Consulting tip: How to make a good survey

Consultants should use surveys more often. They are cost-effective, seemingly impartial, easy to use, and provide data in the “touchy and feel-y” areas where data might be hard to find, collect, or quantify. Bain, PWC, BCG, Deloitte all use surveys; see the links at the bottom of the post. Even on this website, readers reply to surveys to give me a sense of who they are, what they read and what they like here.

Marketers have known this for ages. A well-crafted survey can be a cost effective and ingenious way to gather customer insights. Instead of guessing what consumers want, ask them. Instead of asking them one at a time, send out a survey. With the advent of free tools like survey monkey, and even real-time tools on Skype for business, surveys are ubiquitous and rightly so – they are super useful tools.

As an example of a survey from this website, 121 readers told me anonymously how much of their income they saved.  55% of you (67 people) saved 20% or less, while the there were 12% of you (15 people) saved more than 50% of your income. Bravo.

Consultantsmind - Savings Survey

Surveys create data. I have written before that data is a consultant’s friend because it is apolitical and helps you to test your theories. Surveys can create data where there was none before. A few examples from my past:

  • Testing customers’ preference on financial services
  • Determining customers’ preference on software features
  • Soliciting feedback on presentation materials
  • Gauging interest on the venue for a Christmas party

So what makes a good survey? There are dozens of books, and courses on this topic. Even survey monkey has some tips here. It’s a science and art, but here is my back-of-the-envelope thoughts at 1130pm on a Tuesday night:

Remember the objective:  What is CTQ?

  • Clarify the research objective. What are you trying to discover, and do the questions / choices support that?  If you are unclear on the problem statement, you will be lost and waste everyone’s time.
  • Think it through.  Assuming you get the answer, what action will you take?
  • Segment and target your audience.  Make sure you are getting answers from the right people. Mass-marketing is dead. Which tribe are you trying to target?
  • Get personal with limits. If you want to segment you audience, you likely need some information about gender, age, affiliation, geography, income-level etc.

Organize the survey logically.

  • Put difficult questions in the middle. Put easy questions at the beginning (warm them up), and at the end (when they might start getting bored, anxious).   Sara P (in comments) observes: ” think of it like a ‘difficult conversation’ with a stranger, you don’t go in and ask the difficult questions first, you build up to it slowly
  • Make it easy for the respondent to answer (things they know and remember)
  • Ask the right type of question. What type of analysis do you want to do (e.g., table, graphic, cross-tab with other questions)?  Does the question type do the job?  If you want %, definitely don’t ask open-ended questions.

Write simply. 

  • Use short questions with simple words. No acronyms.
  • Take out bias from your questions. Don’t lead the witness to the answer you want – that is a cheap shot, unprofessional, and sloppy work.
  • Ask 1 question at a time; don’t ask 2-in-1 questions.
  • Make choices clear. The choices should be Mutually-exclusives, and collectively exhaustive.  Remove ambiguity.
  • Include “not applicable ” as a choice.
  • Remember the 4 writing persona: madman, architect, carpenter, and judge. Spend the time to architect the order of the questions, carpenter the wording / choices well, and be a harsh judge and edit mercilessly.  Rewrite until it’s good.

Think like a marketer. Get a good response rate.

  • Call to action. Send the email with a clear title and request.
  • Provide an incentive. Sometimes this is a gift card, sometimes a prize, sometimes just sharing the results of the survey.
  • Respect privacy of the respondents (and tell them your privacy policy).
  • Split test; A/B test. Pretest with 2-3 different email subject lines to see which one has a higher click through rate; then choose the best one for the big survey

Be realistic.

  • Respect the readers’ time. Don’t ask unnecessary questions. Time the survey to see how long it takes. If your survey is 10+ minutes, you are in trouble.
  • Pretest the survey on your friends and colleagues. Don’t embarrass yourself with a bad survey sent to thousands of people.
  • People who take surveys are not your average person. If it is by email, they are computer-literate, agreeable, and open to experiences. Arguably, they also have lower opportunity cost of time; they can “afford” the time to do the survey.

Get started. The more surveys you put into the field, the more experienced and fun it will be. Qualitrics is an industrial pro-tool, but why not sign up with Surveymonkey for free?  They limit you to 10 questions, but honestly, it’s a great and easy experience.

Readers – what other good survey advice do you have?

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What is deliberate practice?

It takes more than 10,000 hours. Malcolm Gladwell popularized the idea that people have to practice for 10,000+ hours before becoming experts. At the time, this dispelled the idea that it is just raw talent or genius at work. No, he concluded, it takes lots and lots of practice to be excellent at something.

Consultantsmind - Freakonomics

When listening to the most recent Freakonomics podcast here entitled How to Become Great at Just About Anything, I learned a few things:

  • It takes MORE than just volume of practice, but also deliberate practice to get better: rigorously pushing yourself to improve, stretching your abilities, pushing yourself beyond your comfort zone; embracing the suck and growing
  • Professor K. Anders Ericsson – professor of psychology at Florida State University in Tallahassee, Florida – actually has a few differing opinions from Malcolm Gladwell, who popularized his ideas of learned expertise
  • How you practice is more important that how much your practice . . .to the point that you can really teach yourself to be pretty damn good at most anything

Practice needs to be deliberate. Researchers have shown here that it takes continual feedback and deliberate effort to improve. More does not mean better. It takes structure, organization, feedback, testing, stress, and growth. It is like a muscle. Low-intensity, sloppy practice does not matter. It takes deliberate practice, usually with coaching.

Hence, continued improvements (changes) in achievement are not automatic consequences of more experience and in those domains where performance consistently increases aspiring experts seek out particular kinds of experience, that is deliberate practice (Ericsson, Krampe & Tesch-Römer, 1993)

This make sense right? We have seen all kinds of people in our professional life who reach competence many years ago, and since then, they are just coasting. You need to push to get to the next S-curve of progress.  It is not natural, but deliberate.

Experts “bucket” their learning. I am a big believer in structured thinking as one of the key consulting skills which make us useful. It helps us to get smart quickly on problems, and use hypothesis-based thinking. Experts organize and “bucket” information here and use their long-term memory to vastly expand their mental reach

Instead they [experts] select the relevant information and encode it in special representations in working memory that allow planning, evaluation and reasoning about alternative courses of action (Ericsson & Lehmann, 1996).

Hence, the difference between experts and less skilled subjects is not merely a matter of the amount and complexity of the accumulated knowledge; it also reflects qualitative differences in the organization of knowledge and its representation (Chi, Glaser & Rees, 1982)

Experts’ knowledge is encoded around key domain-related concepts and solution procedures that allow rapid and reliable retrieval whenever stored information is relevant.

Basically, experts have trained their brains and bodies to do more – through more effective categorization of information and faster retrieval. It’s like having a better operating system, hard disk AND central processing unit (CPU).

Is this encouraging? Yes, the title of the podcast is How to Become Great at Just About Anything, with an enormous emphasis on the idea that you can really craft the way you learn and become close-to-an-expert through effort. No excuses anymore. As an example, Bob Fisher – soil conservation technician – holds 14 world records for free throw shooting here.  2,371 free throws in 1 hour. 52 free throws in 1 minute.

Consultantsmind - Free Throw

What will you become an expert in? Are you willing to put in the dedication, time, discipline, coaching, and sacrifice? Speaking with my wife, this is something I need to think about. . . what am I willing to dedicate 1-2 hours EVERY DAY to get better at? Scary questions to ask yourself.

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Consultant’s gripe: Why is the US tax code 9,000 pages?

April 15 is tax day in the United States for individuals. There are other tax days (e.g., March 15 for corporations), but yesterday was the day most people know – and loathe. People take off work, look for receipts, download bank statements, and answer questions from self-service software like TurboTax.

“The hardest thing in the world to understand is the income tax.”  – Albert Einstein

The tax code is a mess. When filing out forms – on paper or online – you quickly realize there are loopholes, grants, and handouts everywhere. It’s obvious that the government over-reaches. Democrats and Republicans alike have become too accustomed to spending money – deficit spending – and doling out favors to different interest groups. Unlike corporations, the federal government has no real competitor; it is a monopoly.  This could not be more evident than the tax code.

The tax code started out as 27 pages in 1913, and now is more than 9,000 pages. 330x

Consultantsmind- Tax Code 330xConsultantsmind - National TaxPayer Advocate to CongressComplexity breeds complexity.  So, I think this is a bit out of control, but ironically, so does the IRS. Yes, saw this report on their own website complaining about the unnecessary complexity of the tax code.

How does that make sense?  They appeal to Congress, begging them to stop the madness.  They note here:

  • If tax compliance were a stand-alone industry it would employ 3.7 million people
  • The opportunity cost (hourly rate x time) for individuals and companies to document, file, check, contest their taxes comes out to 14% of the revenue collected; if the government gets $100. . .it cost 14 to make it happen
  • From 2001-2012, there were 4,600+ changes to the tax code; one a day
  • Too much overlap; See this diagram on the different programs that are related to Federal pre-school and day-care subsidies and grants. Yes, there are 45 different programs. (see page 166 of Senator Coburn’s Tax Decoder document here).

Consultantsmind - Preschool Daycare

Self-parody. The most shocking thing I found was the IRS website itself here. In the education section, there are lessons on the politics of taxation where you can role-play being a lobbyist. What?  How is this okay?

Question: why are my tax dollars being spent to build websites to educate kids on the nuances of politics of tax code? Sheesh.

Consultantsmind - The Why of Taxes

Tax Decoder. Tonight, while researching this topic, I learned about a US senator by the name of Dr. Coburn. He has since retired from office, but he is a tax reform advocate. His team published a 300+ page manifesto called the Tax Decoder here (12Mb pdf) which takes a consulting-type approach to analyzing the tax code.

Consultantsmind - Tax Decoder Cover

While it seems like it would be boring, it is not. Completely worth looking at:

  • Written in plain English, anyone can understand
  • Breaks the gaps, issues, loopholes in the tax code by industry, group
  • Shows a cost-benefit analysis for each loophole
  • Provides recommendations and potential implementation risks
  • Goes after everyone for tax breaks, including hallowed groups (e.g., military). The table of contents show all the groups who benefit from your taxes.

Consultantsmind - Tax Decoder Table of Contents

As a few examples of the craziness of the US tax code:

  • The tax code is so complex that the tax gap ($ mistakenly not paid, or deliberate tax evasion) is about $500 billion. . .enough to eliminate the budget deficit
  • Out of 145 million tax returns in 2011, 54 million (more than 1/3) had zero tax liability or were owed money back (lots of wasted administration)
  • Over 1,600 people who filed tax returns with income of $1 million paid no income taxes (the more complex the system, the easier to game and circumvent it)
  • Over 80% of the R&D tax credit go to companies with $250+ million in revenue (not exactly the intended manufacturers we are trying to spur innovation from)
  • Many non-profits do not deserve their tax-free status; example of Lady Gaga’s charity that raised $2.6M in charity, but only gave out $5,000 in charity
  • U.S. corporate tax rates are some of the highest in the world. Companies keep their capital overseas; smartly (yet, un-patriotically) avoiding US taxes

It’s a game for wealthy people. After reading Senator Coburn’s tax decoder, I realize that this is largely a game. A game of special interest groups, educated bankers / lawyers / consultants – who know how to optimize their income, assets, and equity. Read through Dr. Coburn’s work – you will find it well-researched, and persuasive.

Consultantsmind - RV Consultantsmind - Nascar

We filed an extension. We had our CPA file an extension a month ago for our personal and real estate taxes. That is the reason I had time to blog about taxes on April 15th.

Use the rules to your advantage. Whether you agree with the insanity of these tax breaks, you would be a fool to not take advantage of them. In fact, just researching this blog post – I unwittingly discovered 1-2 tax breaks I will use in the future.

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Consultant’s gripe: US education is a mess

Many of my friends have school-age children and they worry about their kid’s education. Sadly, they have a lot of reasons to be worried. For all the recent innovation, changing business models, and dedication of some teachers. . .

US public education is a mess.  Every few years, more than 470,000 students in 65 countries take the international PISA test to gauge their proficiency in a number of subjects.  The Economist summarizes the rankings here and the US was a big fail.  We ranked #17 (reading), #31 (math), and #23 (science). Sad state of affairs.

Thomas Friedman talks on the democratization of education – lack of boundaries, rise of MOOCs, and the drive for the best educated global resources – creates pressure for everyone to continually upgrade themselves through education and learning. The World is Flat, and there is not such thing as average; see at 4 min video here.

There is a world-full of hyper-motivated kids out there who have the democratized educational tools to learn, and pull themselves out of ignorance and poverty. Awesome. Democratic. Also, potentially worrying for US kids – if we don’t get our act together.

PISA scores

Generally, I am a libertarian. I believe in markets. Customers do a better job than any government in telling you that a product is good, or the price is right. People vote with their feet. While no system is perfect, the market does a pretty good job of picking winners and losers. So what is so “unfair” about the education crisis?

US Education $$ is unfairly distributed. In the US, a lot of school funding is local, which seems harmless enough on the surface. What happens in reality is a virtuous cycle in rich neighborhoods and downward spiral in poor places. Good schools boost property values, which creates a higher tax base, which funds schools, which boosts property values etc. . The same happens for poor neighborhoods, but in reverse.

Consultantsmind - Education

All kids deserve a decent education. I am a libertarian and generally don’t believe the government owes you much besides security, private property rights, industrial standards, and a system of laws.  I do, however, believe the country owes every single kid a kick-ass education. I mean access to great teachers, holistic curriculum, a safe school/home environment.

Education should be progressive. I actually don’t think we can over-invest here. This is an area where we should be so progressive that it hurts. The poorer the child – the better the education we should give them. We need to give kids the inputs (raw materials, foundation, core education) to be successful. Looking at this list, you can see that the US actually does spend a fair amount of money on education.

Education as a % of GDP

The bigger problem is the distribution of those funds. The Economist points out here how fatally flawed the US system is. . .

“According to the OECD, America is one of only three advanced countries which spends less on the education of poorer children than richer ones. And unlike most OECD countries, America does not put better teachers in poorly performing schools, where teachers’ unions often obstruct reform efforts.”

Education is an input, not an output. We provide a great education to ALL kids – the poorer, the more we invest. What they do with that learning, is up to them.

The libertarian logic goes like this: 1) give people the inputs to success 2) do not blindly hand out welfare / outputs / fruits of unearned labor. Inputs, not outputs.

Parents matter. This seems obvious, but my friends who are teachers will tell you that kids whose parents stay involved in their kid’s education make a HUGE difference. Multiple studies show that a parent’s attitude and behavior have a bigger impact on a kid’s education than the school here. BOOM.

My parents were sticklers for education – they never let me miss school, ensured I did my homework, instilled in me a pride for academic achievement, and basically nagged me until I got good grades. While I was not the brightest or most motivated kid, my parents made sure that I got good teachers and personalized attention. Trust me, that was an advantage.  As Warren Buffet might say, “I won the ovarian lottery”.

Even Bill Gates is worried about US education. The Bill and Melinda Gates foundation focus on the BIGGEST global problems. . .sanitation, malaria, women’s rights. . .and US education. Sheesh.  Cannot believe US education made that list.

Consultantsmind - Bill Gates

Some great things from Bill Gate’s Blog here:

By 2025, two-thirds of all jobs in the US will require education beyond high school. At the current rate the US is producing college graduates, however, the country is expected to face a shortfall of 11 million skilled workers to fill those roles over the next 10 years.

The problem is that too many drop out before completing their degrees, especially students from low-income families. In fact, a student from a wealthy family in the U.S. is eight times more likely to earn a bachelor’s degree by age 24 than a student from a low-income family.

America’s historically black colleges and universities still play an outsized role in providing education to underprivileged students. More than 60 percent of the students they enroll come from low-income backgrounds or are the first in their family to attend college.

Teachers matter. Duh. That is obvious, but something that needs emphasis. Look at this video about a teacher who 1) made his geometry classroom entirely experiential and student-centric 2) who cares enough about his students to visit them at home here.

We need to reward this creativity and entrepreneurship. Thank you Bill Gates. We should rage against the machine if there are laws / unions / organizational cultures / bureaucracies which are impeding good change. Innovation is never a straight line and we need some tolerance of failure, re-invention, and progress. Come on.

Consultantsmind - Betsy Lane High School

Education matters. Many of my friends are teachers, professors, mentors, coaches, and have a passion for teaching / learning / sharing. They are doing a great thing.

A couple from my church hold ad-hoc tutoring for non-English speaking kids every Saturday.  A high school friend is starting up a charter school in an economically disadvantaged neighborhood.  A college friend spent several years with Teach for America in rough, tough part of South Central Los Angles. The burden I need to take, and the question to answer now: How can I make a dent in the US education crisis?

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Rough consulting week: Embrace the suck

Last week was brutal. Was glad to just make it through the days without disappointing people or making too many mistakes. I had 32 different conference calls, a boat-load of work, a dentist appointment and planning for my mom’s 70th birthday. Apparently, the military uses an expression which was entirely appropriate last week: “Embrace the suck“, which simply means that situations go bad. . .and you need to deal with it.

Consultantsmind - Embrace the Suck

It’s been a while since I was up that late. Two nights of 2am or later. Honestly, some of that was dozing on/off on the couch. Yikes. As I told my friend – “I must be a really inefficient and slow worker”. These photos are from different nights, not pretty.

Consultantsmind - Late night

Consulting workload is lumpy. It is not linear. There is no “average” workday. Times of madness followed by stretches of ennui. When people I interview ask me about work-life balance, I have to bite my tongue a little bit.  What is balanced? Rather it’s a question of where are you in the S-curve of your career, and life.

Sheryl Sandberg talks about the fallacy of work-life balance for driven people in grueling, innovative, and client-service roles. There is no punch-clock. There is no union telling you to not work past 37.5 hours a week. We are engineering our own work schedule and expectations. We are molding the work around our lives.

Last week, I was the most productive I have been in a long time. Forced between 4-5 “must do” proposals and work-streams, I just triage the situation. There is a witty expression which I believe is very true. . . “if you need to get something done, give it to someone who is busy.” 

Doling out the truth.  One of my gifts is to give direct feedback to people, project manage a situation, without offending people (too much). In other words, I am a friendly truth-speaker. A few of the direct things I said last week:

Don’t let me get in your way. You do not need another manager on this. You tell me where to plug into your work?

No, I don’t really need to know. Unless you want me to take action on it, I don’t want to know.

Seems like you are in good hands with A & B, I am rolling myself off of this assignment.  They have the passion, content, and logistics covered. Giving control up to them.

Cover me on the call – you know my opinion.  The client has had the data request for 3 weeks, so there is not really any apologizing we need to do on our part.

Okay – I am getting off the phone to get back to work.

I agree – but in the list of things to worry about . . .that is #10 on my list. It’s not under our control, and out of scope.

I just don’t think the presentation is actually any better than it was 2 days ago.  Happiness level is low.

You need to do me a solid and speak with B.  You are pretty far apart – She does not have any clue that is how you feel.

My bad for being late on this call.  I owe you a beer.

Have a great week consultants. Do great work this week. Traveling this week, facilitating a workshop, several proposals due to clients. In the hunt to win business. This week will be WAY more fun, less crazy, and honestly. . . I had a restful weekend.

Related note about meetings (from Tomm in comments): 

When organizing a meeting myself I stick to Dominc Barton’s advice which I find very helpful: each item from the agenda is labeled into one of 3 buckets: ‘for information’, ‘for discussion’, ‘for decision’, so we’re all super clear in terms of what outcome shall be expected at the end of the meeting.

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What a consultant learns from building a house

I am moving. My wife and I lived in the current house for 11 years, and we are moving closer to her work. The new house will be 30% larger, and a whole lot nicer. The big difference is that we are building it from the ground up. So we choose the floor plan, exterior brick color, hardwood flooring, lighting, fixtures, tiles, everything. It’s fun and exhausting. A 4-5 month process which honestly, reminds me a lot of consulting.

Consultantsmind - House Foundation

As a customer with a big purchase (same as a good size consulting project), how did I feel throughout the process?  Introspective questions about consulting in red.

1. It starts with logic. We spent months visiting different locations and builders. We had a list of criteria ranging from house location, size, layout, lot, price, and finishes.

  • Used zillow.com to look at comparable prices
  • Looked at the county’s zoning plans to see where the new roads would be built
  • Talked to realtors and read reviews online on the quality of the builders.
  • Talked to friends who built houses. Did the research

Do we make a super logical case for the client’s to buy from us?  Is there a clear return-on-investment? If the client wanted to explain to his/her boss WHY they should hire us, is that message easy to tell? 

2. Of course, emotions matter. We first thought of moving about a year ago – but instead used that money to buy another rental property. Priorities changed. Then I got an email saying that the last lot in one of our “target” neighborhoods was on the market. L.A.S.T. C.H.A.N.C.E. and I remarked to my wife, “I don’t want to wait another 5 years to live in a house that I love.” That’s not really logic, right?  What a crying baby.

Do we understand the client’s pain points? Do we know the source of the client’s heart-ache, or fear. Have we addressed the head,heart, and hand of the problem?

3. First impressions matter. Of course the model homes where the sales office is located, looks amazing. This model home was 60% more expensive than the one bought – but of course, we anchor on what they see on the showroom floor.

Are the proposals, marketing materials, and qualifications impressive?  What is the first impression the client gets from our website, conferences, and interactions? Are they as impressive as this model house?

Consultantsmind - Model HOme

4. Team of professionals. During the process, the salesperson, the designer, and the builder were all professionals. They listened well, demonstrated their experience and gave me good counsel. More importantly, they acted as a cohesive team complimenting each other’s work and implicitly giving me the confidence that I made the right choice.

Are we supportive and complimentary of our team members? Do we know each other’s roles and direct the client to the right place? Does the client feel like we are providing a total solution – or just continually “passing the buck” to someone else?

Consultantsmind - House

5. A concierge experience. This house is a middle-of-the-road customized house. We chose a lot of the design feature, but we did not create the architectural plans. In other words, 80% of the plans are set, and we get to alter the 20% which is most obvious to your eyes. . . covered patio, color, design, cabinets, countertops, fixtures, lights, etc.

Consultantsmind - Design choices

Still, the sales, designer, and builder made us feel special. They took a routine task – remember there are 50+ of these homes in this neighborhood – feel like a personal, customized concierge process.

Are we making this a unique experience for our clients? Do they feel “special” and catered to?  Do we rely too much on templates, and copy/paste materials? How to help them feel like they are cared for?

6. Keeping the timeline. The builder was a bit maniacal about the timelines. They reminded us that the design selections had to be done by January with materials ordered. The walk-through for the electrical, plumbing, and mechanical had to be done by March. It was a drum beat of deadlines. They kept the process moving. This all required sacrifice – multiple days off of work for just the design center visits – but kept us engaged and working with the builder.

Do our statements of work (SoW) accurately convey the timeline expectations? Are we asking for enough accountability from the clients? Are we just letting the timeline slip because we don’t want to offend the client – at the expense of project and profitability?

7. It always costs more. We got an enormous 75% discount on $ – -, – – – of upgrades, and yet, we blew right past that amount and spent even more. It happens. There is always more that you want done with the house.

Are we pricing the work so that the client can “add on” more work and features, if they want to? Does the quality of the work, and the ability to get more results, create incentives for them to buy more? Is our work worth buying more of? 

8. Surprises suck. Even though we communicated continuously, there were still surprises. . . things not included in the price, features that we could not have, and even a  miscalculation in the price.

Are we unknowingly or unnecessarily surprising our clients?  What are we doing to set expectations and exceeding them?

9. Beware of self-doubt.  The house is currently being built and we are excited about it.  And yet, we still went to an open-house for a comparable house in a neighborhood that we have been watching. Call it buyer’s remorse or just self-doubt. We want to know that we made a good decision. We are gauging our sunk / opportunity cost.

What can we do to continually remind the client that they made the right choice? Are we making sure the client is saving face?  Are we making the client successful

10. Being a part of the process. Watching the house being built is one of the most satisfying and cathartic parts of the process. It’s deeply satisfying to see the quality of the workmanship behind the walls. The builder spent 90 minutes walking us through the house and showing us how they reinforce the beams, caulk the seams, and lay out the electrical. It makes you proud of the house, and more importantly, your decision.

Are we sufficiently showing the client the quality of the work throughout the process? Are we just disappearing for a few months, and surprising them at the end with a deliverable? Are we getting the client’s engagement throughout the process?

What is the last big decision or purchase you made and were there consulting lessons to learn from it?

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Rolling Stones in Cuba: Glasnost

Cuba Glasnost. This is HUGE news for the US, Cuba, and the world. The United States severed diplomatic ties with Cuba and had a trade embargo for 50+ years. While only symbolic, President Obama’s visit and the concert by the once-banned, iconoclastic Rolling Stones is monumental, exciting, revolutionary, and promising. Embassies have opened up again, and Cuba is no longer on the list of countries the US believes supports terrorism. Small wins.

Consultantsmind - Rolling Stones in Cuba

The Economist (yes the fastest way to get smart on any topic) makes a few savvy points on what is driving this rapproachment with Cuba here:

  • The US trade embargo never really worked; it just hurt everyday Cubans
  • Latin America see the US stance on Cuba as imperialist – a shadow of the cold-war, and pretty foolish
  • China has been in favor with Latin America for the last 10 years, as China became a huge trading partner (raw materials); anti-American sentiment has grown
  • Venezuela aid to Cuba ($1.5 billion) is risk as Venezuela’s economy sinks (again)

Mr Obama’s diplomacy leaves a choice for the next president: turn your back on Latin America and feed its resentments and failings, or help it become America’s front yard, a region of increasingly prosperous democracies linked by economic and political ties. The visit to Havana is a welcome step down this path.  – Economist

Cuba is a huge business opportunity. There are 11 million+ Cubans with 75% of them under the age of 55 years old. The GDP per headcount is absymally low, less than $5K and yet Cuba has so many reasons to be optimistic on a more liberalized future:

  • #2 globally in education
  • #2 in physicians per 1,000 population
  • 90 miles from the US, the largest economy in the world

Biotechnology. A Brookings Institute report (somewhat dated 2013),says that the Cuban biotechnology industry is impressive and is comparable to one of the largest US biotechnology firms or a mid-sized international pharma company.  Not bad. . .

The industry employs about 10,000 people, of whom more than 3,000 have university degrees, more than 500 have masters degrees, and more than 250 have received PhDs in science. Their work is done in about fifteen separate facilities that operate in concert, but apparently semi-autonomously. More than 40 products and technologies created by the industry are currently in use. The industry now produces 33 different vaccines, 33 anti-cancer drugs, 18 products to treat cardiovascular disease, and 7 drugs to treat additional diseases.

Travel to Cuba. No surprise that Americans will want to visit Cuba – a large country only 20 minutes by plane from Miami that has been “off-limits” for half a century. The Economist shows that in 2015, there were 150K+ American visitors to Cuba.
Consultantsmind - Economist Cuba TravelCan’t fly there from the US.  I went to Delta.com to try and book roundtrip tickets to Cuba, and I guess we still have to wait. Open embassies, but no direct flights yet.

Consultantsmind - Delta Cuba

Oddly, you can cruise there.  Apparently, it is okay to cruise there from Miami. This cruise line has 7 and 10 days trips. Not sure I want to site-see in Cuba for that long.

Consultantsmind - Cruise Cuba

So far, direct foreign investment = nothing.  Looking at this graphic from the Financial Times, it’s clear Cuba has not done a good job of attracting capital.  Less than the Dominican Republic and Jamaica. . . . really?

Consultantsmind - Cuba foreign investment

Hard to hire Cuban workers.  The Marriott CEO notes that Cuban desperately needs foreign investment, technology and know-how, yet, the laws make it hard to do business there. Apparently, the government dictates which people can work for the company, and all wages go to the government first. . then the government pays the employee. It is like a government-sized staffing agency. . . which probably keeps WAY more than 30%.

It’s very promising, but a long-haul. Clearly, this is the start of the start. Most Cubans make less than $2K a year, and the US government has to repeal its embargo, and the Cuban government is still a one-man show.  As one trade consultant mentioned, companies need to think with a 10-year time horizon.

What is your opinion about this detente between the US and Cuba?

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“That’s What Google is For”

Over the last two weeks, this scenario has repeated itself a few times.  A junior consultant I am working with hits a simple roadblock and instead of reflecting on the problem and hunting out an answer, they pull the brakes and reply, “I don’t know how to do that.”  Hmm, I held my tongue for 3 seconds, then said, “That’s what Google is for

Consultantsmind - Thats what google is for

It might sound like a flippant reply, but it is not. It is the truth. There is INFINITE access to information. You don’t need to buy a book, you don’t need to make a phone call. You don’t need to go to the library. All you need to do is get the Star Trek piece of glass from your pocket and look it up. Don’t forget the leverage model – use people’s time wisely.

It’s not a good sign. It’s shows a lack of rigor, thought-process, and discernment.  If you need help DEFINITELY ASK for it, but don’t give up at the first turn in the road.

  • When you are digging a hole for a fence post, do you just stop when the dirt gets more dense? No, you keep digging.
  • When you are studying a math problem, do you stop when you don’t immediately understand the logic? No, you keep pushing til you get it.
  • When you can’t get the hotel wifi, do you give up? No, you find the answer.

Are you driving $10,000 day of value to the client? As a management consultant, you are highly paid, and it’s not okay to ask dumb questions. Gotta be crafty enough to answer simple questions. Look it up on Google. Think about the problem. Reach out to your network if you need to. Are you using your logic, network, research craftiness, and business acumen to take you further? Or are you giving up too early?

It’s okay to not know the answer. After all, our clients hire us to tackle the ugly, complex, political, persistent, and cross-functional problems. If the problems were easy, they would be solved already. It’s okay to not know all the answers.

  • When you are asking open-ended questions in a client interview to solicit feedback and open the interviewee up.  Build rapport.
  • When you are scoping out a project, defining the boundaries of the puzzle, clarifying what is in/out of scope.
  • When you are seeking the guidance of an expert, or relying on someone’s advice, wisdom, and judgment that comes from experience.
  • When you are directly asked by a client – and honestly – you don’t know

It’s not okay to be mentally lazy.  I know that in the politically correct work of uber-inclusion, it’s not cool to say people’s questions are dumb, but frankly – consultants are held to a higher bar. We pride ourselves on our ability to get smart quickly. If you don’t know how to do something (excel formula, approach to a problem, meaning of an acronym, ways to manipulate powerpoint), AT LEAST TRY to solve it by yourself first.

When I interviewed for my 2nd job, my soon-to-be boss made it clear that there would be lots of executive presentations. This is the book I bought the next day. No shame.

Consultantsmind - PowerPoint for Dummies

Ten years later, I was on a different project working for the Legal department of a large multi-billion $ company, and this was the book I read at night in my hotel room.

Consultantsmind - Patents for Dummies

There is no shame in not knowing.  There is shame in not trying.

Great (funny) link to share.  http://www.lmgtfy.com/

Consultantsmind - LMGTFY

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Pandora – great music, pretty terrible business

I listen to Pandora every day. On my computer, on my Roku, on my Amazon Echo, in my car, basically everywhere. It’s also a fun short-hand way to ask people what they listen to. My buddy turned me on to Carla Bruni, and it’s my “go-to” station.

Consultantsmind Pandora

Yes, the ads are annoying, but not bad enough to pay $55 a year for the subscription. Then the question enters my brain – how much money does Pandora make?

“Cutting to the chase”, Pandora loses money.

Lots of places online to look at financial statements (yes, I am sure banker-types would go to Bloomberg), but I like Google Finance. It’s clean, simple, and easy to use. Tip: don’t forget to click quarterly vs. annual numbers.

Pandora Income Statement here.  It looks like this.

  • Revenues up considerably from 2012, from $427M to $1.1B (not bad, right?)
  • Expenses up just as fast, exceeding revenues every year (uh, bad news)
  • Net loss every year (completely unsustainable)

Consultantsmind Pandora Income Statement

Pandora Cash flow here.  Where is Pandora getting their money from? How can you lose money each year and still survive? Some seriously disturbing things here. In 2013, Pandora got $377 from issue more stock. Then in 2015, they issued $301M in debt. Bad news on all fronts. Diluting equity holders by issuing more stock, and adding on more debt for a company that does not show profits.  Arrgh.

Consultantsmind Pandora Cash Flow Statement

Pandora stock performance? We know that financial performance and stock performance are not always correlated in the short-term. So maybe Pandora stock has done well in spite of poor profitability and dilution of equity?

Nope? Since June 24, 2011 (IPO date), Pandora stock is down 19%. . vs. the S&P which is up 57%. Ouch, not good at all.

Consultantsmind Pandora Stock Performance

Check out investor relations here. Since we have already gotten an x-ray view of the company’s terrible financial situation, let’s see what the Pandora Csuite say about their business prospects and why you should invest your money in this stock.

Here is the Pandora management team’s logic:

1) Lots of people listen to radio.  91% of Americans (245M) listen to radio for 18 hours a week.  Of that, 80% is AM/FM “terrestrial” radio.  Lots of room for internet radio to eat into more traditional radio.

2) Pandora has 58% of internet radio. Market share has grown since the IPO and is more than double the closest competitor, Spotify.

Consultantsmind Pandora 58% of internet radio3) Increasing the amount of usage. Pandora has done an admirable job of getting MORE PEOPLE to use the service  MORE OFTEN.

Consultantsmind Pandora Usage

4) Opportunity for more Pandora in the car.  Pandora’s argument is that most people listen to radio in their car – and therefore – need to integrate into the hardware and grab more of this drive time. To me this is a bit of an odd argument as most cars have bluetooth and can stream from your phone AND lots of people listen to real time radio because they want to listen to talk radio or sports. . . not music.

Consultantsmind Pandora 160 autos

5) Making money through advertisements. Looks like 80%+ of their money comes advertising on mobile and computer devices.

Consultantsmind Pandora Business Model

6) Big player in advertisement game. For mobile ads, looks like Pandora is one of the biggest DJ of ads – right behind Facebook, Google and Twitter.Consultantsmind Pandora Largest advertiser

7) Good customer base for advertising.  See the sample list of customers.

Consultantsmind Pandora Brands

8) Increase RPM (revenue per thousand impressions). Heard of this metric before and found this definition online for RPM from Google Ad Sense:

"Revenue per 1000 impressions (RPM) represents the estimated earnings you'd accrue for every 1000 impressions you receive. RPM doesn't represent how much you have actually earned; rather, it's calculated by dividing your estimated earnings by the number of page views, impressions, or queries you received, then multiplying by 1000. For example: If you earned an estimated $0.15 from 25 page views, then your page RPM would equal ($0.15 / 25) * 1000, or $6.00."

From this slide from their investor relations presentation, I assume that Pandora believes they can offer advertisers a higher RPM than other means.

Consultantsmind Pandora RPM

9) A list of strategic drivers? Pandora ends the presentation with a concept page – as consultants we have seen these pages too often – which is a mix of “drivers” which will help this business to grow – everything from new products to new distribution.

Consultantsmind Pandora Long term drivers

Consultant’s mind conclusion: Pandora had a huge first-mover advantage, but really did not do much with it. They are limited to 4 countries currently and being outmaneuvered by Apple and Spotify. They consistently loose money and seem to be staying afloat largely from paid-in-capital (stock issuance), and issuing more debt.

Apparently, Pandora is shopping itself around to see if there are any buyers. The stock is down 60% recently, and the market capitalization is around $2.5 billion – not cheap.

Thoughts on Pandora and who would make a good acquirer? Do you think Pandora has a future solo, or as a part of a larger media company?

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Review of 39pg McKinsey Presentation

McKinsey & Company do great work. On this blog, I have written about their leader, culture, high-visibility assignments at the CIA, and Department of Corrections. Overall, have enormous respect for the work they do, and the way they have built their practice. By any measure, they are monolithic at what they do.  So, now I would like to take a look a their presentation structure and format. Let’s dissect a McKinsey presentation.

What are some key elements of a McKinsey presentation? I was curious how good their presentations are. I have physically seen a dozen or so from clients who had McKinsey-ites passing through their halls. Online, this content is pretty easy to find. Some of them are from industry conferences and others are from client engagements that the companies and governments (oddly) leave online.

I reviewed a 39 pg presentation from 5 years ago by McKinsey for the USPS here. Generally, this deck follows a simple, but strong logic. It addresses a HUGE problem facing the US Postal Service and provides a smart roadmap for the discussion.

Please find some of my observations. Please add your comments too.

1) Stay Organized. It’s common for consulting presentations to have table of content pages which is re-introduced at the front of each section – telling the audience where in the flow of the presentation they are. These are road markers. In the example below, this introduces the base case section, part 2 of 4.

McKinsey Presentation - Table of Contents

2) Parallel structure in titles. I remind my teams that the titles of the pages are the most valuable real estate – use them wisely. Its storytelling, so the titles should come together cohesively. The titles should read well – similar structure, tense, tone, format. Like an essay, the points should be clear with transitions between the arguments.

McKinsey Presentation - Titles

3) Credibility through data and documentation. Consultants are known for their left-brain, data-crunching rigor. McKinsey is no different. Unless it is a straight marketing or organizational design piece, there are numbers on the majority of pages. They will create data through surveys or other means, if necessary. Clear footnotes indicate where the data comes from . . even if it coyly says “McKinsey Research”.

McKinsey Presentation - Graph4) Make sure each page has a point. Senior managers are trained to push consultants to answer the question “So What” for each page. Each page needs to say something clearly to the audience, or it needs to be taken out. In this page, you see there is a kicker box which says 55% of the reduction came from overtime and non-career cuts.

McKinsey Presentation - Kicker Box

5) Create a simple framework for the problem. Consultants solve complex problems with lots of moving parts. As a result, it’s important that we bucket the ideas and details into an overarching structure which is easy to grasp and helps with the storytelling. Often this can be done with a simple income statement (Rev-Cost=Profits) or balance sheet (A = L+E). Here the reader sees from the color coding that there are several unfavorable revenue AND cost trends.

McKinsey Presentation - Revenue and Costs

6) Find the right data. In professional services, it’s all about the client success – not ours. Therefore, you do what it takes to get the answers and (try to) bury your pride. In the following page, you see that McKinsey actually refers to BCG research on the topic; acknowledging their competitors’ work when appropriate.

McKinsey Presentation - BCG7) Charts which are easy to understand. McKinsey slides tend to be busier than I prefer, but their charts are at least simple and easy to understand. You see that they are clearly labeled and the trend lines are obvious. Revenue is flat. Costs are going up. Profits are going down. Cumulative losses are going up. Unequivocal. Direct.

McKinsey Presentation - Clean Charts

8) A clear case for change. Too many recommendations – including the strategic ones by McKinsey – end up on the executives shelves collecting dust. It is almost a joke. As a result, it’s key to make it in-your-face clear why action is needed. McKinsey shows that $18 billion can be saved if these actions are taken, or $123 billion total. Billion with a B.

McKinsey Presentation - Minto Pyramid

9) High level recommendations have details.  In true Minto Pyramid fashion, there are back-up pages for the recommendations with specific action steps. Here the $10 billion in savings is broken into 4 initiatives and a few action steps:

Question – not sure how the argument on the right hand side supports this $10 billion target. McKinsey notes that the USPS already automates 90%+ of its processing, thereby questioning the feasibility of really improving that much. As a reader – my question is. . .is it possible or not?

McKinsey Presentation - Minto Pyramid

10) Go beyond the obvious. Here comes the creativity. Yes, consultants do a great job of capturing internal know-how, structuring it in a smart story, and marrying it with best practices. That puts a consultant’s performance at a B-/B.  Good, but not great.

The real “juice” in consulting comes from thoughtful inquiry, rigorous intellectual curiosity, creativity, and something new. Let’s remember. . . our clients are smart too. They don’t need you to just regurgitate what everyone knows.

Here, you see McKinsey proposing 30 new revenue streams for the USPS to consider, and the methodology to filter out the ones which are not profitable, or not controllable.

McKinsey Presentation - New Products

For those interested, open up this pdf yourself.  What other elements do you believe McKinsey did right or could improve?

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