Innovation and Measuring Business Planning Using Value Added Modeling

Vale Added Modeling (a.k.a VAM) is one of the hottest topics in business today. VAM is used to find and measure the most effective strategy, person, or approach for getting a desired outcome. In discussing the use of VAM, businesses often speak of finding innovative ways to do or conduct business effectively.  Most often businesses feel that VAM is achieved by presenting innovative programs and techniques that reduce the noises that outside elements may cause on desired outcomes without performing analysis to ensure value is effectively added.  However, what is often lost when using VAM, is measuring the effectiveness of innovation.

The classic example of VAM as an innovative practice is the development of hybrid cars. The technology of combining gas and electric power claim to produce a more energy efficient, fuel saving, and cost effective mode of transportation. While it may seem obvious that hybrid cars adds value to drivers’ life. Is the car indeed more cost effective than non-hybrid cars? If so, how much more effective are hybrid cars? Is the effective of hybrid cars enough that drivers feel satisfied in the product?

On the innovative side of the argument, the hybrids seem to be a no brainer. However, the true answer will not occur until this value added technology is measured over time. This is the beauty of VAM, which suggest measuring the effects of factors on desired outcomes overtime. In this case, measuring if factors associated with hybrid cars adds more value to the driver’s lives. To understand the effectiveness of hybrids compared to different types of non-hybrid cars (gas-powered and diesel-powered), we must take into account factors such as the cost of purchase, gas per mile, maintenance cost, and pollinates.

Given these factors, some have argued if hybrids are as good as the carmakers claim. Ann Job of MSN Autos reported that in a test by Consumer Reports magazine, which calculates its own fuel economy stats, noted that the Toyota Prius hybrid test car got 44 miles a gallon in real world driving, not the city/highway rating of 55 mpg that the government reports. While 44 mpg is still lower than most cars and the difference in the mpg of a hybrid is a reported 30% higher than like-sized non-hybrid; we still have to ask, what is the true value added? For instance, comparing the Primus to a VW Jetta TDI, is that there are greater value added on mpg. Further, Roy Rex of AOL Auto reports that hybrids are $1750 to $15,000 higher than like-size non-hybrid gas-powered cars. Even with tax breaks and some company incentives, is the difference in gas mileage enough to off set the price difference between hybrid and non-hybrid like-size cars?

Another question is whether than is a greater difference between hybrid and diesel-powered cars than between hybrid and gas-powered cars. The noticeable difference between hybrid and diesel cars is that hybrid cars are cleaner. But Ben Stewart of popular motors explains, “today’s diesels have been engineered to burn cleaner while still delivering impressive mileage.” This further brings to question, what is the true value of hybrid cars versus diesel cars?

The point being made here is not that hybrid technology does not provide more value. The point is that to truly understand the value added by this innovative approach, we must complete the VAM process by measuring the effects of factors (cost of purchase, gas per mile, maintenance cost, and pollinates) associated with hybrid cars against other cars. In this process, we might find that the hybrid is strong in many areas, but lacking in other areas.

Further more, while we can see how hybrids may add value to the driver’s (customer’s) life, VAM is more than just see what the customer values and producing a product based on that value. For years, the US auto industry listened to customers and produced bigger cars that were not cost-effective. The result is the collapses of the US auto industry. Because of this type of outcome, VAM is about sustaining customer satisfaction so to ensure that customers will return or the customer will lead to more sells. The best way to ensure this result is by developing VAM that produces innovative services and/or products; and ways of measuring the effectiveness of services, service delivery, and products over a period of time.

Why using statistics analysis is an important step in the VAM process?

We have all seen list of 10 effective ways to make a sale, or 10 effective ways to win customers. The burning question is how do we know the techniques presented are effective? In social science research, we ask are these approaches valid and reliable? This suggests, are these approaches accomplishing what they claiming, and can we rely on these techniques every time we go to make a sale. The best way to truly know if these approaches are effective is by statistically measuring the effects of these approaches on actual sales made.

In a VAM sense, we want not only the measure the effects of these techniques on sales, but to measure these techniques on multiple person over a period of time. In additional, we want to eliminate factors that may bias the effectiveness of the 10 effective ways to make a sell. Let’s say 5 of the 10 effective ways to sale are 1) Networking, 2) Respecting client’s time, 3) Listening to clients needs, 4) Product Knowledge, and 5) Sell customer only what they need. To measure the effectiveness of these techniques on sales growth overtime, it is importance to only focus on measuring the effects of techniques on sales by collecting data associated with sales. So, do not measure things like quality of product, product warrant, or specials associated with the products. By uses these factors, you are not measuring the value added by the sales techniques. You are measuring the value of the product. Additional, but adding these factors, you can bias the value of the sales technique.

Further, if you are interested in measuring the effectiveness of an innovative product, think about what sets you product a part from other similar products. Here, you do want to assess data associated with the product and not data on the approach of the salesperson. 

Keep in mind that statistically measuring the effects of factors on desired outcomes are not as simple as saying, in the first quarter the company sold ten products using the 10 techniques and this month the company sold 15 products using these 10 techniques. Like the situation with the hybrid car, you are not sure if all 10 techniques are effective, which technique produces the greater sales growth, or if a combination of difference techniques produced the greatest sales growth.

By developing effective or innovative approaches to developing a better product is a start to VAM process. However, it is key that companies continue the VAM process by analyzing data to ensure that they approach or product is 1) valued by the customer and 2) can be sustained over time.

For companies wrestling with implementing VAM, appropriate steps are needed to develop effective VAM to your business.

  1. Brainstorm to understand the strengths and weaknesses of reaching your desired outcomes,
  2. Develop plans to build on your strengths and improve on your weaknesses,
  3. Develop measurable factors (what makes the new improvements better) so to assess effects on your desired outcomes,
  4. Compare again benchmarks from prior years or quarters, and
  5. Use VAM statistical technical to determine if the method used for desired outcomes are total effective.

The Music Business – Mind Your Manners

In my travels I have been fortunate enough to be-friend some amazing people that were heavily involved in the music industry. One of those became a good friend of mine and she introduced me to some guys who were looking to put a band together.

They asked her if she would join and she said yes, but on one condition, and that condition was that she could bring me along too. I had never played live in a band before, I had never had a guitar or singing lesson, but luckily for me, she obviously had enough confidence in me. Her name is MaryAnne Rex, a very talented guitarist with a wicked sense of humour and is a great friend that would do anything for you. I will never forget what she did for me all those years ago because without her, I may never have achieved the things that I have.

The most important thing I remember she taught me was the discipline needed to work in the music industry.

  • How to dress when you are on stage
  • How to be reliable and not let anyone down
  • How important it was to be there no matter what
  • How to run your band as a business.    

How many times do you hear about successful bands that are now broke?, and usually it is because no-one really bothered to keep an eye on the money side of things.

The most important aspect of the discipline is ‘The Gig’. No matter what, you must be there. Rain, hail or shine, in sickness or in health, you must turn up to play.

You must also be respectful of the times set out by the venue manager when it comes to

  • loading in the sound and lighting gear
  • when they want the sound checks done
  • when your performance times are.

There is nothing worse than ticking off a venue manager which will lead to ticking off your agent, which will then lead to never working in the industry again. It is that simple.

You need to be professional at all times, but remember to have some fun too. I remember some of the most fun I have ever had is when we went on the road to do some mini tours around New South Wales. We did not get much sleep but we had heaps of fun.

Be prepared to make some sacrifices to achieve things in your band. The worst times are when you are dog tired or even sick. It does not matter, you have to be there. That is the type of discipline you will need.

My worst nightmare was having to ask the boss if I could leave early from work. He was the boss from hell and made things really challenging for me. One day, I had had enough and I resigned! There were a few other reasons at the time but I was positive I was making the right decision. A little risky? Yeah sure, but I was not going to fulfill my dream working full time in a post office.

Have you ever heard about the ladder of success? The music business is no different. Start at the bottom, even if it is against your better judgment, and work your way up. You never know who is in the audience at the worst gig in the worst little pub.

Working behind the scenes of a band is exciting too. There are many opportunities and lots of things to learn working as a sound engineer or lighting technician. What about as a tour manager or publicist?

I was lucky enough to get a job in the agency that represented my first band, ‘Backchat’ in Sydney. (The band my friend helped me get into). I had resigned from my government job and started at the agency two days a week rolling posters and doing the banking. Over a period of about 18 months, I was practically running the place. From that job, I joined another band, and in that band, I met my future husband. Just as well I resigned from that government job eh?

Just a little tip for you to remember. If you ever meet anyone that is even slightly famous, and they just happen to compliment you and strike up a conversation with you, don not forget to swap contact details. You never know where that could take you. I have kicked myself in the butt so many times over the years for letting an opportunity like that get away. The guy just happened to be a popular session musician who had many friendships with a lot of famous people. Big mistake!

Anyway, I hope you have a lot of fun, and learn everything you need to achieve your goals.

The Power Of Celebrities In Small Business Marketing

If you own and operate a small business, then you are missing the boat unless you are using celebrities in your small business marketing. Some may think this is silly? Some may not be too keen on celebrities.

For the savvy, this little technique is pure gold.

Let me explain this further.

Small Business Marketing and Celebrities:

I’m shocked.

That so many small business owners miss using celebrities in their marketing. No, I’m not talking about paying a boatload of benjamins to hire an A-list actress. Or shelling out bukoo-bucks to get the latest teen heart throb to plug your services.

That’s what big and bloated companies do.

What I’m referring to is cleverly piggybacking off celebrity events to drive your sales.

It’s easy to do.

Take Jimi Hendrix for example:

Did you know he was born in November?

Or that he keeled over in September?

Hmmm… how could you use these two dates to drive your business?

Let’s see…

How about throwing an event that pays tribute to either of these dates? Invite all your current customers. Have them bring a friend. Offer some free food and drinks. Give them a tour of your business. Collect their contact information. And then send an irresistible offer to party guests that have never tried your business.

And presto, you’ve just used Jimi Hendrix to grow your business.

Think that’s too easy?

It is easy.

Nobody said using celebrities had to be hard.

And what’s cool is every month there’s a celebrity opportunity waiting to be used in your dentist marketing. Where can you find these events? How can you use them?

Let’s answer these questions:

1. Celebrity Birthdays.

Every day there are dozens of celebrity birthdays. Do you know who’s born today, or how you can use a celebrity birthday to promote your product or service? You don’t have to say the celebrity endorses you. And do not put words into the celebrity’s mouth. But what’s wrong with throwing a sale all because your favorite celebrity has a birthday?

2. Celebrity Deaths.

Same goes for when a famous person died. Why not commemorate your favorite celebrity by offering a special “one day only” deal on the day they passed away?

3. Celebrity Milestones.

When did a famous movie get launched? When did an album go platinum? When did a famous author complete a book? These are all celebrity milestones you can use in your small business marketing.

Just look for opportunities.

And have fun.

Want to know why this stuff works?

One word:

Attention.

Getting and keeping your prospect’s attention is like trying to capture Tyrannosaurus Rex with a mayonnaise jar. And since people are fascinated with celebrities… this solves the biggest problem you’ll have in your small business marketing… GETTING ATTENTION.