Four Square Analyses


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How to evaluate product and services.

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Four Square Analyses

  1. 1. In this fast growing competitive market managing an Organization successfullyand making it a profitable business is very difficult and challenging. In past years wehave evidence of Organizations which are unable to sustain in dried economic andhigh competitive market therefore forced for either bankruptcy or sold out to someother Organization, few Organizations which faced such situation are GM, Laymanbrothers, PALM, Merrill Lynch, Border, Block Buster etc. But we also have evidenceof some companies which grew in faster space in the recent years, example- Apple,Google, McDonalds, Wal-Mart, etc. So, do we see any difference in the business modeladopted by these Organizations? Why some Organizations grew in faster space thenothers and why some of the Organization not able to sustain? Though it is difficult to compare the Organizations directly as each Organizationruns and operates by different leadership and management, has different target market,varies in product-line, etc. it means we don’t have any direct formula to makeOrganization profitable and competitive in the market. So, it is essential to learn andadopt some best practices, focus on customers and market demand, open to innovationand creativity and at the same time control on budget and operating liquidity .
  2. 2. The four square approach is a combination of certain basic rules, standards andlearning from corporate world.Approach-1: Using iterative SWOT analysis and creating action plan. First measure to understand and evaluate one Organization is doing SWOTanalysis frequently and making it an iterative approach. Organizations should periodically perform SWOT analysis and create matrixof “Strengths”- internal strength of the Organization, “Weaknesses”- Weaknesseswhich are needed to be rectified, “Opportunities”- evaluate the market and list downthe opportunities for the Organization and “Threats”- One of the crucial component inthis evaluation process, this will derive how the Organization wants to place itself inthe competitive market. The SWOT analysis should be iterative and must follow theaction plan the organization takes based on previous SWOT analysis. The SWOT andaction plan process should be repeated continually with lesson learned discussed andevaluated periodically.Approch-2: Understanding “BCG Model - SCDQ” [developed by Bruce Hendersonfor the Boston Consulting Group]
  3. 3. Understanding and continuously evaluating products and/or services. This isvery crucial, every product and/or service provided to customer needs to be evaluatedto know how much revenue it is generating, how much value it is adding to the service/product line, what is the future demand of the product, etc. Categorize all the products and services into four sections: i. Stars: The product/service which is unique and/or niche in its market place, drives specific segment of customer group and generates high level of profit with less production. ii. Cows: The product/service which are essential but yet common, has less production/service cost, most customers uses it, has low revenue margin but highly sellable and has high market demand. iii. Dogs: High cost in producing and/or providing service, need high maintenance cost, diminishing market demand, not reaching the market properly, current profit margin is just up to the break-even point and not generating enough margin after taking the operating cost out of sales revenue. This may be discontinued and may be replaced with some product from stars or cows. iv. Questions: Product and/or services which are not generating profit, not works as catalyst in selling other products and services, incurring loss to the
  4. 4. Organization, not much customer demand, product/service is not good enough to compete in the market. United State Postal Service (USPS)- with such high network and customer reachability still not able to generate profit, If an Organization has star products (like Apple products), even though the products/services has high cost still customer will see the value and not hesitate in spendingmoney for those products and services. Keep enhancing and updating the stars,so that it will make the Organization as market leader in niche service/product line.Remember Star products gives high expectation, so Organizations needs to be focusedon innovation and creativity to keep product superiority in the market. Example: Apple,Whole Food, Boeing, etc. If an Organization has Cow products and services, then it is targeting to masscustomers, be focused on serving the mass, keep producing and servicing in highvolume, keep the price competitive, make strong marketing team. Remember theseproducts has less profitable and at the same time incur less cost in producing andservicing, so try to produce and sell more till it becomes a dog product/service .Example of some market players those who have products/services like cows are-Colgate, General Mills, Wal-Mart, etc. If an Organization has Dogs, it means the products and services are not meetingthe expectation. The product may be not marketed properly or may have less demandor reducing market demand, and the production and service cost is too high and canmanage generating the break-even cost, it is better to stop producing/serving unlessthere is any major revamp plan or future market potential. Example: Nokia, Borders, etc.
  5. 5. If an Organization has product which falls under the category of question mark,these products has high risk and high future potential, may need more cash burningto make it operational. These products/services need extra attention, proper controland great sells and marketing team to introduce the product to market and customersin effective manners. These products have potential for high growth and may becomea star or cow. If the products in this category not emerged as stars or cows aftercertain targeted months or years, it is better to discontinue investing in these products..Example: Most of the research companies, alternative energy sector, etc.Approach-3: Understanding dependencies. Every product and/or service has certain market place. The market place isvery complex and has various different driving factors those influences market like-necessity or usability of product/service, customers demand, competitor’s service andproducts, etc. So to deliver quality and profitable product and/or service, it is essentialto understand market need and future expectation. Production/service team shouldalign with marketing and sales team. Marketing and Sales team are mostly customerfacing components, it is Marketing and Sales teams responsibility to update the market
  6. 6. condition and demand to production/service team, so that production/service teamwork on delivering product/service in time and as per market need. So it is essential ofproduction, Marketing and Sales team to work together to create efficient coordinationand delivery strategy.Approach-4: Quadrapole So far we discussed three approaches, effectiveness of all the above threeapproaches possible only when this last approach analysis is efficient and effective.Just doing analysis will not make the products/services profitable. It all depends onOrganizations leadership who makes the decisions, the management team whichcarries forward the initiatives and makes sure the efforts are meeting the expectation,and the employees- one of the most important part of business success who directlygets involved in implementation and delivering the product and/or service. So to makethe process effective, it is essential to create small milestones and evaluate the processin a regular interval. Do brainstorming and lesson learned after completing eachmilestone. Other important factor which need careful analysis is the information flow-steps should be taken to evaluate how effective the information flow, how satisfiedemployees at his/her level. To bring Leadership-Management-Employees into sync it
  7. 7. is necessary to evaluate Organizations culture regularly to make sure each and everyindividual adhering Organization culture and values and working up to their potential tomake a successful Organization. Though there is no single direct single mantra available in making anOrganization successful, the above are few approaches which may help in creatingsuccessful and profitable Organization.