - applying what she calls the Ratio Rule.

It can also apply in other contexts. Consider an administration overhaul at a hospital clinic, such that the number of patients treated by each doctor per day is increased. In each pair, which improvement would free up the most doctors to go and work elsewhere?
a) Each day 11 patients treated per doctor instead of 5.
b) Each day, 8 patients treated per doctor instead of 4.
a) Each day, 8 patients treated per doctor instead of 4.
b) Each day, 16 patients treated per doctor instead of 7.

Svenson again found that her participants consistently applied the Ratio Rule, so that most of them said erroneously that option (a) was more time saving for the first pair, and that option (b) was more time saving for the second pair.
So why do we always apply the Ratio Rule if it consistently leads to the wrong judgement? Svenson said the Ratio Rule works when both options start from the same point (e.g. the same speed, or the same number of patients treated). This may then lead it to become a reinforced and favoured rule applied in real-life experiences.

According to Svenson, this bias in the way we compare time saving options has real-world implications. For example, people who are already driving fast will overestimate the time saved by driving even faster. Meanwhile, politicians may be prone to improving an already fast operation, rather than making improvements to a slower operation with more time-saving potential.

SVENSON, O. (2008), Decisions among time saving options: When intuition is strong and wrong. Acta Psychologica, 127(2), 501-509, http://dx.doi.org/10.1016/j.actpsy.2007.09.003 Author weblink: http://www2.psychology.su.se/staff/osn/

Jonathan Wilson

Strategy, measurement, people, planning, process improvement | No Comments

In the 1930s, GM was in deep trouble as the Century’s worst recession devastated demand and profitability.They were on the verge of closing Cadillac.  But Nicholas Dreystadt said he had a plan to make Cadillac profitable in eighteen months, Depression or no Depression. The first part of his plan resulted from an observation he had made travelling around the country to the service departments of Cadillac dealerships. Cadillac was after the “prestige market,” and part of its strategy to capture that market was its refusal to sell to blacks. Despite this official discrimination, Dreystadt had noted that an astonishing number of customers at the service departments consisted of members of the nation’s tiny black elite: the boxers, singers, doctors, and lawyers who earned large incomes despite the flourishing Jim Crow atmosphere of the 1930s. Most status symbols were not available to these people. They couldn’t live in fancy neighborhoods or patronize fancy nightclubs. But getting around Cadillac’s policy of refusing to sell was easy: They just paid white men to front for them.

Dreystadt urged the executive committee to go after this market. Why should a bunch of white front men get several hundred dollars each when that profit could flow to General Motors? The board bought his reasoning, and in 1934 Cadillac sales increased by 70 percent, and the division actually broke even. In June 1934 Nick Dreystadt was made head of the Cadillac Division.

He proceeded to revolutionize the way luxury cars were made. “Quality is design and tooling,” he said, “inspection and service; it is not inefficiency.” He was willing to spend money on superior design and better machine tools. He was willing to spend even more on quality control and top-notch service departments. He was not willing to spend money on production itself.

“Nick made us look closely at everything,” one Cadillac executive remembered. “If someone else made a part for two dollars, why did ours have to cost three or four?” In less than three years of this attitude at the top, Cadillac’s production costs were no higher, per unit, than those of General Motors’ low-end Chevrolets.

And because Cadillac still sold for luxury prices despite its drastically reduced production costs, it had become General Motors’ most profitable car per unit. In still-depressed 1937 more Cadillacs were sold than in roaring 1928. 

Jonathan Wilson

Strategy, automotive, process improvement, quality, segmentation, success factors | No Comments

I got these quotes from a colleague who’s recently been reading Jeanne Bliss’s book on the Chief Customer Officer. I think these can apply in many walks of life, in and out of work.

• “Think small”
• “Worry about being better; bigger will take care of itself”
• “Think one customer at a time, and take care of each one the best way you can.”

How often do we try to build strategies from the top down and without the real customer context, needs and frustrations in mind? Starting at the frontline, listening to staff and listening to the individual customers is such a powerful way of collecting the most meaningful data on what you need to do next.
There will always be someone willing to put forward the next big thing but how will you know it will make a difference to the little things?

CCO, Strategy, Voice of the Customer, customer experience, listening | No Comments