Oct 15, 2021 | Leadership, Management, Small business
One percent is a tiny fraction. A question I have asked many times of clients, and management in my former corporate life is ‘who could not……… by one percent?
The blank is filled in by a variety of items:
Raise prices, reduce trading costs, reduce overheads, increase volumes, and so on. Nobody ever says ‘No’ to the proposition.
When you look at the impact, particularly cumulative of those one-percenters, they supercharge profits.
We are all in business to make profit, without profit, we are not in business. While there is an extremely important place for calls to be good corporate citizen, provide all stakeholders with a mission and vision to which they can relate, and to build for the long term, none are possible without commercially sustainable profits.
Many SME’s I talk to fail most basic understanding of the make-up of their P&L, and how the one percenters impact on profitability. Usually it is simply because their accountants have failed to break their costs up into fixed and variable, and they have no idea of the impact of the one percenters as they have never done the exercise on a spreadsheet which makes it incredibly obvious.
Profit is not a bad word, it is the gold standard.
It also not a useful objective, which is a role played way too often. Profit is an outcome of a whole range of other, often very small things, done successfully.
Cartoon credit: Dilbert. Anyway, who would want to do business with an unprofitable business?
Oct 13, 2021 | Innovation, Leadership
Machines do not, at least do not yet, have ideas.
Ideas come from people, they are social things, emerging from social situations.
We often find technical solutions to problems, but are they ideas?
It seems to me that they are more the progressive peeling of the onion, until you get to the core when a solution presents. By contrast, ideas do not come from the onion, rather, they come from seeing the onion in some sort of new context that delivers a new and unexpected outcome, not connected to the original.
Research demonstrates that men are more likely to show up on the autism spectrum than women, the ratio being about 4:1.
On the other hand, women are more social than men, their brains are more likely to ‘see’ things from the perspective of others. Empathy in the jargon.
This is consistent with my observation over the years that women are better marketers than men, in terms of the idea generation, but less likely to implement to a plan without deviation. A gross generality, proven often in my experience by the numerous exceptions.
It is just more likely that women will come up with something from ‘left field’, a connection of seemingly unconnected items, than men.
However, the lesson is that ideas have a genesis in social interaction, curiosity about others, and emotive understanding of a different perspective. The more interaction there is, the more fertile the ground from which ideas emerge.
Idea farming is not dissimilar to any other sort of farming. Both require prepared and fertile ground, a willingness to take on some risk, local knowledge, technical expertise, lots of feedback, and appropriate catalysts.
Then comes the more mechanical process of implementation.
None of this is easy. If it was, everybody would be doing it. When you need to add a bit of experience and ‘idea farming;’ expertise, let me know, I just may be the catalyst you need.
Oct 1, 2021 | Change, Leadership
Most manufacturers seek to cut costs, a reasonable response to the increasingly tight margins available in all but very few manufacturing enterprises.
There is an alternative, hard to see and act on, but viable.
It involves thinking about the paradox that exists in manufacturing.
As automation has increased, and costs driven down by the reliability of machines doing repetitive work, jobs have not disappeared, but they have changed shape and location. The value added previously by people doing manual manufacturing tasks have moved somewhere else.
Value is a parallel to Einstein’s theories of relativity.
Matter does not disappear, it changes form under some sort of pressure, and moves somewhere else.
Value, similarly, does not disappear, it moves somewhere else. It cannot be destroyed, but when it moves, there are winners and losers. Think about all the value supposedly destroyed by mergers and acquisitions in the last 30 years, very few have lived up to the hype used to justify the change. Shareholders have lost, but those buying assets at less than replacement cost, and those benefiting from the exit of larger businesses have picked up value in many ways.
Again, value has not been destroyed, it has just moved.
If this is true, the task of manufacturing management is not to cut costs, but to extend capabilities.
It seems to me there is a progression happening.
Machines take on repetitive tasks, increasingly more complex over the last 50 years. They are now moving towards cognitive tasks, with the development of AI. It is in its early stages, but the shift appears to be real as I see the evolution. Again, the jobs of people in cognitive tasks will move somewhere else, they will not disappear.
The somewhere else seems to me to be towards social skills, untouched by automation. However, I suspect in 30 years that will no longer be true, but by then I will be gone, and someone else can worry about it.
Unlike the sci-fi of Netflix, this is not an inevitable dystopian outcome, it is a tool that is there to be understood and managed for the greater good.
Business leaders that see the differences and can manage the shape of them will win in the marketplace of the future, others will, well, move somewhere else.
Pity our political leaders seem unable to grasp the idea that change, and commercial evolution is a value adding outcome, that in the long term will be beneficial, while sticking to the status quo, betting the house on it remaining so, is the way to oblivion.
Header cartoon courtesy Tom Gauld in New Scientist.
Sep 23, 2021 | Governance, Leadership, Management
‘How can I be held responsible when I do not have the authority’?
Anyone in a management role has probably heard, and perhaps asked that question after some ‘do-do’ hits the fan.
‘Accountability’, ‘Responsibility’, and ‘Authority’ often become entangled in ways that leave management, improvement, and scaling of any set of activities challenging. The lines become blurred and ambiguous, which enables problems to be shovelled into a quiet corner, unresolved.
As with any process, ensuring shared clarity, transparency and understanding is the only way to improve.
The absence of such shared understanding means a problem will always be someone else’s. ‘Not my job‘ in the vernacular.
Following are my definitions, which may clear up the differences.
Accountability
Accountability means that someone is specifically held accountable for the activity or set of activities. That person is accountable to track the progress of the activity, process, function, whatever it may be, and give it a ‘voice’. If you cannot nominate one person who is specifically accountable, it will fall through the cracks.
Responsibility
Responsibility falls to anyone who has the ability and opportunity to respond proactively support an activity or process. Anyone who ‘touches’ a process has responsibility to do their best to ensure that the activity progresses as expected, and to remove any hinderances they may see. This is decision making at the ‘coal-face’, taking responsibility for outcomes.
Authority
Authority belongs to the person with the final veto power. There is always someone who has that final say. The larger the organisation, the further away from the day-to-day operational decisions that person is likely to be. Conversely, the bigger the decision, the closer they will be.
The processes and boundaries that determine the point at which a decision can be made will be an explicit outcome of the descriptions of each role, and the culture of the enterprise.
The differences between the meaning of these three words offers a huge expanse of quicksand, in which many people and organisations get stuck.
For example, in a previous life as GM of a large organisation, I had final authority over the expenditure of marketing budgets. The marketing manager had accountability for the development of marketing plans and their implementation across the functions in the business, and the authority to make relevant decisions within the marketing function. Product managers had accountability for the specific activities that took place in their brand portfolios. Operations management had responsibility to ensure that the products produced were up to specification, and when that was not the case, the authority to rework or dump as appropriate. Logistics management had the responsibility to ensure orders were filled on time and in full, and the authority to make decisions to ensure that was the case. We all had a shared responsibility to ensure that the customers who bought our products were serviced in a manner that had them coming back for more.
Back to the question asked at the top: ‘How can I be held responsible without the authority’. The answer is: ‘it depends’.
Everyone has the responsibility to manage their own activities on a daily basis, and be held accountable for the outcomes, but as you move up a corporate ladder, it becomes increasingly challenging to maintain the direct link. The more senior you are, the more you will be held accountable for things over which you have less and less direct control. That direct control is held at lower levels in the organisation.
The key to making this all work is to thoughtfully, consistently, and transparently delegate the authority to make the veto decisions, both Yes and No, as far down the organisation chart as possible. Counter intuitive as this may be to many, offering people control over their defined workspace and span of control, leads to quicker and more informed decision making. It also assumes that everyone understands the differences between these three words, and that there is consistent and explicit feedback on both the outcomes of decisions, and the manner in which they were arrived at and implemented. This requires that you pinpoint the job to be done, have a system of interlinking KPI’s, and that there is explicit and transparent performance feedback and management of both the process and those held accountable for the components of the process.
It also relies on having the best people in the right spots, willing and able to make the decisions necessary, at the right time. Of all the challenges faced by those at the top of an organisation, having the best people in the right spots to deal with the challenge of building commercial sustainability, is the most challenging of all.
Header cartoon credit: Scott Adams and Dilbert, again make the point.
Note: I realised after publishing that I had dealt with with this exact question previously in a post back in 2019. Fortunately, while the wording is different, the meanings ascribed to the three key words are identical. After 2000 plus posts, this accidental doubling up does happen occasionally. Perhaps it is a measure of importance?
Aug 30, 2021 | Leadership, Management, Operations
What do we have to do to scale successfully?
That is a question that I often find myself answering in conversations with SME manufacturing businesses run by people who are seeking to map out in their mind, ‘where to from here?’
Generally, they know some of the answers, but they are hidden amongst all the other stuff going on, and the distractions of being all things to all people who walk through the door.
It is little different to building a house. You need solid foundations, upon which you build your house, brick by brick, designed to meet the needs of your family.
Before anything else, there are three foundational strategic questions to be asked, and answered:
What is the current status?
Every journey has a starting point. Doing the work to define that point clearly is the first step in any journey.
What are the trends, barriers, and competitive forces in their industry, and how does the existing capability set you have leverage those factors in a differentiated manner?
What is the objective?
It is important to understand what it is that they want to achieve. Articulating the objective in measurable terms is fundamental to being able to build the plans to get there. Often it is more than financial success, and unless that is clear from the outset, you can waste a lot of effort further down the track. I use a process I call ‘Hindsight planning‘ in which you imagine the objective has been achieved. You are therefore thinking in the present tense, from which you can look back and observe the mistakes, opportunities missed, and what went as expected with some level of imaginative hindsight.
What are the foundations of the business?
Every business requires a foundation, like anything you build, without which it is no more sustainable than a house of cards. The foundations of every business differ, but are made up of a variety of qualitative and quantitative bricks. The balance will vary depending on the nature of the industry. Childcare for instance will have more regulatory bricks in the foundation than life coaching.
Having answered the three essential foundation questions, you then add the frame that determines how the house appears publicly and shapes the way the activities in the house flow. The activities in the house never cease to evolve in the operational detail, but remain inside the framework determined in the design. Later, you can always add extensions, which are often ugly in the absence of creative thought, or you can build another house.
In no particular order, following are the 12 components of your framework.
Business Purpose. The expression of ‘Why’ they want to do whatever it is, a sentence that distills their motivation. This seems easy, but is in fact a very tough question, and is often not answered without considerable soul searching over some time, and often not before the building process is well begun. The caveat is that it must have something to do with the way value is added, and to whom. ‘To make money’ is not a purpose, it is an outcome of success.
Value proposition. What is it they can offer their customers that will make them want to do business with you rather than someone else? The benefits that they will gather by doing business with you. Often people I speak to are tangled up in the features they can offer, and struggle to get past them to understand customers are not interested in the features of your offering in the absence of any direct benefit to them.
Identify your ‘ideal customer’. The better the description of the ideal customer the better, not only can you target them better in connecting and communicating, but it also enables you to focus your efforts where they have the best chance of delivering.
Differentiation. What makes your offer different to that of any competitors? Differentiation goes hand in hand with the profile of your ideal customer. The differentiators you have must correlate to the specific pain points you are seeking to address with your ideal customer.
Branding. What are the brand characteristics you are building, the personality traits, messaging styles, what stories does the brand tell, and how do they relate to the ideal customer? In effect, it is what you would like those with whom you encounter to say about you when you are no longer in the room.
Strategy. How do you plan to go to market, which market, which channels, which customers, and how you are you going to execute on the strategy? All these questions need an answer, the absence of which will at best cost you money that could be saved, at worst, lead to your demise.
Business model. Your business model is how you turn your value proposition into revenue. Understanding, and making deliberate decisions about how your business model should work is a vital step.
Record keeping and reporting. This starts with the regulatory accounts, compliance reports and returns, but goes much deeper into the management of the enterprise. Producing and disseminating the relevant performance and progress reports to each level of the organisation in as close to real time as possible, is a challenge, but crucial to scaling. The old cliché ‘what gets counted gets managed’, applies.
Regulatory compliance. We live in a community, and there are always rules and regulations that must be followed on top of the moral obligations we have. Often these are seemingly pointless exercises in bureaucracy and politically correct box ticking, but they are nevertheless vital ingredients in the foundation of your enterprise.
The plan. Nothing happens without a plan, a goal without a plan is just a daydream. You must articulate how you turn all the above into a plan that is workable, realistic, funded, and with a clear path towards clear objectives, with activity priorities, review points and feedback loops built in.
People. Scaling is an intensely resource hungry activity that requires the right people. No business is anything more than an idea without people to make it happen. Having the ‘right’ people, irrespective of the size of the business is essential tom successful scaling. Indeed, it is essential for success at any level, but scaling is particularly people sensitive. The obvious challenge is to identify the profile of the ‘right people’ and even more complex, ensure that the mix of skills and thinking styles blend, and compound each other.
Cash. Cash is the enabler of all the above, without which, you will go nowhere. However, cash is readily available from all sorts of sources; the key is to get just sufficient working capital to match the rate of scaling, while ensuring that those around you have confidence in your leadership.
Image credit: Wikipedia
Aug 27, 2021 | Change, Leadership
This is it; we are in it.
There will be no return to the pre-Covid world.
Working from home, or at least in other than large, centralised offices, is acceptable and for many, strongly preferable, and will persist.
Social distancing has become more natural when amongst those we do not know. This has implications the way we plan and build anything from a garden fence to public infrastructure
Suffocating ourselves with masks, which are becoming a fashion item, while mandatory from time to time, will probably remain with us more widely when some of the restrictions are eased.
Being more accountable for educating our kids, which might be a good thing in a few cases is adding all sorts of pain to domestic life. Now, the cohort from 5 to 20 at least, has been denied 2 years of access to the school system. Flawed as that system is in many ways, at least it was more ‘averaged’ than trying to home school, and study remotely.
Business models are being destroyed, while new ones sprout like mushrooms after rain
Our behaviour patterns have been polarised. One hand we are suddenly more aware of the need for ‘community’ and are more dependent on them, while on the other hand, we are even more suspicious and unhappy with strangers.
The use of digital communications has skyrocketed (did you note my avoidance of the term ‘zoomed’) and as a result we are learning the value of face-to-face communication. We are a social species and talking to someone across a screen is not the same.
Un, and under employment is now seen as normal at higher levels than pre covid, therefore the need to take control of your own life, exercise initiative, take personal risks, to make your own way financially, is even more important. We are, however, not a community of risk takers. Despite our view of ourselves as laconic self-reliant individuals, we are just the opposite, always seeking the solace of group approval.
We are scared and fractured in ways not seen for several generations. ‘Common courtesy’ to strangers seems to have taken a dive. I was roundly and loudly abused a few weeks ago in a supermarket, just before we got locked down, again, for being so bold as to offer help to a woman in a wheelchair struggling to pack her shopping after going through the checkout.
Perhaps the worst part is the lack of leadership displayed by bickering politicians, distorting and selectively using the ‘numbers’ from various sources that suit their current narrative, while ducking for cover and shifting blame. I admit it is easier with the benefit of hindsight, but there has been so little transparent honesty displayed that trust is so eroded that we no longer believe anything we are told, and hope is absent.
There is a ‘national cabinet’ meeting later today. This was a process that started with the first wave of covid last year with much hope, and public approval, that has degenerated into just another political clown show. I predict the prognostications after the meeting show no sign of genuine leadership, accountability, or acknowledgement that we are all in this together.
I truly hope I am, wrong, but am, prepared to give long odds.
Header cartoon credit: www.Gapingvoid.com.
