The 2,000th StrategyAudit blog post

The 2,000th StrategyAudit blog post

 

2,000 posts published. A milestone, achievement, a joy.

I tried to do a count of the notes, links, ideas, half written posts, and completed but inadequate posts in my One-note files and gave up. It is in the 10’s of thousands, over 12 years (March 2009 was the first post) of scribbling, reading, thinking, feeding my curiosity. It looks like an idea to publishing ratio of about 1.5%. Yikes!!

A blog is a personal possession, something owned, that continues while the owner cares enough to do the work. Individual posts also have a life of their own. Posts published years ago are still generating pageviews every day. The old saying about newspapers being tomorrow’s fish wrappers does not apply to digital content, especially posts that are specific to a niche where people remain interested and engaged.

Learning from history is no less important for a blogger as it is for someone important.

There are numerous posts that are read often, that are old. I do not know who is reading them, and what if anything they are doing as a result, but the sheer number of times the same posts are opened indicates something useful.

Several have gone ‘viral’ if I use the term simply as a comparison to the averages I see, but in the grand scheme, are little more than a pinprick.

However, there are some lessons:

  • I am a much better scribbler than when I started, albeit still some distance from being a ‘writer.’ This has come with practice, study of others I admire, feedback, and sweat. I have learned to eliminate the beginner mistakes, which centre around clarity and certainty of meaning. Things like long sentences, using three words when one will do, and words that make me appear smart because they have lots of syllables.
  • When people read my musings, they do not get any artifice, or window dressing, they get me, and what I think, devoid of the trappings. Every word is original, every perspective mine, distilled over almost 70 years of life and 45 years of commercial experience. If nothing else, I have been consistent since the first post. When I look back, some of the early posts leave much to be desired, but others, many others, I am proud to have written and put out there for others to take away what they will.
  • While I do range widely, across business, politics, economics, and the occasional personal rant, the focus of the writing is for those running SME’s. Things I see that impact their lives and businesses. This brings them back, not all the time, not for every post, but regularly.
  • SEO is (relatively) unimportant. It is easy to be seduced by vanity measures of likes and even shares of posts, the feedstock of SEO. However, the real measure is the degree to which readers really engage with the posts and respond in a meaningful and thoughtful manner. I am a small, sole trader, without the funds, or indeed desire to be anything more. Readership has come one person at a time, over time. While it is important to do the simple things to give yourself the best chance at being found, spending lots on SEO in the absence of something useful and worthwhile to say, just makes more money for Google.
  • New shiny things while important at a point in time, are not important over the long haul. The value of a post on a topical issue that goes away quickly is limited, while the value of a post on an issue of long-lasting impact is, by definition, long lasting. The name of the thing is after all StrategyAudit, implying both long term and quantitative.
  • The pressure of the status quo is immense, it demands conformity, which is the antithesis of what is required for innovation. Those we need in organisations to question the status quo are labelled as troublemakers, or they are bypassed in one way or another. Most choose, sensibly, to be a part of the status quo, to conform. It enhances career, pay, status and privilege, why wouldn’t you? Because, at some point, good people look at themselves in the mirror and if they do not like what they see, they move on. In the war for talent, this is the worst possible outcome for the organisation. The solution for organisations is to explicitly encourage the weird, to seek out the outliers, those who do not take cover behind the barriers of the status quo and bureaucracy. Encourage them and make it comfortable for them to be different, to think differently. It is these people, along with the owners and managers of SME’s, to whom I direct this blog.
  • Headlines matter. David Ogilvy’s dictum that a headline represents 80% of your advertising expenditure applies equally to blog posts. A great, informative, value adding post with a lousy headline will do a dead cat bounce. By contrast, a modest post (hopefully not too many of them) with a great headline will generate more views, but little engagement. The challenge is to do both.
  • In an increasingly competitive market, people’s time and attention is the one truly non-renewable resource we have. At a networking event about a year ago, chatting to a small group of people I had not met before, one person was looking at me oddly. Later he asked, “Do you write the StrategyAudit blog’? When I answered in the affirmative, he told me he had been reading it for a decade and thanked me for the insights he had been able to glean. Until that moment, I never knew he existed, as he had not ‘engaged’ in any way, other than to read what I published, and occasionally he told me, share it amongst his networks.
  • There is no direct correlation between project commissions (sales) and the publishing date. It has never happened that someone contacts me and says here is an assignment based on a post you have just published. However, what has happened many times, is that after a conversation, I can follow up with a post on the key topics discussed, often several, written over time that address various aspects of the topic discussed. That establishes my level of knowledge and authority, and has led to many, if not most of the engagements over the years.
  • Any brand that believes it has any power to dictate to consumers will disappear, if it has not already. Power is firmly in the consumers hands, and it is the job of marketing to answer questions that emerge along the journey to a transaction and relationship. However, any marketer who believes that consumers want to have a relationship with their brands is soft in the head. Consumers do not care about your brand, only about what it can deliver, the problems it solves, so you need to be explicit about that.

 

How do so many get written?

I am often asked how it is that I produce so much, and so regularly.

My standard answer is that I am simply curious, and writing another blog post is a way to salve that curiosity. I see blog post everywhere, in the questions I am asked, in the stuff I read, and in the things that I think about, usually sparked by something unexpected, and unplanned.

After that, there seems to be a process that is fairly consistent.,

I record the thoughts, ideas, links, in any form they occur in One-Note. It is a library of random stuff broken into categories, of which there are now about thirty, including subcategories. Sometimes stuff gets lost, but it remains there, able to bob up, and the whole mess is searchable.

Every post goes through a process, usually several times as it is refined, often over an extended period. I have a thought that adds weight to something I have recorded before, so I find the original and add it.

At some point, the nascent post gathers clarity. The point it is making, and who that point may be of benefit to, it is then the process becomes serious, and editing occurs.

I try to use simple language, rather than displaying my vocabulary, and I try and use stories that illustrate and make the point. A relevant story, and often those are personal, are better than a page of statistics. Readers do not engage with stats, unless they happen to be a stats nerd, and very few of them read my stuff, but a story that makes a point and is personally relatable makes an impact.

I edit aggressively, trying to reduce the number of words, a task at which I often fail. I also always use the tools provided in Word to check spelling, punctuation, and structure, then when it seems OK, I have the ‘read’ tool read the text back to me, often many times as more edits emerge. At that point, the post is stuck in a ready to post folder, in which it may live for some time before it seems ‘ready’ enough to be published.

What I do not do, which is pretty dumb, is follow the stats of posts in any more detail than at a macro level. You see, they are for me, they are selfish. Writing makes me better at what I do, as it forces clarity and structure in my mind, if someone else benefits, great, but the object has become selfish.

How is StrategyAudit differentiated from the millions of others?

Many blog posts out there are written with the explicit objective of generating income from a transaction of some type. It often seems like good stuff to someone just looking for advice and input, and it can be. Problem is that the advice is often untested, and almost certainly untested in the context of the person seeking the advice. This makes it at best, fragile. I get ideas and perspectives from all sorts of sources, the books read, the conversations I have, the blog posts I read, webinars I watch. Each of those titbits ‘feeds’ OneNote, acting as a general information resource. Nowhere in the StrategyAudit blog is there a call to action for any sort of transaction, no affiliate sales, no ads. If I recommend a book, it is because I think it is worth your time. The only benefit to me is that I may have contributed to someone else’s growth, someone I will never know existed, but nevertheless, I contributed in some small way.

The things I write about are all things I have done. I am not speculating about what might work, the things reflected in the posts are things that I have experienced, it is a toolbox, but everything has its place in the box, and each tool has a specific purpose, a context in which it is best used. Never do I set out to deliver something that I cannot do to an expert level. For example, I often have people wanting me to execute the plans to leverage social media. I know how to use all the tools, but I am not an expert, I do not have the skills to optimise the spending of your money. I know and understand the principals, know which tools to use, but then choose to get an expert to execute.

StrategyAudit plays the long game. It is wrong to think of a post as being tomorrow’s fish wrapper. There are many posts that have taken on a life over many years, every day they deliver people to the posts, and then to others. The longevity of a blog post is a surprise to most, certainly it was to me. The great benefit is that it becomes clear what topics my readers are interested in, so I tend to focus my thinking on those topics.

I also admit to several hobby horses: the paucity of thinking around the funding and organisation of education, the shambolic nature of our politics and the apparent absence of any real oversight, transparency, or moral compass. My views on these are mixed in with the observations and advice that hopefully make the StrategyAudit blog useful for small and medium businesses, particularly those manufacturing a product.

What is the value of a blog?

A single blog, not much, in the absence of something truly extraordinary. It is the accumulation of the knowledge that comes from researching and writing posts where the value lies hidden.

Einstein observed the compounding was the most powerful force in the universe, he was right, and it applies to everything, including blog posts. The caveat of course is that every post must be of value to someone, and compounding is a two-edged sword, working in reverse as well as forward.

Is blogging still relevant in the digital ecosystem that has expanded in an astonishing manner? Well, yes. At least in my view. Despite the numerous new channels, and more opening every day, the discipline of a blog is a value adding activity which can be leveraged onto other channels.

There are many ways you can make money from a blog, at least a successful one with longevity. Not only can a blog lead to consulting assignments, speeches, and accumulated wisdom assembled into a book, there are other opportunities. None of the following tactics have been used: Advertising, affiliate links, sponsored posts, product sales, simply because they pollute the intent of the writing. The reality is that you only make worthwhile money with a big following, which this blog does not have. The price for selling my soul to any of these so called ‘monetisation strategies’ is nowhere near big enough, and never will be.

 

Some predictions.

Years of intimately observing the changing competitive, strategic, and regulatory environment, leaves you with a set of parameters by which to make judgements and predictions of those future things that are unquantifiable, until they have happened. Marketers are charged with predicting the future so that they can enable the alignment of assets of their enterprise to best generate leverage and outcomes. Therefore, predicting the future and placing bets is a part of the responsibility. So, here goes, in no particular order:

Hyperconnected but lonely. We have become the most connected population in history. We have also become the loneliest, losing the connections to small groups that ensured survival as we evolved. This downward spiral will reach ‘bottom,’ and we will find new ways to reconnect with small groups that offer the physical and psychological safety we need. While we have become hyperconnected and lonely, we have also become polarised, driven by the echo chamber of digital platforms that have emerged. I remain optimistic, that the ‘reconnection’ will reverse this disturbing trend.

Digital currencies will create an existential threat to the existing Sovereign borders. There are many ‘crypto currencies’, and hundreds more will be created by anyone with the digital grunt, and ability to create a market for them. Facebook seems publicly to have backed away from its announced ‘Libra’ digital currency, and associated payment and trading enhancements. However, given the reach of Facebook, and the potential of ‘Fintech’ to disrupt the cash generation capacity of ‘pre-digital’ business models, (banks & insurance specifically) I suspect it will re-emerge in some form. Irrespective of the involvement of Facebook, or indeed, any of the other ‘digital unicorns’ the potential for crypto currencies to change the face of commerce and the fiscal health of sovereign economies is, in my view, significant. We had best be prepared.

Social media regulation. It is probable we will see some sort of regulation of social platforms. Twitters recent decision to ban all political advertising is at absolute odds with Facebooks hypocritical position that to do so is an invasion of free speech. I detect an increasing level of public disquiet, so at some point, years too late, regulators will bumble towards regulation of social platforms. The recent Australian experiment which remains legislated, to collect money from digital platforms to keep newspapers alive is an absolute dog, and will be, hopefully, repealed, and replaced by something sensible.

Ageing population. The population of the first world is getting older, and more expensive to keep alive, while the number of people generating taxable income reduces. This creates pressure for a substantial reordering of the status quo in the broad range of industries called ‘health and aged care’. There are numerous models around the world, some work better than others, but all hide enormous inefficiencies and inequity that will become the focus of much innovative attention. The consortium of Amazon, JP Morgan, and Berkshire-Hathaway, set up to address the challenge, closed in early 2021 after 3 years of operations. The managers cited data collection and aggregation as the central obstacle. Given the nature of innovation, I suspect this consortium which burnt $100 million, petty cash to these giants, is just the first experimental foray into the jungle of regulation and self-interest that drives profitability in this huge industry. More will follow.

Climate change is not an opinion. We need to recognise in our marketing activities and positioning, that climate change is a reality. Irrespective of what the dinosaurs running the place may think, the science demonstrates clearly otherwise. The Greta Thunberg’s of this world will be running it soon and will reasonably expect my generation to have made a start on saving the place as best we can.

Customer centricity. You must now be customer centric in everything, as it is the customers who have all the power in the lead up to a transaction. No longer just talking about it but making customers the reason for every activity. This exchange of power in the purchase process will not be reversed. If anything, it will leak into our wider social and political lives, and demand change. In a word, ‘transparency’ will become the objective, and the more it is denied by the status quo and vested interests, the nastier the argument will become.

Artificial Intelligence. Machine learning of various types will continue its march into marketing decision making. Machine learning (ML) is a subset of artificial intelligence, relies on progressive ‘learning’ from trial and error, which delivers increasingly accurate interpretations and predictions against a defined goal. As more data becomes available and is subject to the algorithms, the predictions become increasingly more accurate. ML is a valuable tool when the objective is clear. It is less effective when the objective ambiguous or morally complex. For example, self-driving cars must gain approval from stakeholders outside the data, regulators, insurance companies, and others. In addition, it must be capable of making moral decisions, such as ‘will I collide with that old man or that child’ when no other option but those two is available. We have a long way to go yet, but the advent of quantum computing over the next 20 years will be a game-changer.

Digital access. Around 35% of people on the planet do not have access to the internet, for an array of reasons. Often the infrastructure is not in place, or affordable to those effectively ‘net disenfranchised’ billions of people. Over the coming years this inequity will be addressed, probably by private enterprise. This huge cohort represents the largest opportunity to level the growing inequity in the distribution of wealth on the planet.

The successful become the victims. Success means others will copy what has made you successful. However, to be attractive, you must be sufficiently different to attract attention, and revenue from those who lead the success. It seems to me that this means that the newcomers will look for a segment in a market being served by the initially successful innovator, into which they can deliver a better outcome. There are many examples, Skype, the first mover, has attracted a host of competitors that have delivered growth for themselves and the total market by focussing on a niche and delivering a better outcome than Skype. PayPal has spurred a welter of Fintech innovation, as has YouTube. Locally, it seems to me that the two dominating real estate platforms, Realestate and Domain, are in for a rough time, as competitors emerge that do a better job in specific segments, as well as adding on other services like funding.

The Chinese second long march is digital. China has jumped a couple of generations of digital evolution, and across broad fronts are now the innovators, pushing aside Silicon Valley. Tencent, WeChat, Taobao, Alibaba are all part of an ecosystem that is combining online and offline in ways not seen before. Get used to it, our grandchildren will be living in a world where China has taken the preeminent position occupied by the US in the 20th century. Their system will evolve, history suggests that social and political change comes from the middle classes. China has done an astonishing job in lifting millions from abject poverty to middle class security in a generation, and therein lies the seeds of the changes that will become necessary. The outcome is unlikely to be anything resembling too closely the current so called ‘Democratic’ west, which for the opposite reasons has its own evolution happening, as the divide between the haves and have nots increases.

Surveillance: Is it creepy/scary/intrusive, or just another way to better deliver service. Every click on a website, social platform, email, is stored and used to target you for advertising, based on behaviour. Rapidly emerging is facial recognition, voice control, adding to the data points. At what point does this become dystopian rather than a means by which to serve us better. All these developments are by either robotic engineering people, who instinctively believe machines are better than the humans at decision making, as they are less messy, and more decisive. Those who do wish to build control over the activities of individuals, Putin, rocket man, various mullahs, and others will also continue to deploy surveillance until there is a general revulsion that creates momentum for rolling back, which in some places could be bloody.

The role of brands. The brands we grew up with, which were mostly consumer brands are largely dead, killed by house brands, price, global supply chains, and lack of any emotional connection. A few have survived. Those few are the few that have built a genuine connection that is more than just a brand, it is the transparent commitment of the owning body that is the core. Those few are immensely valuable in a world where ‘intangibles’ is increasing towards 90% of the valuation of a business.

In Australia, banks and large financial institutions have trashed their brands, which offers a huge opportunity for renewal by smaller community banks and ‘Fintech’. It seems to me that ‘Fintech’ is taking over in the absence of agility by the incumbent banks, which will lead to regulatory challenges. Similarly, energy companies, what an opportunity to invest in a transparent manner in renewables, measures to mitigate climate change, long term investments that lead us to trust the corporation behind the brand. Dairy companies in Australia all have brands, but they are owned by multinationals apart from Bega and Norco. Again, what an opportunity to leverage the ownership of those enterprises as the holder of Australian values, as the opposing brands are just labels owned for the benefit of someone else.

Relative economic growth rates. Experts predicted a world pandemic, with the benefit of hindsight it was a safe prediction given the number of times it has happened before. Question is, how will this shape the post pandemic world? My bet is that the debt that has accumulated in the west, together with the evolution of crypto currencies and the reshaping of global demographics will see the relative decline of today’s successful economies and the rise of those in Asia and Africa. They are currently less constrained by debt, ageing infrastructure, sunk costs and a resilient status quo. They will undergo an increasing level of education and gain low-cost digital accessibility which will drive their relative productivity improvement to catch up with the old West.

That is enough from me. If you have read all this, thank you. It has been a bit self-indulgent, but it is StrategyAudit’s coming of age, so why not?

The 6 evils of Cost Plus pricing.

The 6 evils of Cost Plus pricing.

 

Cost plus pricing has always been the worst pricing strategy to employ, although the most common. It is because it is superficially easy, understandable, and requires little thought.

In my experience, the use of a cost-plus pricing model is an indication of a lazy, or uninformed and poorly advised management.

The chances are they have no idea of what the real costs are.

Such a pricing model indicates that there has been no effort to isolate the cost drivers and determine a strategy that reflects their competitive and economic context.

All that has been considered are internal factors that the customer has no interest in at all.

It is also often an indicator that the costing system is driven by accountants, who manage by variances from some mythical standard that rarely reflects the reality of a production process, but over which they can absorb overheads.

Rubbish system, and here’s why:

  • Standard costs. Most operations have a standard COGS system in place that is revised up or down against a schedule, often annually. In the meantime, variances are theoretically tracked and explained, but they tend to get lost in the chaos of day-to-day operations, and a budgeted gross margin.
  • Costs included in a standard system are wrong the day after they are put into the ERP system. It may be a year before they are updated, and even then, remain inaccurate.
  • Cost variability.  Real costs will go up and down, often daily, and even hourly, depending on a range of factors, Factory throughput, supplier price changes, overtime, WIP losses and a host of other factors all impact actual cost. At the very least, you need to know if you are winning or losing at Gross Margin because of these changes.
  • Sales management is compromised in the absence of robust gross margin analysis. Depending on the degree of autonomy the sales force has, they can be ‘generous’ to customers for a range of excuses, normally associated with sales budgets expressed in volumes, rather than gross margin dollars and percentages. This enables all sorts of ‘gaming’ of sales to exist.
  • Increasingly in a commoditised market, value is delivered by intangibles rather than the physical product. It is geometrically harder to put a price on this value to a customer, so the potential for sub-optimal pricing is magnified by poor product costing.
  • Customers do not care about your costs at all. Not a whit!. What they care about is the value delivered to them. Price for that value, just make sure you can make a sustainable profit on the way through.

At the very least the P&L should be broken up into cost of goods sold, further broken into customer and product categories, trading variable costs, and fixed costs. At least then you have the chance of identifying where the cash is leaking out, as it is leaking.

When you need some outside expertise to maximise your profitability, call me.

Is cash always king?

Is cash always king?

 

 

Cash when it is working for you, is king.

However, cash sitting idle in a bank account fritters itself away, slowly, and over time.

Inflation, small purchases, fees, all eat away at the cash like mice in a wheat silo. A bit at a time.

Cash does not generate cash flow without being put to work. It is like going to the gym, it takes time, effort and commitment, but the result will show. Even when there are short term setbacks, interruptions, and periods of despondency acting as a brake, keeping working works.

We are in a time of unprecedented change.

This is more than just the Covid hangover starting to evolve, all that has done is greatly accelerate the changes that were emerging on the fringes.

The status quo in many areas has been thrown out the window. While that is deeply unsettling, and creates challenges most of us have not seen before, the flip side is that it also throws up opportunities not seen before.

Opportunities to fill the merging market niches, to pivot to different business models, serve new customers in different ways, or just grab assets and market share from less nimble competitors.

All of this consumes resources. The management time and inclination to make the necessary changes, and the cash to make it happen.

Successful businesses understand in detail how, and how much cash their enterprises generate. They keep borrowings to a minimum, giving them the ability to grab opportunities as they emerge, but they also keep their cash working, hard.

Header carton again courtesy of Scott Adams and his alter ego Dilbert.

The single question every entrepreneur should ask themselves. Often.

The single question every entrepreneur should ask themselves. Often.

 

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.

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 seems to be all enthusiasm, cheering from the sidelines, jumping up and down, wishing for stuff to happen. What it is really 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 don’t 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 very 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 partner becoming a stranger, you have not had a weekend with your mates for ages, so you look forward to a different future. So, you 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: the means by which 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 reality of the muttering of generals throughout 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 twofold.

You need people to do the work, and you need processes for them to follow, and over time, optimise.

The task of being the entrepreneur has changed from one of management, to one of leadership. You are no longer as engaged in tactical activity. Tactical implementation is being done by others in a manner that is transparent to overview, and with KPI’s based on outcomes. The task now is 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, 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 challenging at all times, and ensuring you are looking beyond the tactical that threatens to consume you at all times.

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: Does this scale?

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 the StrategyAudit site, and then you might want to give me a call.

 

 

 

For freelancers: How to think about the price.

For freelancers: How to think about the price.

 

 

Regularly, I find myself in a discussion with those who sell their time and expertise rather than a physical product, talking about price.

How do you set it?

After 25 years of doing it for myself, you might think I have some tips?

Well, I have plenty of experience and some scars, but it remains a really tough question. It is especially tough when there is not much work around.

There are only two driving considerations:

  • How long the project will take me.
  • What is the value of the project to you.

These two factors combined with my standard rate will define a quote.

Generally my quotes are fixed, if I make an error in scoping in my favour, OK, if the error is in your favour, good luck to you.

I will not haggle, either the knowledge and experience I have is of value to you, or it is not.

However, there are a few mitigating factors that can influence the price.

  • Project scope. I am an expert in specific areas, not all. Often there is the opportunity for you to use others who may generate a better outcome more quickly. In that case, I will recommend a couple of people to you, people that I would trust were I in your shoes. In that case I will not clip the ticket in any way, unless you need me to project manage the ‘subbie’. This may reduce my price, as it no longer consumes my time.
  •  Timing. As I work on projects, there are times when I am up to the gills, and others when there is plenty left over. If your project is flexible in its timing, and I can get to it in those slower times, perhaps we can agree on some price flexibility as well. However, that is unusual, as what seems to be a ‘dry patch’ has the habit of suddenly turning into a downpour.
  • For some reason, the project we are discussing is more than just interesting to me, as those are the only ones I take, but compelling, addictive in its potential to make a difference. Again, rare.

I am a stand alone freelancer, an expert in a narrow but very deep field, trading my time, experience and knowledge for money. I know a lot about a wide range of other things, but do not claim expertise of any great depth. Generally, I do not do projects that require those skills, except as a catalyst and enabler of the areas of deep expertise.

The focus should be on the value that will be delivered, not the price.

Maybe that helps you to think about your own pricing strategy.

The essential template for hindsight planning

The essential template for hindsight planning

 

How do you execute on that BEHAG?

How do you fulfil the vision?

How do you accomplish the mission?

These are all questions I get from time to time from people stumped at the point where the dream, whatever label you choose to put on it, has to be turned into some sort of activity.

A dream in the absence of the steps to achieve that dream is commonly called a fantasy.

The process that I help people through is what I call ‘Hindsight Planning’

It has four distinct steps.

Step 1. Understand the market dynamics.

There is no avoiding the necessity to understand the drivers in the markets you are seeking to leverage. The technologies, barriers to entry and exit, capital requirements, regulatory requirements, major competitive factors, and a host of others all play a role. In the absence of at least having some idea of the ‘Current state’ of the market, you risk that plan being just a shattered dream. Unless you understand what it is you want to change in order to grow, and what the probable drivers of that growth will be, it will remain a fantasy.

Step 2. Agree on the shape of the business down the track.

Planning horizons change from market to market. Technology markets are changing almost as we speak, some others have very long lead times, although it is often these that are disrupted by newcomers who throw the long held beliefs that have driven the market over the wall and change everything. Nevertheless, difficult choices need to be made. What you will do and how, but often more importantly, what you will not do and why.

Step 3. Plan backwards.

Having agreed the shape and size of the business in 1, 3, or 5 years, whatever horizon you have agreed on, the task now is to ‘put yourself there’. Imagine the outcome has been achieved, and then articulate the steps you have taken in that journey. This might seem just to be an exercise in words, and to some extent that is true, but importantly, it is also an exercise in perspective. Working backwards enables you to test ideas, assumptions and choices, against an outcome you have agreed has already occurred, albeit in your collective minds. In that way, a ‘reality filter’ of sorts has been applied.

Some of the obvious questions that need to be answered may be:

  • Where did the revenue come from? Growth is not possible in the absence of revenue, so list the sources on a whiteboard. Current customers, new customers, channels, business models, products, technical achievements, geographies, and so on. However, do not just list them, articulate in some detail how it has happened. Again, that past perspective adds real ‘grunt’ to the conversations.
  • Where did the capital come from? Growth is a veracious consumer of resources, particularly capital. How did you fund that growth? Reinvestment of retained earnings, capital raising from friends and family, or from the markets, public and private, debt finance considering the necessity for assets as collateral?
  • What is the dominant business model? Are you a middleman, retailer, on line item sales, subscription sales, did you achieve a position to monetise arbitrage opportunities, and so on. Digital has delivered a host of new and emerging business models to us over the last decade, but one thing that has become clear, if it was not already, is that differing business models do not live comfortably in the same house. Therefore, if your revenue streams come from different business models, the structure of your resulting business needs to be decentralised by those differing business models.
  • What is the ideal corporate structure?  Have you remained private, are you publicly owned, a partnership, Joint venture, franchise system? There are many options, and as in the previous question, potential siblings rarely successfully live in the same house.
  • What capabilities were required to succeed? This is a question in two parts. Firstly, what capabilities were required from individuals, technical, strategic, financial, and all the other factors that make human beings able to contribute? Secondly, what were the organisational, leadership and cultural factors that enabled the organization to leverage the capabilities the individuals brought in each morning as they turned up to work.

Step 4. Execution of the plan

As noted, a plan of any sort remains a fantasy in the absence of the means to execute, and deliver on the plan.

Executing on a plan to achieve an objective has a few wrinkles that must be accommodated:

  • ‘No plan’, as George Patton said, ‘survives first contact with the enemy. This means that the plan must be sufficiently agile to accommodate the unexpected, while remaining focussed on the objective.
  • All stakeholders, and most particularly those who are employed, must not only know the plan, but they must understand and ‘buy into’ the objective, while reacting tactically to the unplanned things that confront them. The means to achieve these usually mutually exclusive outcomes, is that they not only understand their role, and the part their role plays in the larger objective, but they must also be prepared to be more than just an unthinking functionary, doing as they are told, or at least as they understand they are being told. It is a process of critical thinking and feedback going up, down, and very importantly, across the management chain. Not an easy thing to achieve and one we normally just attribute to some natural ‘leader’ who emerges. However, everyone has the capacity to be a leader, simply by being a participant in the process and holding themselves accountable for the actions of others.
  • Operationally deploying ‘Nested’ functional plans. Like the operations of a mechanical watch, to tell accurate time, each part of the mechanism must contribute in a defined way to every other part of the mechanism, while not being overtly connected. There are always a range of flywheels driving others of varying sizes that are doing different roles, that all add up to that accurate time. An organisation is just the same, and this diversity of role, timing, and relationships to other flywheels must all be kept in synch if the outcome is to be achieved. No easy task, which is why it so often fails. Successfully driving towards an objective, means that the various parts of the mechanism of the organisation must work be synchronised in ways that are able to accommodate the tactical opportunities and reverses that inevitably occur while not losing sight of the objective. This all requires what I call ‘operational nesting’

 

When you need an expert to help you think about these things, let me know.