thinking: relating- celebrating :-)

Over at Paul’s Reynolds blog there are many wonderful post, however what caught my attention was this one on Digital Strategy.

“Day Two – economic/cultural transformation
The second day began with a brilliant presentation from Sean McDougall, the Irish education expert who laid down a strong set of education challenges – or in plainer English /Irish -

let’s bin our 19th and 20th century education system and replace it with a collaborative – open learning co-operative model based on innovation and creativity.

Sounds like jargon – too much of the old Irish – not a bit of it – total plain sense, especially if you want to actually do something around economic and cultural transformation.”

As many readers will know schools everywhere are struggling to work out how best to equip their students for a world which is vastly different than even 10 years ago.

I’m a fan of Sir Ken Robinson’s work on using creativity as a key driver in education and have posted before on that. Great to see more work in the area.

The teachers need help too. Over at Futurelab there are some great resources.

One tablet or two? Opportunities for change in educational provision in the next 20 years

from June 2006 – Sean McDougall imagines how we could embrace all the technologies that children use and re-organise our learning system to take account of them.

• pdf version (pdf, 118KB)

And
Using wikis in schools: a case study
May 2006 – Social software has the potential to support and structure communities where individuals come together to share, learn, create and collaborate with each other. Based on a case study in a UK secondary school, this paper explores the use of wikis in schools.

• pdf version (pdf, 279KB)

To highlight two. There is also much we can do as parents to encourage new thinking and new approaches to help.

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There was an extraordinary news item a few months ago in Sydney. An accounting firm there decided to cull some of the less profitable clients and came badly unstuck. When they sent out communications to those ‘unwanted’ clients some of their more valuable customers got caught in the crossfire.

This may relate to a poor understanding of the concept of customer lifetimes. In any business it would be useful to know which customers were the most profitable and then how to manage the client mix so that PR disasters like the example don’t happen.

For the record the firm was WHK Horwath and the full story is available under the title – “Quick Flick Reflects Badly” by Neil Shoebridge on page 49 of the Australian Financial Review on 13th of August 2007. Customer lifetime has been defined as:

“The net present value of the profit an organization expects to realize from a customer for the duration of their relationship. Customer lifetime value focuses on customers as assets rather than sources of revenue. The volume of purchases made, customer retention rates, and profit margins are factors taken into account…” from Bnet

In other words once you win a customer you should look closely at how that customers activities can be enhanced by your services over a longer period of time – and how they are looked after.

For many large projects the cost of winning new business is high and it is not until the 2nd or 3rd project that you might start making a profit out of the relationship.

Business life cycles are all different – however there is a general rule of thumb that it is 9 times easier to win business off an existing customer than to land a new customer. Regardless of the multiple – the point is look after your customers and they will look after you.

I suspect that the accounting firm looked at a short time period of time and not at a 5 or 10 year cycle which might be more valid. I wonder how many companies know where their business really comes from.

For example do some clients refer customers to their preferred suppliers? Sometimes this does happen – but it is unlikely to show up in a cashflow. If the business owner sees customers as an asset though - the results will show up on a balance sheet over the longer period.

For example many professional services firms work on sensitive projects for their clients. Sometimes they don’t want their competitors to know what they are up to and so a standard referral programme probably wouldn’t work.

However – If I am a potential client and I’m looking for a supplier – it would be helpful and indeed confidence building to know at least some of the names of customers who have been helped by that particular supplier.

Being able to supply a customer list adds credibility but it is hard to value in the context of simple financials.

In the case of the Sydney firm they accidentally sent an “unwanted client” letter to a valued client of 20 years standing. There had been a mix-up between the two lists. I suspect the admin person was not aware of the marketing implications – and in my experience this happens fairly often especially if ther task is seen as admin when it requires some sales insight.

Unfortunately for the Sydney firm their mistake was to send the wrong letter to Neil Shoebridge who is a high profile Marketing columnist at the AFR.

Here are some questions we should be asking Business Managers

1. What is a customer lifetime in our industry?
2. What is does the customer lifecycle look like?
3. Are their times in that lifecycle when profitability is impacted and does that improve later?
4. Do we have a way to value customers? (including referrals)
5. How do we measure customer profitability?
6. Can we increase our “share of wallet” – that is can we sell them more products and increase our revenue and / or profitability?
7. Can we service them is a different way – that improves profitability?

Perhaps you have some other questions – let us know?