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Voltaire wrote “Le mieux est l’ennemi du bien”, or “perfect is the enemy of done”.

Have you ever been so overwhelmed by the enormity of a project that you are too paralyzed to even start? More often than not, we are bombarded by tasks and projects from all areas of our lives. It is those who have the ability to prioritize and then begin chipping away who will be successful in the end.

Is the end in sight?

To further confuse the matter, it’s rare that a project has a clearly defined endpoint. So when to deliver the goods? If perfection is your goal, the recipient of your amazing creation may not live to see the unveiling. Your product or service is of no use to anyone if it doesn’t exist, so whom is perfection serving?  If it is functional, roll it out. 

The value in “good enough”

Most things in life are iterative, and thus offer revenue opportunities related to each additional unit of value you provide.  This isn’t a new concept. There are many examples of companies who follow a strategy of continuous improvement:

• Microsoft rolls out new versions of its Windows, Office and other products;
• Apple make a big splash about its annual rollouts of new versions of its iPod, iPhone and other products;
• Car dealers offer new model years with varying amounts of differentiation.

After all, a product that can’t be improved is likely obsolete or easily copied. Why not continue to grow your business by offering your clients your commitment to continuous improvement?

Voltaire offered us a way to succeed in this crazy busy world we live in.  He told us that the road to perfection is a journey; one that requires stops along the way.

A couple of weeks ago I went camping. I haven’t camped in over 2 decades, so I needed a tent.  After checking a couple of placed on line, I decided to go with the Mountain Equipment Co-op Wanderer 4.  The tent was thoughtfully constructed with a full fly and lots of useful features. But it wasn’t until the last night of the camping experience when a deluge struck that I realized just how important quality was to me.  Despite being stuck in a tent during an extremely heavy rainstorm, we were dry.  The tent outperformed my expectations.  Looking back, the other cheaper tents I saw wouldn’t have performed under those conditions.

Cheney Window and Door is another example of quality and service.  When it came time to replace the windows and doors in our home, we were thrilled with the quality of their product, but more important was the service we received.  The installer was second to none; he took a great deal of care and added some extra touches along the way.  The owner also offered some great renovation advice, and pointed us in the direction of our next successful venture, soffit and facia.

Now this provider was a long-time installer who was preparing to retire, but because Cheney gave us the recommendation, he took our job.  Again, we delighted with the entire experience. 

The final exterior improvement on our list was paint. I knew that it would be tough to find someone who met my standards, having done my share of painting.  A friend had recently had some work done by a painter who came highly recommended to her, so I took a chance.  His work was amazing.

Pricing for Quality

Could I have paid less for these services? Yes.  But I opted for quality, and in the end with a job well done, I was further ahead.  Will I shout these companies’ praises from the rooftops?  You bet!

In a world where all too often we are disappointed by the quality of the goods and services we purchase, it is nice to know that excellence still exists.  This fact provides an opportunity for businesses: customers are willing to pay for quality and great service.  But make sure that you deliver, because bad news travels fast.  My neighbours thought they were buying and paying for quality and service but instead received a nightmare.  I won’t be contacting that company for their services any time soon.

Whether you are an employee, business owner or consultant your reputation matters.  Despite its importance, it isn’t entirely under our control.

The scapegoat

Maybe you are an employee in search of a new challenge. You move on your new job and in doing so you become the scapegoat for problems at the old one. It can be one of the most frustrating, helpless situations.

Or perhaps you are an external consultant. After accepting what seemed like an interesting contract, you discover that you’ve been hired to “prove” an unpopular course of action is appropriate; deflecting criticism from the management team. The added bonus being that if the recommended option doesn’t work out – it’s your fault. 

For service providers whose product is largely intangible, reputation is one of their most important assets.  However, the quality and achievement of their projects’ goals are subject to opinion.  With the qualitative nature of their vocation – reputation can be at risk.

Managing your reputation

While we can’t control what is said about us, we can take measures to improve it.

1. Before starting a contract, take the time to meet with the client and determine their goals. Develop meaningful, quantifiable indicators and milestones that will clearly demonstrate the client’s objective has been achieved.
2. Strive to deserve a positive reputation.  Always do your best to provide a quality product that meets the client’s needs.
3. Put yourself in their shoes.  How do you feel when a co-worker leaves or a consultant moves on?    All sorts of emotions from loss to thankfulness can be in the mix.  Keep in mind that these emotions are in play, and be ready to respond to them with sensitivity. Assure them that you are moving on to new challenges, not running from a bad situation. Point out the positive aspects of the job or contract that you’ve enjoyed, things you’ve learned, and positive memories that you will carry with you.
4. Before leaving, ensure the transition is seamless.  Document your work, put your files in order, and offer to train your replacement.
5. Request a wrap up meeting where you request feedback from the client and confirm that the contract goals have been met.

Confirm in your client’s, coworkers’ or boss’ mind that you achieved their goal and you did a good job.  And keep in touch.  After all, these are folks you shared time with and perhaps a few laughs along the way.  Besides maintaining some valued relationships, it might even mean repeat business down the line.

Further to our earlier post “Accounting for Changes to GAAP for Canadian Private Companies“, the Canadian Institute of Chartered Accountants (CICA) has now released its guide to the new Private Enterprise GAAP.  Resources, FAQs and other information about the new standards can be found here. The CICA’s guide is also available here.  Note that when you save this guide, it has an .aspx extention which is hard to open.  Simply change this extention to .pdf and the file will open as a regular PDF file.

Happy accounting!

Perhaps inspired by the recent healthcare debate south of the border, the economics department at TD has decided to turn its attention to healthcare in Ontario.   Last Thursday, they released a 34 page treatise called “Charting a Path to Sustainable Healthcare in Ontario” which included ten recommendations to “to restrain cost growth without compromising quality of care”.

Unfortunately the fine folks at TD Economics have missed the mark.  Having more than a few years of healthcare experience under my belt, I’d like to comment on some of their assertions.

Firstly, I disagree that this report contains new ideas.  I would also question their assertion that their recommedations could be implemented in a 1-5 year time line.  Anyone who has worked in the Ontario healthcare sector knows that change happens VERY slowly.

I do however whole heartedly agree that the “current governance structure for the province’s hospitals should also be looked at.” I would start with the Local Health Integration Networks (LHINs). 

The report also encourages an expanded private presence in Ontario’s healthcare sector, yet they also recommend that physician compensation be shifted towards salaried remuneration.  Pharmacies are also largely private; yet curbing generic drug costs has been a momentous struggle for the province.  Is more private sector influence the answer?

I’d like to address six of the ten proposals for reform in the report.  (The remaining four are already being addressed by the Ministry.)

1. Expand information technology use in the system.

• The report points to a relative lack of electronic records in physician offices as impacting health system performance.  However, electronic health records created by a physician are the physician’s private property, and not subject to Ministry performance evaluation.  The billing information obtained by OHIP when a physician requests payment is limited to OHIP #, tombstone information, billing code and perhaps a diagnosis.  Electronic health records in hospitals already exist, and are used for analysis by hospitals and the Ministry of Health and Long-term Care (MOHLTC).
• An increase in data collected is only worthwhile if the information created is material, and results in improved quality and/or decreased cost.  Case in point, how many people have hospitals hired to collect wait time data, none of whom contribute to front line care?  Wait time designated surgeries have crowded out other types of surgeries.  Stories of patients driving themselves to their own cataract operations signal that supply outweighs demand.
• Another example is the recent expansion of the Ontario Healthcare Reporting Standards (OHRS) to include the nursing home sector.  Is this increase in the detail of their reporting, which will require hiring more office staff going to yield better frontline healthcare? If the expansion of OHRS in the hospital sector is any indication, I’d say no. 

2. Establish Commission on Quality and Value for Healthcare

• I was really surprised that a bank would make this recommendation! Giving the Ontario bureaucracy permission to study something is like giving them permission to breed.  At about $125k per analyst for salary and benefits, it is yet another expense that doesn’t contribute to front line care.  As the report points out, many arms-length bodies and academic research institutes exist in Ontario who have capable health researchers and policy analysts.  A commission is an unnecessary expenditure of tax dollars.

3. Alter the way doctors are compensated

• As mentioned earlier, the report’s recommendation to move physicians to salary and away from fee-for-service is contrary to its desire to increase the private sector presence in healthcare.  Physicians are private providers after all.  The authors are correct in pointing out that salary based service provision will lead to gaming of the system by physicians as pilot projects have indicated, and will require more data to monitor physician activity. This in turn will require additional bureaucracy and IT systems to create the data, thus reducing any gain to be had from the suggested changes.
• It seems that the report implies that a physician’s chosen care plan may not always be based on the patient’s best interest.   To imply that a physician would provide a service or perform a procedure on a patient that was for reasons other than appropriate patient care is a serious claim. One the Ontario Colleges of Physicians and Surgeons and Family Physicians are in place to determine and address.

4. Change approach of funding hospitals from a global budget system to one based on episode of care

• First.  Diagnosis-Related Groupings (DRGs), the U.S. acute care grouping methodology is not use in Canadian hospitals. Our equivalent is known as Case Mixed Groups (CMGs).  See the following link for a history on this point.
• Second. MOHLTC has recently announced a new hospital funding methodology to be rolled out April 2011.  While not episodic based, the new method is patient based and more sensitive to demographic and other factors faced by each hospital.
• A change to episodic-based funding would require the CMG methodology for acute inpatients, along with a host of other groupers that exist for ambulatory, chronic, rehab, and mental health patients, to be improved upon.  One reason would be that these measures do not currently adjust for the severity of a patient’s condition, and thus the hospital would not be accurately compensated for the episode of care. Also, these grouping methodologies are based on average actual historical performance, not on best practice, quality or efficiency. 
• Even with these improvements, setting up an episode-based payment system would be infinitely more difficult to accomplish than any system in the financial sector.  MOHLTC’s Assistant Deputy Minister Adalsteinn Brown is famous for his illustration of the complexity of MOHLTC data.  It demonstrates just how completely overwhelmed the Ministry is by the data it already has.  
• To further convert to episodic-based funding not only includes costly IT systems (the healthcare system is littered with failed IT projects), but additional labour as well – none of which will contribute directly to frontline care.

5. Establish pre-funding for drug coverage

• This proposal seems to have its incentives confused – It uses CPP as its structure of choice, which we contribute to and see as a good thing to collect on.  If a seniors’ drug plan were structured in a similar manner, would we want to live a longer, sicker life so we could get our money’s worth?

6. Incorporate a healthcare benefit tax into the income-tax structure.

• The report effectively talks itself out of this idea when the inequities and risks to individual health are considered.

While the document is a good primer on some of the issues facing the healthcare sector today, it amounts to what Charlie Munger referred to as “chauffer knowledge”.  I know from past experience as a senior economist that TD Economics is a fine group with a great deal of analytical smarts.  I think their talents could be more productively applied however to issues of a more financial nature – perhaps in tackling the (less complicated!) problems currently facing the Euro zone.

Remember the days of Atari and Coleco? You’d buy a game cartridge or a hand held game like Pac Man and play it, no more complicated than that. Since those days Sony among others has taken the next step in creating a new gaming experience for the user, in return for added revenue opportunities.

The internet and onboard memory offer an opportunity to further capitalize on gaming enthusiasts’ desire to answer the question “what if”.  Through its PlayStation Store, Sony offers additional outfits for characters; additional cars for your favourite racing game; and if you don’t have the time, skill, or interest in mastering each level of a game it’s no problem because for just $5.99 you can unlock those challenges and play your way through the game.

One popular PS3 game, “Little Big Planet”, which features a character known as “Sackboy” has 106 add-ons available; only a handful of which are free.  These add-ons are mostly costumes which your Sackboy can wear and virtual stickers which you can collect. These range from $0.99 – $2.99.  The more costly add-ons such as level packs at around $5.99 add extra levels to the game.

Cross promotion of games is pervasive throughout the PlayStation online store. The day ModNation Racers was released, the store offered a $1.99 ModNation Racers costume and stickers add-on pack for Little Big Planet!

Coming from a generation where buying the game cartridge meant that you owned the whole game, I can’t help but feel that this new generation is getting ripped off.   But in a way, it’s like being able to find out what happened next after a movie ends and perhaps even write the next chapter. 

Sony’s PlayStation systems are an example of what additional revenues can be achieved when you view a product not as an end result, as the beginning of a longer term relationship with its user.

What impression does your website make? Does it imply credibility and quality? Is it up to date?

It amazes me how many small businesses aren’t making their website work for them.  I find this particularly true of restaurants.  Websites are such an easy way to tell potential customers about your business.  If a customer drives by your restaurant or someone recommends it, they will probably want to check out the menu or location by visiting the website, only to fine that it either doesn’t have a website, it’s hard to find, or it isn’t up to date. 

Here are some handy tips to help customers find your site, and keep it current.

Seek inspiration from websites that you admire

Take a good look at your website and compare it to others in your industry, or websites you really like. Once you’ve found a few, look at their code to see how they achieved it.   To see the code, in MS Explorer click on “view”, “source”.  The key here is inspiration not plagiarism.  Make your website your own.

Keep true to your brand 

What colours and font styles have you chosen for your logo, signage, menus, etc?  They should be consistent across all mediums including your website to keep your brand consistent and easily recognized by your customers.

Meta data – a search engine’s best friend 

What is metadata?  Metadata is data about data.  It lets search engines such as Google, Yahoo and Bing understand what your website is about.  This is important because not everyone who is interested in your product or service will know your website address. You will want search engines to be able to display your website to those searching for it.

The key pieces of code you want at the top of your website’s home page are as follows, with examples from our website:

Webpage title:  The title is more than just metadata, in that it appears at the top of your web page.  This should be the name of your website, and the purpose of the page they are on. For example: <title>Economic Insights Consulting Inc.| Pricing Specialists</title>

Keywords:  These words are indexed and used by search engines and compared to search criteria entered by users.  For example, our keyword meta tag is: <meta content=”Pricing Strategies, Billing Strategies, Strategic Management Consulting, Management Accounting, Health Services Consulting, Canadian, Toronto, Oakville, Ontario, Economics”/>

Description:  This is the information provided about the website that is returned to the users.  Ours is as follows: <meta content=”Economic Insights Consulting Inc. is a Strategic Management Consultancy located in Oakville Ontario Canada which offers Pricing Strategies and Strategic Management Consulting Solutions.”/>

Let search engines know you exist

Don’t wait for search engine robots to find you, tell them where you’re at! Submit your site to Google and other search engines.  After all, you want potential customers to find you, right?  Here are the links to the pages that you can submit your web address to.  After a few days, the search engine will index your website and your customers will have an easier time finding you.

• Google
• Yahoo
• Bing (MSN)

There are also sites that will do the submission to multiple search engines for you.  Just do a search on “submit URL”.

Keep it current

Nothing says out of date like a copyright at the bottom of your website from 1999.  Updating this section of code is as simple as changing the year on an annual basis.  It is even simpler if you have a php footer file.  Click here for code that you’ll never have to revisit.

Resources

Web designers come from both coding and graphic design disciplines.  The following resources tell the website development story from both of these perspectives.

Clark, Andy. “Transcending CSS: the fine art of web design”, Berkley: New Riders, 2007.

Castro, Elizabeth. “HTML, XHTML & CSS Sixth Edition”, Berkley: Peach Pit Press, 2007.

Once you have a website, maintenance doesn’t take much time at all, but you do need a few pieces of software.

• An editor program.  Microsoft Expression Web 3 is about $110, if you have a licensed copy of Microsoft Office. A free trial is available as well.
• FTP software. This software will allow you to load your updated files from your computer to the external server where your web files reside.  Free FTP software is available at C-Net.

If tinkering with your website isn’t your cup of tea, by all means hire someone to maintain your site.  Now you know a few more ways to ensure your site is working for you.

When the Ontario government hands them lemons, Loblaw will make lemonade.

Loblaw has crunched the numbers and anticipates that they can still come out on top despite the low margins on generic prescription sales resulting from government reforms.

A new strategy

Loblaw announced on May 4^th that they will extending their hours and services at most of their 500 in-store pharmacies, and more than double the number of onsite medical clinics to capture customers who are shopping around for a provider that offers the service they seek.

This is thanks to the droves of customers they predict will come their way from smaller non-diversified pharmacies who can no longer make a go of it, and larger players such as Shoppers Drug Mart, who have driven their customers away by cutting their hours and service.

Their strategy assumes that the customer will drop off their prescription at the Loblaw pharmacy and then browse the rest of the store, picking up higher margin items such as health and beauty products, or other grocery items.  They are betting that these sales will more than make up for any losses on the prescription side.  To minimize costs, Loblaw will be instituting automatic pill counting machines.

At what cost?

This development raises broader questions. If Loblaw is correct it points to a fundamental change in how we as consumers will be able to purchase prescription drugs.  We are shifting from a market of many players of different sizes with varying levels of service to a few large players who control the dispensing of drugs in Ontario. 

Will oligopolistic behaviour ensue?  Will these larger players raise their dispensing fees to increase their margins, and if so will private insurance companies react?  Or will they exercise their market power towards the generic drug manufacturers, to get a better price in return for exclusivity?

Health Minister Deb Matthews is reportedly pleased with Loblaw’s plans, but is the Ontario government sacrificing service in the name of cost? What will become of small pharmacies?  Or underserviced areas where there is no Shoppers or Loblaw?

Pharmacies of all sizes are fighting back with an aggressive campaign against Liberal MPPs including radio ads, mailings and a website portraying the elimination of professional allowances as “cuts to frontline healthcare”.   It will be interesting to see what the public and government response is to such an overtly negative campaign.

One thing is for sure, we will see some innovative pricing strategies resulting from the reforms.

For more background on this issue, see my post “Generic drug manufacturers are the key to solving pharmacy woes”.

Someone’s ears must be burning!  Since my last post (Consider exchange rate risk when contemplating foreign investments), RBC announced that it is now offering a US dollar-denominated RRSP account through its online brokerage, RBC Direct Investing, with several other banks looking to do the same.  (See the last page of their Spring 2010 Newsletter)

The advantage of these new accounts is that you only need to do the conversion from Canadian to US funds once.  Then you can buy and sell US dollar denominated stocks, bonds, etc. without worrying about exchange rate fluctuations, because your US dollars will remain US dollars until you decide to convert them back to Canadian. 

RBC will also be offering such opportunities in its Registered Retirement Income Funds (RRIF) and Tax Free Savings Accounts (TSFA) as well.

No word on other currencies being considered for this type of account, but given our proximity and knowledge of the US economy the US is a logical first choice.

For more information on these developments see Rob Carrick’s article “Online brokers lower cost of U.S. stocks in RRSPs.”

Opportunities abound to use international investments when saving for retirement.  But even the most successful investment can be impacted by currency fluctuations.

The foreign content limit for RRSPs was eliminated in the 2005 Federal Budget, allowing Canadians further diversification in their retirement portfolio.  With this opportunity however came additional risk.

A simple example

The impact of currency fluctuations can be seen in the following example. Our fictitious friend Jane decides to purchase shares in Coach Inc., because she loves Coach purses and believes that the company’s stock will increase dramatically.  She buys 100 shares at $11.80US on March 6, 2009. 

The exchange rate on that day is $1.2863, so the stocks cost her $1,517.83CDN.  For simplicity we will ignore dividends and brokerage fees.

On January 9^th 2010 Jane decides to sell her Coach shares which have risen to $37.27US per share yielding $3,727US, a $2,547US or 216% gain. The exchange rate on that day is $1.0344 meaning the value of the Canadian dollar vs. the US dollar has risen since she purchased her shares, making her US dollar denominated stocks worth less Canadian dollars.  Therefore in Canadian dollars her stocks on sale were worth $3,855.21CDN, a $2,337.37CDN or 154% gain.

Without exchange rate fluctuations, her gain would have been $3,276.20CDN, which means she lost $938.84CDN due purely to changes in the relative value of the Canadian dollar vis a vis the US dollar.

Mitigating exchange rate risk

The risk isn’t always downside risk – one can gain on the exchange rate as well when the foreign currency appreciates relative to the Canadian dollar.  However, when thinking about investments denominated in foreign currencies, one should include exchange risk when assessing their overall relative risk tolerance.

Relatively small holdings such as an individual’s RRSPs cannot support hedging operations akin to those that large institutions and multinationals undertake, so what’s a little guy to do?   Educate yourself about currencies – read the forecasts and consider them in whether it makes sense to purchase the stock, and when it makes sense to sell.  Then keep an eye on the exchange rate and time your sale to optimize a) the price of the stock, and b) the currency to maximize your overall return.  Build this “cost” into your equation, much like you would your brokerage fees, or capital gains…it’s just a little harder to estimate.

Yes, foreign investments offer a wealth of opportunity for Canadians.  With the proper consideration of all of the risks, we can make better informed choices.