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Friday, July 10th, 2009

How to Scrum & Sprint (Agile Computing)

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I’m sitting here talking with Jane Newcomb, a firm believer in Agile Project Management, including the Scrum approach, to getting things done.

Jane works on product development for BabyCenter.com, the dominant Internet baby company.

Srum Enthusiast Jane Newcomb of BabyCenter

Srum Enthusiast Jane Newcomb of BabyCenter

I thought I’d share her perspective with you through a question and answer session.

Why do you use Agile Project Management with Scrum?

BabyCenter applies the Agile Scrum Methodology to our new product and software development because we found through trial and error (including trying the Waterfall methodology) that Scrum was the most efficient project/product management tool.

Talk about Agile Methology versus Waterfall Methodology?

At the core, Waterfall Methodology assumes all aspects of a project, all features, all the funtionality — it’s all completely mapped out upfront…and then four months later the finished product is rolled out to the business owners. The business owners don’t see any code or software until the entire feature/product is delivered.

And then it’s often not the deliverable that the business owners were expected.

Whereas Agile Methodoliges are more flexible and allows business owners to see working code rolled out every two to four weeks…that allows for change in direction, alterations based on business need changes, marketplace changes.

What’s An Agile Scrum?

The Agile Scrum represents executionof  the Agile Methodology: it’s the daily huddle where team members come prepared to talk about what they worked on, what their obstacles are and what they’re working on for the next 24 hours.

It’s the daily check-in to allow business owners to understand what’s going on…and make adjustments as needed.

Do You Use Agile software development with Scrum?

Yes, we use an out of the box software tool called VersionOne.

What Is An Agile Scrum Master?

The role of the Scrum Master is to keep the team focused on the tasks and the stories that are part of whatever Sprint we are working on. It is their job to remove any obstacles and to help keep the team on track

What is an Agile Sprint?

A Sprint is the amount of time from start to finish that business owners agree to let the team work on the pre-defined set of requirements that were agreed upon prior to going into that Sprint.

How often do you use Agile Sprints?

The average Sprint lasts two to four weeks.

Did BabyCenter provide you Agile Scrum training?

I personally learned it on the go. But you can become a certified scrummaster through Agile training.

Thanks for sharing, Jane!

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Saturday, June 13th, 2009

How to Write A Purpose Statement

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In late 2007 I was introduced to “Coach Terry,” a phone-based life coach.

I was dubious about the phone-only part but I gave it a shot for a few months and learned a ton.

The most important thing I learned from Terry was the importance of having a statement of purpose for anything substantial in my life (you can find a sample statement of purpose below).

I began writing a statement of purpose for my life, my business, my role in business, a holiday trip, my romantic relationship or even just my plan for a day.

I’ve found it useful to constantly be asking myself what the purpose of something I’m doing is, or when people ask me to do something or say they are doing something, I ask them: “What is the purpose of that?”

Be purposeful about all things in your life…and you’ll find that the outcome is more favorable.

So, here’s how to write a statement of purpose along with some purpose statement tips:

1) List Your Expectations

Write down all the expectations you have about your purpose related to a certain topic (e.g. your life, job, relationship with someone, etc.) on the left-hand side of the page.

Examples of expectations are wants, needs and even fears — for example, if you’re writing a purpose statement about a job you should be answering the following questions:

What do I really want my job to be?

What do I really need in my job?

What fears do I have about my job?

Spend at least 5 to 10 minutes on this part…and really open up!

You should now have at least 7 to 10 expectations — and they will probably be centered around a few topics or themes  (e.g. for a job, it might be to make money, have fun, have a flexible schedule, etc.)

2) Purpose Statement

Now, fresh from writing out those expectations, immediately write down one long sentence that starts with “The purpose of my __________ is to …” and the rest of the statement should flow pretty naturally (hint: if you have any challenge here, take your Expectations and group them into a few topics or themes and use those as your purpose statement).

Writing a purpose statement is that easy!

You now have the beginnings of the purpose statement — you can refine this now or later (if you’re like me, you’ll find that you remember new wants, needs and fears later on — so just add them in and iterate).

3) Bonus Round: WriteI Will” Statements

If you want to take this thing one step further, return to the expectations and to the right of each of them write down an “I will” statement.

The “I will” statement should be something actionable that you could do to be more purposeful.

Try to make each “I will” statement specific, measureable, actionable and timely.

Don’t worry about ever doing such things — this isn’t a to-do list — just write it down!

The act of merely writing them down will make you more mindful of your purpose.

I promise you that if you do this exercise, you will be more purposeful on whatever the topic.

So, now you have a purpose statement (remember, you can refine it all you want) and even some actions that you can take (I sometimes DO treat it like a to-do list by printing it out and doing some of the actions immediately)

Samples of Purpose Statements

Here are some sample purpose statements I’ve written:

Life Purpose Statement — My life purpose is to smile most of the time, develop myself constantly to find my greatness, be productive the vast majority of the time, give plenty to others and to have a positive vibration on the planet.

Purpose Statement For Layoffs I Had To Make — The purpose of our layoffs is to be able to execute the plan on a timely basis, to be respected in the execution and to protect the jobs of productive people

Business Purpose Statement — The purpose of our business is to have fun, help people and make a little money.

Purpose Statement For My Job –  The purpose of my job is to make money, meet only with people I love and respect, work on things I enjoy and provide a flexible schedule to take care of the primary choices in my life. Check out 3 Easy Steps To Write A Purpose Statement For Your Next Job.

Purpose Statement For A New Management Meeting I Had To Start (see my Daily Huddle Article) — The purpose of the daily huddle meeting is to align the management team and to increase the speed of our growth.

Purpose Statement for My Wife — The purpose of the relationship with my life-mate is to have a passionate, healthy and positive relationship — while still enjoying some vices! — that leads to a larger family with children I adore.

I also highly recommend you check out this How To Write A Purpose Statement article by Steve Pavlina.

That lead to the following life purpose statement by Mr. Pavlina: To live consciously and courageously, to resonate with love and compassion, to awaken the great spirits within others, and to leave this world in peace.

Enjoy being purposeful!

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Friday, June 12th, 2009

How To Communicate During Crisis

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When you are in conflict- or crisis-mode, the tendency is to get emotionally charged and that sometimes leads to folks taking actions that are unhealthy for the business.

Here are four steps that I adopted from the University of Maryland’s Leadership Program to deal with communicating during crisis or conflict:

1) Separate the People from the Problem

A good communication about conflict should focus on the underlying problem (not the person).

Two examples:

” We just discovered that we did not ship out products to certain customers over the last 10 days and now sales will be down 16% this month” (good)

“George (in Shipping) slipped up and forgot to confirm that our shipping facility received our go-ahead to ship products out this month…and our sales are plummeting” (bad)

If you indeed do have a person-problem, then deal with the problem as a relationship problem by talking directly to the person you have a problem with (i.e. George)

2) Generate a Variety of Possible Solutions before Deciding What to Do

Don’t assume there is just one solution.

Example:

“After discussing this with all of you, we have two potential solutions:

  • Do nothing and just ship the customers their products late
  • Send an apology email to each customer that their shipment will be late and that they will receive a bonus product as a thank you for their patience.”

And it doesn’t have to be your solution versus your team’s solution.

3) Insist That Results Be Based On Some Objective Standard.

Examples:

  • Efficiency
  • Profitability
  • Cash flow
  • Ethics

That way, you and your team can measure how you get out of the crisis/conflict.

And if you’re involved in a conflict and feeling angry about it, this Chinese Proverb has proven invaluable to many people:

“Never write when you’re angry.”

It’s better to pause, collect your thoughts first and even talk to a colleague if you can…then start writing when you’re more calm.

Your communication will now be more effective.

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Friday, May 29th, 2009

Effective Communication By Bandwidth

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Choose your communication channel wisely.

Cerner Corp. CEO Neal Patterson probably wished he had when he fired off a message to senior managers at his medical software maker berating them for their work habits.

Cerner CEO Neal Patterson's Slip on Netiquette

Cerner CEO Neal Patterson's Slip on Netiquette

Excerpts of the email include:

“The parking lot is sparsely used at 8 a.m.; likewise at 5 p.m….

…As managers — you either do not know what your EMPLOYEES are doing; or YOU do not CARE.”

“You have a problem and you will fix it or I will replace you…

…What you are doing, as managers, with this company makes me SICK.”

The e-mail promptly leaked out onto the Web. Two weeks after Mr. Patterson sent the message, Cerner stock lost more than a quarter of its value (tens of millions of dollars) after investors became concerned about the company’s prospects and employee morale.

That story reminded me that when you are communicating in business (or for any reason), that you should pick your communication medium based on the sensitivity of the topic. The higher the sensitivity, the higher the bandwidth of communication.

Here are four examples of channels of communication and their relative bandwidth

  • In-Person (highest bandwidth)  — Use this for your most sensitive topics.
  • Telephone (medium bandwidth) — Use this as a backup for sensitive topics in the event you can not meet in-person with your audience.
  • Instant Message (lower bandwidth) — Use this for lower-sensitivty topics
  • Email (lowest bandwidth) — Reserve this for your lowest-sensitivity topics (unless it’s accompanied by a higher bandwidth in-person meeting)

Amazingly, Mr. Patterson is still CEO of Cerner today (8 years after the slip-up) — my hat is off to him for surviving such a firestorm.

What a survivor! — And Cerner generated $188 million in pre-tax profit in its most recent year on sales of $1.67 billion so I imagine he is doing something right!

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Wednesday, May 13th, 2009

The 9 Enneagram Personality Types

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The Enneagram Personality Types is an effective tool to understand the tendencies of yourself and others; including how you can work and play better together.

If you don’t know your Enneagram type, go here to check out the Free Enneagram Personality Type Tests

The Nine Enneagram Personality Types

the-enneagram-personality-testssvg1

Enneagram 1 = “The Perfectionist” or “The Reformer”

Enneagram 2 = “The Helper” or “The Giver”

Enneagram 3 =  “The Performer” or “The Motivator”

Enneagram 4 = “The Romantic”

Enneagram 5 = “The Thinker” or “The Observer”

Enneagram 6 = “The Skeptic” or “The Devil’s Advocate”

Enneagram 7 = “The Enthusiast” or “The Epicure”

Enneagram 8 = “The Leader” or “The Boss”

Enneagram 9 = “The Peacemaker” or “The Mediator”

If you enjoy Personality Types, you can also check out the Myers-Briggs Personality Types at these two links:

Free Myers-Briggs Jung Personality Test and

The 16 Myers-Briggs Personality Types

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Wednesday, May 13th, 2009

Enneagram Personality Tests (Free)

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The Enneagram is both a figure (see the nine-pointed figure  in the circle below) and a typology (a model of 9 personality types).

the-enneagram-personality-testssvg

You can find out what Enneagram Personality Type you are by taking one of the free tests out there.

Here are two free Enneagram Personality Tests I’ve personally taken (each took about 10 to 15 minutes):

I took both so I could confirm my type.

When you’re done with the test, you should print out or copy the results and then go to the Nine Enneagram Personality Types to learn more, including famous people (including business-people) who share your type!

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Monday, May 11th, 2009

3 Simple Steps To Run An Effective Meeting: The GAP Approach

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I get asked about how to run effective meetings all the time. As I wrote about in my Daily Huddle Article, how you run meetings has a material effect on your business.

If You Run Poor Meetings, No One Will Show Up

If You Run Poor Meetings, No One Will Show Up

I believe that the difference between a dull meeting and an amazing meeting is how you organize it.

I originally heard about one meetings format used by a consultant to a Johnson & Johnson subsidiary and I think it works just great.

It’s called G.A.P and it stands for Goal, Agenda and Preparation.

I believe every meeting should have all three!

Goal

The goal, or purpose, of the meeting needs to be stated upfront. A good way to remember what goes into a goal (for meetings or anything else) is that it should be a SMART Goal as in:

S = The goal should be Specific

M = The goal should be Measureable

A = The goal should be Achievable

R = The goal should be Relevant

T = The goal should be Timely (it should be reachable by the time the meeting ends)

That gets you off to the right start to a SMART meeting!

Agenda

When you hold a meeting, you need to have an agenda…even if the agenda is to have no agenda. Huh?

What I’m saying is that you as the meeting organizer need to state how the attendees are going to use the time at the meeting. The agenda could be something as simple as:

  1. Description of Problem You Face (10 minutes)
  2. Input From Each Team Member (10 minutes)
  3. Recommendation on Next Steps (10 minutes)

Or, if you’re not going to have something so structured, then state that the agenda is:

  • Open Discussion (30 minutes)

Preparation

A key to most meetings is preparation (by you the meeting organizer and by the attendees).

So, if you call a meeting, tell the attendees what they need to do to prepare.

When they join the meeting, should they have already reviewed a spreadsheet that you sent out? Do they need to have collected information from someone inside or outside the company?

Tell them how to prepare…if there’s no advanced preparation then I like to just say: “No Preparation…Just Bring Your Brain.”

If you use online calendars to schedule meetings, you should put the entire Goal, Agenda and Preparation (GAP) within your calendar invitation.

Follow GAP and you’ll have better meetings.

Note: You may have heard of another “GAP” used in business: the GAP Analysis strategic planning tool. Read How to Do A Gap Analysis for more on this valuable tool.

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Sunday, May 10th, 2009

A Simple Formula For How Much to Pay for a Customer

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I’m going to give you a formula to determine how much you should invest to acquire your typical customer.

I call it “Desired Customer Acquisition Cost.” I also saw it referred to as “Allowable Acquisition Cost” in Ready, Fire, Aim: Zero to $100 Million in No Time Flat, an excellent book I recommend by Michael Masterson (I borrowed a couple of his ideas for this article!).

Note: I’m going to write a separate article on customer acquisition strategies, customer acquisition programs, customer acquisition networks and the overall customer acquisition process — please come back for those!

How Much is Your Customer Worth?

How Much is Your Customer Worth?

Ok, on to your Desired Customer Acquisition Cost.

For starters, you’re going to need to do a few calulations of your own…don’t worry about having the perfect answers — just give it your best shot!

Calculate Your Customer Lifetime Value (aka Gross Sales Per Customer)

You need to estimate the lifetime value of your customer.

Let’s first define customer lifetime value. It is how much a customer will spend with you for their lifetime (i.e. the total number of products they buy from you over time multiplied by the price of each product).

If you’ve been in business already, you might know your Customer Lifetime Value. In fact you could simply divide the total amount of sales you’ve had since you began by the total number of customers you’ve had).

If you’re in a new business, I suggest you research competitors or other similar companies to yours to get a sense of their lifetime value.

For now, if you don’t know what your Lifetime Value is then you could use the range I use: where Lifetime Value is typically about 2X to 6X the price of the first product your customer typically buys from you.

For example, if you customer is likely to pay around $50 for the first product they buy from you, you could expect the lifetime value of your customer to be anywhere from $100 to $300.

Where’s the 2X to 6X range come from? That’s just my experience with businesses I’ve seen. Remember, your business and others can be very different.

Sidenote: If you are selling a subscription-based product (e.g. Netflix, DirecTV, Sports Illustrated) as your first/primary product, then your lifetime value is going to be very different. The lifetime value of a cable/satellite customer may be 10 to 40X the first month’s price since they are likely to stay with their service for a few years (i.e. 10 to 40 months).

We’re going to use a Lifetime Value of 3X for this exercise.

Obama’s Lifetime Value

Let’s pick a fictional company to make this easier…we’ll call our pretend company Obama Enterprises (they sell a set of information products on how to become the next President!).

Obama’s flagship product is a $50 DVD that he’ll ship you on the basics of what it takes to be Mr. President; he has more expensive products that he sells you on the back-end.

So, let’s use $150 (3X the price of his first product) as our Lifetime Value.

Calculate Your Refunds, Cancels, Bad Debt, etc

If your business is like most, your customers will cancel or request refunds, or simply not pay you.

This varies by industry and by business.

For Obama Enterprises, we’re going to assume that 10% of the sales will be refunded, canceled or otherwise just not collected as cash we keep.

So, Obama’s Refunds & Cancels is $15 per customer (10% of $150).

Calculate Your Cost of Goods Sold

First off, most people who know what Cost of Goods Sold is call it “COGS” (sounds cooler, right?).

Here’s the COGS definition:

  • The materials cost used in creating the goods plus
  • The direct labor costs used to produce the goods

Note: COGS excludes sales, marketing and distribution costs.

COGS varies by industry but are typically in the range of 20% to 50% of the price of your good.

For example, the retail industry is known to mark items up by 100% so in essence their COGS on a $20 shirt is 50% or $10.

In the Software or Internet industry, the COGS is very low (typically just 20% of the sale)…for example, if Microsoft is selling you a software product for $200, it likely only costs them $40 (20% of that) to create/produce.

Since the COGS for Obama’s video product are pretty inexpensive (Discs, box, etc.), we’re going to use 20% of $150 (or $10) as his COGS estimate.

Calculate Your Overhead Costs

Let’s define overhead cost: It’s simply all the costs that are NOT associated with any specific business activity we mention in this article.

Examples of Overhead costs include: Payroll (All Payroll except that included in COGS), Insurance, Rent, Utilities, Legal, Accounting, Travel and Entertainment.

Again, you’re going to have to research your business’s math (or that of your industry if you’re new), but a good rule of thumb is that Overhead will eat up about 33% of your Sales or Lifetime Value (most of this is due to your labor costs).

So, Obama’s Overhead costs are about $50 (33% of $150).

Now, the only other cost we haven’t covered so far is the Customer Acquisition (or Marketing) cost…we’re going to skip that for now as that’s what we’re trying to determine.

Calculate Your Desired Profitability %

Let’s skip to how much profit you want.

Profit is how much money you want to keep after all expenses (except taxes) are paid…you know it as the “bottom line” (Google and Microsoft tend to keep a profit of 20% to 30% while other businesses are more modest with a profit of 5% to 10%).

Obama’s people are not greedy, so we’re going to pick a profit goal of 10% for Obama Enterprises.

So, Obama’s Desired Profit is $15 per customer (10% of $150).

Ok, now for the good part. Here is how you calculate your Desired Customer Aquisition Cost:

Desirable Customer Acquisition Formula =

  • Lifetime Value minus
  • Refunds & Cancels minus
  • COGS minus
  • Overhead minus
  • Desired Profit

So the formula for Obama’s customer acquisition is:

  • $150 Lifetime Value minus
  • $15 Refunds & Cancels minus
  • $30 COGS minus
  • $50 Overhead minus
  • $15 Desired Profit

…And thus the amount Obama can spend to buy one customer, drumroll please, is…

= $40

And There You Have It (Your Desired Customer Acquisition Cost)

So, if our assumptions are ballpark-accurate, Obama can go out and spend an average of $40 to acquire each customer who buys his $50 DVD product, and still have all his expenses paid and a desired profit of 10% of all he sells.

For example, he could offer to pay you $40 for each customer your Web site sends over to his…and if you sent him 1,000 customers, he would gladly pay you $40,000 (1,000 times $40) because he would eventually receive about $150 in Lifetime Value from each of those customers and eventually receive a profit of $4,000 (the 10% Desired Profit he calculated) on his partnership with you.

Caveat here (which you probably already figured out):

Since Lifetime Value is over time, Obama has to make sure that he has the proper cash flow to afford to pay all bills while he earns the lifetime value for customers.

That’s called “Cashflow” or “Working Capital” and it has to wait for another day!

Though, if you want to improve your creditworthiness (so you can get better/larger loans or credit card limits), you should read How to Boost Your FICO Score.

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