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How many business improvement initiatives can a company manage at any one time?

October 24, 2008

Operating a business in these challenging times is certainly not easy. In the last two posts, I introduced a number of strategies that make sense during an economic downturn. One of these strategies can best be classified as a sales strategy – that is, how to reignite opportunities that one would otherwise expect to stagnate when the economy is in difficult straits and businesses are adhering strongly to the philosophy of hoarding cash because “cash is king.”

The other strategy looked to the internal workings of a company and focused on how a company might best use underutilized resources that are suddenly available because sales are lagging. In this context, we discussed the development of best practices and the optimization of internal processes.

It is on this internal opportunity that I would like to discuss in today’s post.

The internal business process redesign discussion begs the question as to how many initiatives can a company manage at any given time. Is there an optimal number and if there isn’t, how does one determine how many initiatives are manageable so that business opportunities and the needs of clients continue to be addressed?

In all of my research and studies, I have yet to come across a discussion that addresses this particular question. To address this question, I will rely on my thirty years of experience as a CEO and consultant and share with you what I have learned from my experiences as a strategist.

To perform this analysis, one must:

  • Understand your company’s strategic goals
  • Define what tactics are required to support these strategic goals
  • Establish what each department must do to achieve the strategic goals
  • Determine the time and effort required by departmental staff to support the achievement of the core goals that essentially enable the company to deliver value and stay in business

What remains after performing this analysis is the amount of time available for personnel to address new improvement initiatives.

In other words, this analysis is predicated on assessing the company’s priorities and the core roles that must be fulfilled. After all, customer support personnel must perform their support function or the company risks client defections. Sales and relationship professionals must be engaging prospects and customers to assure growth. Accounting and internal support staff must make certain that the infrastructure exists so that the organization can run efficiently. These are the prime functions of these departments.

So is there an optimal amount or maximum number of initiatives a company can manage? As best as I can tell, the number of enterprise-wide initiatives that a company can swallow is typically between one and three. (Note added 11/09/08: Interestingly, several weeks after this post was written, the Obama Transition Team was enagged in a similar conversation and may have reached a similar conclusion.)

The reason that I believe this to be so is that I have concluded that most people have a difficulty managing more than five significant goals or projects simultaneously at any given time. And if one considers that the average person has two or three core functions for which he or she is accountable, this only leaves so much space for professional and organizational development without impacting the core responsibilities that each of us have.

Categories: Sales, Strategic Plans, Strategy
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Sales Strategies in Challenging Times: What I’m Telling My Clients

October 17, 2008

It is really hard to sell products and services when the economic news is bleak. Besides knowing that your prospects and clients are being reminded regularly that prosperous times are no longer on the horizon, you, as a salesperson or company leader can’t help but be affected by all of this negativity.

It is almost as if you are waiting for the prospect / client to turn your proposal down – and frankly, as a rational person, you can understand why they would decline your proposal.

So what to do?

What I am telling my clients is that there is opportunity in a downturn but it requires a different type of selling – one that embraces with sensitivity the needs of those companies and business relationships that we value. This is precisely the time to open up conversations with your strategic partners, centers of influence and existing clients. And it is an excellent time to engage in some low cost marketing as well.

Let’s discuss the opportunities within each of these groups.

For purposes of this example, we’ll envision that our company provides managed IT services, that is, we support a critical component of a business’ infrastructure.

Strategic partners and centers of influence (e.g. accounting and legal firms, associations, etc.) have a strong need and moral obligation to help their clients navigate turbulent economic waters. Now is an excellent time for our managed IT services company to ask these partners if their clients would benefit from having their infrastructure evaluated at little or no cost in order to identify key risks and prioritize needs. If the company that we are evaluating seems like a good candidate to survive the downturn, this type of advice coupled with prescriptions for meaningful solutions and favorable payment terms may result in a new business relationship.

In order to survive, some of these companies may be forced to make difficult personnel decisions and they may be looking for ways to ease the pain associated with these decisions. Our managed services company can assist here as well.

When there is economic hardship, people who become unemployed often turn to consulting. Our managed services company can create a lower cost start-up bundle of equipment and services to help those who are so inclined to pursue this path. By providing people with an alternate future, we are also providing encouragement, faith and support. And as a managed services company, our business can assume some of the IT responsibilities within the company so that the rest of its workforce can function productively.

Contacting existing clients and reaffirming the commitment that we have to their growth and future is another way to strengthen and forge a long-term relationship. These companies may also benefit from a low cost IT risk evaluation. After all, the suppliers and vendors that support us when times are bad are more likely to be the partners that we choose to work with when times are good.

As to marketing, there are several low cost strategies that can be used. Speaking engagements are one way. One of my former colleagues started a wonderful business called Speakermatch. It is a great way to get in front of the audiences that are interested in what you have to say.

There are also companies who will work with your staff to write and place business articles in trade publications. These articles help to generate business but also forward the credibility of your people and the solutions that they provide. Companies like this one, Andover Communications, can help you get placed in trade publications and ultimately become presenters at conferences.

Now is the time to take the initiative and reach out with sensitivity and care. Please share ways that you think a business can make a positive difference for others during these difficult times.

Categories: Sales, Strategy
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Changing Patterns in the World

October 5, 2008

The process of determining the strategy to address your vision begins with understanding the changing patterns in the world.

In his book, “Know-How,” Ram Charan invites the reader to look at these patterns and investigate the impact these changes might have on the opportunities that surround us. There are seven questions that he invites his readers to answer:

  1. What is happening in the world today? The most significant trends tend to cross borders (the global financial crisis, shifts in foreign investment, terrorism are example) and industries.
  2. What part of my frame of reference has worked for me? What hasn’t worked for me? This is tantamount to asking what has surprised me and why was I surprised. By addressing these questions, one becomes more sensitive to looking at other possibilities and in other areas.
  3. What does it mean for anyone? It is important to know how other industries will respond to emerging trends as they might allow for a unique capability within your own industry.
  4. What does it mean for us? Answering this question enables you, as a business leader, to identify what new opportunities these changing patterns will create.
  5. What would have to happen? Answering this question allows you to identify a necessary next step that would create a new opportunity.
  6. What do we have to do to play a role? This tells us what we might have to communicate, organize, market, develop (including skills) etc.
  7. What do we do next?

By answering these questions, one frequently sees opportunities that may be capitalized upon.

Categories: Strategy
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A Case Study of the Five Tests of a Sound Strategy

September 26, 2008

A short time ago, there was no such thing as overnight shipping. Then Federal Express, DHL and Airborne Express came upon the scene. At first blush, these three companies appeared to be competitors but upon closer examination, they each passed the five tests of a sound strategy.

DHL staked out in the international shipping arena so if you didn’t need to send something overseas, there was no need to use them. Their value proposition was simple – “DHL ships overseas and the others don’t.” Because of this, they required a different value chain – one that would allow them to take packages, manage them through customs, get them on a plane to some fairway land and then have some method of getting the package from the airport to the intended recipients. Their activities fit together and everyone in the organization knew exactly what the business model was and how to deliver the business’ value. Finally, DHL, for the most part, chose NOT to compete in the domestic market space.

You may recall Federal Express’ initial advertising campaign. It was simply stated as “when it absolutely, positively has to be there overnight.” Their second marketing campaign was built around the slogan “our most important package is yours.”

These two messages are core to understanding the FedEx strategy. The business model was that you could count on your important package being delivered anywhere in the United States by 9:30 am in that particular time zone provide that the package was in a FedEx drop-off box by 7 pm the night before. The second slogan creatively expressed that Federal Express treats all of our packages the same. There is no differentiation based on who sent it or why or even what is inside. Indeed, the most important package that FedEx was delivering was everybody’s.

The FedEx model was pioneering in the overnight shipping industry because their value chain created a standardized way of assuring delivery overnight of any package. This required a value chain that guaranteed and measured the time by which a package was received as well as when it arrived. The company chose not to promise faster delivery of any package – the package would always be delivered by 9:30 the next morning even if the customer was willing to pay more for special treatment. And everyone in the company knew the model.

I remember when the FedEx deliver person would come to pick up a package at our offices. If the package wasn’t ready when the client said it would be, the FedEx employee would become agitated and sometimes even leave the office without the package if the wait was too long. Boy, were they in a hurry! Our staff never even knew the FedEx employee’s name because there was never any time for conversation. Chasing the clock is very intense work.

And then there was Airborne Express…

There aren’t many who remember their advertising slogan because Airborne chose not to advertise. Airborne’s model was built around custom delivery services. They made business deals with companies that required frequent and ongoing shipments that had to arrive before 9:30 am. Some of their customers were companies that supplied parts and needed to have these parts in a technician’s hand before 9:30 am. Airborne would even build warehouses and acquire roadway services if the customer was large enough so that it could adhere to the promise of customized delivery.

Did the shipping customer pay more? Sure. But for those companies who needed to get staff on the road sooner than 9:30 am, the premium was well worth it. The interesting thing was that if there was a package that was not from an elite customer, there was no guarantee that it would arrive on a certain day, let alone by a certain time. Their most important package was the one sent by the special customers who shipped large volumes of packages requiring special care or timing.

Airborne too passed the test of a sound strategy. Unique value proposition? You betcha. Tailored value chain? Check. Choosing what not to do? Absolutely. Activities that reinforce one another? Certainly. Strategic continuity? Without a doubt.

All three companies effectively executed their strategies and also taught us that you can serve the same function and be successful if you implement a sound strategy.

Categories: Strategic Plans, Strategy, Visioning
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The Five Tests of a Sound Strategy

September 24, 2008

Assuming that we know “what we want to be,” that is, we now have a vision in place, we can begin to immerse ourselves in deciding the best path toward reaching our destination.

Yes, we are finally ready to formalize our business strategy.

Strategy is defined based upon (1) the industry and your position within the industry as well as (2) your position relative to your competitors’ position.

Most people think of strategy as optimizing what they already do and being the best at it, leading them to conclude that there is one, best way to compete. Strategy is really about choosing to differentiate one’s product / services from one’s competitors.

Failing to differentiate one’s products / services from those of one’s competitors – meaning the consumer can’t decide which product is better — creates destructive competition in which the only distinction is price. Price competition is never sustainable and is unwinnable.

Competing effectively means that a company is

  • Exceeding the Industry Average Return
  • Creating a return greater than those of most or all of your competitors

To win, you either have to have a higher price (justified by a differentiation of product / service) or a lower cost (justified by a more efficient value chain). You need to operate from the industry cost vs. your cost and the industry price vs. your price. Regardless, you have to be profitable. After all, you can’t have an army without feeding it…and you can’t have a business without being able to sustain it.

Five Tests of a Sound Strategy

There are five tests of a sound strategy

1.      A unique value proposition compared to competitors

2.      A different, tailored value chain

3.      Clear tradeoffs, and choosing what NOT to do

4.      Activities that fit together and reinforce each other

5.      Strategic continuity (having the strategy permeate throughout the organization)

Defining the Value Proposition

Defining the value proposition means identifying the end users and the channels used to sell to them; understanding the end user’s needs and which products, features, and services will address them; and creating a profitable price at which they will buy. We have already discussed how we can learn more about what our customers are really buying.

According to UCLA Anderson’s School of Management Professor Richard Rummelt, there are two ways to get to a successful value proposition. One, you can invent your way to success. Unfortunately, you can’t count on that. The second path is to exploit some change in your environment – in technology, consumer tastes, laws, resource prices, or competitive behavior – and ride that change with quickness and skill. The key is to take a position while there is uncertainty and ambiguity. Clarity occurs only after a company takes a position. However, by choosing to let another take a position, one loses the opportunity to profit from the knowledge.

The second path is how most successful companies develop their plan. Changes do not come along in nice annual packages, so the need for strategy is episodic, not necessarily annual.

Sustaining Competitive Position – The Role of Tradeoffs

  • Choosing a unique position is necessary but not sufficient to create a sustainable advantage because of the threat of imitation
  • Traditional thinking focuses on competitors’ difficulty or ability to imitate
  • Equally, if not more important, is whether competitors want to imitate
  • Tradeoffs are incompatibilities between strategic positions that create the need for choice
  • Strategic tradeoffs lie at the heart of sustainability
  • An essential part of strategy is choosing what not to do

The takeaway is that as business leaders, we want to encourage choice. In fact, we want to our offering to appeal to our target consumers. We want the service / product to contain exactly what they would like and not have more features than are required, even if they are additional to what the consumer wants. Additional and unnecessary features only drive up our costs and reduce profitability.

In the next post, we’ll talk about companies who employed this approach to great success.

Categories: Leadership, Strategic Plans, Strategy
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The Financial Crisis, Early Warning Systems and the Leader’s Role

September 18, 2008

Crises just don’t happen.

As with any difficult time, the challenge is always how to learn from the experience to assure that it doesn’t happen again. Clearly, there will be some very provocative analysis. Some will attribute the root cause to greed. Others will state that the lack of regulatory oversight contributed to this problem. However, I feel that the very root cause may be elsewhere.

Every business leader must install four components by which they can operate their company.

The first is, of course, a strategy and operation plan. Strategy, as we already know, provides the corporate direction and the operational plan provides that tactics that we are to follow that will get is to the strategic destination. Together, they tell our organization what we must do.

If the strategy and operational plan detail the “what,” then it is the management philosophy that details the “how.” Every business begins and ends with people and their behaviors. A company must recognize the mutual opportunities and responsibilities with its customers, employees, stockholders, suppliers, communities and the public.

This recognition leads us to believe that it is desirable to have a common philosophy. The company’s philosophy should be the basis for actions by managers at all levels of the organization.

An effective management philosophy details

  • What the company is and what it will become
  • How the business will be managed
  • The basic responsibility for each employee
  • The human values that we will live by
  • The company image

The third pillar that must be in place is the compensation program. It should motivate people to properly deliver on corporate tactics consistent with the management philosophy. It serves as a means by which employees will wish to stay within the organization.

Finally, a set of steering mechanisms must be in place. Think of it as more than key performance indicators. It is the dashboard that illustrates how the business is “flying” in all areas and allows for early recognition of difficulties so that course corrections may be easily made and made as early as possible.

So , from a management and leadership perspective, what likely went wrong that caused this crisis?

It is likely that the failures that triggered this crisis are a result of deficiencies in all of the above areas.

  • The strategic and tactical plan may have been flawed in that it took on too much inappropriate risk.
  • The management philosophy may have either ignored or encouraged the achievement of short-term profits at the expense of long-term growth and therefore encouraged irresponsible behaviors and actions.
  • The compensation program may have rewarded results that were produced without consideration to proper behaviors.
  • The steering mechanisms may have been ignored at the earliest stages and therefore corrective actions could not be taken soon enough

The management lesson for all of us then is to place and actively reinforce these elements within our business. It is surest way to avoid catastrophe and the friendliest path to growth and success.

Categories: Leadership, Strategy
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Discovering the Benefits that We Provide to Our Customers

September 17, 2008

We believe that as good managers and leaders, you have a good feel for why your customers work with your company. There is a tremendous opportunity when creating a strategic plan to really tighten that perspective.

We naturally have a tendency to ascribe our own personal perspectives as to what a customer really values about a product. Put simply, this is the wrong way to evaluate the benefits of what your company provides.

The customer’s viewpoint is truly all that matters. To discover that perspective, you must do two things.  First, you must talk to your customers. Second, you must listen to them and hear what you don’t already know.

Your customers will tell you what works great about your product or service. They will tell you what your product or service does for them, how it works and what they find valuable about it. Listen to the small things that they are saying. Can you find a pattern? Can you group their answers into something important?

Ask approximately a dozen of your core customers and a few organizations that you would like to be customers, in each customer segment, a series of questions. Asking these questions results in finding out with certainty what is meaningful to them.

We recommend that you ask these four questions.

1)      What are your reasons for working with our company (what do you value about us) or what are your reasons for using our service or product? The answers to this question will tell you why the customer uses your product or service today.

2)      Where do you think your industry is heading? The answers to this question will provide you with the context regarding the issues that your customer will need to manage in the near term.

3)      How will you operate given the direction of the industry that you’ve just described? The answers to this question will tell you how your client needs to work in the future. It will begin to give you insight as to what you will need to provide in the future that will allow you to keep earning their business

4)      What will you expect from our company (or our product or service) in the future (what will make us indispensable to you)? The answers to this question will provide you with what your client sees that you will need to do to keep earning their business.

Undertaking this interview will produce substantial and wide-ranging benefits. You will:

  • Learn how to better express your value to the marketplace
  • Discover short-term opportunities to sell additional goods or services.
  • Be able to add and contribute to your clients’ strategies
  • Very naturally deepen your relationship with your customer as every customer wants to feel special and simply showing interest
  • Gain thee necessary business intelligence to accurately plot a future

The bottom line of this exercise is that you will find short-term and long-term opportunities and your clients will make you much smarter about your own business.

Categories: Leadership, Strategy, Visioning
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