Nov 16, 2015 | Customers, Governance, Marketing, Small business
Like most interested in this topic, I see a lot of stuff published, and have gone to my share of seminars in an attempt to sort the wheat from the chaff.
Over 40 years marketing experience, and having seen the rise and rise of automation, along with the carpet-baggers flogging get rich quick, and “if I can do it, so can you” schemes that would make a gypsy blush, I am probably just a little sceptical.
Here are the myths I see most often, all flowing from the foundation “it is easy” myth
- Automation solves problems.
Without the basics being right, understanding the markets, your customers and competitors, how your value proposition and service levels resonate, you are still nowhere, automation or not. An early lesson I learnt is that poor problem definition leads to poor decision making and even worse marketing. Crap marketing that is automated just generates a bigger pile of crap, quicker, with a second often larger problem that when it comes from a computer for some reason, it gains credibility, so your pile of marketing crap risks becoming a “truth” that has the potential to send you broke.
2. Automation provides the processes.
Automating anything means that it is done automatically the same way every time. If you have process that deliver rubbish, marketing automation will only enable you to deliver more rubbish, quicker, to more people, Who wants that? Building robust, processes is essential, at every level of the marketing ‘stack’ (sorry about the jargon, the stack is the pile of various digital processes that together make up an automated system). No automation system is “Plug & Play” in isolation.
3. Automation enables a purchase mind-set.
Making a choice is certainly not something that automation can provide. Best it can do is give a rational analysis of the data to hand. The nature of the buying process and associated communication has been transformed in the last decade by digital tools. Buyers now accumulate information independent of sellers, and often make a final choice before a seller knows they are in the market, but the choice is human, subject to all sorts of considerations still way beyond the capability of automation to replicate.
4. Automation cannot respond other than by rote.
Consumers seek all sorts of subjective and referential information when researching even a modest purchase, switching between left and right brain without realising they are doing it. That process cannot be replicated digitally. Best we can do is define the range of personas we see in the market and tailor and continuously improve the communication strings to meet the anticipated and instinctive Q&A sessions happening in purchasers mind as they move through the “funnel” towards a decision.
5. Content is king.
I hear this all the time, “just pump out the content and they will come.” Rubbish. This may have been partially true at the beginning of the digital revolution, but no longer. There is now so much content around that the competition for potential customers attention is now far greater than it has ever been. The challenge is now having the best, most relevant and timely content delivered in a personalised manner, as and when the buyer asks themselves a question. You need to be a marketing mind reader!
6. The number of leads counts.
This is only true when you consider the quality of the leads at the same time. It is easy to generate a lot of response to something, the key is the likelihood of a conversion to a transaction of the initial lead, not the number of leads. Quality wins out over quantity every single time.
7. Automation solves the “don’t know what you do not know” problem.
This goes back too my original point. Experienced, informed and creative marketing thinking cannot be replaced by automation, no matter how much many who call themselves “marketers” would like it to be so.
Automation can be a hugely valuable investment, but it is not easy, not cheap, and does not replace the skills, domain wisdom and experience of those who have been there, done that!
When a dose of ‘fair dinkum’ is required, call me.
Oct 21, 2015 | Branding, Governance, Marketing, Social Media
Fundamental things apply
Great line for a song?
We all know the words, written by Herman Hupfeld from the song ‘As time goes by’, made famous in the movie Casablanca.
It also applies to marketing, particularly the explosion of techniques and tricks that have emerged with digital technology.
Despite all the rumors and offers of instant success, there is no algorithm for great marketing, no sure fire way of short-cutting the risks and uncertainty.
Great marketing takes time, effort, resources, curiosity and a willingness to be different, to see things others have not seen, to create the uncreatable.
You do not do that in front of a screen, the best you can do there is look at the results of stuff you have tried, get a superficial look at what others have tried, and manage digital development and deployment.
Instead of relying on digital bits to do the work, you have to get out and talk to customers, potential customers and others who may have an influence on the way a product is produced, delivered and valued by customers, whether they be a consumer of a simple product or a major corporation making a significant investment.
The fundamental things apply, the same things that have always applied, they have not been replaced by digital tricks.
We can now deliver a message to a tightly defined audience, as small as one, but if the message is poor, wrongly targeted, the product fails to deliver value, you may as well whistle in a hurricane for all the good it will do you.
Make sure the basics are covered, ensure the fundamental things that make a marketing program work are in place. There is no substitute.
Jun 5, 2015 | Governance, Management, Small business
whoops!
Do I have enough cash to……………….?
This is one the 4 fundamental questions for small business survival, and is the one I hear far too often. It is all to do with how much cash is available at any given time to pay the bills.
It is almost inexplicable to me that many operators of small business do not understand their cash flow, how it works, how it can be managed, and how to leverage it. After all, it is their lifeblood.
The sad reality was brought home again a week or so ago talking to a tradie I met casually who was hurting badly because a developer he had subbied for over many ears was not paying him, and he in turn was not paying his bills, as he had used up his overdraft. He was in effect funding the developer, and ultimately the receiver, and seemed unlikely to get any of his money back.
A common occurrence and all too easy to address with a bit of planning.
There are some pretty simple things that can be done to assist in the management of cash, but like all things it takes a little bit of work up front, and a disciplined process
1. Routine.
The steps to a positive cash flow are simple, if you make them a part of your routine, you can follow them with little effort, although at first, it can be a bit confronting.
- Have robust, enforceable and explicit terms of trade. For anything that requires credit terms to be extended, make sure you have a signed agreement that specifics all aspects of the terms under which you agree to provide your goods and services. These terms are an enforceable contract, and in the event it is necessary, is actionable. There are templates available that can be personalised for your needs and used without cost or with just a small charge. Some service providers such as EC Credit Control will assist in the preparation, as will your bank, although your bank has a vested interest in lending you money, not making what you have work harder.
- Do credit checks. By giving credit, you are effectively lending someone your money. It makes sense to check if they have any history of fraud or default, which can be done easily for a modest fee. You pay for access to a database that is in effect a credit footprint of everyone who has applied for and been given credit, and the data includes their credit history, and any outstanding judgements. Veda is one of the agencies that provides this information as a service, there are several, most banks will provide the service for a fee, often they wholesale services like Veda. Often if you choose to outsource your debtor management in some way, these sorts of checks are a part of the service.
- Issue invoices immediately and follow up politely but persistently and in a highly predictable manner. Most businesses wait until they receive an invoice before they initiate any consideration of a credit period, let alone get around to paying, so the sooner you issue the invoice, the earlier you have a chance to be paid. A client of mine about two years ago instituted a process of sending a polite “thanks in advance” for payment on the invoice due in a couple of days. He thanks his clients for the expected payment, indicating being paid on time is one of the ways he manages to maintain the high value he is able to deliver. It had a significant impact on his debtor days, and served a marketing purpose to highlight the quality of the service he provided, and as it was highly automated. After the initial set-up and a few teething problems, the process became virtually automatic, and a boost to his business.
- Keep the credit period ASAP. In this case, the acronym is As Short As Possible. Generally the negotiation on credit terms will take place at the beginning of the relationship, and that is the best time. Make it as short as possible, I always advise starting with 7 days from invoice date, be very happy with 21, and if it is in your interests, give a bit more, but if you start with 30 days from the end of the month, watch your sales bunch into the beginning of the month, which effectively gives a customer up to 60 days to pay, before the invoice is overdue, and you can start chasing payment. This is a gap you are funding, bankrolling your customers, and generally people in business are not there to be a philanthropist, leave that to Bill Gates.
- Do a weekly rolling 13 week cash forecast. This is a simple exercise, but knowing what is coming at you offers the opportunity to manage it with the least pain, ignoring it can be terminal. Generally this cannot be automated, but most bookkeepers and service providers can do it simply, although most would say monthly is sufficient. I strongly recommend weekly for small businesses.
2. Automate.
One of the more innovative automations I have seen is the one noted above, but most of the basic bookkeeping routines are now highly automatable via mobile connections into software that can manage all the recording and invoicing processes. For a tradie, assembly and issue of an invoice via email against a signed and dated acceptance of the cost can be done on site the moment a job is complete. No paperwork to end a long day. Automating can cost a bit to set up, and ensure it all works, but the expense is well worth it.
3. Outsource.
Most parts of the process can be easily outsourced if you choose not to do it yourself. Think of this outsourcing cost as insurance, and the cost of buying back a bit of your own time and peace of mind.
- Book-keeping. There are many book-keeping services available, and whilst they may vary in quality and cost, it is pretty easy these days to find one you are comfortable with, who provide the mix of services you require.
- Debtor and debt management. There are many service combinations possible from the straight invoice financing where you in effect sell your invoices to a finance broker who then owns the debt, to more relationship sympathetic arrangements where a third party undertakes to be your accounts receivable function, and often do some of the risk assessment functions noted above. Selling your debt, or “factoring” still smells of desperation, but outsourcing accounts receivable is pretty sensible and often very cost effective.
4. Leverage.
Most understand the concept of leverage when it comes to moving a physically heavy object, but have never thought of it in relation to their business, and particularly their two most crucial resources, their time and their cash.
- Closely managing terms and collections so that your average debtors is shorter than your average creditors means you are collectively enjoying having your creditors fund your business. However, I recommend paying your bills as they come due, as a history of reliability can pay big dividends when things suddenly go pear-shaped.
- Inventory. In many businesses the greatest consumer of cash is inventory, and closely managing it can save considerable sums. For a retailer like a fruit and veggie market, they take most of their revenue by cash or credit card, for which they get paid within 24 hours, but often pay for their stock on 21 or 30 days, by which time they have turned the stock over several times. Lovely. Measuring stock turn is a great metric if you have inventory.
Finally, there is a further measure not usually recommended that I particularly favour, Net Cash Consumption or NCC. It is a simple measure you can apply over any period, simply the difference between cash in and cash out over a time period. For small businesses I usually exclude capital items, so it is a measure of trading cash generation, or destruction. If the measure is positive, that is a good start, if it is negative for any extended period, trouble. I usually recommend a rolling 3 month measure, short enough to be sensitive, long enough to accommodate the operational vagaries that occur like paying the receptionist long service leave. Adding it as a graph on the bottom of your cash flow forecast automates it. Easy.
If you would like more information, or the opportunity to discuss any of this, just give me a call.
Jun 3, 2015 | Change, Governance, Management
For 20 years, Mary Meeker of KPCB has been collating and publishing an annual report on the growth and growth of the net and the services and products it carries.
This 20th publication contains information that will be useful to every business.
The local lemonade stand, to the huge Multinationals dominating the commercial landscape, there is vital stuff for you.
Just a few of the points that jumped out at me:
- Mobile data usage rose 69% last year
- 55% of mobile data traffic is from video
- Ads in mobile account for 8% of ad spend, but mobile accounts for 24% of time spent with media.
- Mobile use in underdeveloped economies is disproportionately strong. In effect, they are jumping the stage of fixed line infrastructure developed economies went through. If you want to do business in Asia and India, go mobile.
- Government policy, regulation and use of the net lags public usage substantially, around the world
- The number of hours a day people are spending in front of a screen s still growing, and though it has flattened off a bit, but it is 9.6 hours/day. (US data)
- The number of productivity tools becoming available is still exploding, as is the number of platforms for distribution of information and data
- The nature of work is changing rapidly, as is the location of those doing it.
Whoever you are, if you are in business, and want to stay there, it is worth flicking through the report.
PS. June 13.
Mary Meeker released a presentation of her amazing report, listening to her talk through the report makes it easier to absorb, way easier than just looking through the huge pile of slides.
Everyone should watch this, absorb it and figure out how to leverage it for your business.
Jun 1, 2015 | Governance, Strategy
image thanks to Hugh McLeod www.gapingvoid.com
Writing about strategy, and practicing its development with clients, there are always a number of things that do not fit comfortably into the various academic boxes.
That is the nature of the beast, uncertain, instinctual, and driven by insights that usually evolve over time.
I have recorded them just so they do not get forgotten in the general “whoopsy” that goes on in a strategy process. The orderly, sequential process so beloved by scholars and PowerPoint designers is a rarity in my experience.
I am sure you have stumbled across others, but following is my list of reminders.
- Almost all strategic outcomes evolve from trends and developments outside your business, things over which you have no direct control. The best you can do is prepare, anticipate and react better and quicker than your competitors.
- Peter Drucker said that “the only truly sustainable competitive advantage is innovation” and he was right. However, innovation for itself is of no value, it only gains value in the hands of a customer. Therefore the earlier you can get an idea, new product, new business model, whatever it is into the hands of your customers the better, then you have real market research to work with. What often passes for “innovation” that is internal is virtually always (I have never seen it otherwise) better called operational improvement.
- Competitive advantage arises not just when your product is a new gizmo, with new packaging, it arises when you beat up on your competition, create new demand, and open new markets. That is why you are doing this stuff, to win, so don’t be seduced by clichés.
- Strategy is as much about, if not more about, what you will not do, rather than just what you will do. At a base level, strategy is about choice, which markets, which customers, which priority resource allocations are made. These choices should, in a fundamental way, drive everything else
- Size usually does matter, but in the case of strategy, it is one of the few exceptions. In fact, it often seems to me that the smaller enterprises benefit more from a good strategy well implemented than a large one. Perhaps this is a measure of greater opportunity due to the lesser existing coverage.
- Speaking of size, growth for the sake of it is stupid. Commercial activity is all about returns on the funds employed, putting your money to work doing “A” instead of ‘B” because the long term returns are better. Size for the sake of itself only plays a role when human ego gets involved.
- Setting out to “delight” all customers is nonsense. Nobody can be all things to all people, and it is probably the case that if you are not annoying some you have backed away from some of the hard strategic choices. Net result of that is your overall strategy is weaker.
- Committing to a well thought out strategy does not require heroic quantitative predictions about the future. Commitment to a strategy requires that the tough choices be made that create a framework for future priority setting, resource allocation and decision making which together anticipate, accommodate and leverage the future as it arrives.
- An understanding of the differences between agility and flexibility is required. Being strategically flexible implies that you change your strategy as events unfold, which is a sure sign that tough up front choices have not been made. Agility by contrast implies that you are able to accommodate events as they unfold in the most appropriate manner without losing sight of the overall objectives. Generals have known through the ages that strategy rarely survives the first contact with the enemy, the same applies to commercial strategy, “lose the battle, win the war”. This truism demonstrates the difference between agility and flexibility.
- Finally, you get 1/10 for talking, the other 9/10 are reserved for doing. Moving ahead with a strategy that may still have some holes, and learning as you go, is far better than waiting until all the i’s are dotted, and t’s crossed, as that involves lots of talking, not enough doing.
What things have you come across that could be added?
May 26, 2015 | Governance, Leadership, Strategy
cartoon courtesy Hugh McLeod www.gapingvoid.com
Part of what I do day to day is made up of business reviews. Whilst every business is different, and the competitive environment is different, there are some common questions to be asked that tend to reveal the effectiveness and impact of strategic and business planning.
Strategic planning has become a cliché, often just meaning the three day off site that stuffs up your week, and takes some preparation in case you are asked some difficult questions, but following is a checklist of things I look for in a plan, which may assist your thinking.
Major trends. What are the external, big picture things that are, or will impact on your business. Trends such as technology, the regulatory environment, trade barriers, et al that have the potential to change the context in which the plan has to live. These are generally much “bigger” than a one year time frame, although the pace of technical change often gives the lie to that generality.
AAR on previous forecasts. “AAR” is an acronym, “After Action Review” which emerged from the US army after the debacle of Vietnam. They sought to quickly, and from a grass roots perspective, understand what went wrong, what worked, and how it could have been improved. In effect is it a continuous improvement cycle. Applying the same thinking to the previous years forecasts and assumptions always reveals opportunities for learning. If it is the first time, do it for the last 2 or three years, and analyse what the businesses did, or should have learnt from these experiences.
How and why the differences. Planning should be a rolling, self improving process, but so often I see planning done in isolation of the opportunities to learn from the past. Understanding the reasons why forecasts are different from one planning period to another requires an explicit understanding of the assumptions made. This step builds on the AAR above.
How would you double the business. Most business planning tends to be incremental, a 3% increase in sales, a 2% decrease in costs, it is all easy to agree to in a planning meeting, after all, who would not agree to increments of improvement? To get away from incrementalism, consider what it would take to double, or triple the business. What would you need to do differently, what new products, markets, customers would you have to acquire. I like to change the perspective to this by adopting a position 3 years down the track, imagining the business has doubled, and imagining what changes had been necessary, and how they had been implemented. With the benefit of imagined hindsight, what did we do right, what mistakes were made, what capabilities and capacities did we have to increase, how did we fund the increase, all sorts of confronting questions that in the answering offer insights to the planning process.
Where is the growth coming from. Everyone predicts growth, it is part of the commercial DNA, but articulating where it is coming from introduces some reality checks. If it is from a competitor, why will they just let the volume go? what will their reactions be, and how will you in turn react to their responses? If it is from new products, why would a customer buy yours instead of the one they had been buying, and if it is a new market you are creating, how is your value proposition sufficiently compelling to get the attention of a potential customer, and how are you going to justify the new expenditure in a market that they are unfamiliar with?
What are your distinctive strengths, and how does the plan leverage them? It is astonishing to me how often when I ask this question that the responses are reflections of the market table stakes the things you have to do well just to survive and be competitive, they are not distinctive. It is like a watchmaker proudly claiming that their watch tells exact time. So what, to be a watch, you have to be able to reliably tell the time, it is not distinctive, it is table stakes. What makes you distinctive, does something really different, passes Seth Godins “purple cow” test. It may be that your watch is waterproof to 200 meters. Not many will take advantage of this strength, but to some, the guarantee of waterproof performance will be distinctive. The problem now becomes how you reach the small number of those who care at the time the are considering a purchase.
What differentiates you from the competition, and importantly, the potential left field competition? This question is often confused with the one above, a strength is not necessarily a distinctive capability that adds value to a customer that would drive them into your arms. To continue the watch analogy, when the Japanese started delivering digital watches, the Swiss that at that time absolutely dominated the watch market failed to recognise the attraction of the differentiation that had just taken place, and were decimated.
What would a private equity owner do with this business?. This can be a confronting question, but a very useful one. If you look at the business from an entirely different perspective, one whose time frame and investment return metrics are both aggressive, and usually entirely different to the prevailing horizons, it can stimulate some thinking that is very useful, and informs the rest of the discussion.
Creating a strategy that has real “grunt” and articulating that plan to all stakeholders that are impacted, and can contribute is a huge challenge, and takes time, commitment and brain power to achieve. Unfortunately, the success rate of strategic planning is very low, testament to the difficulty, and the number of things that can go wrong.
