Quality As An Effect Means Marketable Value

Comment: This paper was written for a Quality course I took. The instructor challenged us to write creative papers looking at quality in different ways. I choose to write about using Effects Based Outcomes to describe quality as a effect in lieu of a definition.

Abstract: The purpose of this paper is to explore the use of a scientific method to deliver then maintain strategic quality in lieu of an engineered achievement. Engineered solutions include both discrete and perceived quality postures focusing on the production process. This prose argues the use of Effects Based Operations methodology in order to link strategy to quality achieving meaningful outcomes for the organization and the consumer that cannot be achieved in the production process alone. Effects based operations leverage a consumer-centric basis for quality ensuring that the right level of resources is applied for the achievement of the organizational strategy while meeting consumer expectations whether discrete or described as a perception.

Quality as an Effect Means Marketable Value

Discussion: Quality has been a challenge for many organizations to obtain control over and place under reasonable management. Some organizations look at quality as sort of an ethereal ideology, a perception. In these quality organizations  everyone feels the atmosphere of and thinks exceptional quality. For example, everyone strives to meet or exceed the customer expectations or ‘Made in the USA’ means quality or tangible attributes such as weight may translate to quality perceptions. However, expectations are not clearly defined or the location the product is made really does not affect quality or weight is not necessary to achieve quality. Hence, the perceptions of quality. Meanwhile, other organizations travel in the polar opposite direction defining discrete quality and gathering extreme volumes of data to assess the minutest variance in the quality posture. Everyone in this kind of quality organization has assigned quality duties that are identifiable, measurable, and the people are held accountable to the achievement and maintenance of discrete standards. Awards are issued for those who exceed the standards consistently. In the spectrum of quality postures, Figure 1, one extreme is perceived and the other extreme is discrete. Both are definitions being pursued by organizations often with little movement away from one extreme or the other.

Figure 1: The Spectrum of quality postures from 100% perceived to 100% Discrete

The organizational view of quality is often close to the extremes and does not meaningfully or measurably tie organizational strategy to the marketplace view of quality. Yet quality is often considered to be one of the keys to success. The competitive advantage of a company is said to depend on the quality and value of its goods and services, but it has to be proven through ultimate consumer evaluation of the quality (Žnideršić and Marić and Grubor, 2009, p. 170). In traditional terms, quality is a definition, a checkbox item, a measurement, or an intangible look or feel of a product or service exiting out-the-door. This is different than thinking of quality as an effect that warrants a customer to make a purchase.

Quality as an effect means that the end-user reacts to quality that translates to value for the organization such as increased sales, decreased support calls, or increased market penetration. In short, quality as an effect results in competitive advantage for the business and value to the consumer that is deliberate, observed, and measurable. The hypothesis to be explored is if quality can be described as an effect verses a definition then resource-effective quality performance can be achieved that has marketable value. The benefit of such an approach is the deliberate application of the right amount of resources to achieve the expected quality level by the end-user that results in a purchase.

The Body of Works: The body of works regarding quality spans a considerable period. More recent works tended to focus on business models to manage quality in complex circumstances or the introduction of new methods that affect culture. Works regarding Effects Based Operations, EBO, are unique to military operations. Despite EBO emerging well over a decade ago, the works are more recent due to the increased attention to this paradigm.

The business models considered in the body of works include Total Quality Management or TQM; International Standards Organization or ISO-based, and research specific models. Other quality models such as Six Sigma were touched on through elemental practices in the sample body of works. Researchers have looked to business paradigms such as competitive advantage then applied TQM practices with technological innovations to observe how quality is affected. A concept of Business Innovation Capability (BIC) was introduced in order to provide a mechanism that links TQM to innovation. This yielded a competitive advantage for companies who could leverage continuous improvement with continuous innovation (Perdomo-Ortiz and Gonzalez-Benito and Galende, 2009).

Work has also been completed in quality costing benefits of improving performance, quality control, and leveraging competitive advantage. The concern is to accurately cost quality. The researchers determined the need for end-to-end costing systems that provides quality-related financial information and classifications. Researchers provided matrices and formulas to determine costs categories and/or departmental responsibilities (Yang, 2008).

Service quality versus product quality has been studied. Researchers sought to answer the questions that differentiate service quality from product quality, how to approach service quality, and sought to define service quality. Researchers argued that the intangibility of services requires a different approach than physical goods. Quality in services is left more to perception. Researchers then make a call for further study into the complexity and concepts of service quality (Radomir and Plăiaş and Nistor, 2012). In another study on service quality, Researchers looked at competitive advantage as it depends on quality and the value of goods and services that ultimately must pass the consumer evaluation of quality. Researchers concluded that consumers buy the benefits of goods and services offered that include information, emotional components, and other customer perceived value created for them. Researchers point to eleven traits of the customer that companies must pursue (Žnideršić and Marić and Grubor, 2009).

Loyalty is affected by quality according to researchers investigating student choices in higher education. Researchers explored peripheral and situational factors determining that in the student and academic staff relationship quality is critical to loyalty. Overall, the educational quality was perceived and loyalty is a barometer of quality and satisfaction (Purgailis and Zaksa, 2012, p. 148).

Effects based research is indicating a need for standards or doctrine in the effects based practice applied to domestic use. “These [EBO] concepts do offer the possibility of altering the somewhat ad hoc approach to coordinating elements of national power practiced by statesmen and military commanders, to make it a standard operational method (Gladman and Archambault, 2011, p. 24).” Researchers are also discussing how EBO unifies an effort. “Such tools will permit commanders at all levels to monitor effects-based planning performed at subordinate levels to assure that it meets the supported commander’s objectives and desired effects (Elder, 2007, p. 16).”

Work has been completed regarding networks and causal effects on quality. Such networks included various types and populations. This theoretical effort saw the number of firms supporting an emerging technology provided the effect of value to the consumer in terms of information, commitment, and competition. The researchers developed a choice model. They were able to demonstrate the survivability of emerging technology is based on user impressions regarding the number of supporting firms and consumer valuation of size, loyalty, and incumbencies. In the final assessment, the researchers determined that strategic alliances supporting a single emerging technology with incumbent status are valuable partners (Wang & Xie, 2011). Quality was a perceived value based on vendor support of the emerging technology.

Emerging markets posed interesting challenges for business and quality. Researchers discovered that emerging markets are culturally influenced regarding product design and features. The key ability is for a company to combine deep insights about the market place in order to strip out excess costs while amplifying the customer’s true value improving margins and growth in emerging markets (Narayanan and Padhi and Williams, 2012).  Quality is not universal and is culturally influenced. 

In conclusion, the body of works indicates a breadth of research to include standing quality management and business practices in order to achieve business outcomes such as competitive advantage, expanded market share, and improved margins based on the degree of quality. One interesting outcome is that quality can be more perception than specified. Researchers point to perceptions in service quality, loyalty, and culture. Emerging technologies are influenced by perceptions of loyalty and widespread support for products or services before markets embrace them. Strategic alliances improve the survivability of a new technology yielding a perception of the quality of service level.

Studies into effect based operations urge to standardize the methodology while acknowledging the collaborative benefits of EBO. The application of the methodology was to military operations with a little exploration into commercial use. 

The body of works was weak on leveraging quality to achieve planned effects in the marketplace through deliberate strategy-to-task methods which EBO delivers,  This was a second thought in much of the research endeavors and/or a nebulous association affecting outcomes. There were calls for end-to-end cost accounting of quality traits. There was no connection between quality and effects based operation paradigms. Thus, a need for research into methods that link desirable effects to strategy that would offer an end-to-end solution for collaborating on quality projects and create quality as an effect.

Background for Current Research: There have been calls to transform the military and to take advantage of new technologies and methods such as EBO. “Dr. David Alberts describes transformation as a ‘process of renewal, an adaptation to the environment’ (Smith, 2002, pp. xxiv-xxv).” Roger Kaufman of Florida State University comments not to assume that which has worked, will work in the future (Kaufman, 2005, p. 10). Industry should adapt and learn from military paradigms as the emergent marketplace is no longer a simple product or service sale. Consumers buy benefits that goods and services offer and this customer perceived offering is what creates value for them (Žnideršić and Marić and Grubor, 2009, p. 171). As companies seek to blend services and products in order to create value-added solutions forming new markets, these changes affect quality that has become an influencer in market performance. Current trends suggest continuous innovation similar to TQM’s continuous improvements that focus management on total quality in order to promote better customer orientation and workplace integration (Perdomo-Ortiz and Gonzalez-Benito and Galende, 2009, p. 5102). In keeping with the trending, companies should leverage strategic objectives in ways to cause desired effects that enhance both the customer and company benefit.

Researchers have revealed that effects impact markets. The Journal of Marketing published a study of emerging technology market acceptance and willingness to purchase. Researchers concluded that the supporting firm base in relation to product valuation, firm types, and customer interactions most influenced the acceptance of the technology and willingness to buy (Wang and Xie, 2011, p. 11). Quality is part of product valuation. In another study on strategic alignment and new product development, researchers concluded that companies must understand the nature of its competitive environment then based on that understanding, implement a suitable set of alignment mechanisms. Their study evidenced that strategic planning and an innovative climate are key drivers of strategic alignment and new product development performance (Acur and Kandemir and Boer, 2012, p. 313). Hence, a linkage from strategy to objectives then to desired markets effects should be the mechanism that manages and monitors progress.

If quality can be described as a market effect verses a definition or ideology then cost effective quality performance can be achieved that has marketable value. An apparent and inherent need exists for organizations to achieve desired effects in a managed manner in order to align to marketable value. Therefore, a proactive organization that can respond to emergent conditions while adding value or find a competitive advantage has the upper hand to the competition whom become reactive to the affects.

Quality as an Effect: The objective is to explore quality as an effect coupled to the market’s quality perception and/or specification. This requires the use of standing business tactics, techniques, and procedures as well as the introduction of new practices into industry that enhance quality pursuits. This paper proposes the use of EBO found in government in what may be deemed benchmarking between sectors rather than companies. EBO operations provide specific guidelines and processes in order to develop a more collaborative means of acting and thinking (Gladman and Archambault, 2011, p. 24).

The first challenge is to determine the strategy then connect measurable organizational value to that strategy. For the purposes of this research the US Military Joint doctrinal approach to strategy will be employed. The strategy is converted into an actionable mission statement that is further refined by the company’s intent and desired end state, Figure 2. Commander’s intent will be renamed company’s intent in order to place the appropriate focus in this paper. The company’s intent is a statement that narrows action and places constraints as well as restraints on the effort. The end state is a statement of the organization’s desired outcome. The end state has an associated measurable value. In the Table 1 example, the organizational value is (1) the market leader, (2) markets larger than 500,000 people, and (3) market quality expectations. Measurement of the organizational value will be discussed in the section Linking Strategy to Effects.

In comparison between the military and company examples, both structure the strategy in similar manners. The company seeks non-belligerent actions, of course, that promotes favorable conditions for the organization and the customers.

Figure 2: Strategy comparison between military and company examples

In conclusion, having clear strategy at the top of an organization is the beginning of establishing a strategy-to-task effort that leads into EBO planning. This approach should lead into the development of actionable objectives and desired quality effects.

Effects Based Operations: Connecting strategy to actionable tasks has been a challenge for most organizations. Effects Based Operations, EBO, is a method for making this linkage between strategy and tasks.

EBO is a methodology of shaping the behavior in the sphere of operations and is not a new concept tracing back for centuries to what good statesmen and generals have always attempted to do (Smith, 2002, pp. 1-2). In this paper, EBO is applied to leverage quality in ways that create meaningful impact to an organization’s competitive advantage and influence the marketplace favorable to the organization.

There has to be an understanding of what composes an effect. The ‘effect’ is nothing more than a behavioral response to stimuli introduced into a system. EBO is akin to the scientific process of experimentation that has a hypothesis, control variables, and a variable under observation. In business, the hypothesis is strategy and objectives. The control variable, in this case, is quality and the variable under observation is the end users’ behavior.

Organizationally, the process begins by establishing a strategy with objectives. MOV must be coupled to this strategy in order to discern the achievement of the strategic end state that has associated objectives and desired effects or outcomes. Each effect has Measures of Effectiveness, MOE. Each Measures of Effectiveness has indicators that are thresholds for decision points and/or triggers that spawn some sort of action or decision by the organization. Decision points cause a redirection of resources either to the effort or to other efforts. Triggers spawn actions that apply resources or initiate predetermined courses of action. The effects based operational framework flows downward to increased resolution while information flows upward in support of the strategy, Figure 3.

Figure 3: Effects Based Operational associations and information flows

The kinds of measures that can be employed are broad based and include both qualitative and quantitative measures. For example, perceived quality and loyalty can serve as a barometer of satisfaction (Purgailisand Zaksa, 2012, p 148). Other measures can center on the cost of quality. Researchers point to a need for a complete costing system that collects quality related financial information and classifies this data. They went on to offer analytical matrix and formulae to calculate costs (Yang, 2008, p. 190). These matrices and formulae require inputs that can be associated with EBO MOEs.

Researchers investigating consumer evaluation of service quality point to eleven traits that lend well to framing and developing EBO MOEs. They are (1) Understanding the customer, (2) Listening to customers, (3) Prepared to serve the customer, (4) Immediately helping the angry customer, (5) Collecting customer information through permissive means, (6) Living up to commitments, (7) Unsolicited referrals from the customer, (8) Responsible for conduct in front of the customer, (9) Being memorable, (10) Offer pleasant surprises to the customer, (11) Establishing long-term relationships with the customer. These are all about consumer satisfaction and loyalty through managed expectations, experience, and quality (Žnideršić and Marić and Grubor, 2009). The management mechanism should be EBO with customer focused MOEs.

Deliberately linking strategy to low level actions and decisions in a manner consistent with EBO should provide stable management that delivers resource effective quality based on market place perceptions.

Linking Strategy to Quality Based Effects: EBO is deliberately structured to link the effects back to the end state. From the end state, the objectives, effects, and measures of effectiveness as well as indicators and triggers can be determined. The end state in Figure 2 is to be the market leader in Latin American communities larger than 500,000 people who enjoy company products meeting market expectations of quality. From this statement the measurable organizational value is (1) to be the market leader, (2) metropolitan markets larger than 500,000 people, and (3) market quality expectations. There has to be an effort to further define market leader and the markets quality expectations. For demonstration purposes the effects based example, Figure 4, will focus on the quality aspects by providing an illustration of possible market quality EBO.

Taking a closer look at the effects based breakdown, the concept notes provide clarification of the organizational desires as connected to strategy. This is an important aspect for the operator to understand the connection to strategy and the organizations desires. Also note the mixture of qualitative and quantitative traits and how qualitative traits are measured in quantitative terms. This is a major value of the EBO practice that provides for a structured approach to managing strategy-to-tasks. Granted, the effects and measures can be biased and relative. With skill and training these issues can be minimized and leveraged to the advantage of the organization.

Figure 4: Strategy to Effects breakdown example

Conclusion: Mapping strategy to effects and then tasks that contribute toward MOV through strategy-to-task management using EBO framework establishes a deliberate methodology to achieve marketable quality and impact organizational value. Organizational value is simply traits such as conservation of resources, expanded profits, and durable competitive advantage.

Managerial Implications: Managing quality as an effect places the organization in control of outcomes to a greater extent than in the past by focusing rationed resources not to exceed market expectations or benefits to be gained. While quality as an effect is one paradigm, a symbiotic paradigm in organizations must be to design the operations to be responsive and fluid to change by adapting to emergent conditions more readily minimizing quality impacts. Quality as an effect requires a deliberate effort in order to achieve the optimal desired results as opposed to ad hoc approaches consuming immense resources without planned achievements. Sage use of limited funding meeting optimal consumer quality expectations strengthens market performance and frees capital for other projects. In using EBO, companies now will have a tool that stabilizes corporate knowledge and operations while applying resource smartly.

Theoretical Implications and Further Research: The challenge in the research and notion of quality as an effect is in finding the balance between the discrete and perceptive thoughts of quality. While theoretically simple this is not achieved in practice with ease. Research needs to be conducted to determine the methods and practices of revealing a markets placement within the spectrum of quality using transparency.

Complexity also has an essential role in EBO as well. Not only are there intended first order effects but also realized second and third order effects. This means that the outcome is far more complex that a simple cause and effect event. The organization is operating in a complex adaptive environment having emergent conditions that must be dealt with quickly. The necessary character qualities of an organization are a low organizational latency, concise decision-making, and rapid adaptability. This requires an operation to be structured in a manner that is permissive of the necessary level of responsiveness. Therefore, not only is the method of linking Strategy-to-task important but also coupling quality as an effect to an organizational structure supportive of EBO. Research is needed to consider how organizational design influences quality. In short, a quality organization must be designed from ground up and research is required to determine the designs that are effective for the different profit models.

References:

Acur, N., Kandemir, D., & Boer, H. (2012). Strategic Alignment and New Product Development: Drivers and Performance Effects. Journal Of Product Innovation Management, 29(2), 304-318. doi:10.1111/j.1540-5885.2011.00897.

Department of Defense. (2011). Chapter II the art of joint command. Joint Operations, II-1 - II-11, Retrieved from: http://www.dtic.mil/doctrine/new_pubs/jp3_0.pdf.

Elder Jr, R.J. (2007) Effects based operations: a command philosophy. Air and space power journal, 21(1), 10-17.

Foster, S. (2013). Managing quality: integrating the supply chain. (5th e.d.). Pearson: United States of America.

Gladman, B., & Archambault, P. (2011). A Role for Effects-Based Planning in a National Security Framework. Journal Of Military & Strategic Studies, 13(2), 1-26.

Kaufman, R. (2005). Defining and Delivering Measurable Value: A Mega Thinking and Planning Primer. Performance Improvement Quarterly, 18(3), 6-16.

Marchewka, J. (2006). Information technology project management: providing measurable organizational value. John Wiley & Sons, Inc: USA.

Narayanan, A., Padhi, A., & Williams, J. (2012). Designing products for value in emerging markets. (cover story). Mckinsey Quarterly, (4), 46-49.

Perdomo-Ortiz, J., Gonzalez-Benito, J., & Galende, J. (2009). The intervening effect of business innovation capability on the relationship between Total Quality Management and technological innovation. International Journal Of Production Research, 47(18), 5087-5107. doi:10.1080/00207540802070934.

Purgailis, M., & Zaksa, K. (2012). The impact of perceived service quality on student loyalty in higher education institutions. Journal of Business Management, (6), 138-152.

Radomir, l., Plăiaş, i., & Nistor, v. (2012). A Review of the Service Quality Concept - Past, Present and Perspectives. Proceedings Of The International Conference Marketing - From Information To Decision, 5404-427

Schwartz, E. I. (2004). Juice: The Creative Fuel That Drives World-Class Inventors. Harvard Business School Press Books, 1.

Smith, E. (2002). Effects based operations: applying network centric warfare in peace, crisis, and war. CCRP publication series. ISBN 1-893723-08-9

Staszyńska, K. M. (2011). Cognitive Determinants of Data Quality in Public Opinion Polls: Respondents Definition of the Survey. Polish Sociological Review, (176), 493-514.

Summers, J. K., Humphrey, S. E., & Ferris, G. R. (2012). Team Member Change, Flux in Coordination, and Performance: Effects of Strategic Core Roles, Information Transfer, and Cognitive Ability. Academy Of Management Journal, 55(2), 314-338.

Wang, Q., & Xie, J. (2011). Will Consumers Be Willing to Pay More When Your Competitors Adopt Your Technology? The Impacts of the Supporting-Firm Base in Markets with Network Effects. Journal Of Marketing, 75(5), 1-17. doi:10.1509/jmkg.75.5.1.

Yang, C. (2008). Improving the definition and quantification of quality costs. Total Quality Management & Business Excellence, 19(3), 175-191.

Žnideršić, R., Marić, D., & Grubor, A. (2009). CONSUMER EVALUATION OF THE SERVICE QUALITY. Economic Themes, 47(4), 169-185.

The Democratic Reform Process Model - General Discussion

Comment: A common practice on mine is to baseline my understanding on a topic by writing on it.  This increases my knowledge and is a point to which I return and adjust my knowledge as well.  In addition, my objective was to write in a manner in which others could increase their understanding as well.  I have modified this paper for posting purposes.  The topic originated from the Marshall Plan then through several model revisions and ultimately arriving at the Democratic Reform Process model.  This is one in a set of posts on Democracy:

Community Leadership

Democratic Reform Process Model - In Practice

The Democratic Reform Process Model - General Discussion

Figure 1: DRP Model

The United States encourages Representative Democracy or a Republic and capital economies as a means to elevate human dignity and rights around the globe. Democracy has been the view of the United States as the only form of civil government that can best emplace these virtues. Over time as the United States engages increasing numbers of dissimilar and even hostile cultures, numerous approaches of reforms have emerged resulting in an evolutionary model.  

The current approach to implementing democratic reforms centers on a process model that has an economic backbone. Host nations must willfully build the capacity and capabilities to implement the desirable reforms themselves. The United States partners and in some cases organizes coalitions with the host nation in order to mentor the process. The desired end state is a democratic ally who participates in the global community - economically and politically. 

The book 'Managing Policy Reforms', Figure 1, advances the Democratic Reform Process, DRP,  model as a closed loop feed back model that is a strategic management tool. This model considers the reform process from the perspective of the transitioning country's decision maker challenges and measures of effectiveness indicate progress towards the end state. These challenges commonly center of governance, economic, and the organization's ability to implement the reforms. 

Governance: Host nations often have competitive forms of governance with democracy. Democratic reforms often require anti-corruption campaigns, citizen participation, controls, and judicial restructuring. Sometimes restructuring is not sufficient and complete re-constitution of a new governmental framework is necessary. 

Organizational: In order to support democratic reforms, agencies and systems require a systemic overhaul into an organizational framework that is supportive of the desired reforms. Host nations often simply do not possess the skilled work force, organizational framework, and/or operational process sophistication. Identification of these systemic shortfalls is necessary but action is often constrained due to a lack of financial strength to implement. A strong economic tax base is an underpinning of successful implementation.  

Economic:  Many host nations that have been under repressive or inattentive rule simply have never developed the requisite financial strength necessary to implement full reforms. Barriers in local economies such as graft, corruption, and other adverse conduct prevent economic expansion.  Management programs must be in place to reduce the effects and remove the negative influences if possible.  As a nation's economic strength increases then improvements are notable in terms of human living conditions, dignity, personal incomes, quality of life, and healthcare.

As economic strength increases a ready source of internal revenues become available to fund reforms. Taxation must be carefully managed in order to balance the funds redistributed to economic growth.  In part the temptation for graft and corruption may persist and adversely impact the reforms. 

The basic model of implementing democratic and capitalistic reforms centers on a closed loop feedback system. Progress towards the end state are tracked using measures of effectiveness that relate to governance, economic and organizational centers. In order to develop reforms in a focused center constituencies, legitimization, and resources must be championed as well. 

References:

Brinkerhoff, D.; Crosby, B. (2001). Managing policy reforms: concepts and tools for decision-makers in developing and transitioning countries.  Kumarian press: NY. 

The Democratic Reform Process Model - In Practice

Comment: This post is a continuation of the the general post on the DRP model as used in practice. The original works was a topical paper used to brief others on the model basics. I have modified this paper for posting purposes.  The topic originated from the Marshall Plan then through several model revisions and ultimately arriving at the Democratic Reform Process model. This is one in a set of posts on Democracy:

Community Leadership

The Democratic Reform Process Model - In General

The Democratic Reform Process Model - In Practice

The Democratic Reform Process, DRP, Model has an economic backbone in which host nations must willfully build capacity and capabilities to implement the reforms desired. The United States partner's and in some cases organizes coalitions in support of host nations while mentoring the DRP model. the reform process relies on six key steps; policy formalization and legitimatization, constituency building, resource accumulation, organizational design, resource mobilization, and impact monitoring. Overall, the DRP model is a closed loop free back system that undergoes continuous improvement. 

Figure 1: The DRP Model's Cyclic Process

Step 1: Policy formalization and legitimization is a critical first step as the host nation and those who benefit from the reforms must see the policy as vital and necessary. 

Step 2: constituency building is necessary in order to build the required support, establish ownership, and create critical mass. This draws heavily on marketing the reforms to the public and specifically those who are the winners. 

Step 3: Organizational design involves identifying methods and/or processes necessary to implement the reforms then adjust or adapting the organization to deliver those methods and processes. 

Step 4: Resource Accumulation requires identification of shortfalls or gap analysis regarding money, manpower, and /or machinery then developing sufficient resources to implement or drive the reform. 

Step 5: Resource mobilization is the actualization of the reforms that have been on paper up to this point. During this step, the realization of winners and losers becomes evident. The goal is to keep the gap between realizations and expectations as narrow as possible. 

Step 6:  Impact monitoring observes the host nation's transformation by utilizing measures of effectiveness, MOEs, in order to assess progress towards the desired reforms. 

One of the most important aspects of the implementation is to minimize the differential between realizations and expectations. The greater the differential then the greater the possibility of rejecting the reforms and desired policy. Closing this differential is difficult and begins in step 2 during constituency building. The reform outcomes must be attainable and accessible by the effective constituencies. Reforms must not only deliver the expected results but also occur within the attention span of the constituency. Results that occur 'a day late and a dollar short' will most likely be viewed as failures by the constituency. 

A task oriented framework supports the implementation. These tasks help identify short falls, trouble spots, and weak points in planning and implementation. These tasks can be operational and/or strategic in nature and include tools like gap analysis, conflict resolution, workshops, capacity checklists, risk assessments, constituency exercises, benchmarking, MOE's, and strategic reviews. 

The DRP model is comprised of six steps; policy legitimization, building constituencies, structural organization, develop then mobilizing resources, and finally impact monitoring. One of the more difficult challenges is to manage the difference  between expectations and realizations.  Focus constituencies must receive the desired outcomes in a timely and properly proportioned manner. 

References:

Brinkerhoff, D.; Crosby, B. (2001). Managing policy reforms: concepts and tools for decision-makers in developing and transitioning countries. Kumarian press: NY

Business Mindedness Series

Why does a business exist? This is both a rhetorical and philosophical question in which many lay folks to scholars have many varying thoughts. In practical terms of a capital economy, the business is a means of redistributing wealth based on productive value created. The ultimate measure of success is net earnings - not revenue. When seeking net earnings there are two opposing factors driving any business operation; effectiveness and efficiencies. These two opposing qualities are continuously embattled under competitive forces and can be measured in many ways using numerous methodologies; Measurable Organizational Value, Earned Value, Non-Dimensionalization, etc...  Of course, the traditional thought process is the Return on Investment, ROI. Most ROI models want to achieve the return results quickly. However, there are some instances that may take long terms. Those long term result general are more strategic. I deliberately avoided the traditional ROI approaches and looked at other models. 

During the Enlightenment Period, Immanuel Kant circa 1784 asked the begging question, "What is the Enlightenment?" And likewise today we ask, "What is business mindedness?"   As with the Enlightenment, business mindedness is many things to many people.  for the purposes of this post series, business mindedness reflects a keen attentiveness to balancing effectiveness against efficiencies in order to optimize earnings or optimize budgets.  

I have gathered the business minded blog posts into this summary series for your quick referencing.  I am still developing this series. So you may need to return as additional posts come online. 

Protecting Ideas?

ZEO Folds Under

The Art Of Profitability

The Morality of Capitalism

Transitioning World - New Economy?

ITIL Affects Measurable Organizational Value

Supply Chain Financial Performance

Earn Value Management Made Easy

The Non-dimensionalized Methodology

Project Complexity Perplexes Procurements

 

Supply Chain Holiday Bedlam

The holiday bedlam keeps extending way beyond the holidays. During 2013 consumers saw the continued erosion of Black Friday as retailers offered shopping opportunities not only on Thanksgiving day but a few began prior to Thanksgiving Day. Christmas inventories began to appear as early as mid-August in craft stores and late September in some some retail outlets.  A series of articles about shifting patterns were posted:

Which Companies are winning the Online Delivery Race?

Online Shopping Growth Delays Christmas Deliveries from amazon and Parcel Services

UPS, FedEx Scramble to Deliver Delayed Christmas Packages

Now that the Christmas shopping is over late arrivals from online shopping trickle in and returns spawn the reverse supply chain flow. Many consumers are upset over late arrivals of online purchases placing blame on the logistics networks. Who is really to blame for any problems the customer had in completing the purchase during the holiday season?

Holiday Crankiness a Consumer Problem?

Some experts blame the consumer for their behavior; procrastinating, ordering late, and viewing the holiday season in terms of economics and not the nationalistic or spiritual reasons for the holidays. These experts tend to view the holiday season accentuating vanity as gifting becomes outlandish and tempers run high amidst the holiday crowds as people take the seasonal bustle personally. These experts see the world shifting away from nationalistic and spiritual prides towards an economic pride in which status, worth, and esteem are driven by the ability to make purchases and gift to others. Some CEO's reject that notion and view the issue a business problem. They see the model as the consumer is always right then the issue must be within the supply chain and getting the product to the end customer.

Do Supply Chains Compete in the Temporal Domain?

The problem is not logistical routes or the ability to fill the supply chain with goods. Capacity and capability play a major role but there are limitations on the capacity and capabilities too. The problem is more temporal. The gifts did not get there on time. Online retailers are now competing in the time domain. The best reduction in time is walking into a store and making the purchase if the inventory is on hand. The bottom line up front for online retailers is that short of teleportation, there is an minimal time the delivery process takes despite the most lean supply chains. So how do the goods traverse from point A to point B in the amount of time reasonable for the customer that keeps the cost reasonable to the consumer?   A common sense answer is to economically ration the delivery time.

The supply chain cannot make promises without proper compensation to at least break even on the promise and the customer cannot make demands for which they are not willing to pay.  Pure economics 101 is the solution; supply and demand.  The customer should select the solution they are willing to pay for knowing the risk involved. As the holiday date approaches, shipping costs begin to increase in order to ration or guarantee on time delivery. These are typically overnight or expedited deliveries.   Then within a specified time of the holiday ending, the guarantee no longer persists as ordering overnight cannot be delivered Christmas morning. Some online retailers may already be doing this at some level. However, a more accentuated scale would attenuate to demand to something reasonable to manage. Of course, the down side to this is that sales are turned away due to costs or may not be there in time for Christmas. Retailers may need to balance risk and returns in assessing how each online retailer scales this. After all, consumers may recall that last year a company was late and look for another company to fulfill the need.

Of course, the hub and spoke method of forecasting then strategically staging inventory is another solution which runs a risk of overstock and some lengthy delivery times may persist in outlaying areas. So in realistic terms, the best delivery times that can be achieved is overnight for delivery on Christmas Eve. However, the customer must be willing to pay for that service.  Most logistical companies want their staff home with their families. So Christmas Day deliveries most likely will not occur. If that service is offered, I am certain that the customer will most likely pay for it dearly. 

Supply Chain Futures

On a more far out look at the temporal concern is Amazon’s robotic delivery solution which affects capacity and capabilities in which 'drones' or robots will make deliveries in lieu of human operated systems. There are numerous models for this type of service. I want to relate something I saw years ago that has some applications to the Amazon robotic delivery system. In an upscale city in the MidWest, the town’s folks did not want their garbage set out on the curb. They instead, set up a service in which the compactor truck slowly drove down the street while hopper carts raced up into the driveways where a trash receptacle was placed beside most homes. The trash was loaded into the hopper on the cart which then raced to the next home. When the hopper was full the cart pulled up to the compactor truck and dumped its load. Once the compactor truck was full, an empty one would replace it. The activity was a sight to see, as usually anywhere from 4 to 6 hopper carts were buzzing around collecting garbage in a synchronous dance with the compactor truck.  This approach comes to my mind with delivery services. Instead, the visa versa would hold true. Full vehicles would replace the emptied vehicles as the packages are disseminated by robots.

In the Amazon model, the robots may assume traditional logistical routes moving goods in the hub and spoke system between distribution points first. This could be something as simple as unmanned airborne vehicles, UAV’s, that fly dedicated routes dropping off cargo containers then picking up another container to fly to the next distribution point. These UAVs would operate 7/24 moving goods directly to the distribution points. Delivery services such as UPS, FEDEX, USPS, etc… would then humanize the service making personal doorstep deliveries.

Image 1: QuadCopter can be used to deliver packages
Source: Oberwelz Design Projects

Image 2: CL-327 Guardian - Counter rotating rotor heads
Source: Canadian UAV Trials

In a later generation of the robotic system, technologies exist for robotic surface and airborne vehicles to deliver goods to the doorstep as well. Hovering or flying courier vehicles either with quad rotor arrays, Image 1, or counter rotating rotors, Image 2,  could deliver the goods from an airborne or surface mother vehicle centrally stationed somewhat like the compactor trucks using swarm technology.  The actual courier vehicles will be of a different design and size than the example images as well as equipped with robotic arms and/or package grips for drop off in delivery receptacles on homes and businesses.  The advantage of quadcopters is stability. The advantage of a ducted counter rotating rotor design is quieter flight as the rotors are sound canceling.  Thus, 7/24 deliveries could be ongoing. The courier robot would then rejoin the mother vehicle once a delivery is completed for a telemetry download and load of the next package delivery.  Multiple courier robots could operate from a single mother vehicle. 

Full Circle

The supply chain can be leaned out further by having robots operating 7/24 moving goods around or by simply speeding up the supply chain using forecasts and strategic buffers.  Economically rationing delivery guarantees is another way to manage the demands of customers to those willing to pay for the quicker service guarantees. In the end, there may be a combination of solutions.  However, there are costs and temporal limitations to getting the goods in the hands of a buying public and online retailers are close to those limits short of teleporting the goods based on a thought in a buyers mind,

Customer, "Beam it over, Scotty!"  

Scotty, "Aye Captain, I am giving it all she'll take. It just won't go any faster."

This brings the Christmas bedlam full circle to the meaning and reason for the season which is to reflect upon the Judeo-Christian God and his character who is patient and shows temperance.  People should get back to the basics of the season, demonstrate patience and temperance, and all this bedlam can be put to rest. In the meantime, the supply chain will continue to seek ways of compressing the delivery time as that is competition. 

Information Theory Overview

Comment: Some time ago, I became interested in information theory partly due to my career and mostly because I began seeing elements of the theory popping up everywhere in movies, theological commentaries, war fighting etc... I studied the theory off and on purchasing books, watching movies, reading essays, and in general where ever I caught a wisp of the theory.  The interesting thing about truth is that it is self-evident and reveals itself in nature. So I did not have to look far. Although, a curious thing about information is noise or that which is distracting, like a red herring and there is plenty of noise out there. Anyhow, the point in this post is an information theory overview.  I would like to share basic information theory and relate it to the world around us. I will be coming back to this post updating and refining with more citations.

Information Theory

Information theory is relatively new and is part of probability theory. Like the core disciplines of mathematics and the sciences, information theory has a physical origin with broad spectrum applications. The theory has captured the attention of researchers spawning hundreds of research papers since its inception during the late 1940's. This new discovery has generated interest in deeper research that involves biological systems, the genome, warfare, and many other topical arenas. Claude E. Shannon PhD is the father of generalized information theory as developed during 1948 and theorized:

If the receiver is influenced by information from the transmitter then reproducing the influencing information at the receiver is limited to a probabilistic outcome based on entropy. 

Figure 1: Mathematical Formulation of Entropy (H) in a system

There are several terms in the thesis statement that may be difficult to grasp and the mathematical formulation, Figure 1,  may be overwhelming to some people who wonder how is entropy and information linked.  Entropy is an operative concept behind diminishing returns or the rate at which a system dies, decays, or falls apart. Entropy operates under order as formulated in figure 1. Thus, the phenomena is not random.  Within the context of information theory, entropy is the minimum size of a message before a meaning or value is lost. The notion of a probabilistic outcomes involves multiple possible results in which each result has a degree of uncertainty or a possibility that the result may not occur. For example, a rolling of the dice is limited to only six possible outcomes or results. The probability of any one outcome occurring is 1 in 6. The uncertainty in rolling the dice is high being 5 to 6 that any specific outcome will not occur.  As for the mathematical formulation, I will just leave that for general knowledge of what it looks like.

The thesis is pointing towards a 'lossy' system and promotes a simplistic communication model, Figure 2.

Figure 2: Simple Information Theory Model

From the thesis, formula, and model more complex related theories and models spawn coupling information theory to biology, quantum physics, electronic communications, crowds, and many other topical subject matter.  All fall back on entropy or the smallest message before it looses its meaning. The big question is so what? We will explore the 'so what' in the next section.

Information Theory Around Us

Most people fail to realize that information theory impacts us on an everyday basis. Aspects of the theory appear in movies, underpin all biological sensory capabilities, and appear in information networks in many ways. Many people philosophize that human and natural existence is purely information based. Let us explore information theory as it is exposed to many people. Most people have some familiarity with the sciences at some level, movies,  and religion.  Let us begin with a survey the sciences.

Atom smashing experiments during the 1970's lead to the discovery that the universe has boundary limits. According to physicist such as Richard Feynman, the father of quantum computing, matter ceases to exist at 10^-32 meters. When matter ceases to exist so does space-time. Matter has dimensions and time's arrow spans dimensionality. When matter no longer exists neither does dimensionality and time is mutually inclusive. What remains are non-local waveforms or electromagnetic waves which are illustrated as strings that vibrate. The region where this occurs is the Planckian realm which is where matter is quantized or discrete having the qualities of a bit of information. Matter and energy are interchangeable based on the Theory of Relativity, Figure 3, and the wave-particle theory of light. Those vibrating waveforms in the Planckian realm slam together in a process of compactness that is not fully understood forming a particle having discrete size, weight, and possesses a positive (+),  neutral (0), or negative (-)  charge.   These particles then begin to assemble in a computational algorithmic manner based on the charge and tri-state logic into more complex particles from the sub-atomic into the physical realm. In the physical realm, complex molecules form such as DNA from which biological life emerges. 

Figure 3:  Theory of Relativity Formula
Energy = Mass x  (Speed of Light)²

The DNA is somewhat unique according to Microbiologist Dr. Matt Ridley. This is because not only did an computational information process arrive at the DNA molecule but injected into the DNA molecule are 4 bits of information ( G, C, A, and T ) which is used by nanites to endow biological life. Nanites are intelligent molecular machines that perform work and made out of amino acids and proteins. These molecular machines have claws, impellers, and other instruments. They communicate, travel, and perform work based on DNA informational instructions. The information process continues as even more information is applied against the DNA strand such as variation of timing, sequencing, and duration under which a gene fires. By varying the timing, sequencing, and duration of a firing gene  then specific features are managed on the life form under gestation.  Dr. Ridley quips the genome is not a blueprint for life but instead a pattern makers template having some sort of Genome Operating Device, a G.O.D (Ridley, 2003). The point here is that there is some sort of intelligent communication ongoing during the endowment of life and development of the natural universe. All of which are the outcome of computational processes and information.

During the 1960's extensive research was conducted into the operation of human biological sensory processes in relation to information theory.  The conclusion of this research determined that the sense of sight, sound, touch, smell, and taste undergoes an electro-chemical process in which information is encoded using Fourier Transforms into electrical waveforms. The base Fourier equations are somewhat ominous, Figure 4.

Figure 4: Fourier Transforms Equations

The equations are shown to see what they look like. Extensive mathematic philosophy and practical understanding of how these equation perform is necessary to appreciate these equations. In lay jargon, Fourier transforms encode and extract information embedded in a waveform.  These waveforms are constructed from the biological sensory devices; eyes, ears, nose, tongue, and skin. Once the information is encoded into a waveform the human brain stores information holographically.  Consider the operation of the eyes attached as part of the brain. The reason for two eyes is that they act symbiotically. One eye is a data source while the other eye acts as a reference source.  When the waveforms from these two sources collide then information is encoded in the constructive and destructive patterns that result. These patterns are then imprinted into the brain material to be recalled on demand as human's think in terms of images and not attributes. The human brain is capable of storing up to 6 terabytes of information. The eye has a curious tie to the quantum realm detecting a photon of light coincidental with the smallest instance of time, Planck's Time, which is of the order of 10^-43 second.  This leads to the concept of quantum reality or that human perception is limited to the boundaries of the natural universe.

The human experience is said to be a digital simulation and the universe is computationally organized.  This lends credence to the creative license of writers and authors who imagine story lines such as The Matrix, Timeline, The Lawn Mower Man and countless others. But the concept of information in the human experience goes even further into theologies.

Information Theory and The Theological Argument 

Theologies are belief systems and inclusive of godless belief systems such as atheism and agnosticism to mono-theistic and polytheistic systems. Theologies are also inclusive of belief systems that deify idols and objects such as Pantheism which deifies the mother Earth. Cosmologies and philosophies are generally treated as a theology as well since the adherent's behavior is the same as any theological adherent. Religion is the practice of theological doctrines.  All theologies and related religions are information based. That is all theologies possess defining information effecting actions among the believers and/or reactions among non-believers. Some theologies are well organized and others are left to individual expression but all are based on some sort of information or lack of information. Adherents of any specific theology or religion gather, learn, and discuss the merits of their theological doctrines by communicating in order to increase membership or believers. 

Under information theory the Judeo-Christian Bible demonstrates many interesting qualities. The Judeo-Christian Theology advances one of the most comprehensive of all the theologies detailing a narrative from before-the-foundations-of-time to the end-of-time. The narrative begins not with the creation of the universe but a war between good and evil. Michael, the ArchAngel, defeats the rebelling forces lead by Satan. In the meantime, the Judeo-Christian God was busy creating the natural universe and gathered the defeated rebels casting them into the universe like a bolt of lightning effectively trapping evil in the universe or world.  The Judeo-Christian God then turned his attention to the souls, the believers, whom he knew before the creation of time and breathed their souls into human embodiments on Earth. Those human embodiments were architected with an image as well. The purpose of this was to test their loyalty through trials and tribulations having had the war break out in heaven. Evil, trapped in the world, causes the fall of humans into rebellion and the Judeo-Christian God declares war on evil as an outcome. Christ shows the believers the way by communicating the narrow path home. This epic war between good and evil in the world is actually an information war. 

Information warfare, IW, is a broad field of warfare that leverages ambiguity, deceit, innuendo, doubt, and truth in order to dominate the battle space or more correctly space-time.  IW tactics often involve hostile jamming,  man-in-the-middle attacks, psychological operations, in order to diminish, deter, deflect, or degrade the will of the opposition to fight. 

Satan is labeled the great deceiver. The Judeo-Christian God is truth or virtue. Satan placed doubt in Eve's mind about what God really said causing her to rebel against God and bring Adam into her fallen condition. God declared war on evil; Gen 3:15.  The Bible was then inspired by the Holy Spirit and scribed by humans as a 'message' to humans prescribing the way back home.  In the Bible, humans were given a mission, The Great Commission, to spread knowledge and information about the message of Christ.  In the meantime, other theologies either already operative in the world or spawning were designed to confuse the Biblical message or to conduct hostile jamming of the Biblical message.  For example, the Koranic Surah 9:5 is counter to Matt 26:52. The Koranic Surah 112 is direct denial of John 3:16.  These conflicting messages between theologies are commonly referred to as noise in information theory and in IW this is called hostile jamming due to intent. 

In response to noise, the Bible has been designed to pre-empt hostile jamming by delivering the messages multiple ways and times. Thus, by having a high signal-to-noise ratio jamming attempts can be defeated. The more important the message the more ways and times the message is repeated.  The Bible tactically uses parables to encrypt messages that humans who have the Holy Spirit, the decryption key, in them can understand. The Bible also tactically makes use of language being written originally in Greek and Hebrew. Greek is very concise and cannot have mistaken translations. Hebrew makes use of the highest language compression ratio communicating messages both phonetically and pictographically.  Hence, the use of many ways and means of getting the message through is an IW tactic. 

Under the auspices of information warfare, the war can be fought and won solely on the basis of information without committing conventional ground forces to battle. However, the final epic battle in Christian Eschatology is fought and personally won by Christ who is the victor over all evil.  This becomes necessary because those human hearts are hardened and many humans become demonically possessed such that their ears do not hear and eyes do not see. Thus, all communications have failed.

Additional support for the information perspective is the Judeo-Christian God spoke the universe into existence or communicated information; Gen 1:3. This act of speaking a universe into existence was built perhaps in the informational manner discovered by science and is ongoing today. Perhaps the Genome Operating Device varying the information of timing, sequencing, and duration of firing genes is the Judeo-Christian God's hand in the universe.  What ever the theology, the underlying premise is informational. Humans then decide to act based on the information they have or understand.

In conclusion, information theory affects us everyday in our world views, sciences, and personal beliefs leading to actions. Information theory hovers around the notion of a lossy system in which meaning is lost due to noise, interference, natural decay, and provocative measures.  Creative works have leveraged information theory to advance ideological movements.  Even the human life form may very well be the result of pure information causing humans to rethink  theologies and established beliefs in a new light. 

References:

Knuth, D. (2001). Things a computer scientist rarely talks about. CSLI Publications: Stanford.

Moser, S. and Chen, P. (2012). A student's guide to coding and information theory. Cambridge University Press: United Kingdom.

Reza, F. (1994). Introduction to information theory. Dover Books: New York.

Ridley, M. (2003). Nature via Nurture. New York: Harper Collins Publishers.

ZEO Folds Under

ZEO is a sleep tracking product that provided online tracking history and advice regarding sleep patterns. The service operated for about five years then terminated services and closed the business. The CEO cited the business model was problematic and not sustainable.  The CEO's remarks struck a cord with me as I used the ZEO product as well as the Fitbit product and others such as Withing's products too. My experience with these products and services as well as knowledge I have built in these blog postings combine in ways that may indicate business advantage. 

I have included the article directly in this posting for quick reference. I also want to direct readers to the Art of Profitability posting for some background in what I am about to discuss.  My purpose is not to second guess ZEO's leadership but instead to explore alternative ways of looking at this problem set. The overarching objective is for the  service and product to be profitable. 

Figure 1: Withings Aura

28APR14 Update: Withings is coming out with a product line similar to my discussion below. The Aura tracks sleep nearly identical to ZEO and adds integration with other physiology.  The product appears more comfortable to use and is cooler looking too, Figure 1. When I first bought Withings' Blood Pressure collar product the only other product was the smart scale. Withings has expanded the line into a FitBit like product called Pulse O₂ and some products for baby monitoring. Now if Withings can standardize the interface and integrate with healthcare providers then they would have a much strong service and market. They need to add products for self monitoring blood sugar, Ph, temperature, etc... Then the line would improve self health monitoring tremendously. 

ZEO Folds Under

In the article, the CEO cites commoditization of the service and device as a major contributor to ZEO challenges but the real issue was the business model. According to the CEO there were only two options; 1) A SAAS-like business with recurring revenue streams or 2) place all business performance into a single unit sale (Orlin, 2013).  The CEO may have been a bit myopic. Business models are nice-to-have but they do not make money. Profit models on the other hand are how a business makes money. 

There are only 25 profit models that detail how a business makes money.   Therefore, ZEO is not constrained by the business models but instead the profit models.  Business models differ from profit models as business models are more about the operational design rather than the profit design. Understanding how a company makes money is more important than attempting a business design, a common mistake. For example, the auto industry makes money using the installed based profit model. The auto makers attempt to increase the numbers of vehicles in operation in order to profit from repair costs as well as secondary and tertiary after markets. The size of the installed base, numbers of vehicles sold or in operation, establishes the value the automakers can sell rights to manufacture the parts and provide services in the aftermarket. The business model is a central supplier of the installed base to independent and company owned dealerships who in turn sell to the install base and provide services to the market. 

Using more than one profit model is common in the business model. Returning to the automaker example, Brand profit is also employed. The market has loyalist to the brand. Another profit model is the multi-component profit in which people accessorize the vehicle with fog lamps, leather seats, spoilers, etc... The automakers have figured this out and carefully designed the business model around the profit models. The ZEO product is good but perhaps incorrectly approached. Let me explain as a user of the product and business minded person. 

ZEO was perhaps focused too strongly on a customer solution profit solely selling services to monitor peoples sleep patterns. In my case, sleep had been one issue in a host of concerns. While generally in good health, I had joined a local fitness club and was self-monitoring a breadth of vitals having purchased the Withing BP-100 blood pressure collar (Image 1), the FitBit activity tracker (Image 2), WiFi scale (Image 3), and the ZEO sleep monitor (Image 4).  I was also using software that tracked my exercise more more intensely than FitBit. I found the iTouch app Runtastic served my purposes best (Image 5). Like ZEO, Runtastic provided improved accuracy and detail over the FitBit. 

Image 1: Withings BP-800	Image 2: FitBit	Image 3: Aria WiFi Scale
Image 4: ZEO Sleep Tracker	Image 5:  Runtastic

In addition to the products and focused services offered, I also sought a means to manage all the information collected. Most of the competitors offered a website and premium services but only their products were serviced for electronic uploads. Everything else was a time consuming manual entry. Likewise, the Veteran Administration's myHealtheVet website, Image 6, offered a feature for vital readings in which the products collected some of the data but again it was all time consuming manual upload. Commercial services were available for collating the information but were often costly and again required manual entry. 

Image 6:  My HealtheVet Website Application

Looking at this broader picture than a niche market, ZEO was not much different than other services in terms of the business model. ZEO offered higher quality and accuracy than other sleep trackers. Speculating, the sleep tracking niche may be a smaller market than the other niche markets. Although the CEO indicated it was growing. Each of these niche products stand alone may achieve slim profit margins. The ZEO CEO was of the mindset the ZEO product and service had commoditized which is one of the greatest fears of a CEO.  However, if viewed from a broader market perspective, these products and services are really profit enhancers to the broader health maintenance market. With this in mind then other profit models begin to become more viable. 

One profit model that is attractive is SwitchBoard profit which is one stop shopping for complimentary products and services. The switchboard would hover around consolidation of information feeding blood pressure, activity, weight, and sleep tracking data into a comprehensive view. Supply point control would be achieved using brand saturation of the service in which websites like MyHealtheVet rebrands the service on their site.  Microsoft uses this profit model leveraging Open Systems Interfacing with their operating system becoming the dominant operating system in the marketplace. As healthcare companies, insurance, hospitals, and clinics readjust under the healthcare reforms opportunities are abound for a health maintenance provider to develop a switchboard profit opportunities. 

Many of the niche services remain focused on 'what they do good'. ZEO was an excellent sleep tracker. Runtastic is an excellent exercise tracker. Fitbit is good at weight and activity tracking and Withings is good at blood pressure tracking.  None of these are Block Bluster profits. However, they do fit into the Profit Multiplier/Enhancer profit model. Anyone of these niche markets can set up a portal that has Application Programming Interfaces for the other dissimilar niche products that could enhance their own product and sales.  For example, sleep problems are often in combination with other events. Hypertension, lack of exercise, weight, and other issues can cause sleep problems.  Tracking these collateral details could improve sleep. Also by rebranding the online services into insurance and healthcare provider websites could also provide additional revenue streams. 

Specialty Product profit is possible through branding the devices and services as approved by healthcare experts or certified by industry experts or insurance companies for healthcare monitoring. This adds value to the product increasing the earning potential. 

Field Force Morale profit is another model that can increase revenue streams. ZEO could create a swarm of evangelist who build local community groups and socialize the product. For example, many returning veterans have sleep issues for a variety of reasons. The Veteran's Administration may use the product non-medically  as a means of tracking sleep regularly having the data loaded into their Track My Health site. Veterans may meet in groups to discuss their sleep issues where the product is socialized.  

Overall, ZEO has the potential to toe into a greater market but may have prematurely exited. The project manager should facilitate the ideation process for the CEO seeking to build the business case and options. One approach the project manager should use is to pull together a tiger team in order achieve breakthroughs in thought that disrupt the marketplace and create opportunities for profit.  

In conclusion, ZEO should rethink market position of their service and product. The product is good and has merit among older folks and veterans who have sleep issues. The market can be expanded when thought of as a profit enhancer. 

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Sleep Tracking Startup Zeo Says Goodnight

By Jon Orlin

One of the early pioneers in the Quantified Self movement has quietly gone out of business. Zeo, a leading maker of hardware and software used by consumers to track sleep and improve their health, has not been operating since the end of last year. A trustee has nearly completed the sale of all company assets. Zeo has been very quiet about the news up until now. In fact, Zeo’s website is still up and doesn’t mention the news.

Zeo was founded by three students at Brown University who had a passion for using the science of sleep and technology to improve people’s lives. The company introduced its first product, the Zeo Personal Sleep Coach, in June 2009.

The following week, the first article mentioning the term “Quantified Self” was published in Wired magazine. While the article didn’t mention Zeo, it did claim “a new culture of personal data was taking shape.” And that every facet of life from sleep to mood to pain was becoming trackable. “Even sleep – a challenge to self-track, obviously, since you’re unconscious – is yielding to the skill of the widget maker.”

In 2011, the widget maker Zeo introduced a mobile version to its Sleep Manager product line. By wearing a special headband, with sensors to measure electrical current, the Zeo could track different phases of sleep, such as Light, Deep and REM sleep, in addition to awake time. This data was then sent to an iPhone, iPod, or Android phone, and could be automatically uploaded to a personal and private online sleep database. This data along with some analytical tools could then be used to help improve your sleep and health.

What Went Wrong

Former CEO, Dave Dickinson, who lead the company for the past 5 years, tells TechCrunch the problem was not the brand or the product. In fact, the company was growing before it shut down.

Dickinson says the problem was the business model. “The business model is more important than the brand. Consumer health devices are a very capital-intensive business. You have to find enough money to address the consumer, funds to address the physicians, and also the retailers, and that’s up and above the device business having to fund inventory.”

Zeo had two business model options on the revenue side. Become a SAAS-like business with subscriptions and recurring revenue or make enough money from a customer who bought just one unit. But that was very difficult when the company started pricing its mobile product at $99, with ‘sub-optimal’ profit margins.

The Newton, Massachusetts-based company had raised more than $30 million over eight years. Dickinson says raising capital was not the problem.

Sleep Tracking As A Commodity

Another problem for Zeo was that sleep tracking became a commodity. Devices like the FitBit, lark, and Jawbone Up use an accelerometer to determine sleep and awake cycles, using wrist actigraphy. These products brand their products as sleep trackers just like Zeo.

Dickinson says Zeo had peer-reviewed scientific studies, including one published in the Journal of Sleep Research, showing his technology was 7/8th as accurate as data from the a sleep lab, considered to be the gold standard for measuring sleep. The study also says data from wrist actigraphy to measure tiny motions in devices are much less accurate. But that didn’t seem to matter for enough consumers.

The Competition

Dickinson says he admires what the Fitbit and others like it have done. Those devices are not limited to one health issue like sleep, which was another problem for Zeo. Those other products work for different health and wellness areas, such as the well established desire to lose weight and become physically fit. Consumers already spend billions of dollars to achieve those goals. And they are already educated and motivated to improve their weight and fitness.

Part of Zeo’s business model required it to educate the consumer on the importance of sleep and how sleep awareness and data can improve your health. Arianna Huffington, Editor-in-Chief of the Huffington Post, our AOL sister site, has been a crusader on the importance of sleep to your health. But according to Dickinson, “sleep is still lagging behind as important to your wellness. So in that respect, Zeo was early in terms of its mission.”

The Product

I used the device for several months last year and thought it was amazing. While wearing the headband took some getting used to, for me and my wife, the data it revealed was eye-popping. In addition to learning that I wasn’t getting enough sleep, which I knew already, I learned about the different types of sleep I was getting.

Most nights, I would get a half hour to an hour of “Deep Sleep” (dark green in the chart below) after going to bed. This is the phase of sleep the helps you feel restored and refreshed.

I would also see several periods of REM sleep, important for overall mental health, mood, and the ability to retain knowledge. The bulk of my time asleep, like most people, was spent in “Light Sleep,” which is better than not sleeping but doesn’t do as much for my health as Deep or REM sleep.

I was able to see graphics like this on my iPhone in the morning.

Here’s a good night with a sleep score of 90 out of 100 and more than 8 hours of sleep.

here’s a bad night, with a score of 47 with just 4 and a half hours of total sleep.

If I woke up in the morning during REM sleep, it was hard to get out of bed. If I didn’t get enough Deep Sleep, I didn’t feel I had a good night sleep.

Zeo claimed the real value of the program was I could get personalized online sleep coaching. But this required logging in to the website and entering more information about my sleep and other variables I wanted to track. If I could have entered the data right on my iPhone, I would have likely used it more. Since it required logging in on the website, it proved too much friction for me.

I also stopped wearing the headband after a while because it does feel a bit awkward. The former CEO says the company was aware the device was too invasive for some customers.

But if a less invasive sensor was made and it was easier to enter custom data and get actionable information, I would have used it every night.

What’s Next

Dickinson can’t comment on exactly what’s next for Zeo, after all the assets are sold. But he is hopeful that there may be an opportunity for the company to re-emerge in the future.

An article appeared in the MobiHealthNews in March, that reported the Better Business Bureau had listed Zeo as being “out of business” but with no official announcement by the company, the news hasn’t been widely known.

It is still possible to log-in to Zeo’s “My Sleep” site that contains your sleep data. An article on the Quantified Self website today tells users how they can download their data in case the site goes offline.

As word about Zeo’s status has spread, Dickinson says they have received tremendous support and inquires from all over the world from disappointed customers and sleep researchers who had planned to use the units for the research.

He wrote a post on the MobiHealthNews site last week that included some additional lessons learned. He concluded by writing “motivating behavioral change through data visualization can be very powerful, but it is more of an art than a science. We will need far more artists, user interface experts and psychologists to help make our data work harder to motivate better health.”

References:

Orlin, J. (2013). Sleep tracking startup zee says goodnight. TechCrunch. Resourced December 23, 2013 from
http://techcrunch.com/2013/05/22/sleep-tracking-startup-zeo-says-goodnight/ 

Slywotzky, A (2002) The Art of Profitability, Warner Business Books, New York.