If you’ve been waiting for the US luxury buyer to return to pre-2008 levels, it’s time for you to move on.

What has happened to the luxury buyer is more than a business cycle; it’s a long-term change.

Let’s quickly do the math. Affluents as a whole are twice as important to any marketer that sells consumer goods and services, regardless of price. When it comes to selling luxury goods, Affluents are four to five times as important. So statistics about Affluents really matter to the jewelry industry.

Luxury industry data shows that younger Affluents (24-44 years old) spend twice as much on luxury items as older Affluents (45 – 70 years old). Back in 2008, the younger Affluents were 17 – 37 years old, which means that a significant percentage of them (half?) hadn’t yet reached their spending power. In the meantime, older Affluents are nearly 8 years older than they were the last time they were big luxury spenders.

Who are these younger Affluents? The older portion are Generation X (35-50 year olds), and the younger are Millennials (18-34 year olds). In sheer numbers there are now more Millennials; ~81 million in 2015, compared to ~50 million GenX (of which many are part of the older Affluents group). So, your new luxury consumer is a Millennial. No surprise there – we’ve all been talking about this for a few years now.

Two social factors make these statistics very important to luxury goods companies:

1. During the recession we witnessed changing attitudes toward consumption and wealth. Those with wealth became less likely to spend it, felt less wealthy in general (even if they were very wealthy compared to the average American), and became highly conscious of how they are viewed in society (i.e., the 1%). Outside of the richest of the rich financial markets, elitism is out (keep in mind that in much of the country, elitism was never in).
2. Millenials (and Generation Z – the next consumer frontier) have entirely different attitudes toward luxury than the generations that shored up the luxury industry before them.

If you’re a luxury retailer in the US, that’s about all you need to know. But what if you’re a luxury brand? Is the news just as bad everywhere? Actually, it’s worse.

While elitism and status still play well in most international markets, conflict, social unrest, and weak economic systems are inhibiting consumer spending across the globe. In addition, it’s not a coincidence that strong demand for US luxury goods in Russia, China, India, and Europe coincided with years of a weak US dollar.

So. What do you do with this information if you’re a jewelry retail store owner, designer, or brand? You revitalize, and you start doing it now, because this trend is going to continue. Even if older luxury buyers bounce back a little, it won’t be enough to return us to former spending patterns, because younger luxury buyers are quickly becoming the dominant market.

What’s that you say? Your business model has endured multiple cycles over the past 50-80 years? That may be true, but it’s not relevant, A) because this isn’t just another cycle, and B) because the last 80 years saw the largest era of consumer empowerment the country (and world) had ever seen, empowerment that expressed itself as acquisition. But we’re on the cusp of a new era, an era in which consumer empowerment expresses itself as something else.

Many of the things I’m about to suggest are old news – I’ve suggested them before in my writing and speeches, and you’ve heard them from industry journalists willing to challenge the status quo (Rob Bates is at the top of that list).

So I’ll recap (and reference) the things that have been addressed sufficiently already, then focus more attention on bringing a few important issues to the surface; business concerns that are still not getting adequate attention in our industry.

You Need to Make Changes in Product and in Presentation

Everywhere you look there’s a new article, a new blog, a new interview that talks about how Millennials and Generation Z want something unique, something custom, something special, they want stories, they have problems with diamonds, they don’t care about precious metals. They want quality, it’s about the experience, brand reputation matters, and ownership holds less importance for them. These things matter to them in general, so how high do you think Millennial expectations are regarding luxury? If you want to read more about Millennial expectations of jewelry, here are some terrific articles.

Rethinking Open to Buy: (Matthew Perosi’s jWAG blog from yesterday, 5/26/2015)
Understanding Millennials: How to Sell Lasting Luxury in a Disposable Culture (The Centurion: Hedda Schupak)
Fashion Designers, automakers top millenials’ list of luxury brands (Luxury Daily)

There are 8,162 people on Twitter with “jewelry designer” in their bio (and that’s just the English filter). I know many of them, and there’s a lot of genuine design talent out there. Much of that talent comes with a story, social awareness, trunk shows, and energized social media. But independent jewelry designers can’t get their foot in the door at traditional jewelry retailers. So they sell at art fairs and craft fairs and online, and many of them are learning to do very well selling directly to (your) consumers. Clearly, we have ample information on what matters now, yet not enough people in this industry are reacting to this demand.

Making and Designing are Not the Same Thing

In 2013 Fast Company said, “For Millennials, design is not a differentiator. It’s the cost of entry.” Millennials care about design on two levels: the design of the product, and the design of the experience.

One of the effects of growing up with the internet is that Millennials have seen more art and been influenced by more graphic design than any generation before them. They are intensely visual. They report they will turn down a job rather than work in an ugly or uninspiring environment. They care about beauty, architecture, and public spaces. They won’t spend their hard-earned money on products that are average. Even their kitchen utensils demonstrate good design principles. A solitaire diamond in a setting with a few flourishes may not offend, but it doesn’t excite either.

If you aren’t sure you know the difference between excellent design and meh, enlist some help, because Millennials do.

Now. Here’s the stuff not enough people are talking about

The Jewelry Experience

Everyone is throwing about the word experience in retail, saying experience is the key to consumer loyalty. But what does experience really mean?

Consumers would rather get wine at a wine & cheese bar, coffee at an organic coffee shop or Starbucks, and baked goods at a café. All those places are better at offering food, coffee, and wine than you are. So what do they want from you?

A better buying experience, which is not just about your product offering. It’s also about your store design and your processes.

Experience design is very important to Millennials. They have grown up in a world where they can assemble (on their own) the organizational, communication, and information tools to make their lives easier. It’s second nature to them. They are used to being able to find and purchase any product they desire and can afford, no matter how esoteric. They are used to collaborating over distance and across languages. Studies have shown that Millennials find outdated and cumbersome systems like opening bank accounts, buying a house, and buying a car to be not only distasteful, but enraging.

So how do you think they feel about your current engagement ring sales process? Does the next generation jewelry buyer really want to be led through your store to the bridal area, sit at a counter, and suffer through the diamond-buying experience?  They did the research before they arrived. If your selection is six different cases of the same thing followed by a two-week wait, they’re probably not impressed. Jewelers who find a way to reinvent the process of selling engagement rings will really be on to something.

When I walk into my local Verizon store, the sales reps are either actively helping other customers or they are . . . sitting in lounge chairs in the middle of the store, apparently just hanging out. They wave you over warmly, and you go sit with them (there are always empty seats). They pull you into their conversation, which is usually about what’s the latest cool thing in phones. Instant collegiality. You engage in a conversation with them instead of being sold to. They whip out their tablets and talk with you about options – before they ever walk you to a wall display. Ten years ago I preferred a root canal to a visit to the cell phone store. Today, I look forward to checking in with my phone buddies. How does the experience of walking into your store, being greeted, and exchanging information feel? Does it inspire the same feeling of collegiality? Does it stir interest and excitement? Or is it intimidating, cool, and separated by a case and a gate?

The experience of the Apple store is so fantastic that people are writing books about it (check out The Apple Experience, by Carmine Gallo). The average store generates $5,600 per square foot, which makes it the most profitable retail store on the planet. There are a lot of facets to the Apple experience, but let’s focus on the store design for a moment. Steve Jobs was adamant that their stores be more than four walls with stuff to sell inside; Apple stores are a stage. Apple didn’t build every store, but they did the absolute most with the locations they chose. Architectural and design beauty are highlighted, and where possible they integrate into their surroundings as part of the experience (you can’t really tell where the Grand Central Apple Store ends and the Station begins). Apple took products that are typically in the box, behind-the-glass, and put them front and center. They made it clear that people are supposed to come in, play, experiment, and even hang out with one another in the store. The customer who comes, stays, and leaves without a purchase is treated with as much warmth and attention as the person who walks in and presents a credit card. They offer immersive training experiences to build customer attachment to and comfort with their products. And finally, the stores are devoid of anything that is irrelevant to the experience of Apple products. They’re streamlined, purposeful, and immaculate. What is the visual experience of your store? Is it inspiring to approach and enter? Is there junk behind the counter? Tape on the front of a case? Three-year-old posters or signs? Are there elements in play that have nothing to do with the simple goal of telling your compelling story, connecting with your customer, and selling your exciting products? Millennials notice these things.

I’m a knitter, and for me, knitting is all about fiber. If you buy skein of yarn at Michael’s or Walmart, it will cost you anywhere from $2 - $15. A typical skein of yarn for me is upwards of $50. I shop at a very special little fiber shop that knows its customers are buying luxuries. The shop is definitely knitty and not high-endy. The shop owner does a dozen things worth mentioning, but let’s talk about the checkout experience for a moment. She doesn’t have a cash register. She has a few comfy chairs around a coffee table, and on the coffee table is a tablet. When you’re done with your purchases, you sit in one of the chairs and you drop all your balls of yarn on the table. While you chat with the store owner, she rings up your purchases on her tablet, but it all feels like you’re just drinking coffee and knitting together. She’s so good at scanning and ringing up the sale that she remains present with me and our conversation the entire time. Something else of interest; I often find myself giving knitting advice and tips to the women in the other chairs, because I’m the oldest one there. Michael’s and the craft section at Walmart aren't exactly Millennial or Generation Z hangouts, but this shop attracts them every day.

The one interactive process you have that likely elicits a certain amount of excitement is custom design. But even then, most jewelers aren’t prepared to collaborate with Millennial customers the way they want to be collaborated with. The process itself must be seamless – from initial discussion to jewelry delivery. If it’s not, Millennials will scoff at your organizational clumsiness. And what tools are you using? Do you make them come back to the store to review design options? Do you have an endless stream of email going back and forth (Millennials would rather not deal with email unless at work). If you’re not prepared to have your seamless process either available through a phone app or at least through a shared folder in something like Evernote, your process needs improvement.

If you’re a retailer, you have all these processes in your store. People enter, they browse, they have questions, they may need to finance something, they may want to do a custom design, and they have a check-out experience. If you’re not actively experimenting with updating the processes in your store to meet the demands of a very different generation of consumers, you’re going to watch your current customer base slowly die off until you go out of business.

Embrace Technology

The fashion industry is going after technology-as-experience in a big way after falling behind consumer expectations (though not as behind as the jewelry industry). Live-streaming of fashion shows, virtual stores, wearable technology, and other types of digital innovation are now at the forefront of fashion thinking. Fashion brand Rebecca Minkoff has dressing rooms that make suggestions about complementary items to try. Even Fabergé has enabled ecommerce, after years of insisting that ecommerce would tarnish their brand.

The consumer currency of the future is information information information. The kind of information that helps consumers make buying decisions. The kind of information that tells an interesting story. The kind of information that holds their attention for longer than 20 seconds. The kind of information that helps them satisfy concerns about the provenance or manufacture or sustainability or morality of the things they buy. In addition, they want much of that information before they ever make time in their busy schedules to come to your store. It takes technology to do that.

Delivering that information doesn’t start with your website. That’s like hiking the Pacific Trail for weeks with no shower and then putting on lipstick (yes, Wild reference there). Your management of the information that fuels your business must start much deeper in your business processes.

Think about how you approach technology in your business. If you’re like most people, you probably have a pretty current smart phone. But how old is your computer? How often do you explore new software to make your job more efficient? Are you using cloud services or still trying to figure out where the cloud is? Do you and your staff use technology to make you more communicative, more efficient, and more relevant to your customers? Is social media just an extension of your break room, or are you using it for serious marketing insight? Can you make fast, effective decisions about your inventory; decisions that enable you to innovate and respond to a changing market? How is your product database? Do you use all the bells and whistles for product detail and descriptions? Do you collect all the customer information you can collect? Most important of all, do you use all this data to help you run a better business?

There are technology tools that can help you with every single operational and marketing need. Everything I’ve discussed in this article can be enhanced with technology. And even if you’re way behind the curve on your technical skills, you need to start developing them now, because business is going to keep changing faster and faster, and if you think the Millennials have high expectations of your competence, wait until you start serving Generation Z.

Get Fast. Get Diversified. Get Lean.

Getting Lean is the process of streamlining, automating, and de-cluttering your business processes, from manufacturing to stocking, from hiring to sales. Many business owners think that getting lean is for the purpose of reducing prices. While it can certainly be used for that purpose, there’s another major reason to do so. It’s to get fast and to get diversified.

Think back to the late ‘90s and early 2000s when the US jewelry manufacturing base outsourced itself to Asia. Why did that happen? Because reducing the cost of labor was the quickest way to reduce the cost per piece. Of course, that had its downsides. The economics only held if you produced a minimum of hundreds of those pieces. Hindsight being 20/20, we can see that we were selling off our manufacturing expertise at the same time a new generation was being born – a generation that doesn’t want to wear or own the same things everyone else has.

Beyond the excellence of their design, there is a reason that designer brands like Todd Reed, Omi Prive, Just Jules and Pamela Froman have such consumer appeal. There is an element of customization to many (or even most) of the pieces they produce - something you simply can't do if you're manufacturing in China. To accomplish a steady flow of product customization, brands must constantly attend to the operational efficiency of their workshops, because customization gets harder to manage the farther it gets from home.

The other advantage to lean, local(ish) operations is that you can keep your inventory of finished goods to a minimum, which allows you to respond more quickly to changing consumer demand. Yes, yes, jewelry is more expensive to produce than fashion, so it’s harder to change it. But the consumers don’t really care about that difficulty, so the retailers, designers, and brands who figure out the keys to keeping inventory fresh and exciting will win this game.

Retailers need to buy less product more often to keep the store fresh and consumers interested (hint – doing all your buying once each year in Vegas is not going to cut it – inventory needs to change more often than annually). Designers and wholesalers need to create policies that will support smaller, more frequent purchases, and they must migrate to release schedules that satisfy consumer desire for diversity and change. But as you can imagine, if designers and wholesalers are only receiving new orders once each year – with a small number of reorders occurring during the holidays – they simply won’t be able to invest in the merchandising strategies that consumers want.

Each of the concepts in this article could, itself, be a very long blog (and we didn’t even touch on how to market to Millennials. Maybe later). But it’s a good overview of where your head needs to be if you want your retail store, designer label, shop, or brand to become and remain relevant to the next generations of luxury buyers.

I spend a lot of time thinking about the balance between cultivating customers and customer profitability – both for my own business, and for my clients. For every type of B-to-B business – whether you sell products or services – it is critical to understand if your clients are actually worth it. And for jewelry designers faced with the constant request to provide memo goods, it’s business life-or-death.

I have long taken issue with the statement the customer is always right. It was stupid when it first came out, and it’s still stupid today. I understand that someone was trying to make a point about how we are supposed to treat others with dignity and respect, but the real intention was distorted the moment those words were strung together in a sentence.

Small businesses, micro-businesses, and solo-preneurs tend to think that a new customer – any new customer – is the point. They get so excited about the prospect of cash and exposure that they fail to analyze the potential profitability of the source of that cash and exposure. I can personally attest to the fact that invoices paid do not necessarily equate to client profitability. I have learned walk away from accounts that seem like a big deal, because they steal focus, money, energy, creativity, or even brand reputation from my own organization. Even a big client can be not worth it. But this is a difficult business truth to accept for a small business that is trying desperately to cultivate sales.

Let's take a brief look at whether or not to take on memo accounts, and then I'll show you how to analyze any type of customer for potential profitability.

Should I Open Memo Accounts?

I am often asked by jewelry designers if they should take on memo accounts. And my answer is pretty consistent: Mostly no, with rare exceptions. The exceptions are easy to list: It’s reasonable to take on a memo account if it will deliver on four out of five of the following points:

1. Provide you with genuine credibility and brand exposure (i.e., “So-and-so carries my work,” which leads to other retailers saying WOW and buying in). The ideal memo account should be a door-opener.
2. Is an account that is known to do a terrific job of promoting and selling designer work – even if it’s on memo.
3. Is an account that is known to pay its bills promptly.
4. If you can afford to stock that account with the amount of inventory they need without going into debt in the process.
5. If you can afford to service that account without it creating costs (in you and your staff’s time and attention) that take you away from other more profitable opportunities.

There. That’s the checklist to use when considering whether or not to take on memo accounts. If a potential memo account can’t be a hit on 4 out of 5 of the points above (pick any 4, but no less than 4), then it probably isn’t worth your investment.

Why do I say this? Because everything you do as a small business (or micro-business, or solo-preneur) must turn a profit. When you self-fund a business, the only money you have to fund growth is the money you put back into the business. You can’t afford to spend the time, attention, or investment-in-inventory on accounts that aren’t putting profit back into the business – and by that I mean profit sufficient to help you continue your self-funding.

I can already hear some of you thinking, “But I can’t get into any accounts without memo!” And I know that’s true. Jewelry retailers are notoriously hard to get into – the majority of them want jewelry designers to pay to play. If this ultimately turned into a profit-generator for most jewelry designers, I wouldn’t be writing this blog. But it doesn’t. So we’re going to spend a few minutes talking about how to analyze the profitability of a client.

Now Let’s Analyze Your Client Profitability

When you take on a new account, it’s imperative that you calculate the costs, time (which is, of course, a cost), investment (inventory, up-front development work, shipping, etc.), financial return, and amount of time it will take to achieve that financial return. This is easier than you might think.

I’m going to explain all of this below.

Start by Understanding Your Fixed Costs

To complete this section, start by inputting your PROJECTED  REVENUE in the “Anticipated Revenue” tab of the workbook. Then go to the “Fixed Costs” tab in the workbook.

For every project you do, you have Fixed Costs. The most obvious Fixed Costs to a product seller are the cost of the inventory the client wants you to sell them – or “loan” them if it’s memo they’re asking for. If you are required by the client to pay shipping, those costs will be fixed as well. Fixed Costs would also include any unreimbursed travel you are required to make to get the client set up or to provide training, and would also include any displays, packaging, or marketing materials that you will provide.

For service providers, Fixed Costs can include the cost of the bidding process, the cost of setting up communications tools, training for both the service provider team and for the client, travel, and support materials. All the time, fees, and expenses incurred in the winning of a client and in launching them –whether it’s to sell your goods or use your services – are Fixed Costs.

Formula: Cost of your time + cost of employee and contractor time + cost of inventory (one year) + cost of unreimbursed travel + cost of unreimbursed shipping + cost of marketing, training, and marketing materials + any other required initial expenses = Fixed Costs.

Analyze Variable Costs

To complete this section, go to the “Variable Costs” tab in the workbook.

Variable Costs are the costs of managing a customer after start-up. For your analysis, you need to figure out the Variable Costs of the new client in the course of the first year.

The first variable cost you should calculate is the amount of non-production time you and your employees will likely spend managing the client. This includes time spent managing orders, special orders and special requests, in meetings, dealing with revisions and redirections, swapping out inventory, reconciling memos, invoicing, and the amount of time you spend calling them to collect overdue invoices. You should start by analyzing what the average client costs you in time to do these things, then use any market or peer information you have to determine if the client is likely to be lower-maintenance or higher-maintenance than an average client.

If the client requires you to participate in promotions throughout the year, such as trunk shows, annual client catalogs or calendars, the expenses and time associated with these projects are also Variable Costs. Coop advertising should also be included, and you should calculate the amount of coop based on the amount of Projected Revenue.

Some computer software will result in added Variable Costs, such as a CRM that charges you by the client, or an image management system or project management software that you pay additional fees for adding new users or clients. Make sure you figure the incremental cost of all your business management tools, because those costs can add up fast, and you want to make sure you understand the costs relative to your clients. Otherwise, you risk overestimating how much each client is worth.

Formula: Cost of your time to manage this customer over first year + cost of your employee time to manage customer over first year + incremental costs to any business software tools + unreimbursed service costs + coop advertising costs + any other Variable Costs not listed here = total Variable Costs to manage client.

Figure Out the Break-Even Point

To complete this section, go to the “Break-Even Point” tab in the workbook.

Your Break-Even Point is the point at which the client has paid for itself. It is not the same as profit. Profit is what comes after the Break-Even Point. To calculate the Break-Even Point, you add up the total Fixed Costs of start-up, the total inventory costs for the first year, and the total Variable Costs per year. That is the cost you must recover in order to start turning a profit.

What if it’s negative? Then increase your Projected Revenue amount – in increments – to see at what level of sales that client would have to perform in order to be profitable. If the amount of sales required is unreasonable for that client, they’re not a good risk – with one exception: If you can demonstrate that they will produce significant profits in year two and beyond, and if your business can handle the strain of investing in that client for a full year before getting a return, the client may make sense. However, if you go into any level of debt in order to finance the customer, make sure you include the costs of that debt (credit card or loan fees and interest) in your Variable Costs for the customer for however many years you carry the debt.

Formula: Projected Revenue – non-inventory Fixed Costs – inventory costs – Variable Costs = Break-Even Point.

Determine the Contribution Martin

To complete this section, go to the “Contribution Margin” tab in the workbook.

While most small business owners are reasonably good at calculating costs of inventory and whether or not the sales of products are creating a profit, relatively few small business owners know whether or not a client is profitable. That’s because they don’t calculate the Contribution Margin.

It’s tempting, when you think about taking on a new client, to get excited about every sale. Emotionally, sales are fun. But rationally, we know we incur many additional costs in our effort to close the sale. Contribution Margin is how much money you have to cover your Fixed Costs once the Variable Costs have been taken into account. To get this amount, you subtract your total Variable Costs from the expected revenue for the client. By analyzing the Contribution Margin of each client, you gain insight into whether or not the client is producing a profit beyond the profit margin of the goods or services you sell them. This is essential insight, because a high-maintenance client may produce acceptable – or even very good – sales, but still be a money-loser.

Formulas:
Contribution Margin:   Projected Revenue – total Variable Costs = Contribution Margin.
Profit:   Contribution Margin – First Year Inventory costs – First Year Non-Inventory Fixed Costs = Profit.

Ongoing Profit Analysis

Use the “Contribution Margin” tab in the workbook. The section is “Subsequent Year Contribution Margin.”

Finally, you must ensure that each customer is returning a reasonable amount of profit after the first year. Many businesses will perform strongly for a few years, then drop off in subsequent years. This is particularly true when selling to retail establishments that have a style or fashion component, but it’s also true for service businesses that work with clients who eventually will develop some of those services in-house. Once client revenue drops below a certain level, they will stop being a productive client for you. When that happens, your time will be better spent elsewhere.

Formula: Projected Revenue – Total Variable Costs = Contribution Margin. Contribution Margin – Projected Inventory Cost = Profit.

While you may love what you do, you’re not in business purely for fun. You need to turn a profit, and if you’re not turning a profit, then either A) you’re in such a financial position that you can afford to do your hobby full time, or B) you’re going to eventually burn out (both personally and as a business). Invest the hour or two that it may take you to completely understand this concept. Use the spreadsheet I provided to see how easy it is to calculate these numbers. And learn to identify which clients are worth serving and which are not.

Don’t be afraid to face the truth about client profitability

If you have a preponderance of clients who aren’t worth it, you need to know that. That knowledge will give you the impetus you need to find other ways of selling and other types of clients to sell to. A  business only dies when its owner stops feeling the motivation to find new ways of selling and new clients to serve. The time is going to go by either way. Wouldn’t you prefer to be earning a comfortable living at the other end of that passage of time?

• Individuality is in, keeping-up-with-the-Joneses is out.
• Environmental stewardship is in, unconscious consumerism is out.
• Social awareness is in, ostentatious wealth is out.
• Thoughtful acquisition is in, conspicuous consumption is out.

No wonder luxury jewelry is having a hard time.

Which isn’t news. We’ve been watching the closures, consolidations, and down-sizings of luxury jewelry stores for years now. But it’s still newsworthy, because luxury jewelry hasn’t carved a new, meaningful path yet, an approach that responds to these changing values which not only refuse to go away, but instead, continue to build momentum.

Hedda Schupak conducted a very important interview in the Centurion Newsletter this week with third-generation "überluxury jeweler” Jonathan Dorfman, who recently closed his ultra-luxury jewelry store in Boston. Everyone in the jewelry industry should read this interview (read it here). The article addresses the issues of changing consumer tastes, social awareness, and values. But it also points to an element that has been masking the true impact of the changes in the US consumer. Societies where ostentatious wealth and social competition still have some oxygen — China, Russia, and oil-rich Arabic nations — are now suffering economically. During the past ten years these populations have bolstered the luxury jewelry market while the American consumer was turning her attention to other things. Now, as this foreign buyer steps away from the cash-register, the dramatic changes in our domestic market are painfully obvious.

The Solution is Already Here

There is a jewelry offering that is highly individualistic, often pays greater attention to sustainability, and delivers an experience of art, hand-craft, and the type of preciousness that is handed from generation to generation. It is designer jewelry, art jewelry, jewelry made by master jewelers in their studios. For the conscientious consumer, the story of fine jewelry made by artisans who still get their hands dirty is a compelling story; a story of skill built over years, a story of craftspeople who opted out of the more typical salaried/hourly path to pursue a life of art and creativity, a story of artists who have a passion to create beautiful, wearable things.  Craftsmanship is in. Stories are in.

Retailers totally focused on selling pearl button earrings, 1.0 tcw white diamond studs, 3-stone rings, and 4Cs-driven engagement rings cannot engage the new consumer. Manufacturers focused on creating the same designs they always have, en masse in China, can’t either. And by new consumer I don’t mean just the Millennials. I also mean the women my age (50s – 60s) who have changed right along with our young adult children, who often look at life very differently than we did when we were first starting out.

The Jewelry is Out There

Of course, artisan/designer jewelry is not new. It’s out there; online, in boutiques, in museum stores and specialty stores . . . . and sometimes, in jewelry stores, though the list of jewelry stores that truly focus on artisan/designer jewelry is small. Everyone in the artisan/designer segment of the jewelry business shares the same list of about 200 stores that truly get how to sell artisan/designer jewelry. There are several thousand more jewelry stores offering personalization of jewelry through customization and/or original design, many of them using CAD. Still, as an industry we are doing a poor job of telling this story to consumers, so unless they stumble into the store or onto the website, they just don’t know how exciting, beautiful, meaningful, and relevant jewelry can be.

Let's Tell the Story of Artisan/Designer Jewelry

The dairy industry suffered badly after the low-fat movement began. Suddenly, dairy was out due to a change in consumer values. The industry realized that it had to respond with a broader message, and they did, with “Milk. It does a body good.”

As an industry, we should shift to talking about jewelry in terms of art. We should be talking about its hand-made aspects, and how exciting it is when we combine the newest technologies (CAD, scanning) with old-world techniques. We should be telling the stories of the people who make and design jewelry.

We must be investing in and committed to sustainability, protecting the environment and the communities dependent on mineral and metal extraction for a living. And then, when this aspect of our industry is authentic, we should be telling that story loud and clear.

Am I suggesting one of the jewelry industry associations or magazines should step up and do this for us? No. I think they can play a role, an important role, but I believe that all of us — retailers, manufacturers, diamantaires, designers, consultants, everyone — need to embrace where consumers are now, get on board, and start telling a different story.

Individuality is in.

Social awareness and environmental stewardship are in.

Thoughtful acquisition is in.

Craftsmanship is in.

Stories are in.

Artisan jewelry is in.

Let’s all get out there and stay relevant.

Social media monitoring tools bump up your marketing strategy and planning

Nearly all marketing strategy today includes a significant presence in social media. Many people think the most exciting thing about social media is that it's free. A) it's not, and B), that's not even the most exciting part.

What's truly exciting about social media is how much you can learn about your customers and potential customers. Social media activity is by no means an indication that someone will buy from you, but we are beginning to understand that different types of social media engagement offer varying forms of value to a business. Social media engagement can enable your customers to influence other new prospects for you, it can help you foster an online relationship that leads to a purchasing relationship, and it can keep you top-of-mind for additional purchases and visits.

Yesterday we were evaluating the questions that must be asked and answered before you can create an effective marketing strategy. Today, let's look at some of my favorite tools for tracking and analyzing social media engagement. This will give you additional insight necessary to creating a powerful marketing strategy.

How did they find you and how engaged are they?

If you're not asking customers how they heard about you, you are missing an excellent opportunity to refine your marketing. Always ask, and keep records.  Social media monitoring tools add depth to this knowledge. Using them, you can assess how engaged your customers are with your brand, how often you are mentioned, and what is being said. This type of oversight in the social media world will help you refine your marketing activities and quickly resolve any negative comments. My favorite tools for online brand monitoring include:

• Google Alerts. This is the easiest and most common form of brand monitoring. Put in your brand name and any other well-known terms associated with your company, and get feedback every time those terms show up in the web.
• Hoot Suite. If you use this as your social media dashboard you get a lot of great features, but one of the features I like most is that you can add a keyword tracking column. This gives you a real-time stream anytime someone mentions your brand in your social media space. Seesmic does this as well, but I really prefer Hoot Suite.
• Social Mention. You can set up alerts to notify you when blogs, comments, images, basically anything on other social media sites mention your name, or a product, or any keyword you want to track.
• TwentyFeet. This aggregates your activity from multiple social media platforms so you can analyze which activities work the best for you. Using insights from TwentyFeet, you can decide which activities to do more of . . . and less of . . . in the year to come.
• Klout. Klout gives you an influence score based on your social media activity. It not only scores you, it also enables you to look at your influences and who you influence. Knowing this will help you refine your social media program. Other tools that do this are HowSociable and Kred.
• PeerIndex. This helps you identify who your online brand advocates are. Once you know that, you can get more creative in reaching out to them - giving them more to advocate with and about.
• Brand Monitor. This helps you focus on conversations that are relevant to you so you can participate.

Does this seem like a lot of monitoring? Of course it is; constant monitoring is an essential element of a successful marketing strategy. You can use an RSS feed reader to aggregate all of your social media engines, to make it easier to keep track, but the truth is it does take some effort and you should spend time every week analyzing your online engagement and tweaking it.

Oracles speak in riddles, their messages intended for those curious and diligent enough to solve them. So it’s no wonder that an intellectual cottage industry has formed around deciphering Warren Buffett’s investment choices. I’m not immune.

I think Berkshire Hathaway’s investment choices in the third quarter have two important messages for the jewelry industry, apropos for this final marketing column of 2012.

Long Live Local Advertising

At a time when jewelry makers are hyper-conscious of competing with labor costs and product development from around the world, it’s interesting to consider that your marketing efforts should be more locally focused. Berkshire’s continued investment growth in local newspapers, entertainment, and Internet businesses supports this notion.

First, take a look at what Buffett has to say about his increasing investment position in strong local newspapers: “Berkshire will probably purchase more papers in the next few years. We will favor towns and cities with a strong sense of community, comparable to the 26 in which we will soon operate. If a citizenry cares little about its community, it will eventually care little about its newspaper. In a very general way, strong interest in community affairs varies inversely with population size and directly with the number of years a community’s population has been in residence. Therefore, we will focus on small and mid-sized papers in long-established communities.”

To Buffett, community cohesion offers an economic benefit.

Now consider that idea as it relates to social media, which is not a replacement for a well-thought-out marketing campaign. It doesn’t matter how many people “like” you on Facebook if that doesn’t turn into purchases of your product. So what should you be doing?

For designers and manufacturers, it is important to become a partner in marketing to communities in which your retailers’ stores reside. That may mean designing a co-op ad for the local newspaper (which is remarkably inexpensive), creating a Facebook contest that you share with a retailer and its local Facebook community, taking time to post not only on your own Facebook page but as a participant in your retail stores’ Facebook pages, and looking for all manner of ways to connect with the consumers in communities where your line is available. For retailers it means creating a strong store brand image and imbuing that image with a sense that you are part of the fabric of the community, and then building a community (yours) within the community. This can be done through events, outreach, and local advertising and promotion.

Keep Hi-Tech Accessible and Fun

Go stand in a line somewhere and see what people are doing. Almost without exception they are buried in smartphones, communicating, playing games, trying to figure out where to go and what to do next. Berkshire has increased investments in IBM (heavily focused on providing “content on every device”), DirecTV, Liberty Media (Discovery Channel, USA, QVC, Encore, STARZ), and Viacom. These investment positions indicate just how bullish Buffett is on the economic powerhouse of portable communications technology and its ability to combine and deliver entertainment and information to thumb-twitching consumers.

So how are you using portable communications technology for your business? Forget on-the-street text messaging: The jury is still out on that. But is your website automatically scalable on tablets and smartphones? Are you giving your client base (and their client base, where applicable) fun things to look at or do on their smartphones? These are the two most important things you must do right now to ensure your marketing efforts are relevant—and accessible—to today’s consumers.

The jewelry industry as a whole is way behind the curve in our use of technology, but the consumers aren’t sitting around worrying about that. They just spend their expendable luxury dollars on other fun things that catch their attention.

Follow these two suggestions and you should set yourself on the right track for 2013—and be in step with the Oracle of Omaha.

Using Poka Yoke, you can eliminate most of those head-smacking, why-did-we-make-that-mistake process problems.

Let’s face it. Work is often full of busy-work, sometimes it’s monotonous, and there are occasionally days when you head for home and you realize that you just went through the motions all day long (hopefully, you don’t have a lot of those days). Many of the errors in the workplace occur when people are, well, spacing off a little! How can we account for the occasional human lack-of-attention? With a Lean method called Poka Yoke.

Poka Yoke means designing systems to prevent human error, and it can be implemented at any step in any process where errors are likely to be made. A few good examples of Poka Yoke everyone understands include:

Automobile Gas Caps

There are two Poka Yoke applications in most modern gas caps. First, there is a plastic cord that connects the gas cover to the automobile. This prevents those little caps from getting lost. Second, the hole for the gas tank (filling pipe insert) is sized to fit the filling handle of the proper type of fuel  (diesel, leaded, unleaded).

Saving Electricity

Most people remember to turn off lights, turn down the A/C, and otherwise save energy in their own homes. After all, electricity is expensive! But hotels have long known that people do not bring the same conservations to their travel accommodations. So, they poka-yoked a solution.

In many hotels around the world, the hotel room is equipped with a room key holder. If you put your room key in the holder, the lights go on! When you take your room key out and leave the room, the electricity is turned off. Simple solution that prevents the error of wasted energy!

Poka Yoke at Work

At its best, Poka Yoke is the elegant work of process ninjas, anticipating the most peripheral of problems and solving them in simple, elegant ways. But we all have to start somewhere, and we don’t need to be ninjas right away. So here are the three basic approaches of Poka Yoke, as defined by Shigeo Shingo of Lean fame.

• The Contact Method. This is the simplest approach. It is about taking a good look at a product or process and identifying its defects or faults.

• The Fixed Value Method. Also known as the “Constant Number” method, this method is used when there are a known number of steps that must be done to complete a process. If the person doing the process does not complete the full number of steps, they are alerted that they have missed a step. You encounter examples of the Fixed Value Method when you complete online forms. If you miss a required field, the system refuses to take your submission and highlights the fields that still require information.

• The Motion Step Method. Also known as the “Sequence Method,” this method is simply about making sure that the process was done correctly. When you document a process, and then use a checklist to ensure that each step of the process is completed, you are using the Motion Step Method.

How to Start Using Poka Yoke

You can break all Poka Yoke solutions down into two categories: prevention and detection.  Prevention devices keep a non-conformance from happening, and detection devices alert an operator that a non-conformance has occurred.

A good Poka Yoke device is always simple, and cheap. If they are too complicated, they are not cost-effective and they introduce the possibility of additional non-conformance. Poka Yoke devices should also be completely integrated into the process, and close to where the process occurs. Think about that online form again for a moment. When you complete an online form, you see indications of what fields are required. There may be an asterisk in the box, or the box may be outlined in a different color. This is what we mean by engineering the expectations into the process – the “prevention” form of Poka Yoke. Then, if someone skips a required field, the form may refuse to submit until the field is completed. This is the “detection” form of Poka Yoke. And each of these steps are completely integrated in the process, as well as simple, and cheap.

The 5 Stages of Poka Yoke

Step 1: Remember that everyone makes mistakes. So our job as managers is to create  systems where those mistakes can’t be made.

Any time I hear a senior executive complaining about how people should “just remember” not to make mistakes, I assume a certain lack of self-awareness. We all make mistakes. So the goal isn’t to stop being human, nor is it to only hire people with eidetic memories. People who accept this first concept become the most effective practitioners of Poka Yoke.

Step 2: Find the Root Cause. If we don’t find the root cause, we’ll end up focusing all our energy on symptoms, and implementing several – possibly competing - solutions where only one would do. If you want to learn more about Root Cause Analysis (RCA), check out this article on Root Cause Analysis.

Step 3: Think in terms of Standard Operating Procedures. Every procedure should have a standard operation, it should be documented, and the operators should be trained to it. As long as there is variance in a process, you can’t control for errors.

Step 4: Brainstorm “What Could Go Wrong” for Every Process. This is where the real work of Poka Yoke occurs. When you start thinking about what could go wrong, you start to anticipate – and prevent – the errors.

Step 5: Keep it Simple! When you come up with a way to error proof a process, challenge its complexity. The goal is to use extremely simple, dummy-proof solutions. If you introduce complex ideas, then you are also introducing more opportunities for human error!

Some of the most common Poka Yoke tools and techniques include:

• Checklists
• Form/Field Validations
• Vision Systems (visuals that reinforce the proper result or technique)
• Blocks, Barrier, and other Safety Features
• Counters
• Sensors
• Alarms
• Changes in Fixture Designs
• Changes in Die Designs

First You Solve the Process . . .

People problems are often process problems. What does that mean? It means that we humans are not endowed with perfect memories or perfect consistency. That’s why we must create processes that offset those human characteristics.

There is also a tremendous upside to this. We may not be perfectly consistent or have perfect memories, but we humans are wildly creative, and creativity is the ingredient that brings real value to a company. So, instead of spending our time solving problems and re-doing work, let’s make more time for being creative and bringing value! By using Poka Yoke, we introduce the possibility of more time for more innovation. And that’s exciting, because when we are innovating, the work is never dull, and we never feel the need to go on autopilot.

At the end of every project, we take time for reflection, during which we look for insights that will allow us to improve in the future. I like to do this with my life as well. I’ve never been one for New Year’s resolutions, because improvement should be a year-round endeavor. But I am a fan of year-end reflection, to review what I learned from the past year and what I can do better in the next.

To say this has been an interesting year is to invoke the Chinese curse. Now I understand better than ever why interesting isn’t always a good thing. Like about half of us (plus 3 million), I started off 2017 deeply unsettled about our president in specific and our national judgement in general. The 2016 presidential election weighed heavily on my assessments of others and my reservations regarding our collective wisdom throughout 2017. This is a filter that did not fade following the emotional aftermath of the election.

This exercise in looking back has been a good one for me. I am now able to see a few patterns and themes, many of which started long before the last presidential election cycle, and all of which I can use to make better decisions in the years to come.

Fear vs Courage

One of the biggest lessons for me from 2017 is regarding the battle of fear versus courage. My friend and mentor-from-a-distance, Suzanne Wade, calls this the battle of fear versus faith. I started off 2017 fearful, and that is not a familiar place for me. I hid from news for the last few months of 2016, and the beginning of the new year felt blighted, pessimistic. Then, on January 21, the women of the world gathered to march, wearing pink pussyhats and reclaiming respect and power, and I got my mojo back. I wasn’t marching that day – I watched the march in Chicago from a hospital window high above the park where the crowds gathered. And as I sat there with my mom, at the bedside of her husband who would die a month later, I remembered that giving in to fear and pessimism is an act of cowardice.

My 20/20 hindsight can see the myriad ways in which fear dominated 2017. There is absolutely no rationale that can justify the racist, sexist, elitist behaviors of Donald Trump. So why does approximately 30% of the country still support him? Fear. Fear of being wrong in the first place about Trump. Fear of becoming irrelevant (i.e., losing privilege they were historically able to count on). Fear of those who are different from them in looks, thoughts, and lifestyle. From ratcheting up tensions with North Korea to demonizing immigrants; from the Mueller investigation to Roy Moore, this was a year of fear-based decision-making, fear-mongering, and cowardice.

Like the Women’s March, the #MeToo movement was an act of courage. Insufficient to change the culture on its own, but a meaningful milestone. The defeat of Roy Moore was also an act of courage, but one that we will not be able to sustain unless we get behind issues that matter to Black women and families, and support Black women running for public office. In fact, every noteworthy act of courage this year was committed by women.

Lesson learned. In 2018 I will consciously, deliberately, daily, act from a place of courage and faith. I will rigorously reject fear and pessimism. And I will support other women even more energetically.

Selfishness vs Grace

I have long worried (and opined) that our culture is too selfish for its own good. I would like to have been wrong about this, but 2017 was perhaps the most selfish year on record. Not by everybody – I saw a lot of grace this year – but certainly among those in power. What is selfishness but a common form of narcissism? Just look at the word. To be “self-ish” is to be about the self more than about others. The recently passed tax legislation was the most self-ish economic move in a generation, and that is but one example of selfish behavior from those who were elected to represent the interests of the voters – the vast majority of whom struggle to reach or maintain middle class status.

But selfish also shows up throughout the populace. Those who would say “All Lives Matter” and “Blue Lives Matter” in response to “Black Lives Matter” are not denying that Blacks have a much harder life than the rest of us — they’re just claiming that their personal hardships are still more important. Instead of saying, “I can see how that would be terrifying to know that the color of your skin means you might die if you are pulled over for a traffic infraction or are caught running down the street,” the selfish drown out that conversation by shouting, “Well my life is hard too!! Don’t forget about me! Think about me first!” “All Lives Matter” and “Blue Lives Matter” are responses born out of selfishness.

Men who whine about not being able to be themselves at work anymore, for fear of being perceived as a sexual harasser, are being selfish. Instead of recognizing that somewhere around 50% of women have been abused in some way just because of gender, and that all women experience the institutionalization of preferred status for men, they demand their continued privileged status by claiming that addressing institutionalized gender bias is hurting them. Because, nobody wants their toys taken away – not even the kid who stole the toy in the first place.

Why do I feel that Grace is the opposite of selfishness? Because “self-less-ness” isn’t quite on the mark. I think it’s beautiful, in a Mother Theresa sort of way, but I don’t think “self-less-ness” gets us to the cultural change we need.

But Grace. Grace is about giving assistance without expectation of something in return, other than the common good. Grace is about kindness, and acting out of a sense of rightness. Grace is about recognizing that sometimes, we have something that we did not earn, and that we should be grateful for it while also ensuring that others can share in it as well. Thoughtfulness, openness to the experiences of others, and a desire for equality are all characteristics of grace. The person with grace is capable of thinking, “It’s not my turn right now. It’s been my turn in the past, and maybe it will be my turn again in the future, but in this moment, it’s not my turn.”

More grace in 2018. That’s a good plan.

Growth vs Decay

I saw this issue played out at the national level this year, but I also observed it at the industry and personal levels. We often credit the statement if you’re not growing you’re dying to Lou Holz, but the principle has been around for thousands of years. From ancient philosophers to the Bible, wise humans have long advised us to keep growing or risk decay.

Fossil fuel companies are driving bad policy related to environmental rollbacks and disruption. Why? Because they aren’t working hard enough to figure out what’s next. Although everybody knows fossil fuel sources will run out and that extracting them hurts the environment — and often, the laborers who do the work — these companies cling to their current economic models, and as a result they decay from within, affecting everything from their morality to their economic sustainability.

Small business owners are discovering that they can either grow or go out of business. To be successful, a business owner must either embrace a future of continuous reinvention or die a slow (and sometimes, not so slow) death.

And at the heart of all this decay is people. Going back to the election last year, I’ve wondered time and time again, when did people stop thinking? Why don’t people seek facts, rather than reinforcement? Why do they willingly support behaviors that any broadly accepted moral code, and even their own religious practice, tells them is wrong? The most vital place to address the growth vs decay issue is not at the corporate or community level – it’s the self.

The self doesn’t naturally grow – it requires intention and effort. Decay can happen by accident. When I moved to Wisconsin nearly 10 years ago, and stopped my every day running around a 186,000 square foot building, my body paid the price of inertia. Later, I realized my own thoughts weren’t very interesting, as I was filling my downtime by reading news on my smart phone, instead of reading literature or more philosophical works. I was thinking entirely in current events, which isn’t really thinking at all. And one night several years ago, when I started to sing to my new grandson, I realized I could barely squeak out a song because it had been so long since I used my instrument. Music had been my life until my 30s, and somehow I had forgotten to sing for several years.

How many of us are running around not thinking, not learning, not practicing? That is where decay begins, and though it seems small, it results in massive tragedies, like the Fall of Rome, both World Wars, the Great Chinese Famine, the rise of fanatical fundamentalism, and the election of people like Donald Trump.

When I was in junior high, I became obsessed with The Interior Castle, written by St. Theresa of Avila. It was my introduction to the idea that an interior life was essential to a life well-lived. As an adult I have re-read the book many times, each time becoming more aware of how easy it is to let one’s interior life atrophy, and reinforcing my understanding that growth begins inside. 2017 reminded me of the importance of commitment to conscious growth, even when it seems exhausting, because the opposite is untenable. Plus, I need to get my weight down and my vocal range back.

Apathy vs Love

My dad likes to quote Elie Wiesel’s statement that the opposite of love isn’t hate, it’s indifference. It’s a potent motivator on those days when you just don’t have the energy to face the issues. Lately, I’ve been hearing people say, “I’m just so tired of caring so much. It’s exhausting.” But a life without convictions and passions is a life not lived (see above; growth vs decay).

A dear friend, now departed, once admonished me for being so political on social media. She was genuinely concerned that I would drive potential clients away because of my politics. I gave her concerns serious consideration, because I respected and trusted her. But ultimately, I continued sharing the things that matter to me, business-be-damned. Why? Because if I have to hide my beliefs to make money, then I’ve fallen on the side of apathy (and fear, and selfishness, and decay).

Perhaps more than any other shortcoming, apathy defines our current society. Unless an issue has direct and immediate impact on one’s self, home or paycheck, a plurality of people appears willing to ignore important topics that ultimately will affect them.

Of course, the hard part of committing to a life of love is that it must be applied to everyone. Just spend one day trying to see the face of God in everyone you meet, online or in person, and it’s clear that love is a radical sport. Click to Tweet

Now, I don’t see love as a Pollyanna-ish thing. To me, good love, substantial love, readily coexists with argument, disagreement, and directness. Truth is often brutal, but it’s still love. I don’t think love has to come with sugar-coating or baby-talk. I don’t think we need to sell it when we love.

People who never talk about hard things, who don’t tell one another important truths, who don’t call out bullshit when they hear it, they’re not being kind to each other — they’re being apathetic. It’s much easier to get along superficially. Teflon isn’t love, it’s a poison.

From Reflection to Action

The more I think about 2017, the more I realize the state we are in now (for those of us who worry that we are in a state), is due to failures at the level of the individual. When we cruise through our lives excessively concerned with our selves, preserving our energy at the expense of the common good, gorging on gossip, drama, and near-news instead of thinking and learning, looking for approval and — even more insidious — approbation, we end up where we are now.  So, what did I learn from this review of 2017?

• To cultivate Courage, because facing things head on leads to positive change.
• To practice Grace, because people who live in communities must consider the wellbeing of the community.
• To commit to personal Growth as if it is a workout that must make you sweat to be worth it.
• To act out of Love, knowing that real love is neither passive nor easy.

I also know that I must attach these principles to every layer of my life. It’s not enough to Love at home, be Courageous at work, and practice Grace at when doing something charitable. I have to Love my community, commit to Growth at home, be Courageous online, and practice Grace at work.

2017 was a pretty tough year. But we arrived at this difficult time after years — maybe decades — of personal choices. So I’ve decided to own it, and invite others to join me. I won’t make bets on how fast we will change things, but I know that we can. And 2018 is as good a time as any to start.

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or . . . The Shin Bone's Connected to the Thigh Bone

Getting to the root cause of problems can speed up the solutions. Even better - it can keep those problems from spring up somewhere else!

It’s Monday. You’ve poured your first cup of office coffee, you’re sitting at your desk with the steaming mug in your hands, ready to face the week. You open your email and . . .

The email bomb. Your boss, demanding to know why production has stalled on your main product line. AGAIN. You sit there and sweat as your coffee goes cold and your week begins to look bleak.

Nothing is more upsetting – to bosses or managers – than problems that repeat themselves. The first time a problem occurs, reasonable people are accepting about it. After all, sh*t happens. But when problems reoccur, patience runs out. And it should, because errors are costly and keep us from focusing on creating new value for the company.

Typically, when the same problem occurs over and over again, it’s for one of these reasons:

1. The root cause was never identified, so each time we solve the problem we are actually only solving a symptom of the problem.
2. The root cause was identified, but we failed to do the 2^nd step of problem solving, which is error-proofing the process from that time forward.

Lean Manufacturing offers two excellent tools to avoid that Monday-morning, coffee-cooling, temper-raising situation. Root Cause Analysis, and Poka Yoke.

Root Cause Analysis

Root Cause Analysis (often called RCA in Lean) is one of the pillars of a quality system. A commitment to RCA can help a company quickly reduce errors and introduce more quality throughout its supply chain. There are four basic steps in RCA:

1. Collecting all the information about the problem (which we will refer to as a non-conformance). Every little detail – even the details that seem inconsequential!
2. Creating a visual map of the causal factors – the steps, missed steps, and errors that led to the non-conformance.
3. Accurately identifying the root cause or causes (sometimes there is more than one factor at the root – but rarely more than three).
4. Creating a solution that solves the root cause, and developing a corrective action plan.

Collecting the Information

5 Whys

The simplest way to collect information about the causes of a problem is to ask questions. But these questions should be structured as a true interrogative technique – and not just a random set of questions. In fact, when you ask questions in this way, it can be diagrammed.

To do a 5-Whys approach (and the result may be achieved in 3 Whys, or 10 Whys – the approach is named 5 Whys because the theory is that most root causes can be uncovered in 5 or less), start with the most obvious problem.

• We are scrapping a lot of engravings due to poor quality. Why?
• The patterns are too deep in some areas and too shallow in other areas. Why?
• The mirrors are not in perfect alignment. Why?
• We did not do proactive maintenance when we moved the engraver to a new workspace. Why?
• Nobody thought of it, because there is no process in place to ensure machines are maintained after being moved.

Solution: Any time an engraving machine is moved, there must be a process in place to ensure that maintenance is done. Further discussion of the topic would probably led the group to decide that the machine merited regular preventive maintenance – perhaps quarterly.

How do you diagram this?

Why Do You Need Visual Maps?

Before we go on to the next RCA tool, let’s talk about visual maps. Visual maps are an important element of problem solving. When we represent information in a visual manner, we engage more of our brains in understanding the issue. Visual maps require us to structure information, which helps us to better comprehend, synthesize, and remember the information, which leads to generating more and better new ideas. In other words, making mental information visual helps our brains do a better job!

Fishbone Diagram

Another very useful RCA tool is called the Fishbone Diagram (trivia: This was originally called an Ishikawa Diagram). This is sometimes referred to as a Cause-and-Effect Diagram. The Fishbone is more useful than 5 Whys when you are dealing with more complex problems. As you will see, it can take into consideration many more variables than the 5 Whys approach.

When you first look at a Fishbone Diagram, it may seem complicated. But it’s actually very simple!

As with the 5 Whys, you begin by asking, “what is the problem?” Then, you diagram it like this:

The next step is to categorize the causes. For example, missing customer deadlines can involve a lot of different areas, including:

• Sales Process
• Production Process
• Purchasing Process
• Warehouse (pick/pack/ship) Process

Place these different cause categories on the Fishbone Diagram like this:

Obviously, we don’t have enough detail yet to solve the problem. So the next step is to brainstorm the contributors to the problem. This part of the Fishbone will likely look like this:

The team should continue to brainstorm the problems, until all the possible causes have been identified. Very complex problems may go to several levels of hierarchy. You can use different shapes and colors for the different levels to make the diagram easier to read.

Once the diagram is complete, it will be much easier for the group to identify all root causes and brainstorm solutions for them.

 Conclusion

Getting to the root of problems is the only way to cure them. Consider the ramifications for your health. If you suddenly experience pain on the left side of your chest and numbness in your left arm, you don’t try to stretch it out or lay down and take a nap! You already know that these are signs of a heart attack, and you go straight to addressing the core issue (call 911!). You don’t spend time worrying about your sore arm. But what about medical emergencies you don’t already know about? The difference between a good medical outcome and a sad outcome is often based on getting to the right doctor who can quickly diagnose the core issue and treat it.

This is also important in business. Use these Lean tools to get to the root causes of problems. You’ll be solving another medical problem as well . . . the anxiety attacks that occur when you hear a dreaded problem has occurred again.

In next week’s Lean article we’ll discuss Poka Yoke, or how to make problems stay away.

As a writer, I value the editors in my life. They find my errors, recognize when I need to clarify, and push me to be better. An excellent editor approaches the task without self-involvement or ego - she seeks excellence for the sake of excellence.

Back when I was first studying the craft of writing, my professors drilled into me the importance of loving - and not resisting - the red pen of the editor. It wasn't easy at first, but as I began to see how much better the edits made my writing, my appreciation grew.

Once editing is an essential part of your life, you seek its benefits in other areas. We all need the impartial eye of someone we can trust, someone whose discernment is impeccable, to bring us thoughtful critique. A trusted life-editor - a mentor - can help us recognize when our judgment is off, when we are exhibiting less empathy, more ego, or reduced awareness of how we are behaving. Truly honing the self requires the insight of others.

Of course, not everyone can be trusted with this role. If you've ever had the experience of someone criticizing or manipulating you to do something 'for your own good' when clearly they were driven by selfishness, greed, or insecurity, you know what I mean.

When we look for relationships in life, this quality should be part of our consideration, and building the trust necessary to give and take the editing should be part of the commitment. This is also true of the mentors in our professional lives. We often perceive a mentor to be someone who coaches us on skills, but the best mentors coach us on behavior, professionalism, accountability, and maturity.

I have been blessed with excellent editors in my personal and professional life, and as the decades go by, their advice and guidance has become better and better. If you do not have these editors in your own life, its time to seek them

The process starts with you; you must evaluate your ability to accept feedback and work on your 'editability'.  We can only lay the groundwork by ourselves though, cultivate the willingness. The sometimes painful, sometimes revelatory, always challenging work of being edited is something we hone over time, and only with practice.

Of course, no successful relationship is one-sided. It is essential that we cultivate the ability to be a thoughtful, not self-interested, non-judgmental editor for others as well.

I've learned to love the red ink in my life, though on occasion it can still be hard to embrace in the moment. But at the end of the day, as my self-review rolls by in almost cartoon form, with red scratch-outs, redirects, and suggestions appearing in the margins, I enjoy the peace of mind that comes from knowing that, though one gets no re-dos, one need not suffer from repeats.

You find yourself with an extra half hour at your desk and you know you should spend some quality time getting the view from above the forest, thinking about your business. But you don’t know where to start. You sit there, thinking about thinking, and a feeling of dread hits you.

Don’t despair, you're quite capable of strategic thinking. You just don't know how to get started. That’s when it’s time to make a list.

Oh, now you’re excited! You know how to make a list. But before you start, listen up. This is not a to-do list. If you write a to-do list, you’ll be back among the trees. Use your list-making skills to create new things to think about.

Start with Big Questions

This type of list starts with a question. Here are some really good ones (there are dozens more):

1. Why do my customers buy from me?
2. Where else do my customers spend their money?
3. If I could do anything at all with my business, what would I do?
4. What questions do I have about running a business (that are still unanswered)?
5. What mistakes have we made in the past six months?
6. What questions do our customers regularly ask us?
7. What would I like our website to do that it isn’t doing yet?
8. What do I wish my employees knew or could do better?
9. Why do my customers buy from my competitors?

When you ask yourself a question, you immediately engage your brain. It will leap at the opportunity to go into solution mode. Instant strategic thinking! In this brainstorming phase, just write answers to your question as fast as they come to you. Don’t question or challenge any of the things you think of – just go with the flow until you find yourself slowing down.

Next, review each item on your list and think about whether or not it suggests an additional item or two. This takes you to a deeper level of thinking and will yield a few more items to put on your list.

Examine Each Item Closely

Now concentrate on each item on the list. Think carefully about what you could do to better understand, solve, improve, address, or build upon each of the items. This type of thinking is also strategic, taking you out of brainstorming and into problem solving. You don’t have to have all the answers to each item yet; you just need to identify what you can do to get answers, or what steps you must take to better understand something.

Prioritize

Last, prioritize your list. Some of the answers from your initial brainstorming will be much more important than others, so they should go at the top of your priority list. You may even find a few that have little or no value, so feel free to erase them entirely.

What do you have now? A to-do list. But it’s a strategic to-do list, designed to help you focus on things that have real impact on your business success. Spend the next several days, weeks, or even months working through the items on your strategic list.

And next time, don’t wait for a surprise opening in your schedule. Schedule time in your calendar to think strategically about your business at least once each month (I prefer weekly). Now that you know what to do with that time, you’re bound to come up with some exciting plans and changes that will take your business to the next level.

It was all over the news this month - Verizon Communications will buy AOL, Inc. in a $4.4 billion deal. Yes, this is big news for investors and Verizon competitors, but does it matter to you? It certainly does, and here's why.

Content Content Content (but this isn't the main reason)

The mobile market, dominated by Verizon, Sprint and AT&T, is fighting harder and harder for market share now that nearly everyone who wants a smartphone has acquired one. So how do they grow? They grow by competing in two areas: content and advertising. And the reason that content and advertising matter to the big mobile companies is that content and advertising matter to consumers. In 2013 (the last time we have numbers for this statistic), less than 35% of smartphone users reported they used their phones to make phone calls. You can see why that matters to the big mobile companies. But it also matters to you. Because what are they doing on their phones? They are accessing content.

AOL may have fallen off your radar, but one of the reasons they matter to Verizon is that they own some big content providers, like Huffington Post and TechCrunch. If Verizon is willing to spend $4.4 billion to acquire a company that looks like a has-been, you can bet your lunch money that they've studied this acquisition and decided it makes sense to them. They are betting that consumer hunger for content will only continue to grow. Sure, they could be wrong, but the folks at Verizon have been very smart so far, making less mistakes than your average bear. So tuck this in your idea bank: content matters now and it will matter more in the future. Ask yourself how you can participate in the content marketplace in the years to come.

Advertising Relevance

Another thing that AOL has and Verizon wants is the ability to sell and serve ads. We all know why selling ads matters. But what about serving ads? 

Think about this: The last time you considered buying advertising for your business, did you think about going to Verizon? Next time, you should. AOL earned nearly $1 billion last year from advertising revenues on sites that it owns, and another $856 million selling advertising for third party sites. That's a lot of consumer eyeballs. Even more important, the technology that AOL has developed for selling and delivering ads is very advanced, enabling them to slice and dice and target consumers better than most other advertising companies. Because of AOL's innovations, using technology to manage advertising is not only making targeting better, it's lowering the cost of advertising overall. Expensive human management has been replaced by algorithms that can decide in a split-second which ads to show each time a web page loads. 

Now that you're competing with businesses all over the world (and you have been, for much of this past decade), you can't just sit around and wait for consumers to remember you or to find out about you. You must advertise. But today's consumers are busy and distracted and they have no patience with irrelevance. You can get their attention though, if you catch the right people at the right time with the right message. Verizon is betting big that AOL's advertising technology is worth a lot of money. You should be betting that too. If you're not doing so already, start thinking about how your business can stretch its advertising wings and use the internet to reach more relevant consumers on their phones and tablets. 

Pay Attention to Video

Verizon believes that video will be one of the primary reasons people use smartphones in the years to come (AT&T believes it too). Verizon has already developed plans to launch a video service specifically geared to mobile devices. Enter AOL, which has created some nifty tools for delivering video advertisements. Their technology makes it easier for ad agencies and brands to enter the video advertising space.  Why does this matter to you? The consumer appetite for video seems to have no limit. If you're not already looking at ways to use video for your advertising, it's time to start. The tools to shoot and edit video are getting less expensive all the time, but it takes experience and skill to pull off video offerings that appeal to consumers.

When a solid company like Verizon, with deep pockets and lots of research staff, decides to invest in online advertising delivery, video, and other content, we need to pay attention. They have done the analysis and decided that mobile content is where all the consumers are going to be in the next few years. If they're right, then small business needs to be there too.

Several recent studies are practically shouting at the jewelry industry to reevaluate our behavior and prepare for the future. We've relied on Baby Boomers to buy our luxury goods for so long, we've practically forgotten that they would eventually age out of the major acquisition stage of their lives (which, admittedly in the case of the Baby Boomers, was enormous and economy-building).

What are the Studies and What are they Saying?

The first study, by McKinsey & Company (A Multifaceted Future: The Jewelry Industry in 2020), essentially predicted that the jewelry industry would continue to consolidate and would start to mirror the changes in the apparel industry, which means more intense brand focus and a blurring of fine and fashion. Stores with a single strong brand identity and focus will be the clear winners. This points to younger buyers, who are more into the experience of a specific brand than the experience of encountering many high-end brands in one location. The department store jewelry experience will wane and the Todd Reed Studio store in Boulder, the Alexis Bittar Studio  stores in New York, Los Angeles, San Francisco and Chicago, or the Greenlake Jewelry Works experience in Seattle will rise.

The second study, by Unity Marketing and summarized in this article on Rapaport's Diamonds.net, says that we are at at tipping point in branding and marketing. The study asserts that older consumers - long depended upon for their brand-buying habits - have reduced their spending, and that luxury marketers need to adjust their marketing, branding, and channel behaviors to appeal to the younger buyers taking their place.

So what does this mean? Several things.

1. Respect the new consumer. Some things never change. Just as the parents of Baby Boomers were mystified by their children and found them to be disrespectful, responsibility-averse, and entitled, the Baby Boomers are laying the same labels on the next generations. If you're stuck in this rut, dig on out, because the labels are more a product of Baby Boomer age than of younger generation reality.

2. Learn about the new consumer.

1. Millenials are more informed than any prior consumer generation, which means they have done their research before they come to the sale, and they know a lot - perhaps more than most sales people - when they arrive.
2. They care less about social conventions than any prior generation - which means that they don't buy for status. If they want something, it's to satisfy themselves only, which means everything they buy is far more personal. "But wait!" you say. "They run everything by their friends first. Isn't that status seeking?"  Actually, it's not. It's collaboration. This is the most collaborative generation we've ever met, and their opinions matter to one another. They share, borrow, rent, and trade as a way to spread the enjoyment and the wealth.
3. They pride themselves on doing more with less. They search for the right deal, the right product, the right timing, the right experience. This is true in their jobs and it's true in their purchasing behavior. This generation has been labeled entitled, but that's not accurate. They just don't settle.
4. They value experiences. This is the first generation that will blow an entire paycheck on a meal and then live on Ramen for the rest of the month. It's not about the food, it's about the experience, and they don't want to wait until they are retired to have experiences.
5. This generation isn't waiting for luxuries. But their acquisition of luxuries isn't systematic, and it doesn't follow the same life patterns (school, marriage, children, luxury acquisition) as their parents did. If they want something now, they find a way to acquire it now. But see the four points above regarding what motivates them and how they buy it.
6. This one should go without saying, but remember that this generation doesn't perceive any difference between internet marketing and billboards - it's all communications to them. The time to perceive a difference between traditional marketing and new/internet marketing is over.  Similarly, whether a store is online or brick-and-mortar, it's all shopping to them. Sales and marketing channels are forever changed, and you need to be out in front of that.

Now What?

I have a few ideas for you, but first, I want you to go back to the previous section of this article, and read each bullet again. After each bullet, ask yourself, "how does my product offering, my brand, my store look to the new consumer in light of this piece of information?" Try to see it through the new consumer's eyes, because that young person is your next patron.

Now let's start with the basics.

Mobile computing. If your store/brand/offering isn't readily available to the new consumer on her mobile device, there's a good chance she won't see you at all. This next generation of shoppers does most of her computing right on her phone or tablet. If your website doesn't automatically reformat itself to be mobile friendly on any device, this new consumer will quickly dismiss you as out-of-touch and a waste of time.

Your Brand Experience. The new consumer mingles entertainment with shopping. Entertainment can be a variety of things, from educational and informative to interactive. Your store, your website, your social media presence, your radio ads, your magazine ads - all of these methods of communication must present a single, clear brand message that engages the new consumer's interest and emotions.

Unfortunately, there is no pat answer to how to do this. In fact, pat is the antithesis of the new consumer. To define your brand experience, you must dig deep into your identity, purpose, and meaning as a brand. Figure out what it is about you that consumers identify with - and what you want them to identify with. You won't appeal to all consumers, and that's the point. You don't need all the consumers - you just need the right consumers. Figure out who they are, and how to communicate with them, and you will discover which brand experience is resonant. This work can only be done by you. It can be guided by someone who knows how to do such work, but you are essential to it - it can't be provided to you.

Your Sales Organization. The new consumer is coming to the sales cycle late. What does this mean? It means that in the past we were able to guide the consumer through the sales cycle but those days are gone.. Before the internet and the uber-informed new consumer, most pre-purchase research was done in the store, aided by a skilled salesperson who was the expert in the product area. Today, consumers conduct significant research online prior to entering a store. They have already availed themselves of product reviews, user comments, technical reviews, design critiques, and alternative purchase options before they approach your sales organization.

At one time, a salesperson asking the question "How may I help you?" was making a an offer of help that was likely needed. Today those words are simply an annoying form of hello.  The only way to impress the new consumer with your sales organization is to be even more informed than them - and that requires work, and energy, and curiosity.

Your sales organization must have insight, knowledge, and stories that the consumer can't find anywhere else. The help the new consumer wants is not small talk and it's not a pitch - it's genuine assistance, even when that means getting out of their way. To the extent your sales staff is a contiguous, meaningful, seamless part of the overall brand experience, the new consumer will accept and welcome their assistance.

Retail is Evolving

A new retail experience is coming, one that combines the best of ecommerce with the best of bricks-and-mortar. It's the next logical thing. Ecommerce has taught mighty retailers like Amazon more about their customers than any other retailer has ever known about its customers before, and this information has been used brilliantly to tailor offerings, engage visitors, and close sales. We are rapidly approaching a time when consumers don't know retail without ecommerce as one of the options, and along the way consumer expectations of both are going to both evolve and blend.

If you're not heavily engaged in—invested in—ecommerce, you won't be part of witnessing first-hand what it means to serve customers in that way, and you won't have the necessary insights to take your business to the next level . . . whatever that may be. So be sure to include ecommerce as part of your business model now, doing your best to offer your products and services digitally and learning everything you can.

Keep Your Business Fresh

It's always a brand new world, whether we are talking about generational shifts in consumer behaviors, or technology change, or just next season's colors. The stakes may seem particularly high to you right now, as you take steps to ensure your business is not left behind, but in fact, the stakes have always been high. Static businesses do not thrive, and they never have.

The recent studies about changing consumer behavior are a boon to us, because they force us to stop and think about the business we need to be to stay relevant and profitable. Embrace the change! There's more where that came from.