Legacies with value added

"What do you think of EVA as a barometer of business performance?" asked a participant at a recent seminar in the Netherlands. "Not much," I replied. I'm no expert on the pluses and minuses of Economic Value Added. I admitted as much, and then confessed that neither was I that keen on earnings per share or return on investment.

Sure, I understand the importance of profitability, in my business as well as in others', and debate over various measures has merit. It is just that they mostly put the cart before the horse.

The horse is what you make. The financial measure - important as that is - is a derivative of the goodness and acceptance of the product. In short, my bedrock performance measure for the packaged-goods maker is: "Do you get a buzz when you use your product?" For the grocer: "Is it a kick to walk through the store during noontime rush?" And the lawyer: "Is there something pathbreaking about your approach to the case you're working on?"

Consider my own measures: 1) Does the seminar I'm presenting turn me on? To do a good job, I first must satisfy myself. I have given thousands of seminars: how do I make this one stand out from the rest? If I am to feel fresh and energetic, the seminarmaterial must feel fresh and energetic to me.

2) Does it excite the most demanding customers? While I would like all seminar participants to go home happy, my standard is to provoke the toughest customers. In Amsterdam, I worried about the chairman of a huge bakery chain, executives from Saudi Arabia, and senior managers from Hewlett-Packard. While I always go over all the feedback that I get, I read theirs first - and if I fail them, I have failed utterly. In fact, I am delighted to lose customers! I want several of them to say, "He's too far out." If I'm not too far out for the most conservative members of an audience, I'm too far in to be helpful to the risk- takers in the audience.

3) Does the material help the average customer? I haven't got it in for Joe or Jane Average. To the contrary, I insist on instant, detailed quantitative measures of customer satisfaction for all my seminars.

4) Does it pass my quantitative innovation test? I use hundreds of 35mm slides to illustrate presentations. Now and again, I count the number of new ones; I like, in general, to have about 20 per cent new material every four months.

5) Does it pass my qualitative innovation test? New slides can be mere line extensions - or completely new product families. Both are acceptable forms of innovation, but the latter is far more critical than the former. In Amsterdam, for instance, I introduced important material on product design and how to implement change if you are not the big boss.

6) Will I brag about it next year? In five years' time? You only brag about things when you have pushed hard, made some bruising, messy leap into the unknown. Obviously, not every seminar is going to pass the one-year-bragging-rights test - let alone the five-year version. But if, over a couple of months, no seminars qualify for memory lane, I'm in trouble.

7) Is the check in the mail? I do like to get paid.

8) Is it a big check? Getting Mercedes rather than Daihatsu-sized checks is a fair measure of competitive strength in my niche.

9) Is it a little check? Little checks are also important. Not just pro bono work (good stuff), but strolls down byways that allow me to explore an entirely new area. I like to give the occasional speech to folks whose businesses are foreign to me. To survive, I must study like hell.

While this list is personal, I think it is also close to universal. As I've said before in this space, I fret about "me-too" products and services in a marketplace where good products and services from all over are arriving at a breathtaking rate.

The solution is clear: bold, brash innovation that stands a chance of leaving customers - and competitors - breathless.

I have heard scores of boardroom debates on targets for earnings-per-share, appropriate internal rates of return, and so on. I've attended far too few, on the other hand, that focus directly on whether the product adds zing to the strings of my heart. That's worrisome.

Perhaps it is just that I am getting older and fretting about my own legacy. Nevertheless, I think there's ultimately just one question worth answering: Will you brag about it in the morning?

And while trimming costs and adding pennies to the earnings per share may be imperative to saving jobs now, success in the long-term will be a byproduct only of scintillating products and services you can brag about 10 years hence.

Think about it.

a TPG Communications

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