My clients are mostly small and medium sized manufacturing businesses. They usually come to me when they are in a spot of bother, as word does get around.
Over a period of over 20 years of working with these businesses, a process has evolved. It is repeatable scalable, and can be applied to any business of any size. This is not because it is a complex set of algorithms that account for every contingency, just the opposite. It is a simple way of approaching a performance improvement project, that recognises the beauty of Einstein’s quote that “everything should be made as simple as possible, no simpler’
It is not rocket science, it is common sense, first principals.
My entry point is usually strategy, marketing & sales, or as I prefer to call it, ‘Revenue Generation’. The functional distinction these days between marketing and sales is utterly redundant. It never was relevant to customers, it just made the organisation chart easier to understand.
When someone is in trouble, and that is where I usually come in, the standard call is ’get more sales’. However, 9/10 times I see other things that need fixing, so in order to do that, I go back to the foundations, to the first principals of business.
In the end, Business is pretty simple, make and sell something for more than it costs you, and ensure the value to the purchaser is greater to them than the cost, and all will be well.
An improvement project can be treated as being in four parts, or levels, and each will contain numerous sub projects and elements that need to be addressed.
However, they need to be addressed in some sort of logical order, starting with the most urgent, as well as those that will deliver some quick returns. The quick wins are not just for commercial and financial reasons, it is because any change will inevitably be disturbing and potentially disruptive, so having a few quick wins makes the pain of change go away, or at least be more palatable.
Foundation.
These are the things that no matter what else you do, absolutely need to be done.
A lot of it is ‘underground’ as most foundations are, largely unseen, nevertheless, without a solid foundation, whatever else you build will not last.
It is also true that the foundations wear out, become depreciated, and without renewal, which is a continuous process, you will still fail.
- Basic financials. Cash management is essential, as cash is the oxygen of business. No business should be without weekly cash flow forecasting. The Profit and Loss statement measures your trading outcomes. It is less immediate than cash management, and gives a better picture of the items that are consuming and generating cash, so they can be managed appropriately. The P&L should be done monthly, along with the relevant performance measures against expectations in whatever form they have been articulated, usually a budget. The balance sheet is a picture at a moment in time of the performance of the business in creating or consuming wealth for its owners. These three basic financial measures are a part of the statutory accounts of any registered business, but a fourth that is not, is a simple measure of the break-even point in a business. At what point in trading do you go from loss in a period to profit. Knowing your break-even point is a bit like knowing when swimming if your nose and mouth are in the water, or out of it.
- ‘Why’. Being able to articulate the purpose of your business is a huge competitive and cultural benefit that shapes the evolution it will go through. For those who have not stumbled across the various writings of Simon Sinek, it is time to start.
- Business model. This is the means by which you turn your product into money. The foundations of a wholesaler will be different to those of a retailer, or on line supplier of products. The way you build the foundations will similarly be different. Different business models do not easily mix in the one business. Barnes and Noble should have invented Amazon, not been put out of business by them. Similarly, Blockbuster was in the prime position to invent Netfliks, not become their victim.
- Regulatory requirements. These are a do it or be prosecuted choice, which for most is no choice at all, but you would be surprised how many businesses I walk into that are (mostly) unknowingly breaking the law. If you are running a child care centre, better get the regulatory stuff sorted!
- Operational capability. Setting out to run a business, you need to be able to deliver a product of reliable quality, on time, and in budget, that delivers value to the customer. Pretty simple, but I have seen many business plans that seem to think that a product will come about like manna from heaven, just because it is ordered.
The advent of digital has changed forever the manner in which you approach a number of these elements and I would contend, is continuing to change them, almost weekly. I was tempted to put digital capability as one of the Foundation elements, but digital is a bit like breathing, you do it or you are history.
Revenue generation.
Commonly called Marketing & Sales, but as noted the distinction is redundant.
No business survives without revenue, and it is my view that all the processes aimed at generating that revenue, directly or indirectly, should be seen through the one lens.
Marketing is a huge topic, way too much for a single blog post, but there are some basics that should be clear.
What is the profile of your ideal customer, How do you find and engage them?
What is the value proposition, how will the customer make the choice between your product and the alternatives, How will you go about building a brand, what are your best distribution channel options, which communication channels and platforms do you use, which customer profiling methodology, lead generation and conversion, NPD & C, customer service, Strategic key Account Management, value proposition, advertising, market research, and so on and on and on.
I ‘bounce’ between revenue generation and the foundation activities. While you have to have the foundations in place, you also have to be generating revenue to pay for the investment, one without the other is still a ‘fail’. Therefore there is a continuous and parallel improvement in both, it is not sequential, it is a parallel journey.
One of the traps of all the digitisation that has taken place in the revenue generation space is the sudden availability of new shiny toys to play with. Each in its own way promises to deliver at least some part of the silver bullet you are seeking. The temptation to chase the newest shiny tool is overwhelming for many, but also equally daunting for many others. The right mix is somewhere in the middle, as usual.
Identify the tools that solve your problems in the manner that best suits your strategic and financial objectives and limitations, without losing sight of the foundations of your business, and you will be OK. Being seduced by the tools is as bad as ignoring them.
Leverage & Scalability
This is where the fun really starts.
We all understand the concept of leverage, of doing more with less. The tools available in the revenue generation space give you leverage in your current markets. They also provide the opportunity to leverage capabilities outside your immediate markets and customers. This sort of leverage can be applied geographically, to adjacent markets and customers, in new value propositions, new technologies, and to gain a decisive advantage over competitors.
Having built a stable and profitable business by solid achievement in the foundations and revenue generation stages, you will free up the time to enable the leveraging and scaling of your processes, assets, capabilities, collaborative demand chains, and importantly spread your process improvement successes wider.
Sustainability.
Commercial sustainability is the rarely stated, but often considered objective of all this commitment. The best metaphor for this stage is nature. As the environment changes, the organism evolves to accommodate and leverage the changes to its benefit, and this happens without added effort. It is commercial evolution at work.
This is the vision painted by so many of those trying to get into your pockets, of the 4 hour work week, taken remotely while on an island paradise collecting magically recurrent income. It never happens, at least I have never seen it. Even those who claim to be making millions via the web selling all sorts of dreams, are doing more than they tell you. It is true that web based products, a new commercial option still only a decade old have made a huge impact, and there are a few who have made it big, but they are as rare as those who made it big in manufacturing in the last century were. Nevertheless, having a goal of sustainability in your sights, and working towards it will see your business prosper, and you will be able to enjoy the fruits of that prosperity.
So what now?
You can only do a very small number of things at once.
Therefore where I start is with a ‘StrategyAudit’ where I go looking for the holes then prioritise them into an action plan, and gain some sort of agreement that the plans will be followed. A realistic assessment of the current situation is an absolutely crucial first point of any improvement project that offers the genuine chance of enhanced performance.
