Abonar’s Blog

Warning – rant enclosed!
I just got back from a family vacation in San Diego. We spent a week going to the Zoo, Lego Land, Disneyland and Sea World. The experience was full of fun and we made a lot of great memories. This blog is about the trip there, and how our national airline treated us as customers. First, the facts:

• The initial plan was to fly from Saskatoon to Vancouver, then clear customs and fly to San Diego.
• In Saskatoon, the jet arrived at the gate at 7:20 am, instead of boarding at 6:35 am. After boarding, the pilot announced an engine valve problem and he was attempting to fix this by revving the engine. Once this was successful, he announced that we used too much fuel and had to refuel. Once we refueled, we took off at 9:00 am, 2 hours behind schedule.
• Once in the air, I asked the flight attendant about our options, as we would now miss our connecting flight out of Vancouver. She contacted customer service in Vancouver, and told us we would have a rep waiting for us.
• In Vancouver, the customer service rep handed us tickets to Los Angeles and told us to go on the Internet to book a shuttle to San Diego. He told us that our only alternative was to wait until the next day to fly to San Diego. We had under an hour to get through customs and get to the gate so we took the tickets.
• Once in Los Angeles, we contacted Air Canada customer service. They arranged a shuttle to the San Diego Airport. I ended up paying the shuttle driver $70 to take us directly to our hotel.
• When I got back, I decided to send a complaint. After I typed in the feedback on their website, I hit send. Guess what? I received a “Sorry, we couldn’t complete your request” response. I then retyped it (saving it in Word) and resent it. After the third try, it finally got through. The automated email reply said they would get back to me within 10 business days.

Me with a couple of friends I made on vacation.

In my complaint I asked for 3 things:

• Reimbursement of the extra $70 I paid to get to my hotel. A travel voucher is unacceptable, because that presumes that I will book with Air Canada in the future.
• An acknowledgment that giving a customer the choice between the wrong city and wrong date is unacceptable customer service.
• If they wished, they could explain why I should consider booking flights with Air Canada in the future.

I think that the root cause of this mess is Air Canada’s strategy of cutting costs at the peril of customer satisfaction. The jet was in the hangar. The only reason for not getting it to the gate on time is not enough bodies or time to get the jet ready for it’s first flight of the day.  When WestJet has run into problems, they book customers on competitors’ flights to get them where they are going.  This seems to be verboten at Air Canada. When I suggested that to the customer service agent, he looked at me like I was speaking a different language.
All of my hard feelings could have been averted with a simple acknowledgment of the trouble they caused. So far, no apology has been offered.
After this and other experiences with this airline, I infer that their company motto is “Nothing, not even common sense, will keep us from implementing cost cutting.” Compare that to WestJet’s apparent motto of “We will compete on price, but we’ll get you where you are going.” Or “We act like you have a choice in airlines.”
To be fair to Air Canada, they have not responded to my complaint. When they do, I’ll share it on this blog. My prediction is they will send me a $70 travel voucher along with a paragraph or two to explain their commitment to…blah blah blah. If that is the case I will send the voucher to the first person to send me a self-addressed, stamped envelope to our mail address.
Misery loves company. If you would like to share your airline horror stories in the comments, I’d like to read them. In the mean time, WestJet, please expand your route schedule so I don’t have to deal with these clowns anymore.

There was an interesting article in the New York Times about First Quality Music, which is owned by the Sullivan family and manufactures banjos, guitars, parts and accessories in Louisville, Kentucky. The company was having financial problems that had been intensified by the recent recession. One of the family members had read “Profits Aren’t Everything, They’re The Only Thing” by George Cloutier. Mr. Cloutier is the founder of American Management Services, a consulting firm that specializes in business turnarounds. After reading the book, the Sullivans decided to pay American Management Services $500 to give them a preliminary assessment.

The assessment found many areas of improvement but the consultant’s fee for continuing the work was $170,000. The Sullivans could either pay this fee and hire the consultant or they could use the preliminary assessment as a starting point and do the work themselves. The Sullivans decided to scrape together the money to hire the consultant. The consultant worked with them for 5 months during which he would visit them on site a few times a week. By the end of 2010, they were breaking even with a plan to reach profitability. This was in contrast to the large loss that had been projected at the start of 2010.

Matthew Stewart, a former consultant, was quoted in the article:

“If the long-term problem is that the family has exceeded its managerial capabilities, then getting a list of solutions from a management consultant — however accurate or perfect a list it is — won’t solve the problem. When the consultant leaves, they’ll still be faced with the task of getting the job done.”

I think Mr. Stewart makes a very good point that reflects on whether a business owner who hires a consultant to fix a problem like this gets his or her money’s worth. I’m not familiar with American Management Services and I haven’t read Mr. Cloutier’s book but from the information put forward in the article, it appears that the Sullivans got more that a quick fix. They received an education that improved their management abilities. The consultant spent significant time working with them and there was a transfer of knowledge.

This is how the the best consulting relationships should work. The company hiring the consultant should have a better level of knowledge regarding the problem at the end of the project than when it started. This requires a consultant who is willing to teach as things move along but it also requires a business owner who is willing to learn. A surprisingly large number of consulting engagements fail because either the client doesn’t take the advice or the client hasn’t learned enough to keep the momentum going on his or her own.

So, is a consultant worth $170,000? It depends. By the account given in the article, the Sullivans likely got a very good deal. In a different situation where the consultant carefully guards his expertise or a business owner can’t be bothered to learn, the price is much too high. The good news is that the business owner has a lot of control over the success of the project. Hire the right consultant and learn as much as you can and the dividends will repay the investment in the consultant’s fee many times over.

Are you sick and tired of dealing with disrespectful clients? Wouldn’t it be nice to have customers who value what you offer, pay on time, and do their part in the client/seller relationship? Well, according to John Jantsch, author of Duct Tape Marketing, “when you properly target your clients, you will discover that you no longer have to work with jerks.” This might sound unrealistic but I think its something that can be accomplished if done right. Here are some tips from Duct Tape Marketing, on finding your ideal client.

1. The first thing you need to do is to create a picture of your ideal prospect. If you don’t know whom you’re selling to, you decrease your chance of attracting your ideal client. A good way to start is to take a close look at the type of customers you’ve dealt with in the past. What are their similarities? What are their differences? Create a database of these customers and jot down detailed characteristics of each individual or company. You might notice that a group of your customers have a lot in common.
2. Understand how your customers make their buying decisions. This might be difficult to do, but if you’re able to learn a little bit more about buying habits, you’ll be able to better target your clients.
3. Try to find the most effective ways of communicating with your ideal prospects. What promotion methods have you used in the past? Did you reach them through radio ads, billboards, personal networking, etc? What worked? What didn’t? This information will help you uncover effective ways to reach your ideal client.
4. Get people to know you, like you and trust your business. Customers prefer to buy things they know, like and trust. That’s the power of branding. Try to build relationships with your customers and earn their trust with your products and services. Differentiate yourself from others by carrying your personality and values out through your employees. Be consistent and pay attention to what your customers want. If they know that you care, they will like and trust you better.

These techniques should help you get started in finding your ideal client and target market. At the end of the day, if you’re not able to reach your customers, you have no business. It’s time you started to get to know them better. Good luck in your search.

Expert advice is a huge industry. Today, there is an endless supply of experts that promise to solve your problems in the most modern, elegant way possible. Many experts have their clients best interests at heart and work to solve their problems as they appear. Unfortunately, there are experts out there that view their clients as experimental subjects, using them to conduct research. This research doesn’t necessarily align with their clients’ best interest. If you are unlucky enough to hire this type of expert, you are in for an expensive life lesson. On the other hand, the right expertise can be the best investment you ever make. How you can you get the most from your expert?

If your expert wears this button unironically, head for the door.

Here’s how I learned my lesson the hard way. Back in my days at the pulp mill, we had a change in personnel in the bleach plant (the bleach plant turns wood pulp from brown, like grocery bags, to white, like photocopy paper). The new people were technically capable, but new to this technology. Queue our expert from head office. This guy promised that we could save $5 per tonne of pulp (about $1.5 million per year) if we adopted his bleach recipe. He guaranteed the same brightness (degree of whiteness of the pulp) as what we were running. Saving money while keeping customers happy looked to be a great combination. This seemed like a no-brainer. After we took his advice, we found out it wasn’t that simple. First, the fact that this expert didn’t step foot in our mill for the previous five years should have been a red flag. Second, the bleach plant operators openly protested the new recipe. To defend the expert and our decision, we could rationalize that the old management and the operators were fearful of change. That wasn’t the case. So, how did we do?
The results of the change were mixed. We achieved the cost savings and the brightness targets. However, the change was a disaster. This was because the 10,000 tonnes of pulp we made was too dirty to be sold at any price. For those of you keeping score, the sales price of pulp was about $700 per tonne. When faced with this inconvenient fact, the expert told us that bleaching wasn’t the same thing as cleaning pulp. In other words, he was responsible for the savings but was not responsible for the unsaleable pulp. He walked away and declared victory. We changed back to our old recipe, a little wiser from our experience. We later found out that he tried this same project years earlier and was banned from our site.
This is a sad story, but not unique. How can you avoid an expensive, frustrating experience when you hire an expert? Here’s how:
Before you hire the expert, ask for his client list. If he is as valuable as he claims, he should be happy to provide this.

• Make him define your problem and a method to solve it. This makes him think about a customized solution instead of one off the shelf.
• When you hire him, clearly set out expectations and measures for success. If the cure kills the patient, it isn’t acceptable.
• Don’t let your expert pat you on the head and lecture you. You paid for the service. He is your advisor, not your teacher.
• Don’t let him define success. The bad experts will take credit for benefits while ignoring the defects. The true measure is whether or not you are better off from your decision.

This might seem like a strange blog post from a business consultant. I make my living by being an expert. The reason is bad experts make it harder for me to help my clients. More importantly, giving bad advice is bad business. I expect anybody hiring me to hold me to these standards. If you hold your expert to them, you can achieve the results you are paying for.

I’ve seen many cases of this troubling problem. You have an employee that is excellent at his or her job, but is a nightmare to deal with. It’s easy to feel trapped by this situation. On one hand, you need your star for his high performance. On the other, his diva attitude is raising hell with the rest of your team. How do you solve this?

The first approach is to assess how much of a star your star is. A lot of the time, reputations are made on self-promotion or power hoarding. If your star doesn’t share information or takes credit for group achievements, you have a pretty easy decision to make. He cleans up his act or is gone.

Even if your star is as valuable as he claims, nobody is irreplaceable. As a manager, you must tell the star that if he values his position and status, he needs to conform to your code of conduct. This can’t be an idle threat. You must hold the star accountable or this tactic backfires. In addition, you must have the support of upper management or your own job could be at risk.
If you follow this strategy, you will get one of two results. The first is the most preferable: your star maintains his high performance and works well with the team. This usually doesn’t happen. The more likely result is an ugly dispute resulting in the exit of your star. This is still better than doing nothing. You will find that the rest of your team:

• has skills that rival that of the star.
• new respect for your ability to manage.
• renewed commitment to work for you, since you have put the interests of the team before the star.

For an example of this dynamic, we only need to look to this year’s NFL season. Randy Moss is the prototypical star-diva. His combination of size, speed and great hands has made him one of the top wide receivers in the game for a decade. As he started this year with the New England Patriots, he publicly complained that he didn’t have a contract-extension offer. He threatened that this would be his last year with the club and requested a trade. This was a power move in an organization that does not tolerate this. The Patriots’ response was to trade him to Minnesota for a third-round draft pick. Their record since the trade: 7 wins, 1 loss.

Randy Moss, great receiver, greater diva.

Minnesota came to the opposite conclusion when they acquired Moss. They were willing to put up with his antics if he could deliver wins. Almost immediately he started trouble by asking the owner to fire the coach, Brad Childress. In the four games he played for Minnesota, the Vikings went 1-3. Childress was fired shortly after.

Now Moss is toiling on the roster of the Tennessee Titans, averaging one catch per game and not making any sort of impact.

So there you have it. You can’t succeed by placing your hopes with your star and neglecting the rest of your team. If you have any doubt that you can succeed without your star, look to the NHL. After the Edmonton Oilers traded Wayne Gretzky to the L. A. Kings, they won two more Stanley Cups. Gretzky never won another.

photo © 2010 Louise Docker | more info (via: Wylio)

I think business plans get a bad rap. There’s a movement out there that says that business plans are a waste of time because they can’t accurately predict the future. For this reason, these people will tell you to not bother doing one. They’re missing the bigger picture.

It’s true that the future is very difficult to predict. Nassim Nicholas Taleb makes this point very effectively in his book, The Black Swan. However, being unable to accurately predict the future does not mean that it is a waste of time to think about how you are going to approach a situation, given the best information available at the time.

Business planning has a lot of value as a thinking exercise. I’ve seen lot of situations where business owners doomed their business from the beginning because they did not bother to plan out their idea. They made mistakes that could have been avoided if they had been discovered in the planning stage. Sixty percent of all businesses fail before the five year mark. A considerable number of these failures were destined at the outset because of major flaws in their business models.

I think business plans have a bad reputation with some people because of some high profile failures where the management team followed the business plan to the letter without considering changed circumstances on the ground. One such failure was recently documented in Steve Blank’s excellent blog post about Iridium. The company had a long product development cycle and did not take into account a changing competitive landscape. They stuck to their original plan destroyed $5 billion of shareholder value.

By it’s very nature, a business plan needs a feedback loop. As new information is obtained, the assumptions used in the business plan need to change to reflect the new reality. A big enough change might require a new strategy to be successful. This is why venture capitalists will tell you that given a choice of funding an excellent idea with a weak team or a weak idea with an excellent team, they will fund the better team. The strong team will be better able to adapt to changing conditions and modify their original business model as needed.

Iridium could have had a better outcome if they would have made adjustments to their plan as reality started to change around them. If they would have followed Steve Blank’s customer development process they would have undoubted been better off due to the feedback loops he has built into his model. It wasn’t the planning that killed Iridium, it was following the original plan right off a cliff.

Last week, I read a few articles written by Paul Hunt on pricing strategies for companies. His view on pricing is interesting and I found some points that may be helpful for your business.

Most companies have yearly growth ambitions. Lets say your goal in 2011 is to increase profits by 12.5%. Now, where do you start? How will you achieve this goal? Most managers and business owners will begin by looking at cost cutting strategies and use it as a primary tactic to increase profits. But few look at increasing prices as a way to generate more profits. Hunt states that “if the average company captured 1% more in price, without any change in volume and costs, profit would climb by 12.5%.” But the question is, is there room to increase prices without negatively affecting sales? It can’t be that simple right?

Before you start tinkering with price increases take a look at your own pricing strategy, if you even have one. Most managers and business owners set prices at levels comparable to competitor prices. That may be the extent of your pricing strategy research. Think about it, why is your product/service priced where it is? How price sensitive are your consumers? Have you ever conducted any research on product pricing?

Many variables will factor into whether price changes benefit your company or not. And it’s understandable if you think your business has little control over prices. But there are more variables involved than you might be aware of. Research shows that once you reach certain pricing thresholds, slight increases in price will not lower sales. For example, a consumer-packaged-goods study showed that demand for a product was higher at $1.09 than it was at $1.05. Furthermore, demand remained the same when prices were increased to $1.19, and $1.29. These consumers were indifferent between paying $1.09 or $1.29 and actually purchased more goods when the price was increased from $1.05 to $1.09. So, it’s important to understand that pricing threshold levels exist because you might be missing out on extra cash. But there are two sides to this coin. What I didn’t mention first is that, in this study, when prices were initially increased above 99 cents demand plummeted by 300%. 99 cents was the first threshold level for consumers and a slight increase in price was detrimental to sales.

Research also shows that prices ending in nine positively influence sales. According to Dr Vinay Kanetkar, “prices ending in nine make a positive difference to sales in many situations. In fact, in North America, research has found that prices ending in nine generate 12% more sales on average than a price that ends in either eight or zero.” However, there are notable exceptions. Walmart, widely known for its success with low cost products, often ends it prices with sevens. I would assume that Walmart has conducted thorough research on pricing strategies so seven may be a number to use. Keep in mind that cultural differences also play a role in pricing strategies. For example, in China, there is a preference for numbers ending in eight.

So where does this leave us? End your prices in nines or sevens and find your pricing threshold level? Easier said than done right. I think the first step is to research your market. Psychology plays a great role in consumer purchasing patterns so learn more about your clientele. Play with promotional pricing strategies with different client groups and see what works and what doesn’t. Research pricing strategies and see what the experts have to say. Your business may have room to increase prices and capture that extra revenue, but make your decision based on knowledge and solid reasoning. I hope this helps. Happy pricing!

Since Halloween is just around the corner, it fits to have a scary story for a blog post. Anybody following the Canadian business scene is at least slightly aware of BHP Billiton’s takeover bid of PotashCorp. In Saskatchewan, the debate has taken a very political turn, with people dredging up arguments based on ideology.
The rallying cry “Potash belongs to the people, not the company” has been stated by many a pundit. It has also rehashed the Crown Corporation debate. Some revisionist historians state that taking this company public in 1989 was the worst economic decision Saskatchewan has ever made. Unlike these people, I am not so bold to state that PotashCorp would be the same company today if it were never sold.
So what is the big deal about this takeover bid? The Conference Board of Canada released a report showing the effect of the proposed bid. It determined that BHP would take advantage of incentives to reduce government payments by $2 billion over the next 10 years. This sounds like a lot, but BHP would only be taking advantage of incentives in place for any existing potash producer. The report bases these findings on the assumption that BHP will continue to develop it’s Jansen Lake mine, regardless of the outcome on the federal government’s review of the buyout. If BHP is blocked from acquiring PotashCorp, they may rethink their entire potash play.
While there is no doubt that this is a big story for the province and the country, what should we be concerned about?

• Getting ripped off by potash companies — The Saskatchewan Government has a royalty system based on the profit of the company as well as the volume of product mined. The government has the ability to revisit these rates to protect its interest.
• Poor working conditions — Any company working in the Province has to abide by the laws here. They have to compete with other companies for talent. PotashCorp and BHP will likely be very similar in their approach to attracting labour.
• Poor corporate citizen — Each company has their own policy on giving back to communities they do business in.
• Jobs moving out of the province — This is a risk in any industry. People worried about head office jobs are probably not aware that many of these jobs are currently based in Chicago. Both PotashCorp and BHP have made public promises to increase head office jobs.

These are the fears I think are valid in this situation. Insightrix did a survey of Saskatchewan resident’s views on the proposed takeover. The findings were:
A new online poll conducted by Insightrix Research Inc. on behalf of CJME and CKOM radio shows that 55% of Saskatchewan residents either strongly oppose (28%) or somewhat oppose (27%) BHP Billiton acquiring PotashCorp in its recently announced hostile takeover attempt. In contrast, only 14% support such a move by BHP Billiton, while 22% are indifferent on the issue and another 10% are unsure on the matter.

This shows a lot of resistance to the plan. However, the people surveyed weren’t exactly up to speed on the current situation:
It is noted however, that many respondents appear unfamiliar with PotashCorp’s current mix of investors, given that 39% of those who oppose the acquisition say they want the company to remain Canadian / Saskatchewan owned despite the fact that currently, a minority (approximately 30%) of the ownership in the fertilizer company is from Canadian sources. Further, when specifically asked about the ownership structure of PotashCorp in this survey, 23% of survey respondents believe it is still a Crown Corporation. In fact, only 53% correctly identify that the fertilizer company is actually a publicly traded firm. One in ten (9%) believe it to be a privately held organization and another 15% admit they have no idea of PotashCorp’s ownership structure.

Since both companies are making promises to the Saskatchewan public, it’s good policy for the government to remain coy. In the end, the deal will hinge on BHP and PotashCorp setting a price that works for both sides. Only at that point, the government should clarify its position. Going forward, Saskatchewan will benefit the most by having this resource managed by professionals that are motivated to maximize profits and economic activity.

I recently saw The Social Network, which is the story of how Mark Zuckerberg started Facebook. The movie has a number of valuable lessons for entrepreneurs but I think the most poignant one involves Cameron and Tyler Winklevoss and Divya Narendra. They had allegedly hired Zuckerberg to finish work on the HarvardConnection, a social network for Harvard students. He agreed to do the work but prioritized his efforts towards building The Facebook. The Winklevoss twins and Narenda later sued Zuckerberg and Facebook, saying he had stolen their idea.

I think this illustrates the point that often made by venture capitalists; that having a good idea is not enough. Implementing the idea is everything. The partners had been working on the HarvardConnect concept for two years by the time they hired Zuckerberg. They had hired a series of students to build the site because none of the partners had programming skills. Building the site was important but not the first priority for any of them. In contrast, Zuckerberg built The Facebook in less than a month. Whether he stole the idea or not, he made it a reality very quickly.

There are many people out there with good ideas but for one reason or another they aren’t able to bring them to life. I think this ability is one of the key things that separates entrepreneurs from the rest of the population. Entrepreneurs will make the effort and take the risk to implement their vision. There are many people out there who would make good entrepreneurs if they could just get started. They need some of the initial barriers to entry lowered so that taking the first step doesn’t seem so scary.

If you’re a budding entrepreneur I encourage you to take the first step. Doing some research and analysis about your idea doesn’t have to cost a fortune and the risk is minimal. Why not take that first step and investigate whether your idea could be turned into a business? As venture capitalist Mark Suster says, JFDI.