Julia Cupman this week discusses how to drive excellence in companies.

I am always intrigued by what people think drives excellence in companies.  The common thread in everything that we are asked to do in our search for market intelligence is to find the nuggets and insights that show how companies can improve – how they can beat the competition.

The search for excellence has attracted many authors and ex-McKinsey consultant, Tom Peters, has written widely on the subject.  In his book "In Search Of Excellence" (1982), Peters nominated GM (among others) as a model of distinction.  A lot has happened since then and as we know, foreign competition and a lack of focus, perhaps tinged with some arrogance, have seen many of the paradigms of excellence fall from grace.

In his original work, Peters suggested eight themes result in excellence:

1. A bias for action, active decision making – ‘getting on with it’, for quick decision making and problem solving tends to avoid bureaucratic control.
2. Closeness to the customer – learning from the people served by the business.
3. Autonomy and entrepreneurship – fostering innovation and nurturing ‘champions’.
4. Productivity through people- treating rank and file employees as a source of quality.
5. Hands-on, value-driven – a management philosophy that guides everyday practice – management showing its commitment.
6. Stick to the knitting – stay with the business that you know.
7. Simple form, lean staff – some of the best companies have minimal HQ staff.
8. Simultaneous loose-tight properties – autonomy in shop-floor activities plus centralized values.

Like all good business gurus, Peters has developed his thinking, and authored an article recently in the Financial Times (29th August 2011), adding four further "obsessions" which he believes drive excellence.

1. Frontline managers – the equivalent of the sergeants in the army.  They are the foreman in the factory, the supervisor on the shop floor – the people who know an organization intimately and who are responsible for driving productivity.
2. Cross functional excellence – the importance of different departments working together and not against each other.
3. Strategic listening – the importance of listening.  Indeed listening to customers as well as to staff is so easy and yet so often companies plough on with their ear plugs in.
4. Meetings – the need not for fewer nor for more meetings, but for more actionable meetings, i.e. meetings should be used as a platform for boosting enthusiasm and motivating action.

Understanding what drives excellence in business is the Holy Grail.  Market research is not carried out to provide an elegant description of markets.  Rather it is the strategic listening that Peters refers to.  It is about understanding and spotting meanings; in particular, the opportunities that can provide a comparative advantage or help avoid a disaster.

I would like to add a fifth theme that will drive excellence: an obsession with intelligence – knowing more than the competition and using this knowledge more effectively than the competition.

During a recent global branding study for PPG Industries Inc., B2B International developed a set of questions and a unique algorithm, which led to the creation of a new tool providing the market’s perception of benefits and price on brand. PPG Industries – the multibillion-dollar supplier of paints, coatings, chemicals, glass and fibre glass – found the tool so useful, that B2B International branded it the Net Value Score (NVS), and has since used it in a number of studies carried out for the company’s other Fortune 500 clients.

The NVS is a metric that provides the market’s view on the perceived value offered by each company supplying a market. It can also provide the perceived value of a company’s different business units, indicating where the company’s value proposition is seen as the strongest and weakest.

The NVS is based on a calculation that is arrived at through asking just three questions in a market research survey. For each supplier, questions are asked about how the supplier compares relative to other suppliers in the market on (i) its product and service benefits, (ii) its pricing, and (iii) its total value. The data are then run through the algorithm to result in the Net Value Scores.

The tool illustrates the strength of a company’s brand relative to competitors, and indicates where more work is required to improve the level of perceived value – be it through better communicating certain benefits to specific market segments; better differentiating benefits so that they more strongly stand apart from those of competitors; or adjusting pricing so that prices are more in tune with the benefits offered. A company with an NVS which is significantly higher than others with which it competes will be one which enjoys a rising market share.

The NVS can also change the way a company thinks. A supplier is very aware of the benefits offered by its products or services, but these benefits only resonate with the market if people recognise them. In other words, perceptions are shaped by communications. Companies can therefore increase the level of perceived value they are seen to offer by selling on value (such as lifetime cost) as opposed to price. This in particular refers to the sales force and distributors who frequently talk price instead of value.

Patrick Kenny, Vice President of Corporate Marketing for PPG, states, “PPG Industries is fully committed to providing our customers with compelling value and so the NVS is a new metric that provides an ideal way to measure customer-experienced value. It is an excellent, adjacent metric to other popular customer advocacy scores that companies should embrace.”

B2B International is currently building a comprehensive databank of industry-specific Net Value Scores for benchmarking clients against other companies (in both similar and different industries), so that learnings can be shared from those who are performing strongly on perceived value.

Director Julia Cupman, Head of the company’s North American operations, states, “The Net Value Score is an example of our commitment to thought leadership. We hope more companies will recognise the importance of measuring perceived value and that they start benchmarking their performance with the NVS. One should not underestimate the power of this simple tool in providing critical metrics and research findings, which if acted on effectively, can lead to significant business success.”

To learn more about B2B International’s Net Value Score, please visit:

Net Value Score Website www.netvaluescore.com

Net Value Score White Paper: The Metric For Judging A Company’s Success
www.b2binternational.com/publications/white-papers/brand-value-research

In this week’s Thursday Night Insight, Julia Cupman draws the link between the simple act of apologizing, and increasing customer loyalty.

Have you ever been upset or angry by the words or actions of someone, but been ready to forgive and forget if only they could say sorry? As Elton John has sung numerous times, sorry seems to be the hardest word.

A couple of months ago, I returned to my apartment building to find 3 fire engines, 2 police cars, and an ambulance outside, and a lobby that was totally flooded with water. I later found out that a major water pipe had burst on the second floor, leaking 250,000 gallons of 180 degree water (the equivalent to a quarter of the amount of water in an Olympic sized swimming pool, but boiling)!

As you can imagine, this flood caused extensive damage to the building, in that it destroyed walls and flooring, and ruined the electrics – including the fire alarm system and all 5 elevators. As I live two thirds of the way up this 35 floor building, I was one of the many people who had to take the seemingly never-ending stairs for weeks, while our incompetent building management couldn’t arrange for the elevators to be fixed quickly.

In traipsing up and down the stairs each day, I noticed a common theme to the complaints of the residents around me: the building management hadn’t written to say sorry for the inconvenience caused. It occurred to me that anger was surmounting, not so much at the problem the building faced, but at management’s apparent inability to effectively resolve the problem.

As a market researcher, problem resolution is an issue I come across in virtually every customer satisfaction project I work on. There is always an angry respondent bitterly recounting how a problem was inadequately resolved by their supplier. It’s inevitable that in any company, problems will occur, but I have yet to come across an organization that has a procedure in place to respond to problems effectively. Indeed, it has been estimated that most companies spend around 98 percent of their time reacting to problems and less than 2 percent of their time preventing them.

Why do these companies struggle saying sorry? It’s probably because we live in a litigious society in which apologizing for an error or incident is synonymous with admitting liability. Rather than face expensive lawsuits, companies choose to deny, deflect, or defer responsibility. Anything but say sorry!

What these companies don’t realize is that an apology is actually a powerful relationship-building tool, for studies have shown that customers develop greater loyalty to a company if they have experienced problems that were satisfactorily resolved, than if they had never experienced a problem at all.

Of course resolving problems entails far more than simply apologizing. However, key drivers of customer satisfaction and loyalty are so often these smaller, softer things which seem so inconsequential and yet are so impactful. As for the management of my apartment building, it wouldn’t have cost them anything to send an apologetic e-mail to residents. Words are indeed cheap, but when it comes to illustrating the importance and value of your customers, saying sorry is priceless.

Every company needs to innovate to survive. This means constantly enhancing existing products and services, and developing new ones – all to drive revenue and profits, to illustrate a market leadership position, and to stay ahead of the competition.

A new white paper by Julia Cupman can be viewed on this subject at http://www.b2binternational.com/publications/white-papers/product-development-research/

Three key takeaways that are drawn from this paper include the following:

Market research can unleash new ideas and opportunities for product development. It has been said that 80% of industrial innovations have come from customers themselves. Companies that do not actively listen to the market could, therefore, be ignoring unmet needs and closing their ears to new product opportunities.

Market research can help you maximize revenues of a product or service. Market research need not cover only product enhancements or new product development. Market research can provide answers on the size of the market, its growth prospects, the distribution channels, optimum pricing, and factors influencing the purchasing decision.

Market research provides insurance, reducing business risk. After apparently not having conducted market research, FedEx lost $340 million on a new Zap mail offering, and DuPont lost an estimated $100 million on a new synthetic leather product, Corfam. In order to avoid embarrassing and costly mistakes such as these, it’s understandable why so many companies turn to disciplined market research to test and validate concepts and prototypes prior to new product launch.