Top speed is irrelevant

Top speed is irrelevant

 

While contracting as GM of a Federal body some time ago, I used to travel from Canberra to Sydney’s western suburbs on a regular basis.

I had the choice of driving which took a predictable three hours door to door, or catch a cab to Canberra airport, wait, catch the plane to Mascot, then a cab to my Sydney destination. That method took an unpredictable 2 and a half hours to 4 hours depending on all sorts of variables over which I had no control.

My car would happily sit on the speed limit all the way, a far slower speed than the  alternative aeroplane.

Clearly, the top speed of one component of a journey will not determine the time for the whole journey, which is what really matters.

This applies to everything in life and business.

Find a way to remove the bottlenecks and the speed of your journey, whatever that is, will increase.

 

 

The 10 most read StrategyAudit posts of 2021

The 10 most read StrategyAudit posts of 2021

 

At the end of the year, it seems sensible to have a look at the posts that generated the most traffic. Surprisingly, none are posts that have gone up in this most challenging year, not an outcome I anticipated. This demonstrates the long-term value of a blog of this nature. Collecting and curating ideas and perspectives over a long period becomes an investment, certainly for me as the writer, and hopefully for those who choose to follow, or just dip in from time to time.

In order, from the most viewed, the 10 were:

5 key factors to consider when planning your budgeting process. January 2020.

https://wp.me/p5fjXq-2sN

This post was the first of 2020, and did generate some traction early on. However, in the early parts of 2021, when suddenly businesses had to rethink their budgeting processes in the face of Covid it took off. It will no doubt kick along again in the early part of 2022, which is unlikely to be much more predictable than the year just finishing.

 

3 essential pieces of the supermarket business model. November 2014.

https://wp.me/p5fjXq-1pd

First published way back in 2014, this post has been number one or two in the most read posts every year since. Clearly the elements of the supermarket business model retain an abiding interest. Retail is also the core of my corporate experience, now 25 years behind me. Many of the illustrative stories in these pages come from that time, as the lessons are timeless. The tools have changed, the behavioural foundations remain very consistent. Even amongst the massive switch to online retailing in the past year, the foundations of retailing have remained consistent. The pace has increased geometrically, and the logistics are new, but the basic requirement for success, to add value to the consumer, remains exactly as it was.

 

The 4 dimensions of project planning. August 2017.

https://wp.me/p5fjXq-1Gz

Every business is a mass of individual and group projects of various types and importance. This post offers a framework to consider when going about the planning processes. Planning is another form of predicting the future, and as we know, that is not a reliable process. However, planning ensures you are better prepared than just relying on being reactive as circumstances change. As Eisenhower noted just before the Normandy landings in 1944 ‘In preparing for battle, I have always found that plans are useless, but planning is indispensable’

 

The 5 strategic dimensions of price. October 2018.

https://wp.me/p5fjXq-2ba

To my mind, this is one of the more important posts I have written amongst the 2100 over 13 years. How to set and maintain optimum price is a challenging, even confronting task, too often not given the strategic importance it deserves. After all, every added dollar of revenue you can extract from the marketplace falls straight to the bottom line, and it is the one driver of profitability over which management has absolute control. It is one of a number of posts around price that are in the archives.

 

A marketer’s explanation of Net Present Value. February 2018

https://wp.me/p5fjXq-20v

Net Present Value, or NPV, is an accounting term thrown around with gay abandon by accountants, assuming everyone understands what it means. Over the years, very few marketers I have known had a clear understanding of NPV. Hopefully, this post helped some in those conversations with their accounting peers, trying to get their own back for all the jargon marketers habitually use, by using a bit of their own.

 

A private note to the chairman. April 2013

https://wp.me/p5fjXq-10x

This one was a surprise. It is an old post from 2013 that paraphrases a conversation I had with the chairman of an organisation on whose board I sat at the time. We had failed to agree for some time over a series of questions that could be characterised as the priority list against which the board should have been making resource allocation decisions for management to execute. At the time I was pretty fired up, and subsequently resigned the role. On rereading the post, I would not resile from any of the items listed, and would offer the same advice were I to be in a similar situation again.

 

How to wield Occam’s Razor to build robust strategy. June 2016.

https://wp.me/p5fjXq-1Rd

Occam’s Razor seems to have become a bit fashionable recently which is perhaps why this post got a guernsey in the top ten, after languishing with the ‘also-rans’ for 5 years. The advice however is sound, seeking the simplest possible explanation that fits all the facts, no matter how unexpected it may be. In a complex and volatile world, simplicity is one the hardest things to achieve.

 

Classic Marketing Strategy: Before and After. September 2016.

https://wp.me/p5fjXq-1Il

The title says it all. Marketing is about delivering a value proposition to those who may engage and make a purchase. Showing how the outcome of the purchase delivers a positive outcome has always been, and will always be a powerful way to communicate. I used myself as the example, having just had a couple of ‘headshots’ to replace the one I had been using, which was ‘homemade’. It might be time for an update, although the years and inactivity of Covid have not done me any favours.

 

Problem solving continuum. June 2010.

https://wp.me/p5fjXq-k3

This post was a very early one, proposing the idea that every problem sits somewhere on a continuum that describes the way in which management goes about finding and executing a solution. At one end workarounds are common, to the other end where difficult problems are subjected to continuous improvement processes. There is much more that could be said, and a number of subsequent posts addressed some of these items, but given the interest, this idea will receive greater consideration in 2022.

 

The 7 mental models for Successful marketing. June 2017.

https://wp.me/p5fjXq-1Rw

This 10th inclusion reflects on a very personal experience that highlighted to me the simple fact that while the tools of marketing have changed radically over the last decade, the foundations have not changed at all. It is one of the longer posts in the archives, running to almost 3,000 words, and includes an audio version delivered at a small business seminar tagged on the end.

 

To those who have followed, commented, or just ‘dipped in’ occasionally, I extend my thanks, and hope that you continue to draw some value from my musings.

Have a great 2022, it can only be better than 2021.

 

How do you overcome manufacturing’s WMB syndrome?

How do you overcome manufacturing’s WMB syndrome?

 

 

The term ‘Washing Machine Brain’ was used recently by a client as we sorted through all the competing tasks and priorities of his role running a small, rapidly expanding business. Everything was mixed up, tangled, swirling at a rate he found difficult to keep up with, let alone get on top of any of the seeming endless list of tasks.

Common problem, and a very expressive descriptor.

Over the 18 months I have been working with him, the number of tasks and the complexity of those tasks seems to have increased geometrically, while the revenue has increased arithmetically.

Again, a common problem in a rapidly growing business. Every advance delivers a new set of management challenges, until a tipping point is reached. After that point, the scaling of operations can be done off the established base, and the ratio is reversed.

Over the 18 months, we have achieved a number of milestones, and left some significant tasks underdone. The product is a bespoke manufactured product with a sizeable number of customer driven variables, many of which are challenging to explain to the customer base.

We have:

  • A very clear strategy, well understood by the small number of employees. .
  • Implemented an operational planning process from order to installation that works pretty well. This uses Trello as the formal communication tool, enabling transparency across the operational staff, as well as encouraging input and accountability.
  • Developed an electronic customer record in Dropbox that is the storage and reference point of all design and operational data that relates to individual customers.
  • Automated the quotation process, although there is manual intervention still required, and given the nature of the product, may always be required. However, there are still many ‘wrinkles’ to be sorted out.
  • Partially implemented a powerful CRM system to manage the outbound sales effort and lead funnel. Like many of these products, every time we turn a corner, there is more to do, but the promise of further automation to assist scaling is seductive.
  • Generated more sales leads than can be managed with the existing operational and sales resources.
  • Moved from break even to making sufficient profit to reinforce the owners faith in the product, and ensures the business has the resources to fund growth internally.

We have not:

  • Successfully implemented a systematic qualification process to optimise the time spent in the pre-sale stage. We need a process to identify tyre kickers and potentially difficult customers & jobs early enough to either walk away, or price them accordingly.
  • We do not have an adequate handle on cash flow, or the accounts generally. As a reformed accountant, this disturbs me greatly. These ‘back-office’ tasks require robust processes and resources, and remain a work in progress,
  • The supply chain on which we rely is disorganised and hugely wasteful, much of which we wear in lead time uncertainty. While we do not control a key part of the manufacturing, the incentive to find a way to exert control is compelling.
  • Labour availability is a profound challenge. The product relies on physical installation which can be complex, depending on the site. It has a range of variables new to this country and finding experienced people has proven almost impossible, and finding suitable trainees at least as hard.

None of this is unusual in growing successful businesses, but knowing that does not make the challenge any easier.

The only antidote is focus. Relentless focus.

Pick the few things that can be done today, this week, this month, and focus on getting them done, before moving onto the next source of value to be addressed. In so doing, spend the time and effort to complete each activity as well as possible. It is inevitable that in a growing business, the requirements will change, so processes need to be able to evolve, but there is little more frustrating and wasteful than having to re-cover areas you had thought behind you. Over time the washing machine will become significantly less chaotic as we iron out the wrinkles and scale the business. (Sorry, could not resist the obvious pun)

 

 

 

The ‘one-percenters’ to supercharge profits.

The ‘one-percenters’ to supercharge profits.

 

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?

 

 

Set objectives by deciding what not to do.

Set objectives by deciding what not to do.

 

We usually look at objectives and goals as the things we want to achieve. We then set about figuring out the path towards achievement.

There are always hundreds of ways to achieve a goal. Often we find ourselves bewildered by the options, and procrastinating or picking a fuzzy path as a result.

Try drawing a line through the things you will not do to achieve the goal, rather than struggling to pick what you will do.

This will help focus on a path quickly that removes ambiguity and the many opportunities to be distracted.

Over the years I have worked with a number of SME’s in the food industry. In almost every case, the seductive promise of the volumes delivering profitability to be extracted from the two supermarket gorillas is there somewhere. This always confuses the focus on delivering value and building brands for those who care about quality and differentiation before price. In addition, the resources for mass marketing and promotion that are necessary for success beyond an initial flurry in supermarket chains are usually absent in SME’s.

Failing to Recognise the mechanics of the supermarket business model, and the resultant infrastructure necessary to service this model, is a major source of financial and strategic failure of many SME’s in this space.

In those cases, I encourage people to set their goals, by excluding the option of supermarket distribution. Instead, focus their minds on the many opportunities outside supermarkets that better suit the capabilities and resources available.

 

 

 

The three inevitable stages of successful entrepreneurial activity

The three inevitable stages of successful entrepreneurial activity

Every business starts small. The biggest on the planet all started somewhere, in a garage, dorm room, lab, somewhere between the ears of the entrepreneur.

Most fail, or at best deliver a return that would have been dwarfed by the interest on the same investment in a bank account.

Some however, do succeed, occasionally in spectacular fashion.

We all see the ones that do, they are shoved down our throats all the time as the heroes, the ones who made it, and we are asked the question, if they can, why can’t you?

There seems to me to be a pretty consistent sequence of growth, a sequence that holds true across all sorts of products and services, geographies, technologies, and circumstances.

Cheering.

This is the first stage, it is all enthusiasm, cheering from the sidelines, jumping up and down, wishing for stuff to happen. What it is about when you are in the midst of it all is hard grind, chaos, and cash.

At the beginning, you work your arse off, seemingly 24/7, with no letup. Everything that gets done depends on you doing it, you do not do it, it does not get done. Simple. It is messy, usually chaotic, as pressures come from every direction, your attention is demanded by each, which is why the 24/7, and still there is little forward progress.

Then there is cash. As you start, nothing is more important than cash. More start-ups go broke for lack of cash than every other reason combined. Managing your cash is simply the most important thing you must do.

Planning & doing.

Assuming you survive the cheering stage, you will have come to the point where you have a little more head time to be used considering ‘what next’. You probably have a small number of employees, and perhaps some outsourced services, like accounting and IT.

Answering the ‘what next’ question will be eating at your guts, as for sure you do not want to continue as you have been. Your kids are growing up without you, your family seem to be strangers, you have not had a weekend with your mates for ages.

So, you look forward to a different future and stumble into some planning. It is never as easy as filling in some generic template, of which there are plenty making alluring promises. It is more about the graft of figuring out how to accumulate and allocate the resources necessary to grow. While the game is still about cash, it has also become about profit, what is left for reinvestment at the end of the month, quarter, and year.

You plan your products and services, the foundation stuff you need to get right, like the legal and regulatory things that must be done, understand the financial and strategic pressures that are present, and settle for the moment on a business model that guides how you will turn your chaos into sustainable profitability.

However, a plan, no matter how good it may be at telling the future, envisioning new products, markets, and customers, needs one further ingredient.

It needs to be implemented.

Plans that do not get implemented are usually called dreams. You will also recognise the realty of the muttering of generals throughput the ages that while planning is essential, nothing ever goes exactly to plan, so you must be ready to be agile tactically, while consistent strategically.

Building & growing.

The essential ingredients to building and growing an enterprise, on top of the financial resources that enable that growth are threefold:

  • People to do the work,
  • Processes for people to follow, and over time, optimise,
  • Retention of the hunger and freedom that enables innovation.

The great paradox, and downfall of many if not most successful businesses is that they get the last one wrong, as they optimise risk out of their processes in favour of certainty and continuity of the status quo.

The task of being the entrepreneur has changed from one of management, to one of leadership. You are no longer engaged in tactical activity, which is being done by others in a manner that is transparent to overview, and with KPI’s based on outcomes. The tasks now are about the people doing the work, from the daily tactical stuff to the functional management. Your role is to lead all these people and ensure that the processes being deployed deliver on the plan. It is all about the productivity of resources deployed, people and financial, that is delivered via the processes that evolve.

Anyone who thinks this is easy has never done it.

Anyone who stands on the sidelines and cheers for you might be a cheerleader, supporter, and beneficiary, but they are not a coach. A coach delivers the models and means by which the success is generated, which is much more than cheering, as it involves getting dirty from time to time, being always challenging, and ensuring you are looking beyond the tactical that threatens to always consume you.

At each point in this growth pattern, there is a single question that you can ask that will give you an answer to the question of growth potential contained in any tactical decision:

‘Does this scale?’

Many small business owners do not ask this question, so end up selling their time for money, and there is only a limited time in any day. Therefore, if you are about to invest in tactical activity of any type, ask that simple question. If the answer is yes, fine. If it is no, think again.

When you are looking for a coach with the scars to prove experience, browse through the posts on this StrategyAudit site, and then you might want to give me a call.