ASQ - Team and Workplace Excellence Forum

Online Edition - July 2000
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Issue Highlight - WWW
- Friends of mine showed me a letter recently that I thought you might find interesting. It might be a sign of things to come in this New Economy:

In This Issue...
Is Anyone Out There?
Increasing A Good Idea's Profitability
Internal Quality Audits
Every Summit Beckons A Conqueror
Finding Your Way Home In The Workplace

Features...
Peter Block Column
Views for a Change

Pageturners
Heard on the Street
Sites Unseen

Increasing A Good Idea's Profitability Odds
Using a Secret Formula to Pick Outstanding Business Ideas and Win the Game of Higher Profits

    Does a secret formula exist for a successful business? If it did, wouldn’t you be willing to pay any price to obtain it?

    Well, according to Art Hammer, he’s found it. As have American Express, Time Inc. and Exxon. While it is evident that some risk must be taken in order to achieve success, it’s hard to say how much. Hammer feels he has found a simple equation to find just the right amount. He contends that while three out of four “good” business ideas are bound to fail, he can find the one destined to beat the odds by using QualPro’s Multivariable Testing (MVT) methodology program.

   This system tests several factors together within a mathematical equation in order to weed out the ideas that will not lead to a prosperous future.

   Surviving today’s lean, mean world of big business ain’t easy. Just ask Durk Jager. If Proctor and Gamble’s stock can plummet and the CEO can get unceremoniously dumped, nobody’s safe.

   The dilemma for business in the year 2000 has become: How can companies keep up with today’s death-defying profit demands without falling off the shareholder tightrope? Profit, after all, demands risk.
Just in time, consulting company QualPro Inc. thinks they have the answer: Use their mathematical calculation to assess risk before actually committing to a profit-raising endeavor.

   Art Hammer, a principal at QualPro Inc., Knoxville, Tenn., says his company’s method is used by big companies to evaluate capital investments and product launches.

 Winners and Losers

   The big difference between the winners and losers of the business game, according to Hammer, is that winners consistently make the best decisions and get the most profitable results. Making such decisions isn’t just a matter of intuition, however. It’s a matter of testing all the options before investing resources in order to determine which will work.

   QualPro has researched how companies approach moneymaking ideas for over 20 years. Through the years, they’ve uncovered a few truths: number one, most ideas are bad. Only one in four “good” ideas, (ideas already sorted out as the best) will have a positive impact on the company’s bottom line.

    So where do good ideas come from? Most companies start with a brainstorming session and take a few convincing ideas chosen by consensus. Some companies hire outside consultants to come in and give them “good” ideas for their business. Either way, most of these ideas are impractical, expensive and time-consuming.

    No matter where a company gets a “good” idea, it’s not a good idea unless it will have positive bottom line results. Unfortunately, such results are only available after the idea has already been implemented.

 Crystal Ball, Anyone?

   So you’ve got four good ideas. According to QualPro’s statistics, only one is going to do your company any good. Two of the four won’t have any impact at all. And one, purely statistically speaking, could nail you to the wall. These are your odds based on results from 11,000 experiments at QualPro’s lab.

   Enter QualPro’s Multivariable Testing (MVT) methodology program. “The beauty of MVT,” says Hammer, “lies in its unique ability to reduce the risk of innovation. It promotes good decisions based on fact rather than opinion.”

   Now, you’re probably thinking, “Sure it does, Art. And I’ve got a Picasso hanging in my living room.” Before you march your eyes off to some other article, listen to this list of QualPro’s true believers: American Express, BASF Corporation, Time Inc., Lowes, Citibank and Exxon. The list goes on. Not a bad group of multinational corporations for a whole lot of hooey . . .

 It’s How You Play the Game

   “Imagine you’re playing a card game,” says Hammer. “How do you win? By having one good card? No. You win by having the best hand.” How all the cards, or ideas, work together is what makes a strong bottom line. QualPro’s research shows that one-third of tested good ideas will work when combined with another idea. The best results come from the right amount of the right ideas working together the right way.

   QualPro calls its testing “multivariable” because it tests several factors together at once. Traditional scientific testing looks at one idea at a time while holding all other factors constant. Using that model, it takes a long (expensive) time to test the good ideas from a brainstorming session. On the other hand, QualPro’s multivariable testing would likely have physicists running away in their long white coats.

 Secret Recipe

   Whether your needs come in the guise of cutting costs or increasing sales, Hammer says the MVT methodology can work. He points to a national retailer who applied the MVT process to improve advertising effectiveness. The result was $50 million in savings and increased sales revenues.

   A telecommunications company used MVT to evaluate a capital investment. Annual expenditures for repairs cost hundreds of millions of dollars, so the company was considering new testing equipment with a high price tag—$35 million. QualPro came up with a more effective and less expensive solution that, once implemented, saved the company over $100 million.

   In both cases, QualPro pinpointed which ideas would help, hurt or make no difference to the company’s bottom line, eliminating approximately 75 percent of the “good” ideas. The MVT method is applied to real market conditions, predicts dollar amounts and is pretty fast. Most companies get MVT results within two to six months.

   Whether QualPro has the secret to future business success remains to be seen. Until then, one thing is certain: they’re not saying boo about the actual MVT calculation. The most Hammer will say is “it’s a proprietary process developed by QualPro that analyzes ideas by combining them into statistical recipes.”

   He’ll also remind you that his company will tell you precisely what to change, how much to change and what impact the changes will have. Furthermore, “It’s more likely to produce innovation, because so many ideas can be tested. And,” he says with a victorious smile, “It allows you to pick the winner in the game of business—you.”


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