Principles and Rules

Business rules, principles and models offer a powerful tool for business analysts and others to improve communication with business leads (and IT) and to come to grips with real-life complexity. The basic principles and techniques of business rules are relatively straightforward. From there, it’s all a matter of just getting started, staying focused, and using the right techniques.

What are the basic principles of business rules?

First, all business rules are subject to change, including (and perhaps especially) business rules derived directly from business policies. The ability to change and redeploy business rules is essential to business agility.


Basic Principle for Business Rules: No business rule is ever set in stone.

1. The 1st Law of Cybernetics Communication
The unit within the system with the most behavioural responses available to it controls the system.
2. Two Step Flow Model Communication
Information from the media moves indirectly in two distinct stages.
3. Gresham’s Law Finance
Theory that cheaper money replaces more valuable money
4. The Peter Principle – Dr Laurence Peter HR
In a hierarchy every employee tends to rise to his level of incompetence
5. Parkinson’s Law – Cyril Northcote Parkinson HR
Work expands so as to fill the time available for its completion.
6. The Hierarchy of Human Needs – Abraham Maslow HR
When a need is mostly satisfied it no longer motivates and the next higher need takes its place.
7. Theory X and Theory Y – Douglas McGregor HR
Two different views of individuals (employees): one of which is negative, called as Theory X and the other is positive, so called as Theory Y.
8. 7-S Framework of McKinsey Management
7 factors to organize a company in an holistic and effective way.
9. Murphy’s Law Management
If anything can go wrong, it will.
10. Generation X, Y, add and Baby-Boomers… Marketing
A broad model for defining people appeared towards the end of the 20th century.
11. SWOT Analysis Marketing
Identify the positives and negatives inside your organization (S-W) and outside of it, in the external environment (O-T)
12. Marketing Mix (4P’s) – McCarthy Marketing
Balanced mix of marketing activities (Product, Place, Price, Promotion)
13. Six Sigma Quality
Increase performance by improving business processes.
14. The Pareto Principle (Pareto’s Law) Statistics
80 percent of output is produced by 20 percent of input.
15. BGE Matrix Strategy
Milk your "Cash Cows."

1. The 1st Law of Cybernetics

"The unit within the system with the most behavioural responses available to it controls the system."

Cybernetics – science of communications and control within systems – choice over instinct.

Cybernetics is the science of control and communications in animals, including humankind, and machines. The study of cybernetics has been used in various ways since ancient times to attempt to explain and understand and manage the effective workings of all manner of systems – social, organisational, animal, mechanical, electronic and others. As such, the cybernetics concept (notably ‘the first law of cybernetics’) is immensely relevant to the modern development of management, and one’s own role and potential within systems of all kinds.

The organisation in which we work; the world in which we live; the people around us – these are all systems.

The ‘first law of cybernetics’ has massive significance especially in understanding and developing greater individual self-determination; and greater understanding, tolerance and variety of responses to situations and people around us; which are all essential for our ability to interact and respond effectively within work and beyond.

The ‘first law of cybernetics’ is arguably one of the most powerful maxims for living a happy productive and successful life.

And while ‘successful’ is of course a matter for individual interpretation, cybernetics provides the key to achieving it, whatever your interpretation might be. It’s a very very powerful concept – in a way cybernetics is the science of thoughtful choice over unquestioning instinct:

The 1st law of cybernetics:

"The unit within the system with the most behavioural responses available to it controls the system."

This is also known as ‘the law of requisite variety’, which is central to the concepts of neuro-linguistic programming (NLP).

Cybernetics history and overview

As stated above, the word cybernetics is from the Greek word ‘kubernetes’ meaning ‘steersman’ or ‘pilot’. This literal translation embodies much of the modern relevance of the cybernetics principles.

Cybernetics as a popularised (such as it is) science and term in this sense seems generally to be attributed (according to Chambers notably) to Norbert Wiener, 1894-1964, an American mathematician (amongst other capabilities). Wiener was part of a group of very brainy people with various specialisms (psychology, mathematics, sociology, philosophy, knowledge management), including Stefan Odobleja, Arturo Rosenblueth, Julian Bigelow, Warren McCulloch and Walter Pitts, who seem to have been at the centre of cybernetics theorizing around 1940, much based in France, where Wiener’s work was first published.

Other reference sources cite earlier origins and use of the word cybernetics (or translated equivalent) dating back to Plato, 428-348BC, in which he used the term in ‘Republic’ to describe systems of government. More recently others used the cybernetics term prior and closer to Wiener’s ideas, notably André-Marie Ampère, 1775-1836, he of electromagnetism fame, and later Louis Couffignal, 1902-1966, a French ‘cybernetics pioneer’.

In short, the study of control and response to complex systems has been keeping great minds busy for thousands of years, and Wiener seems to regarded as the chief modern architect.

Particularly Wiener appears to have combined the main contributory cybernetics perspectives which have been developed by many and various people over the past two thousand years, ie., the principles of:

regulating, and responding to -

mechanical and electrical systems,
social and governmental systems,
human and animal nervous systems, and

human and animal social systems.

Cybernetics is central to our understanding of life, organisations, and the way we relate to our world, however we define it.

Wiener studied zoology at Harvard, philosophy at Cornell, and at Cambridge (with Bertrand Russell) and Gottingen, and later became Professor of Mathematics at the Massachusetts Institute of Technology. Wiener was an expert in mathematical communication theory, ultimately relating his work with guided missile systems and information handling in electronic devices to the mental processes in animals.

His publications ‘Cybernetics, or Control and Communication in the Animal and the Machine’ (1948), and ‘The Human Use of Human Beings: Cybernetics and Society’ (1950) helped to popularise cybernetics as a science and particularly as a scientific term.

In truth humankind has always been fascinated by cybernetics – how we relate to and respond to the world around us. Thanks to Wiener we now all know what to call it.

Review the essential philosophy contained in the ‘first law’, and see how it relates to your life and the systems around it.

Think about it:

"The unit within the system with the most behavioural responses available to it controls the system."

The ‘unit’ is you.

The ‘behavioural responses’ are how you react and plan, and what you do and say.

The ‘system’ is the environment (in all respects) and the people that represent the world that you seek to succeed within.

And ‘control’ is the choice that you are able to exercise in achieving what you want, whatever that may be.


"It’s not what you say, it’s what people hear."

Frank I. Luntz (born February 23, 1962) is an American political consultant, pollster, and Republican Party strategist.


2. Two Step Flow Model

"Information from the media moves indirectly in two distinct stages."

The Two Step Flow Model of Mass Communication theory claims that information from the media moves in two separate stages. In the first phase individuals (opinion leaders) who pay close attention to the mass media and its messages receive the information. Then the opinion leaders pass on their own interpretations of the actual media content. The term ‘personal influence’ was used to indicate the process intervening between the media’s direct message and the ultimate reaction of the audience to the message.

Origin of Two Step Flow Model.

The foundation of the theory comes from work of Bernard Berelson, Hazel Gaudet and Paul Lazarsfeld in The People’s Choice, a 1944 study on the process of decision-making during a Presidential election campaign. Lazarsfeld c.s. were looking for empirical support for the direct influence of media messages on voting intentions. However they discovered that informal, personal contacts were mentioned far more frequently than exposure to radio or newspaper as sources of influence on voting behavior.

Katz and Lazarsfeld

Based on this data, the Two Step Flow Model of Mass Communication was developed by Elihu Katz and P. Lazarsfeld successively (Personal Influence, 1955). The two authors assumed people are not alone in their community, rather they are integrated in one or more groups, in which they usually have interpersonal relationships with other members. Moreover, they found out that a major role within each group or community was played by Opinion Leaders.

These "special" people act as catalyst, meaning that messages delivered by media don’t hit receivers directly, like it was initially supposed by Hypodermic Needle Theory, but are mitigated by opinion leaders. They take the role of receiving and transferring media messages and, in this process, they exert a certain power of influence over the others.

The model of communication is then: Stimulus – Intervening Variables – Response.

Later on, Katz and Lazarsfeld demonstrated that key elements of this new communication process were not opinion leaders themselves, but the group in general, especially in small groups. What happened in small communities was a sort of intense debate about how to react to socio-political issues that used to end with a decision shared by most of members.

The Two Step Flow Model of Communication was the foundation for the later Multi Step Flow Theory by Rogers and Bass and also influenced later mass communication theories like: Uses and Gratification Theory, Play Theory, Spiral of Silence, Agenda Setting, Cultivation Theory, and Dependence Theory.


"The two words ‘information’ and ‘communication’ are often used interchangeably, but they signify quite different things. Information is giving out; communication is getting through."

Sydne. Harris (14 September 1917– 8 December 1986) was an American journalist for the Chicago Daily News and later the Chicago Sun-Times.


3. Gresham’s Law

    Theory that cheaper money replaces more valuable money

    The principle that "bad money will drive out good.". If two forms of money with the same denomination exist in the same market, the form with the higher metal value will be driven out of circulation because people hoard it and use the lower-rated form to spend.

    We can begin Gresham’s law by outlining some of the highlights of its history. Twenty centuries before Sir Thomas Gresham was born, the elegaic poet, Theognis, born in Megara near Athens, writing in the late 6th and early 5th century BC, wrote some lines suggesting Gresham’s Law. Theognis has been described as "an eloquent and strongly biased witness of the struggle of the old aristocracy, for its traditional ideas and ideals which were partly adopted and partly destroyed by the rising lower classes. In a book called Maxims written for his beloved Cyrnus, he informs us that "alloyed gold and silver is easily detected by a shrewd man." More to the point is an earlier comment: “Nor will anyone take in exchange worse when better is to be had."

    From Theognis, we turn nearly a century later to Aristophanes (450-385 BC). In The Frogs he wrote: "the full-bodied coins that are the pride of Athens are never used while the mean brass coins pass hand to hand." The idea must have been widely known because the illustrious playwright was able to assume that his audience was aware that the law applied also to politicians (bad politicians drive out good!). It was hardly a novel idea at that time.

    What was the condition of the Athenian monetary system that led Aristophanes to this insight? The Frogs was written in 405 BC, in the closing years of the Peloponnesian Wars. From 413 BC onwards, the Spartans had occupied Decelea north of Athens and cut off the supply of silver from the Laurium mines. In 407 BC, confronted with a dire threat to the Athenian fleet and an empty treasury, the Athenians had recourse to melting the gold in some of the statues in the Acropolis to make emergency coins. Eight statues of Nike,the god of Victory, on the Acropolis had been clad with two talents of gold each, to be removed in case of emergency. The gold was thus struck into coin. (One statue survived and the tools used to produce the coins were subsequently dedicated in the Treasury to Athena.) In the next year, copper coins were issued on the credit of the state as replacement for silver coinage, and it "is a modern inference that the emergency coinage was of copper plated by silver."

    Aristophanes’ anticipation of Gresham’s law in The Frogs was by no means his only reference to monetary matters. A new use of small coins gave Aristophanes an occasion to raise a laugh: "It was customary to hold them in the mouth for safe-keeping, and in The Wasps (lines 790-1) Philocleon pops fish scales into his mouth, thinking they are coins. When he goes home with his jury pay under his tongue, his daughter (lines 608-9) manages to get it away from him in a welcoming kiss! Uelpides (The Birds, 503) swallows an obol by mistake." In The Peace, Aristophanes has the maker of sickles say that the advent of the brief peace in 421 BC had made the price of sickles soar, while the maker of helmet crests complains that the peace has ruined him. In another instance, he makes fun of the Athenian "Coinage Decree" which attempted to establish the Attic standard on all its allied cities.

    There seemed to be recognition of the principle underlying Gresham’s Law during the Middle Ages. It was explicitly developed in Oresme’s De Moneta. Written in the middle of the 14th century, this was the most important work on the theory of money before Bodin’s and Grimaudet’s writings in the 1570s. Nicholas Oresme (1320-1382) was the Norman Bishop of Lisieux who made contributions to theology, mathematics and astronomy besides his work on money. His De Moneta laid stress on the rights of the public with respect to currency and the great evils associated with debasement and devaluation, a courageous performance in view of the fact that it was written during the reign of John the Good (1350-1364) who devalued eighty-six(13) times!
    Oresme had a clear statement of what we call Gresham’s Law. There is sufficient proof, however, that the idea was fairly well-known in the 14th century; its essence appeared in petitions addressed to the parliaments of Edward III and Richard II.

    In the Renaissance, John Hales (d. 1571) is probably the first writer to elaborate on the proposition, assuming he was the author of A discourse on the Common Weal of this Realm of England. This rich work contains the following explicit statement of Gresham’s Law:

    "Was there not made proclamations that the olde coyne, specially of golde, should not be current here above such a price: was not that the rediest way to dryve away our golde from us. Everything will go where it is most esteemed, and therefore our treasure went over in heapes."

    At long last we arrive at Gresham! Thomas Gresham was born in London in 1519 and lived through the reigns of four monarchs (not counting Queen Jane) until 1579. Thomas was educated at Gonville Hall, Cambridge, apprenticed to his uncle Sir John Gresham, also a merchant, and admitted to membership in the Mercers’ company in 1543. Upon his father’s death, he inherited the business and transferred the bank to Lombard Street, then the heart of London’s business world. His immense ability was apparent early and in 1551 or 1552 he became royal agent or king’s factor at Antwerp, which he retained with few intervals under Edward the Saint, Bloody Mary and the Virgin Queen until 1574. His initial task was to raise large sums of money for the king, and to maintain a rate of exchange favorable to English currency, keeping watch on the money market and pledging his own credit when it was necessary. The information he provided to England about market conditions was invaluable and upon the ascension of the fiercely Catholic Mary he proved indispensable despite his Protestant convictions.

    On Mary’s death, Gresham advised Elizabeth on how to restore the base money, to contract as little foreign debt as possible, and to keep up her credit especially with English merchants. He later taught her how to make use of these merchants when political troubles in the Netherlands curtailed her foreign resources; at his suggestion, the Merchant Adventurers and Staplers were forced by detention of their fleets to advance money to the state; but as they obtained interest at 12 percent instead of the legal maximum of 10 percent, and the interest no longer went abroad, the transaction proved advantageous to all parties and increased Gresham’s favour. In 1559 he was sent as ambassador to the Duchess of Parma, who was regent of the Netherlands and it was on that occasion that he was knighted.


    "Money is like muck, not good except it is be spread."
    Francis Bacon (22 January 1561– 9 April 1626) was an English philosopher, statesman, scientist, lawyer, jurist and author. He famously died of pneumonia contracted while studying the effects of freezing on the preservation of meat.


    4. The Peter Principle – Dr Laurence Peter

    "In a hierarchy every employee tends to rise to his level of incompetence"

    (Dr Laurence Peter, 1919-90, Canadian academic, from the 1969 book, The Peter Principle, written by Dr Peter and Raymond Hull – Peter was the academic; Hull the writer)

    Far from being an indictment of people, Laurence Peter’s ideas were mostly focused on the weaknesses of typical organisations, and the threat that they present to the well-being of their people.

    Laurence Peter and Raymond Hull’s 1969 book The Peter Principle is a study of hierarchies (Peter coined the scientific term ‘hierarchiology’) and how people behave within them in relation to promotion and competence. Laurence Peter also asserted that, "Work is accomplished by those employees who have not yet reached their level of incompetence", although he places the blame on organisations, not employees, and urges people to prioritise their health and happiness rather than struggle to meet the unhealthy demands of a promotion-too-far, in an uncaring hierarchy.

    Although written in 1969, The Peter Principle contains perspectives that resonate even more strongly today.

    Notably Laurence Peter observed that bosses who are competent in their roles tend to assess employees according to their output and results, whereas incompetent bosses tend to assess employees according to their input and adherence to rules and policies, etc. This remains a feature of poorly managed organisations and hierarchies.

    Peter also suggested that ‘super-competence’ in an employee is more likely to result in dismissal than promotion, which again is a feature of poor organisations, which cannot handle the disruption. A super-competent employee "…violates the first commandment of hierarchical life: [namely that] the hierarchy must be preserved.." which again is symptomatic of poorly run modern organisations, just as it was back in the 1960′s.

    Peter also says of leadership in poor organisations: "Most heirarchies are nowadays so cumbered with rules and traditions……. that even high employees do not have to lead anyone anywhere, in the sense of pointing out the direction and setting the pace. They simply follow precedents, obey regulations, and move at the head of the crowd. Such employees lead only in the sense that the carved wooden figurehead leads the ship.."

    Also included in Laurence Peter’s study was his analysis of a survey of general practice doctors who were asked to list the most commonly encountered medical complaints among ‘successful’ patients. The survey results could easily be found in a modern survey, and included ulcers, colitis, high blood pressure, alcoholism, obesity, hypertension, insomnia, cardiovascular problems and impotence. Peter interpreted such complaints as evidence of ‘constitutional incompetence’ associated with what he termed ‘final placement syndrome’. At the time, Peter bemoaned the fact that the medical profession failed to see the connection between over-demanding work responsibility and people’s well-being. Today of course we understand that there is a connection, although the challenge remains for most organisations, and society as a whole, to focus seriously on dealing with the situation. As Peter himself says, "…Truth will out! Time and the increasingly tumultuous social order inevitably will being enlightenment.."

    Laurence Peter’s ideas of 1969 were keenly perceptive then, and remain so today.

    "Work is accomplished by those employees who have not yet reached
    their level of incompetence."

    Dr. Laurence Johnston Peter (September 16, 1919 – January 12, 1990) was an educator and "hierarchiologist", best known to the general public for the formulation of the Peter Principle.


    5. Parkinson’s Law – Cyril Northcote Parkinson

    "Work expands so as to fill the time available for its completion."

    Cyril Northcote Parkinson, 1909-1993, English political scientist, historian and writer, from his book, Parkinson’s Law – The Pursuit of Progress, written in 1957.

    The fuller vesion of the quote known as ‘Parkinson’s Law’ is:

    "Work expands so as to fill the time available for its completion, and subordinates multiply at a fixed rate, regardless of the amount of work produced.."

    Parkinson also coined other notable phrases of enduring relevance:

    "Expenditure rises to meet income." (from The Law and the Profits, 1960)

    "The man who is denied the opportunity of taking decisions of importance begins to regard as important the decisions he is allowed to take."(from The Pursuit of Progress, 1957.)

    Parkinson’s Law of Triviality

    C Northcote Parkinson’s 1957 book, Parkinson’s Law – The Pursuit of Progress, also contained Parkinson’s Law of Triviality, which contends that in organizations, notably in meetings and group discussions about projects, most time and attention (or certainly a disproportionately large effort) is given to trivial issues rather than important ones.

    Parkinson asserted that this effect is an inevitable ‘law’ or tendency within organizational behaviour. Parkinson provided the analogy of the relative attention given to the building of a nuclear reactor versus a bicycle shed. The nuclear reactor is regarded as a highly complex project, and a general assumption among group members is made that a suitably qualified person or team will make the right decisions about it, (which of course may not be the case).

    Most people choose not to invest time and effort in understanding such a challenging issue, and doubt their ability to make a useful contribution. Instead people largely prefer to focus on simpler accessible matters – crucially which they can influence more easily – such as the design of the bikeshed.

    Bikeshed Colour/Bicycle Shed Law

    Parkinson’s Law of Triviality provided the inspiration for a recently popularized interpretation of its central argument under the name ‘Bikeshed Colour’ (and variations such as The Colour of the Bikeshed Law, and the Bicycle Shed Law). This resurgence was prompted by Poul-Henning Kamp, a prominent Danish computer developer, after an email posting dated 2 Oct 1999 to a mailing list for FreeBSD developers (FreeBSD is a substantial free computer operating system). Kamp’s email had the subject line:

    "A bike shed (any colour will do) on greener grass.."

    His ideas were to an extent an application of Parkinson’s 1957 thinking (Kamp clearly referred to Parkinson’s Triviality theory) as to how computer development projects tend to become distracted by debate about irrelevant minor factors.

    Parkinson incidentally never referred to the colour of the bikeshed. This was part of Kamp’s interpretation, which certainly seemed to capture people’s interest, given the adoption of the ‘bikeshed’ terminology.

    Fascinatingly, for decades, Parkinson’s Law of Triviality remained relatively hidden under its old dry heading. Kamp’s seemingly unintentional and quirky renaming of the concept brought it to life again. The effect of new branding and packaging on anything – whether deliberate or not – can be remarkable.

    (Please note that colour and behaviour are UK-English spellings. US-English spellings are color and behavior.)


    "Number of hours you worked is not important, important is whether it is worth doing, whatever you have been doing in your working hours."
    Unknown


    6. Abraham Maslow and The Hierarchy of Human Needs

    "When a need is mostly satisfied it no longer motivates and the next higher need takes its place. "

    Abraham Maslow was one of the first scholars to be associated with the humanistic approach to management (- as opposed to task-based management). Maslow categorized human needs into a hierarchy, ascending from the lowest to the highest. Maslow’s model remains a valuable management concept. The five levels within the hierarchy can be broken down as follows. A person generally must satisfy the lower level before working on the higher levels.

    Born and raised in Brooklyn, New York, Maslow was the oldest of seven children and was classed as "mentally unstable" by a psychologist. His parents were first generation Jewish immigrants from Russia who fled from Czarist persecution in the early 20th century. Maslow’s parents had decided to live in New York City and in a multiethinic, working-class neighbourhood. His parents were poor and not intellectually oriented, but they valued education. It was a tough time for Maslow, as he experienced anti-semitism from his teachers and from other children around the neighborhood. He had various encounters with anti-semitic gangs who would chase and throw rocks at him.

    Maslow and other optimistic youngsters at the time with his background were in the struggle to overcome such acts of racism and ethnic prejudice in the attempt to establish an idealistic world based on widespread education and monetary justice.

    Maslow died in 1970, although various publications appear in Maslow’s name in later years. Maslow’s PhD in psychology in 1934 at the University of Wisconsin formed the basis of his motivational research,initially studying rhesus monkeys. Maslow later moved to New York’s Brooklyn College.

    Theory of the "hierarchy of human needs".

    Abraham Maslow developed the Hierarchy of Needs model in 1940-50s USA, and the Hierarchy of Needs theory remains valid today for understanding human motivation, management training, and personal development. Indeed, Maslow’s ideas surrounding the Hierarchy of Needs concerning the responsibility of employers to provide a workplace environment that encourages and enables employees to fulfil their own unique potential (self-actualization) are today more relevant than ever. Abraham Maslow’s book Motivation and Personality, published in 1954 (second edition 1970) introduced the Hierarchy of Needs, and Maslow extended his ideas in other work, notably his later book Toward A Psychology Of Being, a significant and relevant commentary, which has been revised in recent times by Richard Lowry, who is in his own right a leading academic in the field of motivational psychology.

    There have been very many interpretations of Maslow’s Hierarchy of Needs in the form of pyramid diagrams. Interestingly in Maslow’s book Motivation and Personality, which first introduced the Hierarchy of Needs, there is not a pyramid to be seen.

    Abraham Maslow created the original five level Hierarchy of Needs model, and for many this remains entirely adequate for its purpose. The seven and eight level ‘hierarchy of needs’ models are later adaptations by others, based on Maslow’s work. Arguably, the original five-level model includes the later additional sixth, seventh and eighth (‘Cognitive’, ‘Aesthetic’, and ‘Transcendence’) levels within the original ‘Self-Actualization’ level 5, since each one of the ‘new’ motivators concerns an area of self-development and self-fulfilment that is rooted in self-actualization ‘growth’, and is distinctly different to any of the previous 1-4 level ‘deficiency’ motivators.

    For many people, self-actualizing commonly involves each and every one of the newly added drivers. As such, the original five-level Hierarchy of Needs model remains a definitive classical representation of human motivation; and the later adaptations perhaps serve best to illustrate aspects of self-actualization.

    Maslow said that needs must be satisfied in the given order. Aims and drive always shift to next higher order needs.
    Levels 1 to 4 are deficiency motivators; level 5, and by implication 6 to 8, are growth motivators and relatively rarely found. The thwarting of needs is usually a cause of stress, and is particularly so at level 4.

    (N.B. The word Actualization/Actualisation can be spelt either way. Z is preferred in American English. S is preferred in UK English. Both forms are used in this page to enable keyword searching for either spelling via search engines.)

    Criticisms

    In their extensive review of research based on Maslow’s theory, Wahba and Brudwell found little evidence for the ranking of needs that Maslow described or for the existence of a definite hierarchy at all.

    The order in which the hierarchy is arranged (with self-actualization described as the highest need) has been criticized as being ethnocentric by Geert Hofstede. Maslow’s hierarchy of needs fails to illustrate and expand upon the difference between the social and intellectual needs of those raised in individualistic societies and those raised in collectivist societies. The needs and drives of those in individualistic societies tend to be more self-centered than those in collectivist societies, focusing on improvement of the self, with self-actualization being the apex of self-improvement.

    In collectivist societies, the needs of acceptance and community will outweigh the needs for freedom and individuality. The term "Self-actualization" may not effectively convey Maslow’s observations; this motivation refers to focusing on becoming the best person that one can possibly strive for in the service of both the self and others. Maslow’s term of self-actualization might not properly portray the full extent of this level; quite often, when a person is at the level of self-actualization, much of what they accomplish in general may benefit others.

    The position and value of sex on the pyramid has also been a source of criticism regarding Maslow’s hierarchy. Maslow’s hierarchy places sex in the physiological needs category along with food and breathing; it views sex solely from an individualistic perspective. For example, sex is placed with other physiological needs which must be satisfied before a person considers "higher" levels of motivation. This view of sex neglects the emotional, familial, and evolutionary implications of sex within the community.

    "If you only have a hammer, you tend to see every problem as a nail."
    Abraham Harold Maslow (April 1, 1908 – June 8, 1970) was a professor of psychology at Brandeis University who founded humanistic psychology and created Maslow’s hierarchy of needs.


    7. Theory X and Theory Y – Douglas McGregor

    "Two different views of individuals (employees): one of which is negative, called as Theory X and the other is positive, so called as Theory Y."

    McGregor’s work on Theory X and Theory Y has had a significant impact on management thought and practice in the years since he first articulated the concepts. In terms of the study of management, McGregor’s concepts are included in the overwhelming majority of basic management textbooks, and they are still routinely presented to students of management. Most textbooks discuss Theory X and Theory Y within the context of motivation theory; others place Theory X and Theory Y within the history of the organizational humanism movement.

    Theory X and Theory Y are often studied as a prelude to developing greater understanding of more recent management concepts, such as job enrichment, the job-characteristics model, and self-managed work teams. Although the terminology may have changed since the 1950s, McGregor’s ideas have had tremendous influence on the study of management.

    In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of human behaviour at work, or in other words, two different views of individuals (employees): one of which is negative, called as Theory X and the other is positive, so called as Theory Y. According to McGregor, the perception of managers on the nature of individuals is based on various assumptions.

    Assumptions of Theory X

    •An average employee intrinsically does not like work and tries to escape it whenever possible.
    •Since the employee does not want to work, he must be persuaded, compelled, or warned with punishment so as to achieve organizational goals. A close supervision is required on part of managers. The managers adopt a more dictatorial style.
    •Many employees rank job security on top, and they have little or no aspiration/ ambition.
    •Employees generally dislike responsibilities.
    •Employees resist change.
    •An average employee needs formal direction.

    Assumptions of Theory Y

    •Employees can perceive their job as relaxing and normal. They exercise their physical and mental efforts in an inherent manner in their jobs.
    •Employees may not require only threat, external control and coercion to work, but they can use self-direction and self-control if they are dedicated and sincere to achieve the organizational objectives.
    •If the job is rewarding and satisfying, then it will result in employees’ loyalty and commitment to organization.
    •An average employee can learn to admit and recognize the responsibility. In fact, he can even learn to obtain responsibility.
    •The employees have skills and capabilities. Their logical capabilities should be fully utilized. In other words, the creativity, resourcefulness and innovative potentiality of the employees can be utilized to solve organizational problems.

    Thus, we can say that Theory X presents a pessimistic view of employees’ nature and behaviour at work, while Theory Y presents an optimistic view of the employees’ nature and behaviour at work. If correlate it with Maslow’s theory, we can say that Theory X is based on the assumption that the employees emphasize on the physiological needs and the safety needs; while Theory X is based on the assumption that the social needs, esteem needs and the self-actualization needs dominate the employees.

    McGregor views Theory Y to be more valid and reasonable than Theory X. Thus, he encouraged cordial team relations, responsible and stimulating jobs, and participation of all in decision-making process.

    Implications of Theory X and Theory Y

    Quite a few organizations use Theory X today. Theory X encourages use of tight control and supervision. It implies that employees are reluctant to organizational changes. Thus, it does not encourage innovation.

    Many organizations are using Theory Y techniques. Theory Y implies that the managers should create and encourage a work environment which provides opportunities to employees to take initiative and self-direction. Employees should be given opportunities to contribute to organizational well-being. Theory Y encourages decentralization of authority, teamwork and participative decision making in an organization. Theory Y searches and discovers the ways in which an employee can make significant contributions in an organization. It harmonizes and matches employees’ needs and aspirations with organizational needs and aspirations.

    Comments on Theory X and Theory Y Assumptions

    These assumptions are based on social science research which has been carried out, and demonstrate the potential which is present in man and which organizations should recognize in order to become more effective.

    McGregor sees these two theories as two quite separate attitudes. Theory Y is difficult to put into practice on the shop floor in large mass production operations, but it can be used initially in the managing of managers and professionals.

    In "The Human Side of Enterprise" McGregor shows how Theory Y affects the management of promotions and salaries and the development of effective managers. McGregor also sees Theory Y as conducive to participative problem solving.

    It is part of the manager’s job to exercise authority, and there are cases in which this is the only method of achieving the desired results because subordinates do not agree that the ends are desirable.
    However, in situations where it is possible to obtain commitment to objectives, it is better to explain the matter fully so that employees grasp the purpose of an action. They will then exert self-direction and control to do better work – quite possibly by better methods – than if they had simply been carrying out an order which the y did not fully understand.

    The situation in which employees can be consulted is one where the individuals are emotionally mature, and positively motivated towards their work; where the work is sufficiently responsible to allow for flexibility and where the employee can see her or his own position in the management hierarchy. If these conditions are present, managers will find that the participative approach to problem solving leads to much improved results compared with the alternative approach of handing out authoritarian orders.

    Once management becomes persuaded that it is under estimating the potential of its human resources, and accepts the knowledge given by social science researchers and displayed in Theory Y assumptions, then it can invest time, money and effort in developing improved applications of the theory.

    McGregor realizes that some of the theories he has put forward are unrealizable in practice, but wants managers to put into operation the basic assumption that:

    Staff will contribute more to the organization if they are treated as responsible and valued employees.


    "In evaluating people, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other will kill you."
    Warren Edward Buffett (born August 30, 1930) is an American investor, industrialist, and philanthropist. He is one of the most successful investors in the world. Often called the "legendary investor Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway.


    8. The 7-S Framework of McKinsey

    "7 factors to organize a company in an holistic and effective way"

    The 7-S Framework of McKinsey is a management model that describes 7 factors to organize a company in an holistic and effective way. Together these factors determine the way in which a corporation operates. Managers should take into account all seven of these factors, to be sure of successful implementation of a strategy. Large or small. They’re all interdependent, so if you fail to pay proper attention to one of them, this may effect all others as well. On top of that, the relative importance of each factor may vary over time.

    Origin of the 7-S Framework.

    The 7-S Framework was first mentioned in "The Art Of Japanese Management" by Richard Pascale and Anthony Athos in 1981. They had been investigating how Japanese industry had been so successful. At around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. The Seven S model was born at a meeting of these four authors in 1978. It appeared also in "In Search of Excellence" by Peters and Waterman, and was taken up as a basic tool by the global management consultancy company McKinsey. Since then it is known as their 7-S model.

    The meaning of the 7 Ss

    1. Shared Values (also called Superordinate Goals).

    The interconnecting center of McKinsey’s model is: Shared Values. What does the organization stands for and what it believes in. Central beliefs and attitudes.

    2. Strategy

    Plans for the allocation of a firms scarce resources, over time, to reach identified goals. Environment, competition, customers.

    3. Structure

    The way in which the organization’s units relate to each other: centralized, functional divisions (top-down); decentralized; a matrix, a network, a holding, etc.

    4. Systems

    The procedures, processes and routines that characterize how the work should be done: financial systems; recruiting, promotion and performance appraisal systems; information systems.

    5. Staff

    Numbers and types of personnel within the organization.

    6. Style

    Cultural style of the organization and how key managers behave in achieving the organization’s goals. Compare: Management Styles.

    7. Skills

    Distinctive capabilities of personnel or of the organization as a whole. Compare: Core Competences.

    Strengths of the 7-S Model.

    (1) Diagnostic tool for understanding organizations that are ineffective.
    (2) Guides organizational change.
    (3) Combines rational and hard elements with emotional and soft elements.
    (4) Managers must act on all Ss in parallel and all Ss are interrelated.

    The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change.

    Whatever the type of change – restructuring, new processes, organizational merger, new systems, change of leadership, and so on – the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration.

    Sounds simple? Well, of course not: Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy, improving performance and managing change. The 7S model is a good framework to help you ask the right questions – but it won’t give you all the answers. For that you’ll need to bring together the right knowledge, skills and experience.


    9. Murphy’s law is an adage or epigram that is typically stated as:

    "Anything that can go wrong will go wrong".

    The contemporary form of Murphy’s law goes back as far as 1952, as an epigraph to a mountaineering book by John Sack, who described it as an "ancient mountaineering adage":

    "Anything that can possibly go wrong, does."

    Fred R. Shapiro, the editor of the Yale Book of Quotations, has shown that in 1952 the adage was called "Murphy’s law" in a book by Anne Roe, quoting an unnamed physicist:

    He described [it] as "Murphy’s law or the fourth law of thermodynamics" (actually there were only three last I heard) which states:

    "If anything can go wrong, it will.”"

    "Shit happens" is a common slang phrase, used as a simple existential observation that life is full of imperfections and unforeseeable events, either "Así es la vida&quoy; or "C’est la vie". The phrase is an acknowledgment that bad things happen to people for no particular reason.

    Murphy’s Laws and Other Observations

    If anything can go wrong, it will.

    If there is a possibility of several things going wrong, the one that will cause the most damage will be the first one to go wrong.

    If anything just cannot go wrong, it will anyway.

    If you perceive that there are four possible ways in which something can go wrong, and circumvent these, then a fifth way, unprepared for, will promptly develop.

    Left to themselves, things tend to go from bad to worse.

    If everything seems to be going well, you have obviously overlooked something.

    Nature always sides with the hidden flaw.
    Mother nature is a bitch.

    Murphy’s Law of Thermodynamics
    Things get worse under pressure.

    The Murphy Philosophy
    Smile . . . tomorrow will be worse.

    Quantization Revision of Murphy’s Laws
    Everything goes wrong all at once.

    Murphy’s Constant
    Matter will be damaged in direct proportion to its value

    Murphy’s Law of Research
    Enough research will tend to support whatever theory.



10. Generation X, Y, add and Baby-Boomers…

"A broad model for defining people appeared towards the end of the 20th century."

References to it – normally for interest in a wider discussion – arise often in the western world among writers and social commentators, and also marketing people, notably in North America and the UK.

It’s a very loose theory, open to wide interpretation and debate, and is not a reliable scientific tool for demographics and profiling.

The model most commonly features three generational types: Baby Boomers, and the Generations X and Y (which are completely unrelated to McGregor’s X-Y Theory). Generational groups have been retrospectively suggested for pre-war times.

Increasingly commentators devise new groups and names, and we can expect the model to grow and become more complex as a result.

When considering the model, significantly, the teenage years and years of young adulthood are the biggest influence on people’s attitudes, not when they were born. Music and fashion are often regarded as reflecting and helping to form the character of the group.

Generation name:

The Lost Generation 1880-1900

The term reflects the unthinkable loss of human life in the First World War- approaching 16 million killed and over 20 million wounded. This happened in just four and five months (1914-1918). We cannot imagine this today.

The Interbellum Generation 1900-1913

Interbellum means ‘between wars’, referring to the fact that these people were too young to fight in the First World War and too old to fight in the Second.

The Greatest Generation (The Veterans) 1914-1930

These people are revered for having grown up during the Great Depression and then fought or stood alongside those who fought in the Second World War (1939-45). As for other generations of the early 1900s, life was truly hard compared to later times.

The Silent Generation 1930-1945

Characterized as fatalistic, accepting, having modest career and family aspirations, focused on security and safety. These people experienced the 1930s Great Depression and/or the 2nd World War in early life, and post-war austerity in young adulthood. They parented and provided a foundation for the easier lives of the Baby Boomers.

Baby Boomers 1946-1960

Equality, freedom, civil rights, environmental concern, peace, optimism, challenge to authority, protest. Baby Boomers mostly lived safe from war and serious hardship; grew up mostly in families, and enjoyed economic prosperity more often than not. Teenage/young adulthood years 1960-1980 – fashion and music: fun, happy, cheery, sexy, colourful, lively.

Generation Jones 1953-1968

Acquisitive, ambitious, achievement-oriented, cynical, materialistic (a reference to the expression ‘keeping up with the Joneses’). Generation Jones is predominantly a US concept, overlapping and representing a sub-group within the Baby Boomer and Gen-X generations.

Generation X (Gen-X) 1960-1980

Apathy, anarchy, reactionism, detachment, technophile, resentful, nomadic, struggling. Teenage/young adulthood years 1973-2000 – fashion and music: anarchic, bold, anti-establishment.

MTV Generation 1974-1983

MTV Generation is a lesser-used term for a group overlapping X and Y. Like Generation Jones is to Baby Boomers and Gen-X, so MTV Generation is a bridge between Gen-X and Y.

Generation Y (Gen-Y or Millennials) 1980-2000 and beyond (?)

Views vary as to when this range ends, basically because no-one knows. Generational categories tend to become established some years after the birth range has ended. Teenage/young adulthood years 1990s and the noughties – fashion and music: mainstream rather than niche, swarmingly popular effects, fuelled by social networking and referral technology. Also called Echo Boomers because this generation is of similar size to the Baby Boomers.

Generation Z (Gen-Z or perhaps Generation ADD) after Gen-Y

Too soon to say much about this group. A name has yet to become established, let alone characterizing features. Generation Z is a logical name in the X-Y-sequence. Generation ADD is less likely to establish itself as a name for this cohort – it refers ironically to Attention Deficit Disorder and the supposed inability of young people in the late noughties (say 2005-2009) to be able to concentrate for longer than a few seconds on anything. Gen-Z is difficult to differentiate from Gen-Y, mainly because (as at 2009) it’s a little too soon to be seeing how people born after Gen-Y are actually behaving, unless the end of the Gen-Y range is deemed to be a few years earlier than the year 2000. Time will tell.

The model is here mainly for interest and basic explanation, not to suggest it be applied seriously.

The framework is very loose, not scientific at all, and has no single point of origin or founding theorist, although claims of origination are made for some of the generation names within the model.

The theory attempts to categorise different generations of people into obvious different demographic groups or ‘cohorts’ according to the period in which they were born, referring typically also to lifestyles and attitudes.

The notion of characterizing an entire generation, tens of millions of people, in such a sweeping way is of course daft, nevertheless there are fundamental correlations between society and the culture, on which premise the model is essentially based.

It is tempting to over-estimate the significance of when people were born and the societal influences of their formative years, and to under-estimate the life-stage changes which all people, regardless of when they were born, inevitably pass through.

Arguably Life-Stage theory is much more meaningful and useful than attempting to ascribe character on the basis of when a person was born. See Erikson’s Life-Stage Theory – it is refreshingly sensible compared to the vagueness of the generational model above.

Erikson’s theory also provides excellent guidance for anyone seeking to analyse the effects of social conditions and experiences on people’s lives, which would be relevant if attempting to substantiate or develop the reliability of the generational model above.


11. SWOT Analysis

" Identify the positives and negatives inside your organization (S-W) and outside of it, in the external environment (O-T)."

Opposition is an inevitable part of change and one that can significantly impact your community organizing. However, if you know how to take stock of the opposition inside and outside of your effort or group, you are more likely to plan and act effectively.

That’s where SWOT analysis comes in. SWOT can help you handle both ordinary and unusual situations in your community health or development initiative, by giving you a tool to explore both internal and external factors that may influence your work.

What is a SWOT analysis and why should you use one?

The name says it: Strength, Weakness, Opportunity, Threat. A SWOT analysis guides you to identify the positives and negatives inside your organization (S-W) and outside of it, in the external environment (O-T). Developing a full awareness of your situation can help with both strategic planning and decision-making.

The SWOT method (which is sometimes called TOWS) was originally developed for business and industry, but it is equally useful in the work of community health and development, education, and even personal growth.

SWOT is not the only assessment technique you can use, but is one with a long track record of effectiveness. Compare it with other tools to determine if this is the right approach for your situation. The strengths of this method are its simplicity and application to a variety of levels of operation.

Completing a SWOT analysis is very simple, and is a good subject for workshop sessions. SWOT analysis also works well in brainstorming meetings.

Use SWOT analysis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. You can also use SWOT analysis exercises for team building games.

Note that SWOT analysis is often interpreted and used as a SWOT Analysis 2×2 Matrix, especially in business and marketing planning.

In addition to this 2×2 matrix method, SWOT analysis is also a widely recognized method for gathering, structuring, presenting and reviewing extensive planning data within a larger business or project planning process.

It is often helpful to complete a PEST analysis [1] prior to a SWOT analysis. In other situations it may be more useful to complete a PEST analysis as part of, or after, a SWOT analysis. See also Porter’s Five Forces model [2] which is used to analyse competitive position.

[1] A PEST analysis measures a business’s market and potential according to external factors; Political, Economic, Social and Technological.
[2] Porter’s five-forces model looks at the strength of five distinct competitive forces, which, when taken together, determine long-term profitability and competition.

Please note: If you use SWOT Analysis as a 2×2 matrix method , then technically Strengths and Weaknesses are internal factors (generally the case anyway), whereas Opportunities and Threats are external factors (this can be more difficult, since it requires you to ignore internal threats and opportunities). The SWOT 2×2 ‘internal/external’ matrix method thus only considers external threats and opportunities.

Swot Analysis – Different Applications

SWOT analysis is a powerful model for many different situations. The SWOT tool is not just for business and marketing. Here are some examples of what a SWOT analysis can be used to assess:

a company (its position in the market, commercial viability, etc);
a method of sales distribution;
a product or brand;
a business idea;
a strategic option, such as entering a new market or launching a new product;
a opportunity to make an acquisition;
a potential partnership;
changing a supplier;
outsourcing a service, activity or resource;
project planning and project management;
an investment opportunity;
personal financial planning;
personal career development – direction, choice, change, etc.;
education and qualifications planning and decision-making;
life-change – downshifting, relocation;
relationships, perhaps even family planning?..

Whatever the application, be sure to describe the subject (or purpose or question) for the SWOT analysis clearly so you remain focused on the central issue. This is especially crucial when others are involved in the process. People contributing to the analysis and seeing the finished SWOT analysis must be able to understand properly the purpose of the SWOT assessment and the implications arising.

To be more specific, the set of questions that needs to be answered should be similar to the following:

Strengths

¦ What are your advantages?
¦ What do you do well?
¦ What relevant resources do you have access to?
¦ What do other people see as your strengths?

Consider this from your own point of view and from the point of view of the people you deal with. Don’t be modest. Be realistic. If you are having any difficulty with this, try writing down a list of your organisation’s characteristics. Some of these will hopefully be strengths!

In looking at your strengths, think about them in relation to your competitors – for example, if all your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.

Weaknesses

¦ What could you improve?
¦ What do you do badly?
¦ What should you avoid?

Again, consider this from an internal and external viewpoint: Do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities

¦ Where are the good opportunities in front of you?
¦ What are the interesting trends you are aware of?

Useful opportunities can come from such things as:

¦ Changes in technology and markets on both a broad and narrow scale
¦ Changes in government policy related to your field
¦ Changes in social patterns, population profiles, lifestyles, etc.
¦ Local Events

A useful approach to looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could open up opportunities by eliminating them.

Threats

¦ What obstacles do you face?
¦ What is your competition doing?
¦ Are the required specifications for your job, products or services changing?
¦ Is changing technology threatening your position?
¦ Do you have bad debt or cash-flow problems?
¦ Could any of your weaknesses seriously threaten your business?

Carrying out this analysis will often be illuminating – both in terms of pointing out what needs to be done, and in putting problems into perspective.

Pros and cons

The success of this method is mainly owed to its simplicity and its flexibility. Its implementation does not require technical knowledge and skills. SWOT analysis allows the synthesis and integration of various types of information which are generally known but still makes it possible to organise and synthesise recent information as well.

It is worth pointing out that whereas SWOT analysis is often not seen strictly speaking as a Foresight method, it is fruitful to consider it from this perspective. Indeed, Foresight is particularly useful for addressing the OT dimensions, whereas SWOT analyses often fail because of poor examination of OT (opportunities and threats).

A correlation is made between the internal factors, strengths and weaknesses of the organisation, and the external factors, opportunities and threats. An effort can be made to exploit opportunities and overcome weaknesses and at the same time for the organisation to protect itself from the threats of the external environment through the development of contingency plans.

The most common drawbacks of SWOT analysis are:

¦ The length of the lists of factors that have to be taken into account in the analysis;
¦Lack of prioritisation of factors, there being no requirement for their classification and evaluation;
¦ No suggestions for solving disagreements;
¦No obligation to verify statements or aspects based on the data or the analysis;
¦Analysis only at a single level (not multi-level analysis);
¦ No rational correlation with the implementation phases of the exercise.

Moreover, there are risks of:

¦ Inadequate definition of factors;
¦Over-subjectivity in the generation of factors (compiler bias);
¦ The use of ambiguous and vague words and phrases

One has to be aware that this method is very commonly used by consulting firms and that for this reason some people in the public/quasi-public sector have an aversion to it.


12. Marketing Mix (4P’s) – McCarthy

"Balanced mix of marketing activities within your marketing plan"

Marketing Mix Explained

The concept of the marketing mix was first developed by McCarthy over 40 years ago. It was designed to suggest that you should have a balanced mix of marketing activities within your marketing plan. That is mainly that you have the right product selling for the right price to attract sufficient sales and profits, at the right location for maximum effect (place) communicated with the right promotional activities.

Elements of the Mix

The now simplistic attributes are known as The 4 Ps – because those elements named above all begin with the letter "P" namely product, price, promotion and place. Here’s a run down of what each of these terms means.

Product

The first P is your product or service. It’s the definition of what needs are being satisfied by your end customer. It should be more about the benefits that your customer receives by purchasing the product rather than listings of attributes.

While formulating the marketing strategy, product decisions include:
– What to offer?
– Brand name
– Packaging
– Quality
– Appearance
– Functionality
– Accessories
– Installation
– After sale services
– Warranty

Price

The second P is the price of your product and decisions surrounding your overall pricing strategies. Pricing can be a very complex area. Most people believe they should undercut their competitors but this is not always a wise strategy unless you are in a commodity business. Consumers place value on higher priced products so it’s best if you test various pricing levels of your products and over time you’ll find the right pricing level that maximizes your profits.

Even if you decide not to charge for a service it’s useful to realise that this is still a pricing strategy at no cost.

¦Pricing Strategy (Penetration, Skim, etc)
– List Price
– Payment period
– Discounts
– Financing
– Credit terms

Using price as a weapon for rivals is as old as mankind. but it’s risky too. Consumers are often sensitive for price, discounts and additional offers. Another aspect of pricing is that expensive products are considered of good quality.

Promotion

The third P is about promoting your products and services. This may include advertising above the line in general, specific product offerings through below the line activities, face to face selling, direct marketing and public relations exercises. This is the communications aspect of your business and is part of marketing but the final piece after strategy and analysis.

Promotion includes all communication and selling activities to pursuade future prospects to buy the product.
Promotion decisions include:

– Advertising
– Media Types
– Message
– Budgets
– Sales promotion
– Personal selling
– Public relations
– Direct marketing

Place

The final P is about ‘place’ – the location where the product or service is actually going to be purchased by the consumer. Many retail gurus will tell you it’s all about “location, location, location” and this still holds true today. Locations with high foot fall always out perform businesses tucked away in a side street. Online is also a location for internet services. It not only includes the place where the product is placed, all those activities performed by the company to ensure the availability of the product tot he targeted customers. Availability of the product at the right place, at the right time and in the right quantity is crucial in placement decisions.

Placement decisions include:
– Placement
– Distribution channels
– Logistics
– Inventory
– Order processing
– Market coverage
– Selection of channel members

Limitation of Marketing Mix

Marketing mix (4 P’s) was more useful in early 19′s when production concept ws in and physical products were in larger proportion. Today, with latest marketing concepts, marketing environment has become more intergrated. So, in order to extend the usefulness of marketing mix, some authors introduced a fifth P and then seven P’s (People, Packaging, Process). But the foundation of Marketing Mix still stands on the basic 4P’s.

This is all well and good and is an attempt to put the customer at the forefront of what every business should be achieving.

But if you don’t take things literally and just put yourself in the customer’s shoes when looking at these then the four or six Ps are fine to work with.

Whatever you choose you should include all four basic elements into your own marketing mix and then custom tailor this to your specific situation.

The classic 4P’s may not work well in marketing for the mere consultants or the coaches and professionals, thus, 5P’s
may typically help the independent professionals.

1. People – people play a vital role in effective marketing, in fact, experts proclaim that they represent the actual service one is marketing and is also a critical factor in service business. However, people whom one is marketing to and also the people who assist in making the name of the business are important in marketing process.

2. Positioning – positioning is highly significant in any professional field as simple description of work is not enough but appropriate and perfect prospectus of the work is also necessary. The prospects should be well enough to determine the steps to the goals and objectives and also the results being anticipated from it.

3. Personal credibility – An important part of the marketing process should involve increasing of the personal credibility.

4. Push plus pull – push plus pull style marketing in an autonomous professional inculcates cold calling, also emailing, paid advertising and promotional events such as trade shows etc. it grows quite easier and quick to sale the product when customer makes the first step and contacts you on hearing about the product from someone else or because of its free advertising or sampling.

5. Persistence – persistence is important in order to achieve success, without this, the all other four factors are of no importance.

The 4 Cs

Many now dismiss the four Ps as being out of date and have developed the four Cs to replace that concept.

R.F. Lauterborn (1993) proposed a 4 Cs classification to address the growing focus of marketing strategist on the consumer. While the 4 Ps framework for defining the marketing mix has been popular for decades, the four Cs have gained in terms of importance, considerably in recent times.

The 4 Cs consists of CONSUMER, COST, CONVENIENCE and COMMUNICATION.

The roots of the 4 Cs of marketing can be traced back to the classical 4 Ps marketing mix. However, with the onset of database marketing, the focus has shifted in marketing from a consumer transactional view-point to a consumer relationship viewpoint (and very recently consumer engagement). However, the basic focal strategic issues remain unchanged at its very core.

The details which a manager designing a marketing mix using the four Cs needs to focus on are as follows:

Consumer (customer) is the king. No longer can products be developed and pushed to the consumer in the hope of conversion of a purchase decision. Gone are those days when consumers had to buy products to satisfy needs for a simple lack of substitute. The market is over saturated with great products. Consumer behavior needs to be studied thoroughly from the product development phase itself. The attributes of any product should be almost built-to-order in current times, and substantial inputs should be taken from primary market research.

Pricing is crucial. The pricing strategies undertaken by any product development company should keep the perceived value of the product, to the consumer, in mind while deciding a pricing strategy. Effort should be made to estimate a customer’s tradeoffs among multiple attributes in a product so as to arrive at the perceived total value while pricing a multi-attribute product.

Convenience of the service delivery or product purchase location is crucial. The price utility often is a differentiating factor in the success stories of many a promising product. It becomes extremely important especially if the product purchase is a low engagement decision making process, like that of purchase of day-to-day products.

Communication is crucial. As opposed to the initial focus of brand promotion, communication of the brand personally so as create a brand awareness and brand cognition is extremely crucial for a sustainable pull strategy. Every brand is perceived to have a personality. Communicating the same using proper communication channels becomes crucial for the success of any marketing campaign.

While the focus of designing a marketing mix has shifted from the 4 Ps to the 4 Cs, it is extremely crucial to understand that the underlying core remains the same. The major shift has been due to a paradigm change of focus from the product or service design to understanding the customer. This is where a 4 Cs strategy scores over the 4 Ps or 7 Ps strategy.


13. Six Sigma

"Increase performance by improving business processes."

Six Sigma is a quality management methodology that provides businesses with the tools to improve the capability of their business processes. This increase in performance and decrease in process variation lead to defect reduction and improvement in profits, employee morale and quality of product. It is a quality measure and improvement program that was pioneered by Mikel Harry and Motorola.

It focuses on the control of a process until the point of six sigma (standard deviations) from a centerline, or 3.4 defects per million items. It includes identifying factors which are critical for the quality as determined by the customer. It reduces process variation and improvement capabilities, increases stability and designs systems to support the six sigma goal.

The Six Sigma model is a highly disciplined approach that can help companies to focus on developing and delivering near-perfect products and services. It is based on the statistical work of Joseph Juran, a Rumanian-born US pioneer of quality management. The word "Sigma" is a Greek sign used for a statistical term that measures how far a given process deviates from perfection (standards deviation). If the sigma number is higher, you are closer to perfection. One sigma is not very good; six sigma is defined as only 3.4 defects per million. The central idea behind Six Sigma is that if you can measure how many "defects" you have in a process, you can systematically figure out how you can eliminate them. Thus you can almost come to "zero defects".

The Japanese origin of Six Sigma can still be seen by the system of "belts" which it uses. If you are new to Six Sigma and you go on a basic training, you get a green belt. Anyone who has the responsibility for leading a Six Sigma team is called a black belt. Finally there is a special elite group called Master Black Belts who supervise the Black Belts.

According to the Six Sigma Academy, Black Belts save companies approximately $230,000 per project and can complete four to 6 projects per year. (Given that the average Black Belt salary is $80,000 in the United States, that is a fantastic return on investment.) General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation. GE first began Six Sigma in 1995 after Motorola and Allied Signal blazed the Six Sigma trail. Since then, thousands of companies around the world have discovered the far reaching benefits of Six Sigma.

Five Steps in Six Sigma.

Typically, a Six Sigma process has the following five stages:

1. Definition. The first step in any Six Sigma project is to clarify the problem and narrow its scope in such a way that measurable goals can be achieved within a few months. Then a team is assembled to examine the process in detail, suggest improvements, and implement those recommendations. In the manufacturing world, project managers and their sponsors typically begin by defining what constitutes a defect and then establish a set of objectives designed to reduce the occurrence of such defects.

2. Measurement. In the second step of a Six Sigma project, the team gathers data and prepares it for high-level analysis.

3. Analysis. Once a process has been mapped and documented, and the quality of the hard supporting data has been verified, the Six Sigma team can begin the analysis. The team members usually start by identifying the ways in which people fail to act as needed, or by identifying the ways in which people fail to ensure effective control at each stage.

4. Improvement. Recommend, decide and implement improvements.,/p>

5. Control. In the final stage of a Six Sigma project, the team creates controls. These are enabling the company to sustain and extend the improvements.

A recently published (online) article in the Journal of Operations Management examines the effect of six sigma adoption on firm performance – Swink and Jacobs (2012) ‘Six Sigma adoption: Operating performance impacts and contextual drivers of success’ The study compares financial data for 200 Six Sigma adopting firms against data for matched firms, which serve as the control group. It finds that Six Sigma adoption has a positive impact on return on assets (ROA). These arise mostly from reductions in indirect costs; but not from savings in direct costs nor improved asset productivity. Six Sigma also appears to make small improvements in sales growth. When manufacturing and service firms are compared there is little or no difference between them. But the benefits of Six Sigma for manufacturers are significantly correlated the firm’s intensity in manufacturing, whereas in service firms it is correlated to the firm’s financial performance before adoption.

Design for Six Sigma (DFSS)

Lean Six Sigma tries to fix broken processes that already exist. But what if there were a way to create higher quality processes at the design stage?

A variant of Six Sigma, Design For Six Sigma (DFSS) is a methodology used to design from scratch or re-design a product or process to one that meets customer requirements and has an expected quality level of Six Sigma.

DFSS is about "getting it right the first time" instead of improving later (the focus of DMAIC Six Sigma).
That’s the point where the cost of change is lowest and the ease of implementation is the highest.

10 Criteria to Use for Evaluating Six Sigma Projects

Projects are the core of every Six Sigma initiative. Identifying the right projects, having skilled people on board, and providing a proper environment for project execution determines whether the intended process and business results can be achieved and whether Six Sigma will be perceived as a powerful approach to contribute to business success.

A relatively simple 10-point checklist can be used for ongoing project evaluation at specific milestones as well as part of the lessons learned exercise after project completion. Anticipating potential project failures also can help drive an effective project selection.

1. Link to Strategic Imperatives

While it is not crucial that every project has a strategic dimension, it is important that the majority of the projects impact one or more of the business’s high-level metrics and goals (which are often called Big Ys or KPIs). While not every project will result in a dramatic change of performance, completing a number of projects should have a visible impact that is recognized across the entire business. Maintaining a focus on the strategic drivers of the business is important to ensure that the leadership remains engaged in the concept of continuous inprovement.

2. Application of Six Sigma Tools

Applying the tools and concepts included in the Six Sigma framework correctly while following a logical thought process is a critical success factor of the overall initiative. While a project might be successful without using any of the tools correctly, over time the correct application of the tools as part of a systematic and logical problem-solving process yields superior results.

3. Active Sponsor Engagement

The degree to which the Sponsor is actively engaged in the project is a leading indicator of success for the project. The Sponsor’s role is to help scope the project and guide the team through the process to ensure business results.

4. Team Actively Engaged

While the Black Belts and Green Belts are expected to lead the team, they need to actively engage the team members to achieve buy-in as well as transfer skills and knowledge of the Six Sigma process.

5. Broad Organizational Awareness of the Project

Engaging the entire organization in the Six Sigma process is a crucial element of overall success. Each team has a responsibility to ensure that the key stakeholders are aware of the project. Executing an effective communication plan is a key element of the overall project plan and responsibility of every team member.

6. Project Delivered the Anticipated Results

The ultimate test for each project is whether it delivered the business results and customer impact it was chartered to achieve. While the real impact cannot always be exactly determined at the start of the project, the project has to deliver against the goals defined in the project charter.

7. Project Completed on Time

Completing projects in a timely manner is a leading indicator for the success of the deployment. Short project durations help demonstrate the power of the approach to a broad audience as well as help energize the team. Long durations often indicate a loss of interest from key team members or loss of active Sponsor engagement as well as an inability of the team leader to prioritize.

8. Successful Transition of Ownership to Process Owner

Transitioning ownership for the performance of the improved process is crucial to ensure that the project gains are sustained and the new methods are actually being used. A successful team engages the process owner early on in the project and ensures that they buys into the team’s findings. Once the project is complete, the process owner is expected to manage the new process using the control systems designed by the team.

9. Improvement Sustained Over Time

Oftentimes, the impressive improvements attained over the course of a project cannot be sustained in the long run due to a failure to manage change effectively. Successful projects result in improvements that can be sustained in the long run.

10. Replication of Results

Projects are often scoped so that they can be completed within a relatively short period of time which in turn leads to concentrating on one specific aspect of the overall issue. While this approach is prudent it also suggests that once the initial project is completed there is often a significant opportunity to replicate the results in other areas. An effective team realized the potential for replication and ensures that a proper plan is in place to replicate the results.


14. The Pareto Principle (Pareto’s Law)

"80 percent of output is produced by 20 percent of input"

Known by various names, including The Pareto Principle, The Pareto Law, Pareto’s Law, The 80/20 Rule, The 80:20 Rule, Pareto Theory, The Principle of Least Effort (a term coined by George Zipf in 1949 based on Pareto’s theory), The Principle of Imbalance, The 80-20 Principle, The Rule of the Vital Few (an interpretation developed by Joseph Juran in the field of quality management) and other combinations of these expressions.

The Pareto 80/20 Rule is commonly used (and ignored at considerable cost) in many aspects of organizational and business management. It is helpful in specialised quality management such as six sigma, planning, decision-making, and general performance management.

The principle is extremely helpful in bringing swift and easy clarity to complex situations and problems, especially when deciding where to focus effort and resources.

The Pareto Principle (at a simple level) suggests that where two related data sets or groups exist (typically cause and effect, or input and output):

"80 percent of output is produced by 20 percent of input."

or alternatively
"80 percent of outcomes are from 20 percent of causes"
or alternatively
"80 percent of contribution comes from 20 percent of the potential contribution available"

There is no definitive Pareto ‘quote’ as such – the above are my own simplified interpretations of Pareto’s 80-20 Rule. The Pareto Principle is a model or theory, and an extremely useful model at that. It has endless applications – in management, social study and demographics, all types of distribution analysis, and business and financial planning and evaluation.

In actual fact the Pareto Principle does not say that the 80:20 ratio applies to every situation, and neither is the model based on a ratio in which the two figures must add to make 100.

And even where a situation does contain a 80:20 correlation other ratios might be more significant, for example:
99:22 (illustrating that even greater concentration than 80:20 and therefore significance at the ‘top-end’) or
5:50 (ie, just 5% results or benefit coming from 50% of the input or causes or contributors, obviously indicating an enormous amount of ineffectual activity or content).

The reasons why 80:20 has become the ‘standard’ are:

the 80-20 correlation was the first to be discovered
80-20 remains the most striking and commonly occurring ratio
and since its discovery, the 80:20 ratio has always been used as the name and basic illustration of the Pareto theory.

Here are some examples of Pareto’s Law as it applies to various situations. According to the Pareto Principle, it will generally the case (broadly – remember it’s a guide not a scientific certainty), that within any given scenario or system or organisation:

80 percent of results come from 20 percent of efforts;
80 percent of activity will require 20 percent of resources;
80 percent of usage is by 20 percent of users;
80 percent of the difficulty in achieving something lies in 20 percent of the challenge;
80 percent of revenue comes from 20 percent of customers;
80 percent of problems come from 20 percent of causes;
80 percent of profit comes from 20 percent of the product range;
80 percent of complaints come from 20 percent of customers;
80 percent of sales will come from 20 percent of sales people;
80 percent of corporate pollution comes from 20 percent of corporations;
80 percent of work absence is due to 20 percent of staff ;
80 percent of road traffic accidents are cause by 20 percent of drivers;
and so on..

Remember for any particular situation the precise ratio can and probably will be different to 80:20, but the principle will apply nevertheless, and in many cases the actual ratio will not be far away from the 80:20 general rule.

Such a principle is extremely useful in planning, analysis, trouble-shooting, problem-solving and decision-making, and change management, especially when broad initial judgements have to be made, and especially when propositions need checking. Many complex business disasters could easily have been averted if the instigators had thought to refer to the Pareto Principle as a ‘sanity check’ early on. Pareto’s Law is a tremendously powerful model, all the more effective because it’s so simple and easy.

For example, consider an organisation which persists in directing its activities equally across its entire product range when perhaps 95% of its profits derive from just 10% of the products, and/or perhaps a mere 2% of its profits come from 60% of its product range. Imagine the wasted effort… Instead, by carrying out a quick simple ‘Pareto analysis’ and discovering these statistics, the decision-makers could see at a glance clearly where to direct their efforts, and probably too could see a whole lot of products that could be discontinued. The same effect can be seen in markets, services, product content, resources, etc; indeed any situation where an ‘output:input’ or ‘effect:cause’ relationship exists.

Pareto’s Principle is named after the man who first discovered and described the ’80:20′ phenomenon, Vilfredo Pareto (1848-1923), an Italian economist and sociologist. Pareto was born in Paris, and became Professor of Political Economy at Lausanne, Switzerland in 1893. An academic, Pareto was fascinated by social and political statistics and trends, and the mathematical interpretation of socio-economic systems.

Vilfredo Pareto first observed the 80/20 principle when researching and analysing wealth and income distribution trends in nineteenth-century England (some people suggest this was Italy), in which, broadly he noted that 20 percent of the people owned 80 percent of the wealth. Beyond this he also noted that this ‘predictable imbalance’ could be extrapolated (extended) to illustrate that, for example, 10 per cent would have 65 percent of the wealth, and 5 percent of people would own 50 percent of the wealth. Again these other ratios are what Pareto found in this particular study – they are not scientific absolutes that can be transferred reliably to other situations.

Pareto then tested his 80-20 principle (including related numerical correlations) on other countries, and all sorts of other distribution scenarios, by which he was able to confirm that the 80:20 Principle, and similarly imbalanced numerical correlations, could be used reliably as a model to predict and measure and manage all kinds of effects and situations.

Thus while the very first application of the Pareto Principle, or 80-20 Rule, was originally in Pareto’s suggestion that "Eighty percent of the wealth is held by twenty percent of the people," the principle was and can be extended to apply to almost all other distribution scenarios as well.

As a mathematical political and sociological innovator, Pareto developed other theories, for instance his 1916 book The Mind and Society predicted the growth of Fascism in Europe, but his most famous discovery was the ’80/20′ statistical rule that bears his name. Regrettably Pareto didn’t live to see the general appreciation and wide adoption of his principle; he seems to not have been particularly effective at explaining and promoting the theory beyond academic circles, and it was left to other experts such as George Zipf and Joseph Juran to develop and refine Pareto’s theories to make them usable and popular in business and management later towards the middle of the 20th century.


15. The Boston Matrix

"Milk your ‘Cash Cows’"

Imagine that you’re reviewing your organization’s products. You need to decide which ones you should focus investment on.

One of the products is doing well financially. However, demand has fallen, and this trend looks set to continue.

Another product is also doing well, but it’s in a new market, and needs a lot of cash to support it. Should you continue investing in it?

And another product is barely profitable, although its market is growing. Should you kill it or keep it?

To make these decisions, you need to look beyond the income that the products are currently bringing in. You need to assess how they’re likely to perform in future.

The Boston Matrix, also called the Boston Consulting Group (BCG) Matrix, is a simple, visual way to examine the likely financial performance of your product or business portfolio.

Understanding the Boston Matrix

Management consultants at the Boston Consulting Group developed their matrix in the early 1970s. They designed it to help managers at large corporations decide which business units they should invest in.

However, managers in all kinds of organizations now also use it to decide which of their product lines or products to invest in, and which to dispose of or to shut down.

The matrix places products into four categories based on their market share and market growth.

The categories are:

Dogs: Low Market Share and Low Market Growth Dogs are business units or products that have low market share in a low-growth market. They often don’t make much profit, but they don’t need much investment either. Much of the time, you’ll need to offer a price discount to sell Dog products.

Cash Cows: High Market Share and Low Market Growth These businesses or products are well established. They’re likely to be popular with customers, which makes it easier for you to exploit new opportunities. However, you should avoid spending too much effort on these, because the market is only growing slowly, and opportunities are likely to be limited.

Stars: High Market Share and High Market Growth Businesses and products in this quadrant are seeing rapid growth. There should be some good opportunities here, and you should work hard to realize them.

Question Marks (Problem Children): Low Market Share and High Market Growth These are the opportunities that no one knows how to handle. They aren’t generating much revenue right now, because you don’t have a large market share. But they’re in high-growth markets, so they could become Stars or even Cash Cows if you can build market share. However, if you cannot increase market share, Question Marks could absorb a lot of effort with little return.

Rationals for using BCG Matrix

Macro Perspective:

- Maximize the organization’s use of money and investments to achieve desired ROI
- Allow a company to assess their multiple businesses on hand and manage the multiple businesses in portfolio
- Visuals on where the money is coming in and out; Resource allocation and fund movements.
- Achieve the entire organization objectives

Micro Perspectives:

- In the micro level, users usually look at where the business/products is in, and try to implement strategies to shift it around in the portfolio
- Ability to do simple calculations to see where the business/product lies in the BCG matrix
-Allow marketers to develop strategies for the business/product in the particular quadrants as they display similar characteristics in the quadrant

Limitations of the BCG Matrix

Some limitations of the Boston Consulting Group Matrix include:

• It neglects the effects of synergy between business units.
• High market share is not the only success factor.
• Market growth is not the only indicator for attractiveness of a market.
• Sometimes Dogs can earn even more cash as Cash Cows.
• The problems of getting data on the market share and market growth.
• There is no clear definition of what constitutes a "market".
• A high market share does not necessarily lead to profitability all the time.
• The model uses only two dimensions – market share and growth rate. This may tempt management to emphasize a particular product, or to divest prematurely.
• A business with a low market share can be profitable too.
• The model neglects small competitors that have fast growing market shares.

Conclusion

BCG matrix is used by large organizations with alot of different businesses and products in the marketplace. They can measure the growth rate and market share of each and put them all together in a table form(portfolio). It allows for clear understanding on how the company is performing, where each businesses lies in the matrix, and how to develop strategies to do something about them, in order to achieve the organization’s overall goals and objectives.

For brand managers or small business owners, it is useful to gauge your market share and growth in relation to your market to see how your product is doing. When you get a sense of which quadrant you product is in, then develop necessary strategies to achieve your desired outcome.

Having said that, BCG Matrix is not without it’s critics, but suffice to say this matrix is a good tool for portfolio analysis.