Category: strategy

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Get clear on your strategy

 

Over the last few weeks I have helped a number of clients get some more clarity over their business model and their strategy for the future.

This is such a fundamental area for business success. Without that clarity, you cannot determine what your organisation should look like in 3 or 4 years, you cannot determine where to allocate your resources or even how to approach your market.

We are all told we have to have an elevator pitch, so that when you are in the lift with your ideal prospect you can tell them what you do in the time it takes to travel between one floor and the next.

There’s a fundamental flaw in that thinking. Your prospect does not care what you do. Your prospect cares about the result you deliver for their business.

It really doesn’t matter that you write wonderful software, or that you sell the best engineered widgets. What matters is how that software helps your customer or client, what gain they get from deploying it and what pain you are taking away. It doesn’t matter that you manufacture the best widgets, what matters is that you help your customer produce his product that relies upon those widgets.

Take your current marketing information, from the elevator pitch through all your brochures, leaflets, proposals and your website and highlight every time you see the words “We or I” and change them to you. (It’s known as weeing all over the page when you have too many we’s)

Now look at those statements that have a “you” replacing the “we”

See if you can respond to the statement with “so what?”

See if you could put that statement on your competitor’s website and it would still be true.

You may find you have some work to do so that your customer or prospect cannot answer “so what?” and that may take you right back to the fundamental reason why your business exists!

 

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New Markets

One challenge for any business is that a product has a life within a market and that life has a limitation. It may be that the time frame of that life is substantial but there will be a limit.

Addressing the decline of a product can be managed in many ways but one of the less frequently employed is the alternative market strategy.
Alternative markets take many guises, from geography through alternative uses, and examples are readily available once you start to consider them as such.
Relatively few businesses have a defined export strategy but that can allow you to deploy the same technical skills and knowledge. You will have significant marketing and possibly design work to enter such new markets – what works as a marketing campaign in the UK almost certainly won’t work in another country, even an English speaking one

Export markets can extend the life of a product to a really significant degree; many years after the decline of the western European market for the non-smart phone, those same phones were highly prized in emerging markets such as Africa.

Alternative uses for a product are sometimes harder to recognise; if you are not embedded in the history or knew the product before the use you now see you may not be aware of the transition. I watched a TV program about an early 20th century hospital where one of the surgeons adopted an early model vacuum cleaner for use as a suction device!

Listerine was developed as a surgical antiseptic, and an article from 1888 recommends Listerine “for sweaty feet, and soft corns, developing between the toes.” Over the course of the next century, it was marketed as a refreshing additive to cigarettes, a cure for the common cold, and as a dandruff treatment. But it was in the 1920s that the powerful, germ-killing liquid finally landed on its most lucrative use as a magical cure for bad breath.

Viagra was originally conceived as a treatment for hypertension, angina, and other symptoms of heart disease. But Phase I clinical trials revealed that while the drug wasn’t great at treating what it was supposed to treat, male test subjects were experiencing a rather unexpected side effect: erections. A few years later, in 1998, the drug took U.S. markets by storm as a treatment for penile dysfunction and became an overnight success. It now rakes in an estimated $1.9 billion dollars a year.

Brandy started off as a byproduct of transporting wine. About 900 years ago, merchants would essentially boil the water off of large quantities of wine in order to both transport it more easily, and save on customs taxes, which were levied by volume.

Coca-Cola was originally invented as an alternative to morphine addiction, and to treat headaches and relieve anxiety. Coke’s inventor, John Pemberton — a Confederate veteran of the Civil War who himself suffered from a morphine addiction — first invented a sweet, alcoholic drink infused with coca leaves for an extra kick. He called it Pemberton’s French Wine Coca. It would be another two decades before that recipe was honed, sweetened, carbonated and, eventually, marketed into what it is today: the most popular soda in the world.

Play-Doh, was first invented in the 1930s by a soap manufacturer named Cleo McVickers, who thought he’d hit upon a fantastic wallpaper cleaner. It wasn’t for another twenty years that McVicker’s son, Joseph, repurposed it as clay for pre-schoolers and called it Play-Doh, a product that remains wildly popular among the under-5 crowd today.

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Alignment

 

Sometime ago we learned that the banks have specialist recovery divisions for clients who appear to be in trouble. Amongst them was RBS, who have been accused of causing their clients to collapse by commissioning property valuations that came in too low support the borrowing. The recovery division claimed the assets and sold them off above the valuation through the bank’s own property business.

I’ve no doubt someone has stepped over the line, but I do wonder what they were thinking about when they created their own property business. If the objective of the RBS property arm is to make money (or as RBS would have it, rather coyly, minimise losses) then it’s not such a big step to the point where they see a customer struggling and think “We could make that project work”

My neighbour is a keen golfer, and these days uses a small electric buggy as he is getting on a bit. He’s been having some trouble with it running out of battery, and the manufacturers finally realised one of the brakes was out of alignment. The buggy has been wasting energy, fighting itself.

One of my clients had a problem with their collections; very long days outstanding, and it was not getting any better. When we drilled into it, the credit control team were doing their best but sometimes had to go back to the customer service team for more information.

The customer service team’s incentives were all around speed of customer response and satisfaction and had nothing to do with credit control, so of course the requests for help from the credit controllers were very low priority.
We made the credit control team a “customer” for the objectives of the customer service team; many of the problems were cleared up and the debtor days were greatly reduced.

How well aligned are the pieces of your business? How much energy do they waste in friction with each other?

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Making decisions in hindsight

 

I was working with a client who asked my advice on a new service offering, something to add to the portfolio of services they offer.

The question was “Do you think we should do this?”

I responded by asking a series of questions to gather further information, making sure I really understood the pros and cons of the situation.

My client was struggling to make this decision, but really that was the symptom. The cause was that the business did not have enough knowledge. Someone had a bright idea, and it seemed attractive.

They knew they could add this offering at a fairly low cost.

My client wanted to make the decision on that basis, but was not sure.

I wanted to know how the clients would value this new offering, whether the sales team thought it would help them win more deals and if there was an opportunity to leverage this new and different offering to create a market advantage – a USP.

If you look at any business decision – the ones that went right as well as the ones that went wrong – there is a key phase where you gather information about the potential rewards (those were the questions I was asking my client) and the potential risks (which my client had assessed)

I’ve found in my business career that all the poor decisions I’ve made can be traced to poor information; either I didn’t have the right info, or perhaps I had not asked the right questions. Once or twice I can say I asked the right questions but the answers were not as truthful as they might have been, but that is a tiny minority.

The reverse is true of the good decisions. Yes, sometimes I have been lucky, but more often than not it has been a case of asking the right questions, weighing the evidence and making a prompt decision.

Hindsight is a wonderful thing; we can all make the right decisions in hindsight but that’s because we have all the facts! Ask the right questions, then make a timely decision.

 

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The numbers are the answer, now what’s the question?

 

In The Hitchhiker’s Guide to the Galaxy  by Douglas Adams one part of the story is the creation of a super computer to determine the “Answer to the Ultimate Question of Life, The Universe, and Everything”. This takes the super computer 7 ½ million years and the answer turns out to be 42.

I was helping a contact understand some accounts the other day. My way of looking at financial analysis is fairly straightforward, I look at the movements between the two years and against the budget / plan and try to understand what has happened in the business to create those movements.

Like the answer in HHGTG, the absolute numbers are not very helpful. They answer the question, but the trick is to work out what the question really was!

Apply that thinking to your planning process whether that is for a new project, a market entry or the overall businesses next quarters plan.

That means you start with the activities that will generate the numbers, not the numbers themselves. If you take sales as an example, the temptation is to take what you did last time and add on a bit.

That can leave you completely unaware, until you fail to make the plan, that you don’t have enough marketing leads for the sales team to convert.

You could apply the same thought process to customer service, or delivery or manufacturing – in fact, throughout the business.

So start with (for example) lead generation. You know (of course you do, you’ve done the analysis haven’t you?) what percentage of leads convert to sales. You have a certain level of capacity for lead generation, so you know what is achievable with the present level of resource. That gives you the first constraint, and the first question – are we investing enough in lead generation?

Now we know how many leads we are generating, let’s look at the sales conversion. Do we have enough sales resource to convert those leads, or too much? We don’t want sales people with idle time, so perhaps this element causes us to reconsider the lead generation question.

When you have those two questions, you have the answer – that’s your revenue number. Perhaps it’s not big enough? Revisit the two questions.

This approach to planning, effectively from the bottom up, allows you to spot opportunities (sales team not fully utilised) and identify constraints that you will never see by just taking last quarters numbers and adding a bit!

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Assumptions are dangerous

 

I am helping a client deal with an approach from a prospective buyer, and  I’ve been reminded just how dangerous assumptions can be.

My client doesn’t have a background or training in finance, so I’m acting as the translator, explaining language used by the buyers’ advisors in plain English.

In this case the shareholders are a management team of 5 and after the deal is done only three will stay. There’s an earn-out involved, and to my client it was obvious that only those members of the team who are staying would participate in the earn out.

All the shareholders have the same type of shares with the same rights.

The buyers’ expectation is to treat them all the same way – including the earn-out, even for those no longer part of the team once the deal is done.

My client assumed one thing – you could say it was common sense – but the buyer’s advisors assumed something completely different – and again for valid reasons.

The problem with assumptions is that they are sometimes so obvious to person making the assumption that they don’t even know they have made the assumption and are not aware of an alternative.

This can be damaging!

To avoid assumptions is largely a matter of communication. If you explain, in great detail, what it is that you expect or want to happen, and then listen carefully to the reply, you will stand a chance of minimising or avoiding assumptions.

I was arranging for some subscriptions to be paid by standing order, and I set out the standing order form with instructions on how to complete it. To me it was obvious that the person sending the money has to send it to their bank – but then I have done this before!

If I don’t include that step in my instructions, we will get many of these completed forms in the post.

That’s no good to us – the bank cannot follow instructions it does not have!

If there’s not enough detail, assumptions creep in. Make sure you are all on the same page with detailed instructions – especially for something new – and then listen well, looking out for assumptions!

 

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Are you listening?

 

A colleague told me a story about an engineering business having trouble with the reliability and frequent failure of its products.

A fellow speaker described what they do as helping people to listen.

A different colleague told us how he had created a multi-million dollar business using a simple sales technique.

The engineering business resolved the quality issues when they started listening to the mechanics using the equipment, and took note of the modifications these enthusiasts were making to their own machines.

My speaker colleague is a specialist in mediation and problem resolution. Most problems occur because people are not really listening to each other, or even worse just sending emails.

The sales technique is to (at its simplest) listen to what your potential customers want, and then provide a solution.

“We have two ears and one mouth so that we can listen twice as much as we speak” is a quote attributed to Epictetus the Greek philosopher.

If you are listening to the people on the front line – those who have to deal with the customer, or fix the problems – you can see patterns and take steps to minimize those problems before they occur.

If you are listening to your team, you can recognise when morale is not what you would like it to be. Poor morale in your team will lead to poorer customer service and to poorer business performance.

In negotiation, if you are really listening to the other parties you will be much more successful.

In sales, if you drown out the customer by telling them what you can do, you may miss the opportunity where they tell you what they really need. Supply what your customer really needs and you will keep a customer forever.

Try listening more – you don’t know what you might hear!

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Leading in the right direction

 

I don’t know about you but I was always told to “work hard and success will come” and that’s true, to a point. Put it the other way around – success won’t come without hard work – and it is much truer.

It is really important to work smarter, not harder.

There’s an old saying “Insanity is doing the same thing over and over again but expecting different results” which has been attributed to many authors. If working harder was going to make the difference you want to make, then you are just too lazy!

So take a step back and build into your schedule some time to think. Even the Prime Minister takes a few minutes each day – and I am sure his diary is busier than most – to stop and reflect.

Perhaps take time to go for a walk – the physical exercise is good for you as well, and if you have a dog (as I do) they will appreciate it!

A further opportunity to make sure you are working smart is to join a Mastermind Group. That’s a group, usually of your peers, where you can share your thoughts and problem. You can get and give feedback and sometimes just explaining things to your peers helps you see the solution to your problem.

If a mastermind group is not for you, consider engaging with a coach or a mentor. There are hundreds available, so be careful who you choose, but they can be a fantastic way of getting clarity and becoming re-energised.

On a less personal, more business level you might consider engaging a Non-Executive Director.

The Institute of Directors says “Essentially the non-executive director’s role is to provide a creative contribution to the board by providing objective criticism…should bring an independent judgement to bear on issues of strategy, performance and resources including key appointments and standards of conduct.”

Whichever route you choose, make time to ensure your efforts are focused in the right direction. If you aren’t focused on the right things, your team won’t be – you are the leader and leading in the wrong direction won’t get you to your destination.

 

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Lessons from the top 100 companies to work for

 

I’ve been reading Fortune magazine’s article on the top 100 best companies to work for.

In the article the authors point out that the perks provided by the top employers have an indirect purpose; Google (as many of us will already know) provide many employee perks including free food; what I had not known is that they manage the serving time so that employees have to wait for a few minutes – so that conversations may be struck up whilst waiting to be served.

The eating arrangements are long tables, placed a little too close together. There’s a good chance that you will sit opposite someone you don’t know, and when you push your chair back to get up you’ll likely bump into the person behind you – they call that the “Google Bump”

The thinking behind all of this is to create relationships across the company – and it is a common factor in the top 100 – that encourage the employees to feel part of a team.

A study quoted in the article through a little graph (http://www.oceantomo.com/blog/2015/03-05-ocean-tomo-2015-intangible-asset-market-value/) shows that intangible assets as a percentage of market value have risen from 17% in 1975 to 84% in 2015.

The article continues

“the most effective teams are not those whose members boast the highest IQs, but rather those whose members are most sensitive to the thoughts and feelings of others”

How can you apply this learning to your business?

It starts with your personal approach and attitudes.

Gandhi said:

“Your beliefs become your thoughts,
Your thoughts become your words,
Your words become your actions,
Your actions become your habits”

In simple terms if you start to believe that this matters – in a business context, not just in your personal life and with your family & friends – and you act in accordance with those beliefs, you will be observed and imitated.

What can you do today to make someone else’s day a little better…the foundations for a more productive workplace?

 

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Keep your promises

I’ve had a couple of experiences this week where promises made were not kept. One was a promise about funding for a voluntary organisation, the other a promise to change a procedure to allow more time for comment and input.

How do you feel when a promise or a commitment is broken?

I know I was angry and disappointed. I sat in the room when the commitments were made. Then I saw the emails setting out the revised position. I had to read them twice to be sure I was not misinterpreting what was being said!

Mark Carney, the Governor of the Bank of England, said “trust arrives on foot and departs in a Ferrari”

Now, I don’t trust the people who made those commitments. It makes it difficult to continue doing business with them – are they going to let me down again?

What commitments have you made that are still on your to-do list?

Is there a training course you said you would organise / pay for, or perhaps it’s a new printer because the old one keeps breaking down.

What about your customers?

Have you made explicit commitments – perhaps on delivery time? The project will be completed by xx/yy or your goods will be shipped within one working day? Are you matching those commitments with your actions, or even better exceeding them? If there aren’t explicit commitments there are implicit ones – your customers’ expectations.

Sometimes, life gets in the way – and what you thought you could do you now find you can’t. You are going to break that promise – that commitment.

If you do nothing – stick your head in the sand and hope the recipient has forgotten your promise – you aren’t fooling them, just yourself. You think that by avoiding the problem it will just go away!

If, on the other hand, you put your head above the parapet and confront the problem – you tell the recipient what has happened, and why you can’t avoid breaking that promise – you will at least reduce the damage. It won’t feel like it when you tell them, but you will be better off in the short term.
The customer service gurus will tell you it is not avoiding customer complaints – that’s pretty nearly impossible – but how you deal with the complaint that matters.

Do as you say & say as you do – but if you can’t do, communicate why