When I am investing in real estate, one of the demographic markers I use for the area is gained by visiting the local supermarket and checking out what wines they stock, and the balance between different price points. So I was intrigued as to what wine intelligence was all about.

Clicking through to the site www.wineintelligence.com I found an array of interesting market data extracted from Vinitrac Global consumer survey, due for launch in March 2009. Insights such as:

“lot of turbulence in the middle of the Wine Wall ($4-$10)”.

“Buyers really are trading down from $7.99 to $5.99″

Following 9/11, it was proposed that wine sales were “recession proof”. The New York Times recently reported that consumers are trading down, but buying more. The argument given was that there was “even more of a reason to drink,” ….I’m with you on that one buddy! Whilst the price dropped 17%, the volume increased 15%. But what about the impact on the producer side. Since the cost of distributing a $5.99 wine is not $2 less than a $7.99 wine, trading down has a big effect on producer and retailer profits…..so one can expect revenues and profits to take a hammering. In markets such as China, where wine is still considered a luxury item, it is more easily deleted off the shopping list without substitution.

All this data is harvested from grocery store loyalty card programs…there is a reason they are willing to give you all those airpoints and free homewares. The article represents a great example of how important it is to understanding the desires and thought processes behind consumer behaviour. In any market condition!! It also illustrates how modelling a current scenario, aligning to common elements in past scenarios can help companies predict with reasonable certainty how the market will react to certain products and services.

Read the full article http://www.wineintelligence.com/

When fear enters the picture, in the absence of the truth, the individual makes up something that is so much worse. We seem to be genetically programmed to look at the negative side of things, a natural protection mechanism.

So what message should you give. That depends entirely on the customer group – and knowing about your customer to that level of detail requires business intelligence capability. For customers in lower economic levels – they will be looking at ways to spread payments or lower cost options. For those in the mid-level, with perhaps more job security and lower debt levels, they will be looking to cash in on the good deals and are more willing to get a good discount for cash payments now, rather than extended payment terms. For those at the top, they are more concerned with ensuring that support will be there when they want it – they don’t have time to read manuals and prefer to get on the phone and have someone walk them through installations or have a service agent do the installation for them.

You need to affirm to your current customers that your business is solid. Be honest. Tell them you are taking prudent actions to cut costs to ensure your debt levels remain within good business practice, and that to ensure your current products remain supported that you are working closely with suppliers to ensure that both product delivery and after sales service remain at the levels you know they value.

Customers just want to feel that you are on the ball – that you care that they may be feeling restless and want some form of assertion that all will be well. Contacting your customers and keeping them close to you will do more for maintaining sales volumes than almost any other strategy.

So you see, The Logical Organization and business intelligence is not all about raw data. It’s about having the right information you can rely on to create a transparent relationship with your suppliers and customers. Right brain emotion is still a valued partner of left-brain logic.

Consulting group McKinsey has released the results of its recent global survey [November 2008] of over 2000 corporate executives on their decision making processes and outcomes. This included questions pertaining to:

1. Decision makers involved
2. Drivers of the decisions
3. Depth of analysis
4. Openness of the discussions
5. Impact of Politics on process and outcomes
6. The financial and operational outcomes
7. Hard business benefits

The results of the survey highlighted the benefits of decision making disciplines, ensuring the right people are included and adopting organizational-wide approaches to risk and outcome analysis. It also highlighted flaws in strategic decision making, especially around the impact of irrational thinking on corporate planning

Good Decision Process

Process steps strongly associated with good outcomes included:

• Including people with the right skills and experience in decision making
• Clearly defining decision criteria
• Making decision on facts, not personal assumptions
• Managing contributing politics, such as some consensus and alliance building

Types of Decisions Made in Organizations

More than 75% of investment decisions were aimed at revenue growth rather than cost savings and just over half [57%] of decisions related to human resources were aimed to improve efficiency or productivity:

• Organization Change – Expansion [New products, services, markets] 34%
• Organization Change – Other 21%
• Growth – Existing products, services, markets 15%
• Growth – Infrastructure 12%
• Growth – M&A’s 11%
• Maintenance – Infrastructure 5%

Decision Outcomes

Most decisions were driven by the executive team, most of these outside the annual planning process.
Whilst the survey showed that overall, outcomes for decisions were good, it also supported other findings that execution is too often overlooked when making decisions, with operations executives only being consulted in less than one third of the most financially unsuccessful decisions. Decision outcomes were assessed in terms of met or exceeded executives’ expectations for revenue growth and cost savings, speed, implementation cost, and gains in market share or efficiency. The expected payback period of decisions was less than 2 years.

Successful decision outcomes result from:

1. Strong relationships linking financial success to goals set around benchmarks
2. Clarity about who is responsible for implementation
3. Involvement of implementers in the decision-making process
4. Appropriate level of analysis, discussion, and corporate politics for the decision type

Common Decision Making Mistakes

• Decisions initiated and approved by the same person – generate the worst financial results. This indicates the value of good discussion.
• Decisions made without any strategic planning process are twice to fail or deliver substandard results
• Lack of or insufficient risk and impact analysis

Good Decision Making Principles

Analysis

• Sensitivity analysis and financial-risk models
• Implementation speed of project completion, cost to implement, impact on whole organization not just area of implementation
• Outcomes – benchmarking expectations for both financial and productivity improvements

Implementation

A concise analysis and understanding of what constitutes:

• Financial success
• Completion of the project in less time than expected

Politics

• Encouragement of participation on the basis of individuals’ skills or experiences
• Reliance upon transparent approval criteria for the decision
• Having an understanding of how the decision will impact the whole organization allows for relationship and alliance building ahead of implementation, positively impacting the success of both the speed of implementation and the outcome.

One interesting paradox emerging from the results was that the most successful and the most unsuccessful projects were those where the CEO was highly involved. Certainly, the CEO has a major impact in managing the internal politics of a program and ensuring that impact and risk are assessed at organizational levels, not departmental. This ensures that departmental goals remain aligned with the overarching organizational goals.

For detail results of the survey.

The survey closely followed a previous McKinsey survey [October 2008] on strategic thinking and how companies make good decisions. This survey revealed the error in relying on decision makers using rational thinking even when highly strategic outcomes were at stake. Irrational thinking adversely impacts both individual economic decisions and corporate strategic planning.

Both surveys support the premise of The Logical Organization™, that in spite of the perception held by executives that they alone are capable of solid, rational decision making, it is merely a perception, not the reality. The time in which executives today are pressured to make decisions fails to provide sufficient time for human driven collaboration and analysis. The use of business intelligence tools is critical if this vital part of the decision making process is executed well. BI tools also help ensure that decisions are tied to high level strategic goals and how the decision may impact them.

1. Single Event – It starts with a single event,
2. Isolated Events – It then appears on the horizon as a series of seemingly unrelated events
3. Connected Events – It then becomes a trend, with more ‘isolated’ events starting to form connections located in remote regions
4. Local Market Force – It appears in your market – and boom, suddenly with the speed of Web 2.0 it becomes a recognisable market force
5. Mass Market – It reaches mass market – where it has not only the inertia to continue under its own energy, but also leaves behind a latent footprint impacting other market factors
6. Shadow Force – It becomes a shadow – it has moved from a driving market force into a market that lingers to the sidelines of a new change

If you are not watching over the horizon, and monitoring any new forces that transform from being isolated events into trends, then yes, the change will appear to happen rapidly. What has changed more than the so called ‘speed of change’ is the complexity of change. In many cases, it is the complexity that allows change to be hidden in plain sight.

The option to ‘stay the course’ is only valid if the environment in which you will be operating in the future is the same as the past. Twenty years ago, even only ten years ago that may have been reasonably valid. But not today. Today, the changes are so fast, and much more subtle. Small incremental, seemingly insignificant changes in market, supply and technology build into large significant changes very quickly.

It is essential that organizations have reliable information collection and analysis systems to identify and interpret changes and trends that may significantly impact their future. And once these changes are recognised, the company must start acting immediately to counter the new force.

Those who don’t manoeuvre to make the force work for them, will likely bear the consequences of the force moving against them.

The Logic Evangelist