Monthly Archives: September 2012

The Dog Curse – When More is Less

Why you should not blindly trust the Marketing wisdom when it comes to defining assortment

Alejandro Serrano – Sep 27, 2012| Spain

Last week I watched a very interesting talk TED talk by Barry Schwartz based on his book “The paradox of choice” . He argued that having more options to choose from does not necessarily imply having more freedom. This is despite the usual approach from Marketing, which claims that “more is better” when it comes to definition of assortment. His argument stems from some findings which show that having many SKUs to choose from may actually be counterproductive, as it could lower the customer’s utility.

I have summarized the five main findings and packed them under the acronym “PERRO” (thus the title of this piece) for me to easily remember them. Here they are:

  • Paralysis. Too many SKUs force customers to try to analyze each option with respect to the others, pondering pros and cons, until a decision is made. The process can become so messy that customers simply postpone their decisions for later. Put differently, we could say that “too much analysis drives paralysis”.
  • Expectation. If assortment is large, customers usually significantly raise their expectations about the quality of the product they are going to buy. Since utility can be measured with respect to expectations, rising expectations leads to decreasing utility.
  • Regret. If a bought product does not completely satisfy a customer, she may ask herself, what if I had bought an alternative? Therefore, the higher the number of alternatives, the higher degree of regret she will have as she becomes more convinced that one of the others was better.
  • Responsibility. If there is just one variant, and that one does not satisfy the customer, he will think “What can I do?”, with no blame. However, if there are many alternatives and the one chosen does not satisfy the customer, he will blame himself, as he was the one who chose the “wrong” product.
  • Opportunity. As variety increases, the opportunity cost decreases, as the alternatives are closer in value (not necessarily in price) to the product considered. The more SKUs available, the lower the incremental value of the product chosen with respect to the second-best choice.

Given these, it is maybe time to reconsider your marketing strategy, and start reducing the number of variants so as to increase your customers’ utility (aka happiness).

The TED talk is here. The book “Paradox of choice” can be seen here.

To know more about supply chain follow the link

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ZLC, a safe bet

The crisis forces us to establish priorities when deciding what to do with public money. ZLC is one of the most promising bets to achieve economic growth.

Alejandro Serrano – Heraldo de Aragón, Sep 1, 2012| Spain

Original article is aquí (in Spanish)

The years of economic bonanza drew many public and semipublic initiatives to our region geared to incentivizing economic growth in the region. Aramón, walqa, and Motorland are all examples of initiatives of this kind. In the university realm, the existing infrastructure was extended to create new campuses in Huesca and Teruel. Lastly, as a result of an agreed commitment to logistics, given our region’s potential in this industry, we witnessed the creation of PLAZA—with its younger brothers PLHUS and Platea—on the one hand, and the establishment of Zaragoza Logistics Center (ZLC) by  MIT (the world’s leading school of engineering), on the other. Years prior to joining this latter project, I already praised its creation and the commitment shown by the regional government to this project  in this newspaper (April 2004, May 2005).

Source: Heraldo de Aragón

With the advent of the economic crisis, the rules of the game have undergone a profound change. It is no longer about achieving all the goals established at a lower cost, but rather about achieving the greatest number of goals on a restrictive budget. In other words, it has become necessary to establish priorities, because it is impossible to achieve everything, which implies abandoning certain commitments viable in the boom years in order to commit firmly to others. In this regard, it would be disastrous for our region to apply a ‘one size fits all’ economy, attempting to keep all the projects running by reducing the budget of all initiatives, good ones and bad ones, by a similar percentage.

What criteria should be followed to establish which projects should be given priority? Logically, focus should be placed on those projects that are aligned with the strategy of the region, which can be inferred from the electoral program presented by the governing party last year. It stated that Aragón should be a “territory of excellence in teaching”, “achieve an optimal collaboration between companies and University”, “attract international teachers and researchers” and seek excellence “in those areas of knowledge susceptible to becoming niches of excellence comparable with the best in the world”, mentioning logistics as the first example.

In this regard,  Zaragoza Logistics Center has many of the attributes required to be part of the group of initiatives to be focused on. Some examples: The ZLC international masters course has been ranked the best logistics program in Spain in the last two years (El Mundo newspaper ranking). As to collaboration with companies, ZLC worked both with Aragon companies (two consultancy projects currently under way with Saica; seventeen alumni contracted by Transportes Carreras to date, …) and multinationals (the list is long: companies such as Adidas, Amazon, BASF, Caterpillar, Cummins, DHL, P&G or Roche have come to Zaragoza to finance projects or hire students). These brilliant students (from Aragón or from elsewhere) will eventually reach decision-making positions in the multinationals that are now hiring them. And it is then when the investment made will more than yield its return, in the form of job creation, projects or research centers.

The first significant initiative of this kind that comes off shall justify economically the existence of ZLC for more than a hundred years. But we have to give it more time. It is not fair to demand from  ZLC in 10 years of existence something that nobody has demanded from the University of Zaragoza in 450 years. ZLC is still a “start-up” in the academic sector. MIT has just celebrated its 150th birthday. Harvard Business School celebrated its centenary in 2008. Excellence in academia takes its time. It is tempting to forget priorities and focus on short-sighted, short-term projects. But if we really want our region to become a reference for others and not turn it into a piece of land with no hope, we should continue to give our firm commitment to ZLC and other similar initiatives.

To know more about ZLC please follow the link

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ZLC, una apuesta segura

La crisis obliga a establecer prioridades y a decidir qué hacer con el dinero público. El ZLC supone una de las apuestas con mejores perspectivas para el futuro desarrollo de Aragón

Alejandro Serrano – Heraldo de Aragón, Sep 1, 2012| España

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     Read it in English

Los años de bonanza trajeron a nuestra comunidad autónoma multitud de iniciativas públicas o semipúblicas para incentivar el crecimiento económico en la región. Así nacieron por ejemplo Aramón, walqa, o Motorland. En el ámbito universitario se desdobló la infraestructura existente para crear nuevos campus en Huesca y Teruel. Finalmente, en una clara apuesta por la logística, y dado el potencial de nuestra región en este capítulo, se impulsó la creación de PLAZA—con sus hermanos menores PLHUS y Platea—por un lado y del Zaragoza Logistics Center (ZLC) de la mano del MIT (primera escuela de ingeniería del mundo) por otro. Años antes de unirme a este último proyecto ya alabé en este periódico (abril 2004, mayo 2005) la creación del mismo y la apuesta que el gobierno regional había hecho por él.

Fuente: Heraldo de Aragón

Con la llegada de la crisis económica las reglas del juego han cambiado profundamente. Ya no se trata de conseguir todos los objetivos marcados al menor coste, sino de conseguir el mayor número de objetivos dado un presupuesto restrictivo. Es decir, hay que marcar prioridades porque no todo se puede conseguir, lo que implica desechar algunas de las apuestas que podían ser sostenidas en los años de bonanza para apostar decididamente por el resto. En este sentido, sería nefasto para nuestra comunidad aplicar una economía de “café para todos”, tratando de mantener todos los proyectos en marcha reduciendo un porcentaje similar el presupuesto de todas las iniciativas, buenas y malas.

¿Cuál debe ser el criterio para marcar qué proyectos potenciar? Lógicamente es preciso seleccionar aquéllos que estén alineados con la estrategia de la región, que puede inferirse del programa electoral que el partido en el gobierno presentó el año pasado. En él se habla de que Aragón debe ser un “territorio de excelencia en la enseñanza”, “alcanzar la óptima colaboración entre empresas y Universidad”, fomentar “la atracción de docentes e investigadores internacionales” y buscar la excelencia “en aquellas áreas de conocimiento que sean susceptibles de convertirse en nichos de excelencia equiparables a los mejores del mundo”, poniendo como ejemplo de esto último en primer lugar la logística.

En este sentido, el Zaragoza Logistics Center posee muchos de los atributos requeridos para estar dentro del grupo de las iniciativas por las que apostar. Algunos ejemplos: el máster internacional de ZLC ha sido considerado como el mejor programa de logística en España en los dos últimos años (ranking del diario El Mundo). En cuanto a la colaboración con empresas, ZLC trabaja tanto con empresas aragonesas (dos proyectos de consultoría actualmente en marcha con Saica; diecisiete exalumnos contratados por Transportes Carreras hasta la fecha, …) como multinacionales (la lista es larga: empresas como Adidas, Amazon, BASF, Caterpillar, Cummins, DHL, P&G o Roche han venido a Zaragoza a financiar proyectos o a contratar alumnos). Estos alumnos brillantes (aragoneses o no) llegarán con el tiempo a los ámbitos de decisión de las multinacionales que ahora los contratan. Y es entonces cuando retornará con creces la inversión efectuada, en forma de creación de empleo, proyectos o centros de investigación.

La primera de estas iniciativas de calado que cristalice justificará económicamente  la existencia de ZLC durante más de cien años. Pero hay que darle tiempo al tiempo. No se le puede exigir a ZLC en 10 años de existencia lo que por ejemplo no se le ha exigido a la Universidad de Zaragoza en 450. ZLC es todavía una “start-up” en el sector académico. El MIT acaba de cumplir 150 años. La escuela de negocios de Harvard celebró su centenario en 2008. La excelencia en el ámbito universitario toma su tiempo. Es tentador olvidarse de las prioridades y apostar por políticas miopes y cortoplacistas. Pero si de verdad queremos hacer de nuestra comunidad un referente para otras y no convertirla en un solar sin esperanza debemos seguir apostando firmemente por ZLC y otras iniciativas similares.

Para saber más sobre ZLC

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