The Executive Edge Newsletter May 2008
Communicating Authenticity
Five Ways to Solicit Customer Input
Exclusive White Paper: Respond Quickly to Changing Markets
Coping With Changing Depreciation Rules
QuickStat: Spyware Takes a Bite Out of SMB Productivity
Communicating Authenticity
By James H. Gilmore and B. Joseph Pine II
With all the news stories of counterfeit or defective products, consumers crave authenticity. This excerpt from Authenticity: What Consumers Really Want defines five categories of product authenticity, and describes how to use them communicate the authenticity of your offerings.
Commodities – Natural authenticity
People tend to perceive as authentic that which exists in its natural state in or of the earth, remaining untouched by human hands; not artificial or synthetic.
Growers of organic foods, in forsaking fertilizers and pesticides, appeal to this genre of authenticity. So do numerous soap manufacturers, such as Indigo Wild and the Rocky Mountain Soap Company, which hand-make soap in slabs from only natural ingredients (like goat’s milk and kiwi seeds), using little packaging and exposing the soap so one can see and touch the bar.
Goods – Original authenticity
People tend to perceive as authentic that which possesses originality in design, being the first of its kind, never before seen before by human eyes; not a copy or imitation.
Almost everything that Apple designs – from the iPod to the Genius Bar in its Apple stores – seeks to appeal to this genre of authenticity. Even its slogan, “Think Different,” is originally ungrammatical. Likewise, Blue Man Group appeals to original authenticity, with three blue men doing things on stage that no one has ever seen before.
Services – Exceptional authenticity
People tend to perceive as authentic that which is done exceptionally well, executed individually and extraordinarily by someone demonstrating human care; not unfeelingly or disingenuously performed.
Any company that encourages its people to genuinely care about customers and respond to their individual needs – think of Nordstrom or Southwest Airlines in industries known for treating customers anonymously and often downright poorly – appeals to exceptional authenticity.
Experiences – Referential authenticity
People tend to perceive as authentic that which refers to some other context, drawing inspiration from human history, and tapping into our shared memories and longings; not derivative or trivial.
Iconic experiences … drinking beer in England, the Chinese tea ceremony, and so forth all exhibit referential authenticity, drawing their inspiration from the rituals of long-standing cultures. Whenever you read a review that says a novel or movie is “real” or “authentic” it is because the novelist or director renders their work referentially real, a verisimilitude of real life.
Goods – Influential authenticity
People tend to perceive as authentic that which exerts influence on other entities, calling human beings to a higher goal and providing a foretaste of a better way; not inconsequential or without meaning.
The wave of interest in sustainability in building construction – for homes, offices, and factories – stems from this genre of authenticity, as do fair trade practices and the like. Even Hard Rock Café’s tagline, “Save the Planet,” seeks to render the restaurant venue more real via influential authenticity.
In any offering appealing to authenticity you encounter one or more of these five genres – and occasionally all five. Consider an entity explicitly chartered with preserving the past – the United Nations Educational, Scientific, and Cultural Organization, or UNESCO. In determining which venues it places on its World Heritage List of protected sites, UNESCO issued “Operational Guidelines for the implementation of the World Heritage Convention” – a set of rules for meeting “the test of authenticity” based on “design, material, setting, workmanship” as well as “use, tradition, and spirit/feeling.” The rules follow the five genres of authenticity: “materials” (natural), “design” (original), “workmanship” (exceptional), “setting” (referential), “spirit/feeling” (influential).
You find the five genres across a wide variety of circumstances. For example, look at the topics addressed in the 2005 Oxford Symposium on Food and Cookery, as reviewed by the Financial Times: the “natural evolution” of European cheeses (natural), “place of origin” of certain dishes (original), “distinctive food” (exceptional), “recreating” dishes (referential), and how “industrialization caused . . . authentic dishes to disappear” (influential).
The world-renowned timepiece merchant Tourneau once ran full-page ads for its blowout sale, “Watchfest.” As “the undisputed authority in the watch industry” (influential), Tourneau touted its sales event as “the biggest thing to happen since Daylight Savings Time” (referential) featuring “the world’s largest selection of watches under one roof at a time” (exceptional) including “one-of-a-kind timepieces and new collections never before seen in the United States” (original); and as part of the gala event, one could “enter to win a 10-night trip for two to Australia” (natural). It all adds up to one fine way of rendering authenticity, since you cannot mistake these watches for all the fakes from China.
Interestingly, a place one of us encountered in Chengdu, China – the ten-million-plus-populated capital of the Sichuan province – effectively uses all five genres of authenticity. Jin Li Street exudes authenticity to most anyone who visits. Over four million visitors every year escape the downtown drudgery when they walk through a tower gate and enter a street lined with a tea house, restaurant, hotel, shrine with contemplative gardens, and numerous shops housing artisans who are making and selling their wares on site. Visitors can also experience a ceremonial tea and a Sichuan dinner after they stroll the 350 meters of gardens and shops.
Appealing to natural authenticity, Jin Li’s centerpiece is the ancient contemplative gardens, and every material used throughout is traditional, simple, and natural – wood, tile, and brick. The native Sichuan artisans gathered from various parts of the province speak directly to original authenticity. The street bespeaks exceptional authenticity in the uncommon manner everything is done, from construction techniques to ceremonial rituals to personal service. The place even employs referential authenticity, for it is not an ancient street – one meaning of Jin Li is “Fantasy Land” – but a former residential area completely rebuilt (except for the original shrine and gardens) and opened in October 2004. One of its proprietors, Xia Jia, remarks, “The ancient Jin Li Street has faithfully restored the style of the ancient town of Western Sichuan.” She and her husband undertook this restoration, with financial backing (not to mention artifacts) from the nearby Wuhou Temple Museum, not just to restore that ancient style but preserve it, not only for tourists to visit but for artisans to practice their craft and find ready markets – directly appealing to influential authenticity. In no way a tourist development, Jin Li Street was created for the inhabitants of Chengdu. If it is now a tourist trap, it’s only because it first became a resident trap.
Examine any offering you find authentic – commodity, good, service, experience, or transformation – and you will find one or more of these five genres behind your perceptions, whether explicitly or beneath the surface. The categories are admittedly capacious. In finding ways to render your own offerings authentic, it will not suffice to appeal to some generic form of authenticity; rather, employ one or more genres – natural, original, exceptional, referential, or influential – specifically and intentionally.
James H. Gilmore and B. Joseph Pine II are the authors of Authenticity: What Consumers Really Want, from which this article is excerpted. They are cofounders of Strategic Horizons LLP, a thinking studio that helps companies design new ways to add value. In addition to their bestseller The Experience Economy, Gilmore and Pine also edited Markets of One and have written for Harvard Business Review.
Five Ways to Solicit Customer Input
The most powerful way to keep in sync with customer demand is to ask for feedback. While this concept is easy to grasp, and the benefits of having on-target offerings are obvious, many small and mid-sized businesses don’t have a process (other than their sales force) to keep in touch with their customers systematically.
However, it is not hard to take the pulse of your customer base on a regular basis. These five tips can help you create a sustainable – and profitable – customer feedback process.
Use business intelligence and Web site analytics
Even before reaching out to customers, companies can exploit data locked away in their IT systems to gain valuable customer insights. With business analytics software, for example, companies can mine customer orders to discover demographic, seasonal and product preference patterns. These trends identify cross-sell opportunities, as well as direction for product development. In much the same vein, online customer behavior also provides a wealth of insight into customer preferences. Web analytics tools let you identify popular products and features, as well as where your site visitors are coming from.
Survey says…
Surveys are a tried and true way to gain customer insight. Before jumping in, however, have a clear objective for the survey, and limit the questions to those issues that are most pertinent to your customers. It’s a good idea to target only your best customers as possible respondents, and to offer some a compelling incentive. Online surveys can be a quick and cost-effective. Sites such as SurveyMonkey and Zoomerang offer survey tools, as well as tips on everything from crafting survey questions to e-mailing techniques to boost responses and reporting tools to analyze results.
Tap into Web 2.0
The Web offers a wealth of opportunities to collaborate with your customers. Unlike surveys or “one-way” formats, newer vehicles like blogs, online communities, and even social networks provide a forum in which to converse with customers less formally. Blogs, for example, encourage customers to weigh in with their own thoughts and perspectives while also providing a company with a platform to present their positions. Online forums and communities are another good option for generating unscripted customer feedback. Consumer products giant Proctor & Gamble, for instance, sponsors vocalpoint.com, an online forum where customers can express their feelings, make suggestions and ask questions about P&G products and services.
Reach out and touch select customers
As part of a balanced feedback mechanism, there’s a time and place for getting personal. While individual conversations don’t reflect the wants and needs of a broad spectrum of your customer base, it’s always worthwhile to pick up the phone, send a personalized e-mail or spend some quality one-on-one time with a select group of customers. By rotating these one-on-one interactions, companies can keep their finger on the pulse of what’s important, in addition to maintaining a live portrait of their customer rather than grouping them by numerical stats.
Create a “voice of the customer” culture
It’s not enough to ask customers for feedback – you have to show them that their input is important and that you’re ready to take action. Educate customers on the specific programs in place to capture their feedback and how that input impacts decisions made in all functional areas of the company. Acknowledge that you’ve received their input and are giving it serious consideration. Finally, train company employees to give customer input that same level of precedence so the practice becomes ingrained, rather than a one-time initiative.
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Coping With Changing Depreciation Rules
By Paul R. Pavich, Red Moon Solutions LLC
Everyone would like their tax bills reduced to compensate for their investment in business assets. Normally such purchases must be depreciated over many years. However, in 2008, the politicians really are here to help. They are passing out tax breaks for business investment and here’s how it works. Along with the stimulus checks for individuals, businesses have been given two valuable incentives: the Code Section 179 expensing provision has been enhanced, and bonus depreciation has re-surfaced, benefiting virtually all businesses, whether incorporated or not.
First, the expensing provision of Section 179 has been doubled to $250,000 and increases the investment threshold for the phase out to $800,000. This provision of the law allows a company to fully write off (expense) an asset in the year of purchase. This applies to property purchased and placed into service for taxable years beginning in 2008. Most small and medium-sized businesses will be eligible to take advantage of this change. However, due to the investment limitations imposed on the dollar amount of assets a company purchases in any given tax year, not all companies will be able to take advantage of this newly enhanced law.
Second, bonus depreciation has returned for the 2008 calendar year. Bonus depreciation allows a company to write off 50% of an asset’s cost as an expense in the current year, via depreciation expense, in addition to the regular depreciation expense amount that is normally allowed. Eligible property that is purchased and placed in service after December 31, 2007, and before January 1, 2009, will be entitled to claim bonus depreciation. Keep in mind that bonus depreciation must be claimed for both regular and alternative minimum tax, although taxpayers also have the option to exclude an eligible asset class from claiming bonus depreciation.
These two areas of the tax law make grown CPAs cry and software developers change professions. However, a well-established software company can manage these changes and provide complete and reliable solutions on a timely basis to their customers. These new law changes will not alter the filing of the 2007 calendar year tax returns; however, they will have an impact on the tax planning process for 2008…once the 2007 calendar year returns have been completed.
CPAs and those providing tax services have come to rely on their software solutions for providing specific answers to these types of questions. Even before the ink was dry on the newly signed bill, established software companies were poised to modify their software to incorporate the new rules and calculations into their solutions. Let’s take a closer look at how these changes are analyzed and incorporated into the software.
As the details of the proposed stimulus package unfolded, it became apparent that the Code Section 179 expensing limitations would be increased and that bonus depreciation would be making a limited time come-back. The software company’s tax analyst began monitoring the bill’s progress while laying out the tax logic needed by the development team to begin their design work. It is the responsibility of the tax department to provide the effective dates, rates, and the desired calculated results to the design team. The design team then lays out the programming logic; the programmer then writes the code based on the design specifications. It is at this important step that the tax analyst and the programmer work closely together by testing the system for accurate and efficient handling. Team work and specific industry knowledge are the keys to achieving the results that CPAs not only require, but demand.
To amplify the working relationships between tax and programming, consider the following two phrases: (1) “Property purchased and placed in service for tax years beginning in 2008” and (2) “Property that is purchased and placed in service after December 31, 2007 and before January 1, 2009.” To those that have never had the joy of experiencing the intricate details of tax preparation, these two phrases may seem to say the same thing….applies to my assets purchased during the 2008 year. Not so – says the tax man!
First, the key to item one above are the words “…tax years beginning in 2008.” Generally speaking, an entity’s tax year begins on January 1 and ends 12 months later on December 31. These dates represent the time frame within which the entity is doing business – so to speak. This is the most common type of tax year, called a “calendar year,” under which most businesses and individuals operate. An entity can also have a “fiscal year,” that is, one that starts on a date other than January 1st and ends on the last day of the twelfth month. It can have an end date or a start date shorter than twelve months due to a business termination/combination – also called a short tax year. As the new law applies to this particular situation (Code Section 179), the start date of an entity’s tax year must begin on January 1, 2008 or some other date before December 31, 2008.
Second, the key to item two above, are the words “…purchased and placed in service after December 31, 2007 and before January 1, 2009.” This represents a period of time when an asset must be purchased in order for the new tax rules to apply. It is not dependent upon an entity’s taxable year start date.
For example, let’s assume that a corporation has a fiscal year start date of October 1, 2007 and an ending date of September 30, 2008. First, since the taxable year starts in 2007, the enhanced Section179 expensing limit will not be allowed until October 1, 2008 – the start of its 2008 taxable year. Prior to that, the 2007 current year limitations of $125K/$500K must be used. Second, bonus depreciation will be allowable for eligible assets that are purchased and placed in service any time from January 1, 2008 through December 31, 2008.
Using software to answer questions like the example illustrated above is no longer a luxury. It is a necessity. As new laws are enacted, prior laws can become obsolete, be retroactive to certain dates, and be effective for prospective dates only or any combination thereof. Reliable software has the ability to remember all of the rules, whether old or new, and apply them on a consistent and reliable basis.
When choosing your software, it is important to look beyond the software and behind the scenes at the people who are providing the software, in order to have confidence that the answers are correct, accurate, and in line with the level of service you require to maintain your professional practice.
Paul R. Pavich is the Director of Tax and Accounting for Red Moon Solutions LLC. He has over 30 years of experience in the field of taxation and accounting. Paul has been working in the software development business for the past ten years. Red Moon Solutions is a premier provider of specialty software solutions including Fixed Assets Manager (FAM), Like-Kind Exchange Matching (LKEM), and WorldPro, a solution that assists human resources personnel manage international work assignments.
QuickStat: Spyware Takes a Bite Out of SMB Productivity
Spyware infections carry big costs for small and mid-size businesses (defined as companies with between 10 and 200 computer users), according to a recent survey commissioned by the Computer Technology Industry Association. More than one in four computer users say their productivity has been diminished by a spyware infection during the past six months. Of those, more than one-third reported multiple infections. What's worse: users said they lived with the problem for more than two days before they sought assistance.
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