WILFMC #4: Pay Attention to the Small Things

What I Learned From My Contractor: A Series About the Client-Provider Relationship
Fourth in a series of 10. For background see the introduction.

Now is probably a good time to mention that I’m NOT getting anything from H3 Renovations for writing this series. That crown moulding in the living room that didn’t make it into the budget? Still not there, and probably won’t be for a while. I was simply perplexed with the dichotomy between my home renovation experience and the usually disastrous experience you hear about. Often overlooked, I think Carlos proves how important operational discipline is to managing a successful project with a happy client.

Now that’s out of the way ….

Part of installing central air conditioning was putting an air handler in our attic. For this to happen, we needed to cut a hole in the ceiling at the front of the house big enough to fit the air handler and convenient enough for maintenance. A side benefit of this was, for the first time, we would have access to our attic for storage because they would be installing a set of fold-down stairs. I cannot stress what a big deal this is. When you live in an urban area you make tradeoffs. I can walk or ride a bike to most anywhere I need to go on a daily basis, my “front yard” is a 2 square block park maintained by the National Park Service and I never have to sit in traffic for an hour just to get to and from work. In return, I find strange objects in my front garden, I collect parking tickets and the idea of storage space is a complete myth. That is to say, if the crew leader, Ricardo, cut a hole in the bedroom ceiling with a pair of dull scissors I would not have even noticed, I’d be so happy just to have the extra space.

Now you can understand why I was surprised to see the attic access and stairs redone not once, but twice. The first time had to do with the trim — I never actually saw what was wrong, I was so blinded by my eagerness I totally missed it. The second time the entire apparatus had to be removed and repositioned. At that point we actually discussed chucking the whole thing and starting over because of an issue with our existing ceiling (again, its an old house so you never know what you’ll find). Ultimately the second time was a charm and now all our suitcases, camping equipment and other assorted items that had once been in the scary basement were relocated to the new penthouse suite.

At the time, my only opinion about this process can be summarized in one word: hurry. We were near the end of the project and beyond the end of my patience with having the house in disarray. Having this task finished meant I would have some space to start putting things away and restoring order to my surroundings. Honest to goodness, I couldn’t see what was wrong and was probably ready to overlook anything in order to mark this task as finished. But Carlos was insistent. They were small things — a seam in the trim, a narrow gap in the access door — but he wanted them fixed. And he was absolutely right. Now that been a couple of months, I know those little things would have driven me crazy. As part of the first phase of the project, I had all the mouldings and door & window casings changed so that they matched because the fact that they didn’t was my #1 pet peeve. Yep, it was on the list above “no central air conditioning”. So though the issues with the attic were small things, getting them right made a big difference.

Up next: Be upfront with your opinions.

Coming up this summer …

This has been a very busy year for Black Lab and though I haven’t been terribly bloggy of late, it isn’t for lack of material. So, here’s a bit of a sneak peek of what is coming up this summer:

Business Lessons I Learned From My Contractor: An 11-post series on the practical but oh-so-important things I learned about the provider-client relationship from working with a general contractor to renovate my house the past 5 months. Yep, 5 months. It explains a lot about my state of mind of late. This one will be starting next week and last throughout June.

Living Local: 31 Days on Capitol Hill: I’m a big fan of supporting the local community so for the month of July, I’ll be putting my money where my mouth is by exclusively shopping my neighborhood — lovely Capitol Hill in Washington, DC. There will be regular blogs about the businesses and people I encounter during my experiment as well as daily Tweets from @SCLinDC.

The Motivator: Ever feel like you’re talking to a brick wall when trying to motivate co-workers or employees? Especially during the highly distracting, “but the weather is so nice out” summertime? I’ll have a special guest tell us how he not only gets people excited about their day, but he does it at 6:30 in the morning!

Design Matters: Remember the generic canned food with the white label and black print that just said stuff like “CREAM CORN” or “GREEN BEANS”? This is what always went through my mind: “That doesn’t look like it tastes very good.” How something looks plays a huge part in how we perceive it … and how much we are willing to pay. I’ll have a graphic designer tell us about why design really does matter.

I’m also very excited to be part of a new project: The Hill is Home. This new blog will feature hyperlocal content for the Capitol Hill neighborhood. We are just getting started, but we already have a great group of contributors with amazing experience. I’ll be covering some business issues, so go check it out!

Choose Your Competitors

It may sound strange, but you can, in fact, choose your competitors. Actually, you SHOULD be choosing your competitors. Competition is fierce so it is up to you to shape your own competitive landscape so that the choice is clear for your customer. Sound a bit shady? It shouldn’t — there are many successful models. Two of the most clear and well-known examples? Coke vs. Pepsi and Mac vs. PC.

Coke and Pepsi have been battling it out for decades now, and I guarantee you they wouldn’t have it any other way. There are hundreds of sodas out there — the market is flooded, yet two companies command a vast majority of the market. Forget store brands or small companies like Jones that are just a blip on the soda radar. By choosing to go head-to-head, Coke and Pepsi have relegated everyone else to 2nd tier status. The benefits? Because each company only has to focus resources on one serious competitor, they know EVERYTHING about each other. The battle is fairly cut and dried because the opposing force is right in front of you. No guerrilla attacks or multi-front wars to worry about. Sure, there may be a sneak attack on occasion, but when you’re fighting an enemy that is well understood and evenly matched, the wounds won’t be too serious.

Apple has taken a different approach to defining and choosing its competitors. When you walk into a computer store you may find 6 or 7 major brands to choose from. In differentiating itself from competitors, Apple could try to demonstrate how they’re better than Sony or Dell and be making essentially the same argument they’re making today. Instead, they’ve chosen an Us vs. Them approach. Their television ad campaign for computers is based on this strategy. They’ve portrayed the consumer’s options as choosing between a Mac or everyone else. In this way they’ve collapsed their entire universe of competitors down to one: PC. So now, rather than trying to battle it out with the different brands, one by one, they’ve told the consumer that the choice is really between the fun, dynamic and unique Mac or one of those other guys who are really all the same. In this way they’ve accomplished 2 objectives: dismissing a multi-front hardware war in favor of a single front operating system war and, at the same time, reinforcing their image as a creative lifestyle choice.

Pricing

Putting a price on your good or service can be tricky. Price sends lots of cues, such as whether the product is a commodity, how valuable it is, how many buyers are out there, how the buyer will use it, what the competitive landscape is like … and on and on. But with the volatility of the current economic cycle, many companies are looking at price and only saying one thing: go lower. In reality, that’s probably the worst thing to do, and here’s why: competing primarily on price is a downward spiral to lower profits. It is inevitable. Why? You are resetting customer expectations and the behavior of the masses is very powerful.

Take this past holiday season. Retailers lowered prices dramatically prior to Christmas. People bought, but not that much. There was so much inventory still hanging around that many stores were offering broad and unheard of discounts. What did consumers learn? Hold out, because if you wait long enough, there’ll be a better discount around the corner. Remember when GM and Ford first offered “employee pricing” a few years ago? It was HUGE. Gas prices were still low, but were exhibiting some serious volatility yet it didn’t matter. Consumers snapped up SUVs like they were going out of style. Now? GM and Ford are still in the dumps and “employee pricing” sales are a regular feature because nobody wants to be the chump that gets taken to the cleaners by the local car dealer. Oh, and all those SUVs that went flying off the shelves a few years ago? When gas sustains $4, the resale market is depressed. Loans go upside down. Everybody looses.

Perhaps it is an extreme example, but it demonstrates what happens when price becomes the focus. What’s the alternative? Make your product more valuable. Be the polar opposite of a commodity, be so special that customers wouldn’t dream of doing without your product. If your customer feels like she’s getting more for her money by sticking with you, even though your product can be had for a lower price, then everybody wins. After all, you get what you pay for. Also keep in mind, maintaining, or even increasing, margins in a down cycle need not mean making compromises on quality. There are many ways to make your customer feel like she’s getting more for her money, but that don’t add cost. (Take a look here to see how you can give your customers more for free.)

Today’s conclusion: don’t compete on price, instead be worth what your customers pay.

I Heart Local Businesses, Part 3

Peregrine at Eastern Market

First, check out Part 1 for some background and Part 2 just for the entertaining reading.

For our final installment on how local businesses outcompete national chains, we’re following up the game theory discussion with something a little more fun: giving your customer more for free. Harkening back to the point about flexibility in Part 2, unless a national chain has run the numbers and confirmed an initiative will meet or exceed the ROI hurdle rate … I don’t think I even need to finish that sentence for a local business owner to see where your advantage lies. You’re you, and you don’t need a finance team to tell you what sells. You see something that makes customers happy, you do it. Especially when that something makes the customer feel like they’re getting more for their money (making your product a better value) without you making any additional investment, then everybody’s happy. Take Peregrine Espresso as a concrete example. This Eastern Market business gets my dime over the nearby chain store every time. Why? Because they take the time to draw a picture in my drink. Seriously.

I Heart Local Businesses, Part 2

(If you didn’t already read Part 1, go check it out. I’ll wait and you’ll need the background.)
With consumers jittery and $50,000 home improvement projects not as common as they were five years ago, how does the local business out compete the “rock steady” reliable national chain? When a buyer is worried about squeezing every last bit out of her dollar — and then some — the likely move will be to go with the national chain: a known quantity that will definitely be around in 2 months or in 10 years when the pipes leak and ruin your drywall. This way our buyer controls the maximum number of variables, leaving the least amount of uncertainty possible. But has she traded away too much variability?

What our local business has going for it, in a very big way, is FLEXIBILITY. And flexibility is an inexpensive (or even free) way to give that buyer the feeling she is getting the most for her money. Maybe our buyer feels good about the national chain’s guarantee, but she wants one appliance different from that chain’s branded line. The national chain cannot deviate from protocol. The local business doesn’t have the same constraint. The national chain may have done thousands of projects like hers, but they also have hundreds of work crews and high turnover. Her local business can guarantee that everyone on her job has done that specific work many times over. And since she can speak to the owner, that is a guarantee that carries weight. Big companies must depend on operational consistency to keep their ship on course. Deviating from protocol is not rewarded and is often punished. Operational consistency is also important for a small, local business, but they’re also small enough to provide a much wider range of flexibility within that operational framework. It makes the customer happier and the small business owner can reward her staff for it.

In game theory, this comes down to a very important difference between

I Heart Local Businesses, Part 1

Bad economic cycles can be scary times for small businesses. Consumers are spending less, which reverberates throughout the supply chain, especially one that isn’t maximized. When consumers can be persuaded to part with their money, it may only be for very steep discounts (which carries its own problems – more on that in another post) or for something they feel comfortable purchasing either because it is a safe purchase or there is an attractive consumer surplus — i.e., the price paid is less than the value the consumer has for the product. Lab Notes is undertaking a two-part look at how small, local businesses can use these factors to out compete large, national chains during difficult times.

First, the scenario. Times are tough and you’re a small business fiercely competing for a rapidly declining number of consumer dollars. What do you do? For the sake of argument, let’s dismiss discounting because we don’t believe it is appropriate or sustainable. That leaves you appealing to safety and/or consumer surplus. Let’s say a customer is interviewing contractors for a complete master bathroom renovation that will cost $50,000. One estimate is from a national chain that has been around for over 100 years and the other is from a local business that has been around since 1998.

Here are the key factors for evaluating the national chain:

Aren’t you supposed to ride OUT of town on a rail?

Santa Claus may be coming to town in a sled, but President-elect Obama has chosen more conventional means for making his big entrance: Amtrak. In today’s special, extended version of Whose Idea Was That??, we’ll consider whether this is the best way to prepare for that Really Big First Meeting.

Gather your team before the meeting. Run through the talking points one last time, double check all your materials and make sure nobody has the jitters. For this, Amtrak is a good idea. Obama gets on first, so he’ll have time to find everyone a seat. The hour and fifteen from Wilmington to DC is perfect for settling in for some face-to-face prep while en route to the big meeting. That is, assuming, the weary traveller asleep in the table-top four seater with her luggage piled up next to her will kindly move for the Obamas and Bidens. Privacy isn’t exactly at a premium, but hey, everyone else is too busy talking on the phone or listening to an iPod jacked up way too loud to pay attention anyway.

Make sure your image is consistent with your message.

Is Tradition Stale?

Everyone tends to reflect on tradition this time of year but when it comes to thinking about tradition in a business sense, the first industry that comes to mind for me are newspapers. For generations, they have been (and continue to be, according to statistics) consumers’ most credible source for news and information. They survived television coming into everyone’s home, but are struggling to find successful business models for the internet age. The digital economy is not very kind to companies more interested in preserving an old business model than those willing to completely rethink how to approach a market (in this instance, online-only newspapers, blogs, vlogs, etc.) But does this mean a more traditional business — or more importantly, YOUR more traditional business — is destined for slow decline while consumers look to new economy companies to meet their needs?

Stay on the lookout for opportunities

I’ve been hearing lots of friends and colleagues talk about how the economic downturn has impacted their professions — cancelled meetings, contracts on hold, travel bans and the like. So I thought this profile of Singapore Airlines was very interesting. I’m the last person to advocate using an airline as an example of how to be smart and flexible during tough times,