Get stronger, then get bigger

Get stronger, then get bigger

Mar 6, 2019 | Change, Customers, Management, Strategy

Most businesses find themselves on the ‘get bigger or get out’ merry go round. Unfortunately, one of the characteristics of merry go rounds is that unless you hold on, centrifugal force  will throw you off.

Also, the faster you go, the more likely you are to be thrown off, and as you slip towards the edge, the momentum grows making it that much harder to reverse the trend.

The alternative choice is to get stronger, rather than just bigger.

This usually means you say ‘No’ to a lot of tempting, but short term ‘opportunities’ that will arise, as most will dilute the focussed and differentiated value you can deliver to your ideal customers.

The dual question therefore is: How do you get ‘stronger,’ and what does stronger actually mean?

To me, strong means a number of things.

  • You are commercially resilient,
  • Customers, employees, and suppliers are all aligned to your values and strategy,
  • You have a strong brand amongst your customer base who want what you have because you are the only one who has it, and
  • Your competitors employees wish they worked for you

In short, you have a ‘moat’ around your business that repels all boarders and pretenders, and resists the siren song that suggests the grass is always greener somewhere else .

When you have all that, you can get bigger, it will happen almost without you driving size, as the strength will attract suppliers, customers, and those great employees with energy and ideas. 

 

The hidden magic of the triggering event

The hidden magic of the triggering event

Jan 31, 2019 | Communication, Marketing, Sales, Strategy

What is it that acts as the catalyst that initiates the journey a customer will undertake that may end up with a transaction?

If you knew this, you would be in a situation to be very specific about your marketing, both the nature of the offer, the way you make it, and to whom you communicate it.

Customer personas are a great way to focus resources in a manner that delivers productivity of your marketing efforts. The more details and representative the persona the  better.

It works, and works well, but is not the whole story.

There are events and interactions that occur in peoples lives that are not logically accommodated within a persona. There is a point in the journey a customer makes towards that purchase not considered with anywhere near enough weight.

That is the situation, the event, the ‘thing’ that acts as a catalyst to create the beginning of the customer journey. The event that suddenly creates an awareness that there might be value in considering options, and that the current solution, whatever that may be is inadequate.

This is a ‘triggering’ event. 

A friend is a real estate agent.

She knows the market cycles very well, not just the economic ones, the seasonal ones that tell you that there will be a lull in activity in the market over Christmas, which will pick up again when things get back to normal in February.

Seasonal.

However, over Christmas lots of people will find themselves with family and friends staying over, for the night, for a week, and suddenly, the house they have is too small, the kids no longer can sleep two to a bed,  and one bathroom is no longer enough. That becomes a triggering event for some to start the process of thinking that perhaps a bigger house is necessary, or that they really need to do a tree change. As a result they start being unconsciously sensitive to any real estate ads that may pop up, where before they would not have even seen them.

Is my friend better off starting her advertising in February, when all the other agents are starting, in the expectation that the market is waking up? Or should she advertise in January, when there is  no activity, nobody else is advertising, but the possible users of her service are in the middle of their ‘triggering event’ and highly sensitive to suddenly relevant messages?

I know where my money would be.

 

 

 

The 11 point program for scaling your business.

The 11 point program for scaling your business.

Jan 8, 2019 | Change, Leadership, Strategy

 

Successful scaling of a business is not luck, nor is it just good management, it is way more than both.

It is having the leadership capacity that enable all those in the business to consistently and willingly take action that collectively, over time, compounds into growth greater than that available from just doing what you are doing now a bit better every day.

It takes leadership, because this stuff is hard.

Good managers manage, leaders define what it is that needs to be managed, when, and how.

Over 40 years of working with this challenge, it seems to me there are some common traits amongst those businesses that successfully scale, all originating with the leadership.

None of the following can be taken in isolation. as they all contribute to each other. There is a synergy you need to find that is necessary for scaling, as distinct to improvement.

To scale, you need to change what is done, and how it gets done, rather than just improve the way in which things get done. There is a quantum leap in this seemingly minor semantic difference.

 

Have a genuinely stretch goal

Scaling a business requires change, which is uncomfortable, so there must be a very good, well communicated reason for the discomfort to be imposed, with a specific outcome. Often this is now called a ‘BEHAG’ a term coined by Jim Collins in his book ‘Built to Last”. In it absence, nothing will change. The most obvious example is President Kennedy’s 1962 commitment to land a man on the moon by the end of 1969. You have to find, communicate and commit to your metaphorical ‘man on the moon’ goal.

Underneath the BEHAG there must be a strategic plan, broken down progressively into its tactical components in order to deliver the goal.

 

Alignment.

A much used and abused word, but absolutely necessary.  Every person, and every persons activity has to contribute meaningfully to the strategies in place to deliver the objectives, irrespective of the time frame of those objectives.  Without some sort of overriding objective towards which every person and activity can be looking, the outcomes will be suboptimal.

The metaphor I always use to describe alignment is that of a rowing eight, training towards a major championship, for example the Olympics. Every training session, every activity of each of the eight who will be in the shell, as well as their support staff, needs to be looking towards that goal of winning that medal. Everything that is done needs to be judged by the simple criteria of ‘will this add to winning that medal’?

 

Strategic Ambidexterity.

Let me explain this idea of strategic ambidexterity.  Every small action taken has to be a part of a larger action that builds into the scaled outcome. Any individual is easily distracted in their daily lives by the urgent but not important things that arise. Allowing those distractions to consume time takes away from the objective of scaling. Therefore, the focus of every person has to be on the one thing today, tomorrow, this week, month, quarter, and so on that has to be achieved in order to achieve the scaled target.

If you were to set out to run a marathon under 4 hours, you would  not just start trying to run the 42km from day one, you would fail. You would break your training down into pieces, each one building on the last towards the objective. You would have a range of daily sessions, building into weekly and monthly targets that would eventually result in the successful completion of the marathon. It takes time, dedication, and a dual focus in getting every small step completed sequentially, while recognising that each one builds progressively towards the objective.

Engaging your supply chain partners and customers in the process adds to the power of the process. It is like having specialised trainers and suppliers of equipment contributing to your overall program. As success builds, you will find that they want to come on board, as everyone wants to be part of a winning team, which further builds momentum.

 

Operational rhythm.

Every activity and set of activities can be managed to have some sort of operating rhythm. In most cases it is unrecognised and unmanaged, so is not optimised. The most obvious example is the annual budget setting process most businesses go through. This normally happens in some sort of regular order and manner, to some sort of timetable. It is also in most cases I have observed, an addition to the routine set of activities, and is therefore an imposition rather than being a key part of the business management and development process. Similarly, the process to turn an order into product will follow some sort of routine that follows roughly the same set of steps every time. However, in every case, without an explicit and transparent process that has performance measures and associated management in place, the process will inevitably ‘wander’ being subject to change for many reasons. Process stability, noted below is essential for a predictable and consistent operational rhythm.

 

Accountability.

Ensuring clarity of accountability  for an activity, item, and process is essential to performance that can be measured and improved. Without accountability, a problem will always be someone else’s problem. Accountability, responsibility and authority often become entangled in ways that leave the improvement and scaling of any set of activities challenging.

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 falls on anyone who has the ability and opportunity to respond to proactively support an activity or process. Anyone who ‘touches’ a process has some responsibility. Authority belongs to the person with the final veto power.

For example, in a previous life as GM of a large organisation, I had authority over the expenditure of marketing budgets, product managers had accountability for  the specific activities that took place in their brand portfolios, and we all had responsibility to ensure that the customers who bought our products were serviced in a manner that had them coming back for more. 

The question ‘how can I be held responsible without the authority’ is often asked. The answer is that ‘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 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 and consistently delegate. 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.  

 

Stakeholder engagement.

All stakeholders, and most critically, employees need to be ‘engaged’ in the objective of scaling a business. To go back to the metaphor of the rowing eight, if one oarsman is not concentrating, and is therefore slightly out of rhythm, the performance of the eight will be critically compromised. That out of rhythm may be created by the training regime of the individual, the maintenance of the oar, and many other specific sources that together add up to the sub optimum performance of the eight when engaged in the race.

 

Clear, unambiguous and valuable personal purpose.

Again to refer to the rowing eight. Every member of  the crew and support staff know the purpose is to compete in the Olympics, and to do everything possible to win. To every person, the goal of winning is a personal one, as well as one that motivates and directs the team, and to every person, the goal provides a deeply personal objective upon which they can focus all their efforts and emotion.

It is no different setting out to scale a business. If the employees see the objective of scaling as being one that will enrich the proprietors  and shareholders without  anything in it for them, why bother. The purpose has to be one with a ‘higher calling’ that delivers something very personal for everyone.

 

Performance transparency.

No improvement project, let alone one that requires scaling can be successful without a roadmap provided by performance measures to show progress, identify weak spots, and offer alternative perspectives.  The greater the level of transparency the better able will the whole team be able to buy into the program.

Performance transparency  has a number of faces. It covers individual, team, and corporate performance measures, from the perspective of both the internal KPI’s and the external ones that will impact on the manner in which the enterprise competes. These external KPI’s are those factors that impact performance, but over which the enterprise has no control other than being aware and able to accommodate and when possible leverage them.

 

Process Scalability.

It is a fact that as enterprises become bigger, the degree of complexity increases as the number of people, teams, functions that require co-ordination and alignment grows. With size comes complexity. The essence of a scalable management infrastructure is simplicity and conquering complexity is a challenge of leadership as well as the management of the processes themselves.

The tool that works best in my experience is to document all processes. This enables the process to be applied consistently irrespective of the person working it, and is the basis for  improvement, without a starting point that is stable, no process can be improved.

 

Marketing.

Everyone is in marketing. From the CEO to the lowest level support staff, everyone has a responsibility to be an apostle for the business. Word of mouth, personal recommendation, whether it be by clients referring you to prospects, or your employees telling their friends what a great place it is to work, remains the most effective form of marketing. All that comes after is in one way or another a scaled version of that first person marketing.

Scaling marketing is not a matter of posting some cat photos on Facebook. It is a disciplined process of communicating your value proposition progressively to those most likely to be future customers, and retaining those you already have. It is very easy to blow huge resources under the banner of ‘marketing,’ but like all things worth doing, it is not as easy as it sometimes seems, requiring clarity of the value proposition, an ideal customer persona to be served, and a product and service mix that is both differentiated and valuable to customers.

As marketing is exercised externally,  the potential for misdirection and complication is significant, so focussing attention on the productivity of marketing expenditures is a key to being able to successfully scale.

 

Cash.

Growth, let alone scaled growth, are voracious consumers of cash. Proactively managing your cash resources is essential. From time to time borrowing may be necessary, but when it becomes necessary to keep the day to day activities going, you have over-reached, and quick remedial action s necessary.

 

Without wishing to belabour the point made in the intro, the absolutely essential ingredient is leadership, without which scaling will not be possible.

Do not make resolutions, set goals.

Do not make resolutions, set goals.

Dec 31, 2018 | Governance, Marketing, Strategy

It is the morning of the last day of 2018.

Tonight most of us will gather with friends and family, watch the fireworks, have a few sherbets, and consider what 2019 might bring.

Some of us will make New Year’s resolutions.

Things we decide to do to change our lives, some will be tiny, others huge, most will be things we have had in our minds for some time, and new year’s eve is the traditional time to trot them out (again) for a moment of feel-good.

Most will be discarded a few days into January.

If we know anything about resolutions, it is that they fail unless there is a clear path towards the achievement, and usually we call them goals, or objectives.  

‘Resolutions’ are even easier to discard than goals.

To achieve a goal, there are a few simple steps:

  • It needs to be worthwhile.
  • There needs to be a clear path towards the achievement made up of incremental steps that are individually achievable.
  • We need to be committed to the goal. Hope is not a strategy, we need to be serious and commit.
  • There needs to be performance measures along the way so we can see progress, measure what works and what does not, and adjust as necessary.
  • Be public. Public goals are way better than private ones, let others know, and you will be more committed.

Take those steps, and your chances increase.

Some ‘resolutions’ do not fit the typical path above, such as giving up smoking.

Every smoker and former smoker I know failed many times to give up, and giving up smoking incrementally does not work. When I gave up, 35 years ago, I used a simpler method. I did not give up smoking, again, as doing so had failed comprehensively many times, and is a deprivation, something none of us like. I took up ‘non-smoking,’ a practice that had seen me happy and healthy in the past. It worked; it was a positive goal, not a negative one.

Try seeing your New Year’s goals as positives, things to which you aspire, things that make you feel good, rather than focusing on the negatives.

Don’t set out to deprive yourself.

Have a great 2019, see you there.

The where, why and how of enterprise value creation.

The where, why and how of enterprise value creation.

Dec 17, 2018 | Governance, Management, Strategy

 

The balance sheet of an enterprise is a snapshot in time of the financial value of an enterprise. The comparison of balance sheets over time delivers a picture of the value creation, or destruction, of the enterprise over time.
The ‘Financial trio’ Balance sheet, Profit & Loss, and cash flow, together generate a picture of the performance of an enterprise, and are the foundations of performance management.
However, these are not enough for a thoughtful management.
To build a clear picture of the intrinsic value of a business, we need to look beyond the financial accounts, to the ability of the business to create sustainable value for customers. In other words, provide solutions to problems that cost less than the amount customers are prepared to pay for those solutions.
Therefore a closer look at the parameters of value may be useful.

Value cycles.
When the return on capital exceeds the cost of that capital in a given period, value has been created. Looking at the cycles in isolation can give a distorted picture, driven by seasonal sales mix, competitive activity, operational changes, product launches, and many other factors. These cycles always have in them a mixture of the short term challenges faced, and the longer term factors almost always driven by trends external to the business, such as technology adoption, regulatory changes, and the emergence of new competitive business models. Understanding the cycles of value creation and consumption can assist not only in smoothing them out, but doubling down on the good times, hunkering down in the bad, and ensuring that your strategic thinking is tuned to the evolution of the external environment.

Where is value created or consumed.
This can be pretty granular to geographies, product lines, market segments, brands, and so on. Understanding the variations, and applying pressure to them can dramatically increase the average value creation by isolating areas where it is routinely being destroyed, and fixing them. In many instances, the value destruction in the short term is deliberate in an effort to build value for the future. However, often the destruction is unseen in the mix of activities in every business. Innovation is in the short term generally a value destroying activity, but essential to the long term value creation, and this is a delicate balance that requires a strategic framework to be consistently applied to the allocation of resources.

Why is value created.
Linking the creation or destruction of value to specific assets and capabilities, again delivers the opportunity to optimise the investments you make. What makes you sufficiently different that you can create value? Is it short term or is it longer term, and how do you maintain the momentum, as superior value creation always attracts competitive capital in time.

How is value created.
Very simple to say, but hard to do. Value creation always comes down to solving a problem, or creating an advantage, for an individual, group, or enterprise.

Market position and long term decision-making obviously play a key role in value creation, and none of this happens by accident or over a short term. It is tangled up in your relative market position, the evolution of the market you are in over the lifespan of the market, and your competitive position in that market.
This sort of analysis enables a complete picture to be put together. If you have enough information to make judgement about your major competitors, those that might emerge from the pack, and those from the sidelines which are usually missed, this will inform the decisions you make that will impact on future value creation.

The root of all this is strategy.

The golden rule of marketing in regulated markets.

The golden rule of marketing in regulated markets.

Dec 13, 2018 | Governance, Management, Strategy

‘He who has the gold makes the rules’

I had to go to Sydney airport last week, and needed to park for a while, the plane was late.
It almost required an extension of the limit on my credit card.

It was just another brush with the cost of doing business with someone who has the inside running in a regulated market that I have had the misfortune to tangle with over the last few months. In this case, the airport is a monopoly, that was privatised. Governments seem to think that when they sell off a public asset to the private sector, the buyer will continue to price it at ‘social’ levels. They then act all surprised when the new owner with the regulated monopoly suddenly starts pricing at monopoly levels.

Consider what has happened to your power bills since the ‘privatisation’ process kicked in. Pretty obvious that the sale process included some sort of ring-fencing of competition to beef up the price so the press release looked better, as in the case of the sale of Port Botany and Port Kembla now being brought to court by the ACCC.

Pretty much all markets are regulated to some degree, from a very little to a whole lot, on top of the basics of incorporation, and paying taxes (which seems to be increasingly optional for MNC’s). Adding to the complication, there are three levels of government in this country all regulating different things in different ways creating an alphabet soup of bodies that have to be navigated before you can trade.

In highly regulated markets, it is reasonable to assume that most if not all incumbents will move aggressively and creatively to protect what they have. Claims of public interest, safety, loss of employment, are common, and are generally the reason the monopolies are there in the first place. However, what they have is a position that enables them to charge rent, rather than achieve success through a superior value proposition.

Understanding the structure of the rent seekers business model will help to see ways to invigorate or disrupt it.
The taxi industry is a classic. Around the world it was a regulated market that delivered regulated profits to the few who owned the licences, which therefore accrued a capital value, until Uber came along. Similarly, the milk industry in NSW was regulated until it became unmanageable to continue, and then there was a decade long 10 cents/litre levy to pay down the capital value of the regulated milk runs.

Having an understanding of who has the power in any market, the basis of that power, and the means by which it can be wielded, is vital to the construction of a viable business model and value proposition.

Header Photo credit: courtesy Jason Heller.