Saturday, July 17, 2010

Book Review: "Performance Dashboards and Analysis for Value Creation" by Jack Alexander

4 Stars (Out of 5)

The following is a book review of "Performance Dashboards and Analysis for Value Creation" by Jack Alexander. The book was first published in 2007 by John Wiley & Sons, Inc.

This book was written for individuals at all levels of the enterprise to show conceptual links between operating performance, financial measures, and shareholder value; and show how dashboards can be built to effectively track performance and manage the enterprise. The book is clearly written, uses clear examples and is written with an academic and systematic style.

"Performance Dashboards" has three parts which I will call introduction to finance, value driver dashboards, and practical matters. The intro to finance section summarizes the fundamentals of finance and valuation concepts for those without a financial background so they can follow parts two and three. The value driver dashboard section devotes a chapter to breaking down each of the drivers of shareholder value and showing how metric dashboards can be created to manage the drivers. The practical matters section discusses some of the issues that come along with introducing a new tool to an organization and how to make sure to be successful. The book also comes with a CD-ROM that is full of spreadsheets (dashboards) that were used as examples throughout the text.

The only criticism that I have of the book is that it is largely focused on metrics for businesses that produce physical products (or goods) and it would have been nice to see a chapter devoted metrics and dashboards for businesses that produce service products. With this said, the high-level business metrics are there and maybe it felt that managers of service companies should be able to drill down another level to create the dashboards and metrics that make the most sense for their particular business.

In Summary, "Performance Dashboards and Analysis for Value Creation" is a great book for individuals at all levels of the enterprise who want to see how the multitude of business metrics fit together and can be use to drive shareholder value.

Friday, July 9, 2010

Book Review: "Designing and Delivering Superior Customer Value" by Weinstein and Johnson

5 Stars (Out of 5)

The following is a book review of "Designing and Delivering Superior Customer Value: Concepts, Cases, and Applications" by Art Weinstein and William Johnson. The book was first published in 1999 by CRC Press.

"Designing and Delivering Superior Customer Value" was written to serve as a text for MBA students on the concepts and theories of customer value, but would serve as an excellent read for general managers who are striving to make step changes in products and services. The book goes a step further than many other books on customer value as it not only proposes a framework and supporting logic (where most books on the subject stop), but backs up the propositions with real world data and several case studies (half the book is applications and case studies). The book is clearly written, has an excellent bibliography, and uses real-world examples to illustrate main points.

One of the major contributions of this book is that it suggests a relationship between customer value and Total Quality Management (TQM), which was a continuous improvement initiative the proceeded Six Sigma. Indeed, one of the major criticisms of traditional Six Sigma is that it focuses largely on cost savings and forgets to consider improvements in customer value. The authors state it clearly: The losers in the quality battle will be those who attempt to do things right, while the winners will be the organizations that learn to do the right things.

The book serves well as a foundational piece as the methods and tools are largely qualitative, but those interested in the latest analytical techniques that include quantifying and forecasting value metrics may want to seek another book on the subject. Another consideration is that even though the words "Designing and Delivering" show up in the title, the book is largely focused on delivering, i.e. the processes that make up the "service" side of the business and how they contribute to customer value.

In summary, "Designing and Delivering Superior Customer Value" is an excellent contribution to the area of Value Driven Management and is highly recommended for marketing and general managers. This book would also be a good addition to the library of quality managers because of the attention given to the link between customer value and quality.

Thursday, July 8, 2010

Book Review: "Value Driven Management" by Pohlman & Gardiner

5 Stars (Out of 5)

The following is a book review of "Value Driven Management: How to Create and Maximize Value Over Time for Organizational Success" by Randolph A. Pohlman & Gareth S. Gardiner. The book was first published in 2000 by the American Management Association (AMACOM).

"Value Driven Management" was written for managers at all levels of the organization who want an intellectual and philosophical foundation of how to think about business. Namely, the book focuses on why its every employee's role to create value for eight fundamental stakeholders: external, the overall organization, employees, customers, suppliers, third-parties, owners, and competitors. The book is clearly written, has an excellent bibliography, uses real-world examples to illustrate main points, and is a very quick read (can be read on a short flight).

The authors admit that the book does not offer a simple formula for calculating value, but is intended to "represent a running start toward the successful implementation and use of the principles of Value Driven Management." To do this they offer "Eleven Assumptions of Value Driven Management"; "Eight Value Drivers"; and "Seven Critical Steps to Implementing Value Driven Management."

The book serves well as a foundational piece, but may fall short for those interested in the latest analytical techniques that include quantifying and forecasting value.  Specifically, the framework puts equal importance on all eight value drivers, where many would argue that there are fundamental value drivers (like product value, product cost, and pace of innovation) which are what make a business a business and secondary value drivers (like employees, suppliers, owners, etc.) which can only enter the discussion after the business performs.

In summary, this book is perfect for managers interested in a foundational understanding of value driven management. This book is not for those interested in the latest analytical concepts and tools.

Tuesday, July 6, 2010

Book Review: "Economic Value Management" by Bloxham

4 Stars (Out of 5)

The following is a book review of "Economic Value Management: Applications and Techniques" by Eleanor Bloxham. The book was initially published in 2003 by John Wiley & Sons, Inc.

This book provides a conceptual framework and a high-level introduction to the practice of Economic Value Management, which is a set of methods and metrics that are used to evaluate and predict business performance and strives to provide overview free of the biases introduced by typical accounting-based measures. This book is written for members of the board of directors (especially those who serve on audit committees) and for executive managers who want to build a performance measurement and reporting system that fosters trust between management, the board, shareholders, and the capital markets.

Overall the book is very clearly written, has good flow and examples, and can be read in short order (two short or one long flight). "Economic Value Management" begins by providing a foundation and rationale for a new way of evaluating and predicting business performance. The rationale includes typical tricks and traps of traditional accounting-based measures and the need to move to a system that provides more clarity to all the constituents and stakeholders. The case studies in Part Two (Applications and Techniques) show how the methods and metrics can be put into play and used to make better executive-level decisions. The only criticism that I have for the book is that all of the examples used in the book are somewhat suspect as they are unreferenced and use alias names for the businesses, so it is unclear whether the stories were pulled from thin air or if they are veritable stories.

Monday, July 5, 2010

Four Steps to Deliver Product Value

Businesses must be responsive to how customer's tastes change. For example, in the early days of cell phones customer's wanted small and light-weight phones. Today's phones must possess a balance between functionality, usability, size, and durability. What makes the task increasingly difficult is that there are several different markets of consumers with different expectations and willingness-to-pay for each of these attributes. The many cell-phone manufacturers have come up with their solutions over time and the consumers show their preferences with their purchase decisions. Some of the manufacturers have found ways to satisfy certain target markets, but these guys fight hard for every point of market share.

Product planners can make deliver big gains in market share and profitability by taking four major steps:

1. Identify sources of product value
2. Make changes to goods and services that increase net value (product value minus product cost)
3. Promote the changes
4. Assess the product value delivered

Identify Sources of Product Value
The first step in identifying sources of product value is to measure the current product's value to the customer. Measuring product value is how the business measures how its solution measures up against the competition and serves as a source of ideas for integrated communications to the customer to remind them of the solution's benefits. The key to Step #1 is exploring the voice of the customer for adding or changing attribute levels for which consumers are willing to pay. Although many product planners and executives use their gut to identify the sources of product value, it doesn't have to be this way. The competitive landscape is just too tough to rely on gut feels alone.

Increase Net Value
Competing on both product value and product cost is the key to creating value for the customer and value for the business. Studies have shown that successful businesses (in terms of profitability and market share) are the ones that focus on creating valuable products AND keeping costs down simultaneously. Generally, when making these tradeoff decisions, analysts will come up with cost forecasts and leave it to the product planner to use "the gut" to figure out if the change will be a net value winner (net value losers are the ideas where the change in willingness-to-pay does not cover the change in product cost). Again, making the net value decisions doesn't have to be this way. There are ways to make these calculations rapidly to support better decisions.

Promote the Changes
If changes are made that give the consumers more for the money--TELL THEM. The metric of product value is based largely on perception, so its important the product changes are communicated so that the consumer know how your product is better than the competition (and how to explain it to their friends).

Assess the Value Changes
The last step is measuring the value changes using actual purchase data. Actual sales data is the only way to obtain a metric of product value that truly measures how consumers vote with their dollars. Using survey data to forecast value changes is a necessary step in determining what product changes will help net value, but using real sales data to measure changes in product value is the only way to assess the innovative power of product changes.