Be More Successful in Testing Value-Enhancing Business Model Innovations

Here's a list of ways to diagnose how you can improve on developing new business models that deliver more value at the same price while increasing your profits.

What went wrong with the last 25 volume-building tests your company ran that did not work as well as you expected?

Organizations are like individuals, and often show consistent good and bad habits. Start by understanding what your road blocks have been, and you are likely to begin noticing patterns. If you don't have documents that capture this information, simply spend some time talking with those who were involved or were affected by the tests. Be sure to include at least the company's employees, customers, and suppliers who were involved.

What are the patterns, if any, of problems that were encountered in implementing the tests?

Botched implementation is usually present in volume building tests. One of my favorite examples is a consumer product called Wine 'n Dine which debuted in test market during the 1970s. The product's concept was to create a more upscale and tastier version of Hamburger Helper, at a slightly higher price.

You would buy a box that contains some cooking wine, some noodles, and a powdered sauce. Add fresh ingredients like a little meat or vegetables and water or milk, and heat up. Voila! You have a treat for the adults in the family at a value price.

From the time the product was conceived and tested, it was clear that only a small price premium could be charged. In the meantime, the costs of noodles, packaging, and wine soared during the high inflation following the oil price shock of the early 1970s.

In development, the quality kept being cut . . . while the price was increased. By the time the product was ready for test, it was very expensive and produced a very low quality entree. Hamburger Helper tasted a lot better and was much cheaper.

The group of people who ran this test had had other failures where the test failed to be consistent with the concept that had been researched with consumers. Their approach of changing the test mid-process in ways that were inconsistent with the opportunity was a pattern that needed to be remedied.

How can you overcome the habits that probably caused the unsuccessful patterns?

In the example of the new product being adulterated away from the opportunity, clearly the company lacked a development process that would prevent that. Any change in pricing or formulation needed to be constrained within certain guidelines. If the individuals running the test could not do that for themselves, a formal review process involving those they reported to was needed that would add that discipline for them.

Where could each test go wrong?

In deciding which tests to pursue, you will notice that some tests have dozens of items that could trip up the test results. Others, meanwhile, will have few. Be cautious about taking on the more delicate tests. Chances are that you will not be able to implement them well enough to learn what needs to be done to expand volume.

What has been your success rate of implementing the key changes involved?

Here is where a lot of people fool themselves. Let's say that you have 15 things to do where you are successful around 90 percent of the time. Does that mean that your chances of success are 90 percent? Actually, no. Each element probably affects the success of each other element. If that's the case, your likelihood of success is less than 20 percent (0.9 to the 15th power).

Let's take another case, where you are 90 percent likely to succeed in two key tasks, and 20 percent likely to succeed at the third. If all three are needed, your likelihood of success is not 67 percent (the average of the three) but less than 20 percent again (0.9 X 0.9 X 0.2).

If you have a low likelihood of success with a test because of one or two implementation vulnerabilities, what can you do to improve the odds?

Sometimes, the solution is as simple as getting some outside help in these areas. Realizing that your overall opportunity to make millions is at risk, it will become apparent that it may be worth spending extra tens of thousands on the test to give it a decent chance to succeed. Otherwise, you may well be better off not doing this test. You will probably will learn little, the time and money will be gone, and you will have missed some other opportunity that you could have grasped.

Most companies will find that they only need to successfully implement one out of 50 or 100 tests for the whole program to pay for itself within two years of starting. Tests that fail to succeed because of implementation problems just slow you down.

Have you eliminated conflicts of interest in the tests you are considering?

Tests are delicate things, and often involve a lot of work for little recognition or reward. For example, in a tough year, salespeople may be at risk not only for bonuses . . . but also for their very jobs. If you load too many tests on them, you have to assume that the effort will go towards the quotas they must meet in what they normally do before much attention will go into the test.

If you want them to spend 50 percent of their efforts on the test, though, you have better adjust the compensation and evaluation process that year to reward them accordingly. If you cannot eliminate these conflicts, you will have to assess the individual commitment levels that the individuals feel above their own self interests.

Have you reduced the conflict with "standard operating procedures" for the test?

Tests usually require fast response, agility, and good communications. Most companies have just the opposite, wanting to make it hard to make an inappropriate change. Unless you loosen up the normal rules for the test operators, they will be stymied and stifled by the usual rules. If you cannot handle this in any other way, a potential solution is to set up a temporary stand-alone organization to run the test that is exempt for the usual rules.

About the Author

Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .

Related posts:

• Develop Effective Managers and Leadership
• The Importance Of Research When Obtaining Business Insurance
• The Three Steps to Recession-Proofing Your Business
• Big Ideas for Small Business: Cross Training Your Staff
• Who Else Wants To Get Rich Quick & Make Quick Money Online

Open Your Horizons to the Many Forms of Value

While meeting with the CEOs and senior executives of many companies that have provided extra value at the same price, I was impressed with the large variety of ways that more value can be added. Even more impressive was that organizations who were good at this were ignoring most choices that others were finding to be helpful.

Seeing the many choices and single organization myopia about which choices to consider, I've organized them for you into categories to help stimulate your mind by focusing your attention in the most productive areas that others have experienced. In sharing this secret, be sure to appreciate that there are probably many other productive areas that are not yet known to us. So keep an open mind about where to find new advantages for customers.

To begin with, who will experience and enjoy the additional benefit? First, you can do something that only benefits the customer. Second, you can extend increased value just to the customers' customers. Third, you can go beyond those important people all the way through to benefit just the ultimate consumer or user. Fourth, you can create new connections to each of these people through the new benefits you offer.

Obviously, if you can find benefits that reach all these groups from a single change, you have located a most useful opportunity. By always addressing the full reach of benefits and their interconnections between chains of customers, you will probably begin to realize that some benefits that you have been choosing not to offer are potentially more important than you had previously realized. For example, your market share may be blocked by a downstream customer not being able to sell into an account that has a 70 percent market share. Help your downstream customer open up that account, and your volume could go up by several hundred percent over time.

Consider book selling. Prior to 1990, they were primarily a place to browse for books you might want to read and to pick out your next selection. Larger stores offered more selection. Smaller stores usually offered more book-knowledgeable staffs.

Then newer chain bookstores began to copy some independent bookstores and offer comfortable furniture for people to nestle in while they browsed. This seating was later expanded to include cafes where browsing could be conducted in even more comfort by providing room to spread out and while enjoying coffee and snacks priced like what Starbucks offers.

Eventually, people who work at home began to use these locations as temporary meeting rooms and as places to take work breaks. As bookstore cafes began to add electrical outlets, some customers next began doing their e-mail there using laptop computers with wireless connections. From those laptop computers, the customers could also order books on-line from the retailer's Web site.

As a result, the value of a trip to the bookstore kept increasing and the number of companies benefiting from one person's visit also grew, while the prices for books there remained the same as bookstores that did not offer these new benefits.

Then consider within the universe of each person who gets the benefit, what type of benefit is it? In our time-crunched society, many people favor products and services that take less time to use.

Customers at theme parks have typically struggled with long lines for their favorite attractions. Most of the day seems to be spent winding back and forth in line rather than experiencing the attractions. In recent years, many such parks offer the opportunity to secure an appointment for the most popular attractions. When you arrive, you spend 10 minutes in line rather than an hour. Attendance predictably increases after such innovations increase value at the same price.

For a business customer, helping your customer add new customers and more volume with existing customers will usually be the greatest benefit. For example, in the high technology business areas where new products have short lives, cutting elapsed time is often more important than saving the total hours involved in a process.

Every month shaved from elapsed development time, for example, can create tens of millions of dollars of increased sales. As a result, those who help their customers' customers get to market fastest will gain market share. In recent years, those who supply semiconductor design software, technology, equipment, and services have focused on reducing customers' elapsed time to market with new products.

Sometimes, allowing users to get more benefits is the only issue involved in accelerating market growth rates, and customer and company market shares. For instance, electronic devices are frequently limited by their battery lives. Few wish to carry around extra batteries and replace them, so the devices are often unused when the batteries run down. When Linear Technology began to design chips that extended battery life by being more stingy in power consumption, the company accelerated the purchase and use of all the portable devices that employed this new technology. Naturally, the demand for its chips rose, as well.

About the Author

Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .

Related posts:

• Develop Effective Managers and Leadership
• The Importance Of Research When Obtaining Business Insurance
• The Three Steps to Recession-Proofing Your Business
• Big Ideas for Small Business: Cross Training Your Staff
• Who Else Wants To Get Rich Quick & Make Quick Money Online