The simple answer is that you have no idea. If you’ve got competition, then you can probably use their price as a starting point. However, if you don’t have clear competition, then you’re sorta stuck. This is when your old friend Mr. Cost Plus pricing always seems to show up.

Just in case some readers don’t quite know what cost plus pricing is, perhaps I should take a moment and define it for everyone. Cost plus pricing for a product is when you attempt to calculate all of the costs that went into creating it. You then add the appropriate level of margin on top of this cost and vola – you have your product’s price.

We all love cost plus pricing so much because it has this aura of being a “financial way of creating pricing”. I mean, if we are able to account for all costs and then priced our product above that level then we are just about guaranteed that we will be profitable.

The problem with this is that all too often, we are wrong. The reason that we’re wrong is because as the volume of products being created goes up, the costs of manufacturing goes down. If you are managing a service the same thing can be said – the more subscribers you have, the lower your cost per subscriber is.

Since your unit cost is changing with volume, your price will determine how much you sell. This will then impact volume which then impacts unit cost. Whew, it’s all connected!

A great example of how not to use cost plus pricing was provided several years ago by the good engineers over at Wang Laboratories. They invented the first commercial electronic word processor in 1976. Their product was a big hit. They used cost plus pricing to come up with a price for this revolutionary product.

The problem that they ran into was that in the early 1980′s personal computers become hot and they too offered word processing capabilities. As PC based word processing became more popular, Wang sales slowed.

This meant that their cost plus pricing required that they raise the price of their product even as their competition was reducing the cost of their products. Their pricing eventually drove away all of their customers.

So what’s wrong with cost plus pricing? Simple – cost plus pricing will cause you to over-price your product when there is a weak market and will cause you to under-price your product when there is a strong market.

Cost Plus Pricing For Products Is Easy To Do, But It's The Wrong Thing To Do

So what’s the lesson to learn here? Hopefully, you now understand that cost plus pricing is a really bad idea. Instead, as a product manger what you need to do in order to ensure profitable pricing is to spend some time and decided on what your anticipated prices are going to be. Then, use this information to manage your costs. This type of value-based pricing needs to start BEFORE you make the investments required to breath life into your product.

How do you do pricing for your product today? Are you happy with your prices? Do they seem to be appropriate for the current market conditions? Have you ever tried a technique that is different from cost plus to set prices? Leave me a comment and let me know what you are thinking.

Contact Blue Elephant Consulting

If you are interested in finding out more about how you and your products can boost your firm’s bottom line and gain more market share, get in contact with Blue Elephant Consulting in order to find out how a consulting or training program could be customized to meet your unique needs.

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When Negotiating, The Bogey Is Your Best Friend

As a negotiator, the key to your long-term success is to have a number of different techniques that you can use when a situation calls for it. One way to think about this is like a carpenter who has a tool belt with his most commonly used tools on it. As the carpenter is working on a job, just about any situation can be solved with one of the tools that he has close at hand. Today we’re going to talk about the negotiation equivalent of a carpenter’s hammer: a practical, simple, and ethical tool that everyone should know how to use. What’s this negotiating tool called you say? The Bogey.

The easiest way to define what the Bogey is, is to show you it in action. Let’s say that you want to have your house painted. You have a contractor come out to the house, he looks it over, and then he gives you a quote for $20,000 to do the job. You then tell the contractor “Hey, I love your proposal and I think that you do great work; however, all I have to spend is $17,000 that I got from an insurance claim. Here is a certified check for that amount.” The painter accepts your offer and gets to work.

So what happens when you use the Bogey technique? There are three fundamental principals of negotiating that are at work here and it’s important that you realize what they are:

1. By complimenting the painter, you have boosted his ego. He realizes that you now expect something from him in return. In a subtle way, you have actually asked for his help and in most cases you will usually get it.
2. In all negotiations, the seller knows more about his product than the buyer ever will. The Bogey is one way that the buyer can give the seller a chance to show what they know about the product.
3. One of the fundamental rules of negotiating is that there is always a better deal available for all parties that are participating in the negotiation if only they are willing to search for it. The Bogey technique is how the search for this better deal starts.

When you present a Bogey to a seller, the seller generally won’t roll over and accept it. Instead he will come back with a more complete description of what he is selling to you: the quality of his product, his workmanship, the quantity of different items included in his quote, etc. Out of all of this you will now have a much better understanding of what you are buying. Now the real negotiation begins. The seller may lower his price, drop some options, change the delivery schedule, etc. No matter where it goes from here, you will end up ahead of the game.

Contact Blue Elephant Consulting

Contact Blue Elephant Consulting to find out how your team can be trained to get the best deal out of their next negotiation.

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You Can't Align If You Can't Communicate

A quick quiz for you: what has been the #1 task on every CIO’s to-do list for the better part of the past 20 years? If you guessed “aligning IT with the rest of the business” then you are correct. This has been an IT goal for the past 20 years? What’s up with that? When you become CIO what are you going to do to solve this problem. Can it even be solved?

It’s All About Communication

Why has something that sounds so simple when we talk about it been so hard for CIOs to do? Tony Kontzer over at CIO Insight has taken a look at what’s been holding CIOs back and he’s come up with one answer: communication.

I’m pretty sure that we all know where this one is going. The non-IT business folks like to spend their time talking in business terms and we over on the IT side of the house seem to be only able to communicate using IT jargon. The results of this inability to communicate can be disastrous.

The Tower Of Babel — IT Style

When the business side of the house and the IT side of the house find it hard to communicate, what happens is that they simply stop communicating. When this happens, each side goes off and starts to do its own thing.

I can’t tell you how many firms that I’ve worked for where I’ve seen this happen. When communication breaks down between IT and the rest of the business is when you start to see the multiplying factor start to show up: multiple email systems, multiple ERP applications, etc.

From a CIO perspective, this is the worst thing in the world that can happen. The reason is that every IT system that gets added to the company means that there is one more system that needs to supported forever and that boosts the cost of having the IT department do work that does nothing to help the company’s bottom line.

The Big 6

When you become CIO, how will you be able to measure how well the IT department and the rest of the company are doing in trying to align themselves? Well, you’ll have to fall back on what everyone in IT loves the most: metrics. The trick is knowing what needs to be measured. Here are the top six alignment metrics as recommended by the Society for Information Management (SIM):

1. Communication Channels: Have effective communications channels been established between the IT department and the other departments in the firm? Are these channels being used?
2. Metrics: are metrics in place and are they being measured in order to determine where the firm stands in it’s efforts to align how the business processes operate and what the IT department spends its time working on?
3. Governance: are there processes in place that will ensure that what IT works on lines up with what the company’s true business needs are?
4. Partnership: is there a partnership between IT and the rest of the departments where each is taking actions to make the other more successful?
5. HR: does the HR department understand what the company is trying to align and are they taking action to attract and retain the talent that will be needed to make this happen?
6. Technology: are the right tools in place and available to be used in order to drive the changes that will be needed to transform how business is done once the alignment has occurred?

What All Of This Means To You

For way too long CIOs have been looking for ways to try to align what IT does with what the rest of the business needs. So far they have not been successful.

The primary stumbling block has been the simple fact that there exists an enormous two-way communications gap between the IT department and the rest of the firm. IT communicates using technical terms that nobody else knows about while the rest of the firm communicates using business terms that make no sense to the IT staff.

A first step in finally bridging this gap is to implement the six alignment process metrics that we’ve identified. When you become CIO these will provide you with a way to measure your progress in finally getting the IT department to become a meaningful part of the firm. Nobody ever said that this was going to be easy, but at least now you have a plan for how you can accomplish the impossible.

Contact Blue Elephant Consulting

Contact Blue Elephant Consulting to find out how your team can be trained to be ready for their shot at the top spot. We’ve can lay out the skills that they will need to develop. By working with Blue Elephant, your IT team can be ready for the day that they call their name to become the firm’s next CIO…!

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Dr. Jim Anderson Will Speak At The 16th Annual Pink Conference

Dr. Jim Anderson has been asked to deliver two speeches at the 16th Annual Pink Conference. The role that Blue Elephant Consulting plays in the IT industry has been recognized as being a thought leader and the organizers of the Pink Conference have asked Dr. Anderson to share some of his insights with the conference attendees. Dr. Anderson will be delivering two speeches at the conference in Las Vegas on Monday, February 20th.

The first speech that Dr. Anderson will be giving will be giving is titled “The Secret To Knowing Where You Are Going“. In this speech Dr. Anderson will be discussing the Balanced Scorecard management technique and showing the audience how it can be applied to an IT department.

Dr. Anderson’s goal will be to build a complete IT balanced scorecard during his presentation. He’ll also be showing how a single balanced scorecard can be used to monitor a department’s performance, communicate it’s strategy, and even ensure the proper execution of its strategy.

Dr. Anderson’s second speech is called “Secrets For Getting Them To Listen“. In this speech Dr. Anderson will be covering the common mistakes that IT professionals make when they are asked to deliver a presentation.

It’s not that they don’t know the material, rather it’s how they create their presentation and how they deliver it. Dr. Anderson will address both of these issues by using his presentation to create a complete IT presentation the correct way. He’ll introduce and use the Blue Elephant Presentation System to create an effective presentation that the audience will be talking about long after the presentation is over.

You are invited to join Dr. Anderson and attend both of his presentations — all you have to do is sign up for the 16th Annual Pink Conference. Here’s the link and I hope to see you there!

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Dr. Jim Anderson explains why it can be so difficult to reach an agreement during a negotiation — there are ghosts in the room!

Dr. Anderson shows that the other side of the table has to make sure that many parties have their needs met by any agreement that is reached. He shows you how to make sure that you can “see” all of the ghosts in the room…

If you want to get more negotiating secrets, subscribe to the free The Accidental Negotiator newsletter here: http://goo.gl/Yqf70

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Top Athletes Can Teach IT Leaders How To Reach The Next Level

So we all know that Tiger Woods is a fantastic golfer. However, do you think that he’d be any good at running an IT department? The answer, somewhat surprisingly, is that yes, he probably would do a good job. The reason is that there is a lot of similarity between being an excellent athlete and being a top-notch IT manager.

Graham Jones is the founder of a company called Lane4 which uses studies of professional athletes to help managers do a better job of managing. One of the interesting things that he has discovered is that in the area of sports, just like in the world of business, one of the main obstacles to achieving something that has been identified as being “impossible” just might be a self-limiting way of thinking.

One of the first things that you have to realize about being an IT leader is that great leaders are not born, but are rather made. Sure some leaders have nature gifts such as communication skills and leadership attributes; however, the most important skill that they need to have is mental toughness – this means that they get better at doing their job when things get tough.

Great IT leaders rise up not due to chance or luck, but rather because they planned to succeed. Specifically, they identified and achieved lots and lots of little goals in order to get to where they are. This requires them to sharpen their skills and to, much like Madonna, reinvent themselves many times in order to stay out in front of their peers.

So what can IT leaders learn from top athletes? Simple, how to succeed over and over again. Here are the steps that are needed to do achieve top performance over and over again:

Gotta Learn To Love That Pressure

Call it what you like, but pressure is what drives great athletes and great IT leaders to achieve their best. What this means for you is that you’ve got to find a way to learn to love pressure. Another way to say this is that you’ve got to commit yourself to using work pressure to continually improve yourself all the time.

One secret to dealing effectively with pressure is to only focus on making yourself better. Don’t let yourself get distracted by other IT leaders who mange / complete successful projects, get promoted, win awards, etc. Instead, focus on those things that you can control and don’t spend any time thinking about the rest.

You need to be able to step away from the workplace pressure. This means that you actually do need to have another life – family / hobbies / sports, whatever. Top athletes have the ability to flip the pressure switch on when they are “on the job” and then flip it off when they are involved in their other life.

It’s All About The Long Term

By the way, you will occasionally fail. This means that you need to have a way to pick yourself up, dust yourself off, and get back to work. A good way to be able to do this is to have long term goals that you focus on.

What star athletes do is to create very detailed plans that are made up of a series of short term goals. The plan is laid out so that the athlete can do his / her best at the right time – not peaking too early or too late. IT leaders need to do the same. You want to make sure that when you have a big success, it is the right time for it to get maximum exposure within the company.

Push Baby, Push!

We all push ourselves based on the people who we work directly with. If we are working with a bunch of slackers, then there won’t be much self-pushing going on. Instead, we should be searching for opportunities to work with the best-of-the-best. This is very similar to when top athletes train with their fiercest competitors in order to push themselves to be their very best.

Invent And Then Reinvent Yourself

Always be sure to get feedback from trusted sources. This will allow you to understand what you are doing well and where you need to make changes. These changes will allow you to reinvent yourself so that you can become the best IT leader that you can be.

Party Like A Rock Star

Something that IT leaders all to often pass over is to take a break after a major achievement and celebrate. Spending as much effort celebrating a success as you did achieving the success is a way to reward yourself. This is the time to blow off some steam, pause and catch your breath before you push on to the next higher level.

Contact Blue Elephant Consulting

Contact Blue Elephant Consulting to get the assistance that your IT managers need in order to become successful managers who can lead and motivate teams in order to achieve maximize everyone’s potential.

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Often It's A Good Political Speech That Gets The Vote Out

Political speeches, for the most part, are forgettable. Except when they aren’t. If you’ve spent any time listening to the types of speeches that politicians are giving these days, they are basically junk (the Phil Davison, GOP Candidate, Delivers Stark County Treasurer Speech on YouTube is a classic bad political speech). The question is whose fault is this: the speech writers or the speech givers? I’m willing to bet that the art of writing a good political speech has been forgotten by far too many speechwriters. I’m going to solve that problem right now…

What Is Rhetoric?

Political speeches are a specialized form of speech. According to Wikipedia, rhetoric is the art of using language to communicate effectively and persuasively. What this means for us is that when we use rhetoric to create a political speech, we want the speech to accomplish a goal – convince an audience to vote our way.

If you want to dive in deeper to rhetoric, you can explore the three audience appeals: logos (reason), pathos (emotions), and ethos (knowledge). For our purposes here we’ll stick with the understanding that a good political speech needs to win over an audience no matter how you go about doing it.

What’s Wrong With Political Speeches Today?

Most speeches given by politicians today suffer from the same fatal flaw: they are completely forgettable. Exactly who’s fault this is has not been resolved: is it the speechwriter’s fault or the speech givers? No matter, both are probably partially to blame.

Where did things go wrong? Jeff Shesol who is a political speech writer believes that one of the reasons that political speeches have lost their punch is because of how speech writers are writing them.

He points out that it’s all too easy for political speech writers to focus on the sound bites that they hope will be captured out of a speech. In order to make this happen, they over use such tools as alliteration (repetition of a particular sound in the first syllables of a series of words and/or phrases: “economy, employment, empowerment”) and cliches (an expression, idea, or element of an artistic work which has been overused to the point of losing its original meaning or effect: “there’s no place like home”).

Even worse, too many speech writers / speakers believe that if they keep saying the same thing over and over again it will eventually become true. The reality is that the audience tunes out the speaker and the speech ends up being quickly forgotten.

What Does It Take To Write A Good Political Speech?

All of this negativity talking about political speeches might make you feel as though there is no hope – maybe it’s not possible to create a political speech that has an impact. The good news is that history shows us that this is not true. Churchill, Kennedy, Reagan, Clinton, etc. have shown us that political speeches can still change the world. They just have to be created the right way.

The first thing that you need to realize when you are sitting down to write a political speech is that the speech needs to have a point. What is the main goal: do you want the audience to take some action, vote a particular way, etc.? A political speech without a point is just a waste of everyone’s time.

Next, you had better take the time to organize your speech in a way that your audience will be able to follow what you are saying. Sure, you might believe that what you are asking them to do is the right thing, but if you don’t lay out your reasoning in a way that they can follow then they won’t come along for the ride.

Finally, and this may be the most important point of all, every single word in your speech must matter. This means that there can’t be any phrases that are in there just for filler or just to transition from one thought to another. Instead, ruthless editing is involved and every word that is not contributing to reaching the final goal needs to be chopped out and removed. Shesol points out that an excellent example of this is the speech that Bill Gates gave at the Davos meeting of the World Economic Forum in which he introduced “Creative Capitalism”.

What All Of This Means For You

At some time we are all called on to write a political speech. We may not be running for president, but perhaps we’re trying to get elected to the local school board. No matter, there are too many bad political speeches out there – we don’t want to contribute to this mess.

Instead, we want to write a good political speech. To do this we need to make sure that our speech has a very clear point to it. The speech will need to be well organized and every word in it will need to have a purpose for being there.

If we can craft a political speech that has these characteristics, then we will have created a very powerful communication tool. With tools like this, elections can be won and from there, the world can be changed.

Contact Blue Elephant Consulting

If you are interested in finding out more about how you and your team can improve how you give presentations using the Clear Blue Presentation System(tm), get in contact with Blue Elephant Consulting in order to find out how a customized presentation, consulting or training program could be created to meet your unique needs.

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Dr. Jim Anderson explains why there are some problems that an IT department just can’t solve — because they are wicked problems.

Dr. Anderson identifies why traditional IT problem solving techniques won’t work with wicked IT problems and how you can determine if a problem is really a wicked problem.

Get a free subscription to The Accidental Successful CIO newsletter by visiting the sign-up page at: http://goo.gl/NOfh2

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The Flip Video Camera Seemed To Have Everything Going For It…

Dang it! This was supposed to be a story about a product success, not a product failure. Pure Digital created the low-end highly portable video camera market a few years back and then got bought out for a half a billion U.S. dollars by the networking giant Cisco. Cisco is stuffed with smart, bright product managers and they should have been able to boost this successful product into outer space. But they didn’t and now the Flip video camera is going away, what happened?

Why I Loved The Flip Video Camera

So I’m willing to ‘fess up – I own a Flip video camera. In fact, I so fell in love with this product that I bought one early on when it was still owned by Pure Digital. However, after a while of traveling around in my pocket all the time, the screen failed. I ended up getting a Kodak Zi8 to replace it in part because the Zi8 had a feature that the Flip never did – it had a jack that allowed it to be used with an external microphone.

I kept my eye on the Flip over time because I was still seduced by its small size. I never again bought one simply because it never really seemed to change – the Flip that is being offered today sure looks the same as the Flip that I bought several years ago. Sure, they’ve come out with an HD version and some pretty “skins” that allow you to personalize it, but that seems to be about it.

What Went Wrong Between Cisco And The Flip

Cisco is a smart company. They employ smart product managers. Something went wrong here. Brian Chen and Chunka Mui have both taken a close look at what happened here, and it’s not pretty.

It appears as though the reason that the Flip product line didn’t do well under management by Cisco is due to two preventable sets of conditions: the Flip was a bad purchase decision for Cisco and then Cisco did a poor job of managing the product once they had it. The product line might have been able to survive one of these mistakes, but it couldn’t overcome both of them.

The Wrong Decision

Cisco should not have purchased the Flip product line. Sure, at the time it seemed like a good idea. Cisco’s John Chambers announced that Cisco was buying Pure Digital so that they could promote products that would create content that would drive the need for bigger networks – Cisco’s core business.

However, what was missed in all of the glowing press releases was that Cisco bought Pure Digital not because they were in a fantastic “adjacent market”, but rather because Cisco’s core business was slowing. Because of this mistake, Cisco found itself in a market that it really didn’t know anything about – consumer electronics. The forces that drive this market are unlike those that drive Cisco’s main enterprise networking market.

Additionally, Cisco thought that their brand name that conveys quality and innovation in the enterprise market would help to sell more Flip video cameras. It didn’t. I, for one, don’t associate Cisco with home products and would rather buy something from Sony or Apple before I’d buy something from Cisco. Finally, any thoughts that Cisco had about using the Flip product line to cross sell its other products was a pipe dream. People who are buying a US$100 video camera are not going to be the same people who buy a US$25,000 high-end router.

Bad Product Decisions

Did I mention that the Flip product line seemed to be stuck in a time-warp? In the fast moving field of consumer electronics, this is the worst thing that can happen. The Flip pretty much got mowed over by the arrival of smartphones: both Apple and Android products keep getting better and better every couple of months at doing what the Flip does.

The Cisco product managers could have saved the Flip. Just like the folks over at MySpace, they could have specialized to save the ship from going down. One way to do this would have been to work very hard to incorporate social networking features into the Flip. Just imagine if you could shoot a video of your dog barking a Christmas song and then hit a button and have it automatically uploaded to both YouTube and your Facebook account. But that never happened.

Finally, the product never moved on. There was never a compelling high-end Flip product that I saw in magazines that caused me to pause, and look longingly at (e.g. the iPad 2) thinking about what I could do with it. The Cisco product managers would have had to be careful here, but things like a good zoom lens, Wi-Fi connectivity, and maybe even an apps store just for the Flip would have done the trick. We’ll never know…

What All Of This Means For You

When a company wants to grow its bottom line, purchasing another company to get a successful product sure seems like a simple way to make this happen. However, the ultra-successful Cisco has just proved that this can actually be a risky way to do things.

Their purchase of the Flip video camera product line was flawed in several ways. Although the product was hot when they bought it, the future was already getting cloudy as smartphones kept getting smarter and cheaper. The lack of any compelling high-end features or social networking tie ins reduced consumer interest in carrying this extra electronic gadget. Finally, Cisco just didn’t know that much about the consumer market that they were getting into.

In the end it all comes down to doing the basic product manager homework that we’ve all been taught to do. You need to take a look at the market and understand what need they are looking to fill. Then you need to take a look at your product and make some hard decisions as to how you are going to be able to fill that need better than anyone else. It cost Cisco over US$500M to learn this lesson, let’s hope that the rest of us can learn from their mistake…

Contact Blue Elephant Consulting

If you are interested in finding out more about how you and your products can boost your firm’s bottom line and gain more market share, get in contact with Blue Elephant Consulting in order to find out how a consulting or training program could be customized to meet your unique needs.

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Dr. Jim Anderson explains why there are some problems that an IT department just can’t solve — because they are wicked problems.

Dr. Anderson identifies why traditional IT problem solving techniques won’t work with wicked IT problems and how you can determine if a problem is really a wicked problem.

Get a free subscription to The Accidental Successful CIO newsletter by visiting the sign-up page at: http://goo.gl/NOfh2

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