6 ways SME’s can leverage a Corona induced Pareto

We all know the 80/20 rule, the Pareto principle, understand it, talk about it, then do nothing to implement it, for all  the wrong reasons.

The CEO created that brand as a product manager, the Chairman bought that company, or opened that factory when he was CEO (it was usually a man), the Operations Manager is committed to that highly efficient machine that produces 15,000 widgets an hour even though we only sell 15,000 in a month, so our inventory requires a new warehouse. The list goes on.

One of the silver linings in the Corona cloud is the forced pause, the opportunity to reflect on the dumb crap all businesses accumulate over the years, and have a spring clean.

This is a once in a generation spring-clean opportunity, while everyone is in lockdown, trying to manage Zoom while their kids (and in my case, grandkids) play ‘star wars’, or something equally as noisy around the desk. An opportunity to start again with an almost clean sheet of paper, to exercise the answer to the: ‘What if we could start again’ question, except you have a running start, because, come the revival, some of you will still have a business.

Here is the spring clean list;

Products. Get rid of those that have no differentiated position, strategic importance or margin. Not revenue, margin, as revenue is pointless other than in a launch phase without margin. Nobody come the revival will even realise it has gone.

Business model. Digital has changed forever the business models that most senior managers grew up with, but the whole business is oriented towards that dinosaur. Run away, as fast as you can, and experiment with the many alternatives while you have the opportunity. Your business model is the way you deliver value to customers. make sure you find the better  way to achieve that outcome than the way you have always done it.

Brands. Just like products, almost every business has too many brands, each has some great reason to be kept in the good times. Usually it is to satisfy someone’s ego, but when the chips are down, as they are now, all they do is take up working capital, operational time, warehouse space, and management attention, usually in the opposite proportion to the margin they deliver. Chop, chop!

Distribution channels. This has a lot to do with business models, but is significant enough to have a caption of its own. Distribution channels drive revenue, and the channels that drove revenue 20 years ago, upon which many businesses were built, are no longer as relevant, and getting less relevant as each month goes by. If we have learnt anything over the last few years, it is that only those with direct communication with the buyer, uninhibited by someone clipping the ticket in the middle, who will be successful in the long run.

Personnel. Every business has a few pieces of dead wood hidden in the corners where they can do little harm. Sometimes a relic of times past, often an early employee who deserves the loyalty, sometimes just not up to the job they are in. The Peter Principal at work. You will never get a better chance to make ‘adjustments’, and be subsidised to do it.

The marketing budget. As times get tough, the marketing budget is usually the first to be chopped. Before chopping, have a critical and realistic look at what works, and what does not. Having made the rational, data driven decisions double down on the elements that do  work, especially in the slimmed down, lean and mean business you have created. In fact, double it, as everyone else will be cutting. There is a once in a generation opportunity to position yourself as ‘The one’ while the others are hiding.

Now you have done the exercise once, do it again, the benefits will be compounded as you focus progressively on the activities the deliver real value rather than are just activities that fill the time.

Pareto the Pareto!