5 things you need to change an industry

5 things you need to change an industry

May 27, 2019 | Change, Innovation, Small business

Today, I will be engaged in a workshop with a client who has a small business on the leading edge of a large, conservative, price driven industry, with established supply chains and relationships, that is about to get a kick in the guts.

We have to map out how a bootstrapped small business can be a catalyst for that kick, and ultimately benefit strategically and financially from the changes they will drive.

Not an easy task, with a considerable  number of unknowns.

This session is an exercise in identifying the key business processes required, and starting the process of building them out, while keeping the wolf from the door. It is also an opportunity to consider the modest number of macro factors from which will emerge the drivers of the growth we are planning for.

Strategy.

In order to make good choices at this early stage, we need to be able to see the whole game, at least our version of what it will be. This is making some bets on what the future of this industry might look like, figuring how we might change it, and assembling the resources to make it happen.

Timing.

Timing of the commercialisation of innovations is a critical and under considered factor in every industry that undergoes change. It is often not the first into the game that ends up the winner, but it is always the one who is best able to recognise the  inflexion points as they occur, and shape them to their benefit. Apple did not introduce the first MP3 player, but changed the world when they lunched theirs. Tesla is not the first electric car, to find that you need to go back well over  100 years, to  Thomas Parker’s vehicles, amongst several.

Value chain influence.

Every business operates in an eco-system of some sort, where there are others upon whom they rely for components, communication, services, and all sorts of items that together make up the differentiated product offering being created.  When you are a small business, without financial or technical resources of any great depth, just a vision of the future and a huge dose of passion, the challenge is to exercise influence over your value chain, way out of proportion to the financial and organisational muscle you can assemble.

Deliberate Design.

In this homogeneous world, looking great is essential, but being great is way more than looking great. It is the attention to the detail, certainty and transparency of processes, and emotional engagement that can be generated that really counts. This means that deliberate design of everything you do is a necessity. Deliberate design also involves the characteristic of stability, and creativity evolves out of stability, because you are able to hypothesise, experiment,  and quickly adopt what works, while discarding what does not. 

Audacity and belief.

Actually believing you can change the direction and nature of an established industry, with little more than the shirt on your back is audacious. It is not just thinking big, it is being prepared to do the work, and take the risks to make it happen.

It is going to be fun!!

The header photo is of one of Parkers vehicles outside his home in Wolverhampton, about 1895. Parker is in the middle.

 

Why does ‘Hindsight Planning’ really work?

Why does ‘Hindsight Planning’ really work?

May 6, 2019 | Communication, Small business, Strategy

For years I have used a process I call ‘Hindsight planning’ with clients to conceive then execute  a strategy that delivers sustainable prosperity. 

Put simply, rather than planning forward, as it usually occurs, from an  analysis of the current situation towards a goal,  I seek to have them articulate the goal in great depth, and from a range of perspectives so that they ‘internalise’ the goal as if it has been achieved. They have absorbed an  emotional attachment to the goal as if it was the current reality, rather than a goal.

I always thought it was a bit of a semantic trick, but it turns out I was wrong.

Hindsight planning is rooted in psychology.

Daniel Kahneman in his book ‘Thinking, Fast & Slow’ said it best: ‘Once you adopt a new view of the world, or a part of it, you immediately lose much of your ability to recall what you used to believe before your mind changed’

In other words, hindsight planning is more than a semantic trick, it is a process of replacing the current reality with a new one, that just happens to be the goal you set out to achieve. Once you believe the new reality, it is easier to look backwards and articulate the things you did right, and those you did poorly, the resources you needed, the timing, capabilities, and all the other things that require assembly for the achievement of a stretch goal.

When you need help with this challenging idea, call me, and challenge me to do for you what I have done for others.

Header Photo: the last known photo of the Titanic as it left Queenstown Ireland, on April 12th 1912. A little but of hindsight would have gone a long way!!

How SME manufacturers can survive the coming downturn.

How SME manufacturers can survive the coming downturn.

Apr 10, 2019 | Management, Small business

In contrast to the rosy picture politicians of both colours are painting about the prospects under their  government, and the disaster looming if we elect the other, I think we are in for a rough ride.

I am not an economist, so have no numbers apart from those in the public domain to support this rather pessimistic view. However, I have been around a long time, and the feeling in my guts from the anecdotal stuff I see everywhere has a familiarity to the lead up to several tough periods I have seen before. 

Part of the challenge is that many now in so called leadership positions have never seen a downturn in their working lives.

So, following are a few tips on commercial survival in a tough period, and dare I suggest it, prosperity, if you are bold enough to see the downturn as an opportunity.

Act early.

If you agree that it might get nasty, batten the hatches before the impact gets to you. Even if the worst does not happen, you will be better off anyway by seeking greater productivity from your resources.  If it does get nasty, you will then be in a much stronger competitive position for being prepared. 

Focus resources.

Pareto rules, and focussing on the 20% that generates the 80% is always a good strategy, and essential to thrive in tough times. Doubling down on areas where you have a competitive advantage, increasing your share of key customers wallets, being explicit about your value proposition,  sending high cost low margin customers to competitors, and so on. In effect, you set out to do more with less, increasing the productivity of your assets. 

Take a long term view.

Economies work in cycles, every downturn is followed by the good times, again, it is just a matter of time.  Many times I have seen a few businesses double down on marketing activity when others are cutting to preserve short term profit, grab market position at relatively low cost, and keep it when things improve.

Be opportunistic.

In a downturn, opportunities arise that may not normally become available. Some of those I have seen in the past:

  • Customer acquisition becomes less costly
  • Distressed sales of inventory, businesses, capital equipment, premises, all sorts of opportunities emerge as others scramble for cash.
  • Lead times for capital equipment, and contractors with specialised skills become shorter.
  • Great people with the capabilities you need to grow suddenly become available.

The challenge is to remain externally observant, while everyone else has their eyes on their own internal problems.

Be collaborative.

Tough times are usually the best to forge lasting relationships. Assisting others when they really need it creates trust, the foundation of  collaboration, which will pay off in many ways over time. 

Expect the unexpected.

While this may be akin to being optimistic, in my experience, planning to be opportunistic does help. Anticipating the opportunities before they actually emerge enables planning, and therefore better use of resources. It amounts to being prepared to be proactive rather than just being reactive.

Hoard your cash

To act on any of  the above, you need cash. While interest rates are at historic lows, having cash when others are struggling is like being the only one in a rainstorm with an umbrella. Everyone wants to be your friend. Hoarding cash is not a matter of being mean, it is an outcome of discipline in your expenditure, removing waste from your own processes, maximising your own revenue generation strategies, and collecting from debtors.

When you would benefit from the experiences of others, give me a call.

Header photo courtesy Sarah Macmillan

 

 

 

 

The ’90 day trick’ for success

The ’90 day trick’ for success

Jan 18, 2019 | Leadership, Operations, Small business

 

We tend to overestimate what we can do in a day, but underestimate what we can do in a year. 

This is a well understood cognitive bias first articulated by Roy Amara, as it applied to tech development, but I have found it holds everywhere else.

90 days appears to be the intersection of the two.

It is short enough to create a bias to action, a sense of urgency, but long enough to make meaningful progress while accommodating the adaptations that appear along the road.

In my consulting, I encourage, indeed demand planning followed by execution of the plan. However, it is always challenging to have a 3 or 5 year plan aligned with the day to day activities, so I encourage what I call ‘nested’ plans.

A nested plan is one that has a longer term outcome agreed, then progressively broken down into annual, three month planning and performance assessment cycles, broken further into monthly and even weekly and daily plans, depending on the situation.

For example, a factory should be working on rolling daily plans, sales working on weekly plans. Performance measurement should follow the planning cycles, and be made absolutely transparent. For example, I encourage weekly rolling 13 week cash flow forecasts, which deliver the combination of urgency and perspective over the more usual financial reporting of monthly profit and loss.

It all comes down to determining what you are going to do today that will contribute to the outcome required, today, this week this month, this quarter and so on. 

Without a nested plan to which you commit, you will always tend to do the seemingly urgent but unimportant things rather than the important longer term things. These longer term activities are always more emotionally and intellectually challenging, which is why we put them off, find excuses, and generally procrastinate.

It is a fine circus act, this short term/longer term balance, one that is hard to maintain, requiring concentration, situational awareness, and finesse, but essential for success.

A note of caution to finish.

As essential as the planning being a part of normal activity, so should be the ongoing incorporation of feedback into the plans. A robust review and incorporation process is as important as the planning itself. No good ensuring you stick to the plan when it runs you off a cliff. 

 

 

To focus, ask the ‘Framing Question”

To focus, ask the ‘Framing Question”

Jan 16, 2019 | Management, Operations, Small business

 

One of my acquaintances is in a real muddle, and stressing out beyond the point of sensible.

His business is circling the drain hole, and he is drowning in things that he thinks he needs to do, and things that his various service providers, suppliers and customers have told him he must do, now, or sink.

Problem is, they are all different, and all come from the perspective of the person offering the advice.

Over a beer, during the Christmas break he observed I had been the only person he knew who played in this space, and had not offered a ‘perfect solution’ to his problems, so he asked my opinion.

I do not have all the details of his situation, so have no solid base from which to offer a view, but suggested he ask himself what I call ‘The Framing Question’

‘What is the one thing I can do, such that by doing it, everything else will be easier or unnecessary’

Answering this question will lead logically to several others, such as ‘How’,  which leads onto a set of steps, which begins to sound like a plan!

You can have a plan that is really long term, which often resembles a dream until you put specific milestones and performance measures in place, and work towards it progressively. Exactly the same thing can be said about the tasks that confront you on a daily basis.

Making sure that the daily tasks build towards the longer term one is simply a cascade of the daily answers building over time. The daily answers will vary, the longer term answer should not.

In my acquaintances case, the answer was ‘Cash’

He is now working on executing a plan we developed on the back of a coaster that manages his cash better, and will generate more of it.

The plan was for 90 days, which was all he had left if nothing changed, with targets and tasks, and he now has a cascade of monthly, weekly  and daily priorities that he and his staff will work on before anything else. 

What is the one thing I can do…..?

A simple question, but clear and with no room for wriggling.

 

 

What makes the perfect business?

What makes the perfect business?

Sep 14, 2018 | Marketing, Small business

A while ago after a networking meeting, a few of us went to a pub for a steak, and ended up solving the problems of the world on beer coasters.

As you do.

Given we all owned and ran small businesses, the main topic of conversation was around the nature of the perfect business, the one none of us had.

The depth of intellectual effort that had gone into  the discussion deserved preservation, so I collected the tattered and somewhat wet coasters at the end of the night.

The next day it took a greater than anticipated effort to decipher what had been very clear just a few hours before. However, following are the parameters of the perfect business we arrived at.

  • It has a wide demand area, not just the local area, the world. This is now a possibility whereas a decade ago it was still fantasy.
  • You have a ‘monopoly’ in a niche, with inelastic demand. To achieve this the business must be very specific, and very good at what it does. So good, and so specific in fact, that it is simply not worth the investment and risk of competitors coming after you, but customers need your product and are prepared to pay for it. (A former client sold a highly refined chemical into a high end niche in the professional photographic market. A tiny, narrow world market, where the users needed the product in very small quantities, so price was not an issue, but the challenges for a competitor were significant. Perfect.
  • Substitutes are hard to find. In the example above, there were substitutes, quite acceptable ones at average levels of output integrity, but at the really pointy end, there were none so he could set his own prices. This is, until digital took over, making his business one of the bits of disrupted post digital debris.
  • Labour costs are minimal, the fewer personnel the better. Contractors undertake the recurrent processes, often in lower cost locations.
  • As above with overheads, which just anchor you to a place.
  • Investments in inventory, which chews up working capital, are minimal.
  • The business is mobile, in the sense it really does not matter if the HQ is in Sydney, Melbourne, or under a tree in Port Douglas.
  • There are limited regulatory regimes that interfere in the running of the business. The opposite is also true, where the regulatory impositions are so high that they discourage competition.
  • There is some element of cash, not for tax evasion purposes (although this angle did have some attraction) but to minimise the working capital necessary to run the day to day operations.
  • It is not bricks and mortar retail. Sounds specific, but in retail there are always long hours, and problems with personnel and customers, that just get in the way of making a profit. Besides, B&M retail is in the early stages of disruption, and Amazon had just opened their warehouse in Melbourne.
  • It is a subscription business of some sort, where the revenue just rolls in without the necessity to go through the sales process again and again for every dollar of revenue.
  • It is not a straight trade of your time for money, there has to be leverage involved. The web with its opportunity to leverage content has opened up a host of opportunities not around a few years ago.
  • The business has some value to your ‘internal’ life. It is something you love, it feeds your intellect, gives you the time you need to chase a dream, whatever it is, it delivers more than just the financial rewards.

None of this allows you to be successful in the absence of real marketing understanding, a product that fills a genuine need in ways not easily replicated by others, and a bit of being in the right place at the right time. Being able to see an opportunity when it knocks is critical, as it rarely knocks twice.

Additions to the list are very welcome, and it may serve as a scorecard for your business!!