Jan 1, 2015 | Leadership, Management, Marketing, Small business, Strategy
happy new year
It’s been the Christmas and new year period, and over the break some introspection occurred, along with the pud, family connections and some nice wine.
One of the insights that emerged was the application of Clayton Christianson’s “job to be done” idea to marketing, and specifically the manner in which I approach the task of developing, selling and delivering Intellectual Capital.
As I thought about what is was going to take to be successful in 2015, I needed to ask, and answer three pretty basic questions:
- What is it that I do every day?
- Why would people hire me?
- How can I help them do their job better?
When I worked my way through those, the answer was pretty simple.
The job of a marketer is to discover, develop, and tell interesting and engaging stories to people who care, who may receive value from the experience an wisdom contained in the stories, and who may take an action as a result that delivers them some benefit.
The job is not to make ads, or create blog posts or posters, it is to identify the ways that as marketers we can bridge the divide between what people are looking for, the challenges and opportunities they face, and how we can help them with the task of “finding.”
I trust 2015 will be a good year for us all, at least better than 2014.
Our families, friends, colleagues, and those who are in great need around this shrinking world need some simple wisdom, helping hand and quiet counsel, and it is up to us collectively to give that to them as we can, in the best way we can.
Happy new year.
Allen
Dec 22, 2014 | Customers, Governance, Management, Marketing, Small business, Strategy
“marketing” inventory
Taking inventory is one of the most boring things, but necessary things we all need to do. Understanding what you have in stock is fundamental to determining the operational priorities for the future.
Taking physical inventory is familiar to everyone, it is an essential part of staying in business, but how many take an inventory of their marketing assets?
We spend time and money creating things that we hope will deliver leads, or push them through the conversion stages, but how often do we stop and think about optimising the leverage those assets are generating?.
The Christmas break is a great time to get some of this essential stuff done, to examine from the recipients point of view, how well your marketing assets actually work. Following is a list of the typical marketing assets even a small business should have, and often will have without really considering the implications, consequences and costs.
Planning and tracking.
- Do you have a marketing plan that reflects the short to medium term activities needed to deliver on a longer term strategic plan?
- Is there an activity plan for marketing investments that outlines the timing, costs and expected returns from marketing activity in 2015?
- Have you put in place the measures that will enable you to calculate a Return on your marketing investments at each stage of the engagement funnel?
- Are there tracking measures in place that will enable you to improve your returns?
Customers.
- How well do you know your existing customers?
- Who are they?
- What problem are you solving for them?
- Would they be prepared to recommend you to others?
- What is your share of their wallet?
- Why do they use you instead of your competitor?
- Do you know who your priority target customers are?
- Are they defined to the point where you could personalise them?
- Are your communications “personalised” and directed to their specific needs and challenges?
- Do you understand their behaviour
- Do you understand why you lost customers, and have you made the choice not to spend resources to keep, or get them back?
- Are there some ex customers you are happy are ex? And why
Digital assets
- Are your websites and social media platforms linked and cross posting?
- Are your profiles optimised on each platform?
- Are tracking codes in place and optimised on each web page and platform?
- Do you work the key search terms for your segments naturally into the headlines and body copy of posts?
- Are the auto responder emails appropriate for the trigger response?
- Do you say “Thank You” enough?
- Are you capturing data at every opportunity?
- The “ABC of sales” or “Always be closing” school of sales has changed to “always be collecting”.
- Are you using analytics to test, test, and test again to improve your conversion rates?
- Do you track conversion rates at each stage of the sales funnel?
Relationships
- Are you seeking ways to build and leverage relationships with suppliers, and natural partners?
- What is the balance of your sales efforts between nurturing existing relationships to building new ones, and is that balance appropriate?
- How would you rate your relationships with your best customers?
Capability building
- How deep and appropriate is your management “bench” or in its absence, contractors to fill gaps?
- Have you defined the capabilities necessary to sustain growth and profitability, and set about building on the existing, and filling any holes?
Your time.
As the owner of a business, the most valuable asset you have is your time. Problem is usually there is not enough of it, and others do not value it so try to use it to their purposes.
- Do you have the business/life balance right? I know it is a cliché, but that is why it is true.
- Do you explicitly set out to work “on your business” rather than in it? Another cliché, but also true.
- Does the business run without your detailed day to day involvement?
- If not, when will that day come?
Financial management.
I often get puzzled looks when as a marketing consultant I bang on about things financial. However, it does not matter how good your marketing is if the product is crap, or delivered late, or sold at below cost. Financial management is the foundation of any enterprise, as much as marketing is the essential ingredient for success.
- Do you have a cash flow forecast?
- Do you know and actively your costs, fixed and variable?
- Have you calculated your break even?
- Have you a revenue forecast and operational planning in place?
The above is just a start, a “taster” for 2015 which I expect to be a difficult year, so those who are best prepared, will do well, the others… well, they sell flowers at the funeral home.
Thanks for reading, responding and sharing my musings through 2014. I am going to take a break from the keyboard for a short time. Have a safe and merry Christmas, and I will see you in 2015.
Allen
Dec 17, 2014 | Change, Customers, Strategy
“Only the paranoid survive”. Andy Gove
We spend heaps of time setting out to satisfy customers, do what is right for them, to ensure our success, no argument, but is it enough?
To add another dimension to your competitive efforts, ask yourself the simple question “what would really hurt the opposition?”
If the answer is clear, you probably should do it to them before they either do it to you, or address the weakness.
It does not matter if you are BHP or a local business, there is a always a strong Darwinian trait displayed by those who are successful.
In my past, I spend a significant amount of time in the dairy industry, lots of lessons, but amongst them one that demonstrates the essential truth of commercial Darwinism.
My major competitor made an inordinate amount of their total profit from one product in one state, a situation that had evolved over many years, and seemed unassailable. The margins they made on this product would have funded a substantial amount of activity elsewhere that was causing us grief. The board of the dairy co-operative I worked for would not allow me to aggressively attack that profit pool, not being prepared to lose a little bit in order to assist the competitor lose a lot.
They were concerned at retaliatory action, correctly, but the capacity to retaliate would have been limited by the impact on their profits of a successful attack by us, and the fact that our business did not have any equivalent weak point that made us way less vulnerable. My view at the time, and still, was that the real reason they were unprepared to be aggressive was that it was not “gentlemanly” and the dairy industry in those days, which was still evolving from a lot of smaller co-operatives, carried some of the competitive baggage of being a co-operative.
Gentlemen did not do those things!
Competitively stupid decision, and an opportunity lost, but all this had nothing to do with the customer, beyond setting out to disrupt the comfortable relationship they had with my competitors brand in South Australia.
Some years after I left the business, my erstwhile target, having addressed their competitive weaknesses, successfully mounted a successful hostile takeover of the my previous employer, who still acted as though the competitive market place was somewhere that gentlemen met to have afternoon tea.
Sometimes we lose sight of the playing field as we play the game, we talk about competitive advantage, but often just in the context of the customer, and the value they receive, but forget the flip side of competitive advantage, finding a way to belt your competitor over the head.
Legally of course, and within the boundaries of acceptable behaviour, but nevertheless, a belting.
Dec 15, 2014 | Change, Governance, Leadership, Strategy
With thanks to Tom Fishburne. http://tomfishburne.com.s3.amazonaws.com/site/wp-content/uploads/2014/05/140505.pivot_.jpg
Strategy is one of those alters of organisation to which almost everyone offers lip service, and once a year in the planning cycle, receives mass genuflection. That does not mean we believe, just that it is a part of the duty of organisations, and as such, fails to deliver to its potential.
Over the years as a corporate employee and consultant, I have seen strategy implementations fail, sometimes with spectacular results. Usually however, strategy just whimpers in the corner, ignored and derided, but every now and again, I have been privileged to see, and be a part of successful strategic exercises. Below is a list of the most frequent sources of the failures I have seen, the good part of such a list is that taking the opposite gives you a list of what you need to do to succeed.
- Failing to understand that reality is not always what people tell themselves, self talk is too often tangled up with self delusion and adherence to the status quo. Recognising the hard realities as they actually are rather than the way you would like them to be is a remarkably common delusion.
- Believing self serving optimism and hubris are substitutes for achievable goals. It is OK, indeed admirable to work towards the BHAG, but allowing ego, management power based on the position rather than the person, and “group-think” into the room , and it becomes a different beast.
- Not seeing “Capability inflation” for the damming flaw that it is. Virtually everyone sees themselves as better than average at whatever it is they are doing, which simply does not work. Capability like everything else in life is spread across some sort of “normal” curve, in which the only thing that really changes is the height of the average, in relation to the spread of scores.
- Not recognising that competitors do not always react in an orderly and predictable manner, they are not a party too your strategies, and rarely react in wholly predictable ways.
- The factors often seen as “differentiators” are very often just the table stakes to be in the game. Asking management what are the “differentiators”, what characteristics makes any enterprise different, or its products different, and you usually get back a list of things that are just a cost of doing business, just like a watch has to tell accurate time before it is a watch.
- Failure to recognise and adjust for unintended consequences quickly. Usually this occurs because it is not in the plan, and plans are after all prepared by the bosses, performance measures are tied to the plan, and it is a great adornment on the shelf. (my time contracting to the Public Sector sees this blatant ignoring of unintended consequences justified by all sorts of complicated and cliché ridden language developed as an art form)
- Failure to believe. For a senior management to formulate spruik, and go through the motions of articulating and implementing a strategy, then not “living” it themselves means the strategy is doomed to failure. People watch what you do far more than they listen to what you say. Saying you believe is not enough.
- Underestimating the importance of “people“, their attitudes, fears, relationships, egos, and behavioural norms.
- Failing to recognise the elasticity of the status quo. Its durability in the face of logic, common sense and the blinding obvious (to outsiders) is just remarkable.
- Failing to understand and manage the essential paradox of “predictable” and “Innovation” . Customers like predictability, they come to rely in it, but they also expect their suppliers to be at the “cutting edge” to be finding innovative solutions to their problems, and the jobs to be done by their products. Nobody has managed this paradox as well as Apple over the last 20 years. Their products are all predictable easy to use, look great, and perform beautifully, yet they are always at the cutting edge, innovating with everything they do.
- Failing to recognise the sources and likelihood of disruption, and preparing as if it was about to happen. The commercial technical and competitive environment in which a strategy has to succeed is increasingly being disrupted in very hard to predict ways. Strategy is about the basic choices that make up the business model, and those are no longer models that are predictable across decades, they are evolving almost daily. A quick look through Jerry Owyangs presentations, writings and data bases outlining the collaborative economy is all the evidence of the shifts happens that are needed, but just think a few words: Air BnB, Uber, Amazon, iTunes.
- Failing to understand that loyalty cannot be built by money, and material benefits, loyalty is to people, and is very local. it must be earned by displaying and genuinely feeling respect, awareness and interest in individuals. Dunbar’s number plays a huge, largely unrecognised role in organisations. 150 people is about the maximum we can have relationships with on a face to face basis, and the smaller the group, the more intense the potential of the relationships that exist. In this context, loyalty is local, people relate to, work with, and support those who are a part of their local “tribe” against all those outside their tribes. This can often mean other divisions from the same business, or even the other function living down the hall. Believing this local loyalty can be leveraged or changed without real hard work is a common trap for strategists, particularly those entering a strategy that calls for organisation al change, renewal, and in the case of M&A activity.
- Failing to understand that data is inherently ambiguous, and swings between being of some value and intensely dangerous. It all depends on the assumptions that drive the analysis, wrong assumptions render the analysis at best misleading. Is that upswing in sales due to the insightful marketing campaign, or the failure of a competitor to deliver due to problems in the factory? Bet I know most marketing people will say.
- Thinking Strategy and culture are one and the same thing, with perhaps just a few nuances for each. Whilst they must be considered together, they must be managed as separate but mutually reinforcing entities, A degree of inconsistency here will see a strategy fail, as culture is always stronger. Attempts to change culture to align with strategy, rather than recognising the the power and reliance of culture, are doomed to failure, it is simply too elastic to be easily changed. There are really only two ways to change culture. The first is bit by bit, with a leader who demonstrates the behavior required, and is unprepared to accept compromises. The second is to fire almost everybody, if not everybody, and start again.
- Failure to recognise any of the above for what it really is, and calling it something politically more acceptable, thus ignoring the failure, and worse, taking no steps to correct the sources of that failure.
I would be interested in other sources of strategic failure you have witnessed, or been a part of, I am sure there are many I have missed.
Dec 1, 2014 | Management, Small business, Strategy
www.strategyaudit.com.au
Time, as is often pointed out, is our most valuable and non renewable resource. Using what we have productively is a challenge we all undertake in our own way.
We all have exactly the same amount of it available to us, the differences emerge when we examine what we do with our time.
For most, we respond to the email, phone call, text message, distractions at the water cooler, to all sorts of stuff that really makes little difference, but has the ring of urgency.
Urgent but not important.
By contrast, at the other end of the scale, we tend to put off things that are difficult, challenging, and often uncomfortable. That time necessary to really flesh out the assumptions underpinning the strategic plan, consideration of the nature of the business model that will see the enterprise commercially sustainable amidst the change all around us, or the culture and work patterns of those entrusted with the implementation.
Important but not urgent.
Every waking moment is spent in some way. The really productive people amongst us focus on the things that are important, they make a difference in the medium to long term, and they treasure their time.
Can you imagine Warren Buffet, Bill Gates, or Steve Jobs watching “Big Brother”?
For them, that would be an hour a day that they will not only never get back, but that adds no value whatsoever to anyone.
Commercial and personal sacrilege.
Where is the balance in your enterprise, and your life?
Nov 24, 2014 | Change, Governance, Management, Small business, Strategy
Roman baths. Bath UK. photo courtesy www.guardian.com. No matter how fancy the building, it will not last on dodgy foundatons.
I talk to small businesses all the time, have done for 20 years, and it makes me cry how many of them do a great job at their passion, the reason they stated the business, but a lousy job of making money from it.
A simple analogy.
When you drive around a bit, you use petrol. Everyone knows that when the gauge gets low, you need to put more petrol in, or the car will stop. Basic common sense, but how many use the same sort of common sense with the basic gauges in their business, and stop now and again to look at the levels, and recharge when necessary? Nobody can make you look at the gauge, and take the necessary action, you have to do that yourself, just like driving into a petrol station before the car stops.
There are four really simple questions to be asked that represent the “gauges” of your business, they represent the foundations of profitability and longevity. For many small business owners, motivated by the passion of what they are doing, it is too easy to ignore the basics of what will build the foundations of the busness that will allow them to keep doing what they love.
Take this road at your peril.
However, the good news is that much of this can be automated, and outsourced, so you can spend a few minutes a week, and be sure that the foundations are in place.
So, to the four questions.
- Will you have enough cash to pay your bills? Many small business owners just look at the balance in their bank account, and answer “yes” or “no” to that question. Mobile banking apps have made it even easier, but that is not enough. Cash is the oxygen of business, cut it off, and you die, very quickly. You should know if there will be enough cash to pay the GST bill in 2 months, or the long service leave entitlement of Suzie the receptionist in three months when she goes to Europe with her husband. For that you need to track your cash-flow, the money you anticipate coming in, and going out over the next three months. The formula for a cash flow forecast is pretty simple, and takes only a small amount of time, but can save your arse.
- Pick the period. I recommend a rolling 3 month forecast, updated weekly.
- List all the cash you expect to come in, and when you expect it in. Not sales, cash coming in. Similarly, list what cash will be going out, and when, as you pay the bills that come in. This is the reality of the cash flow through your business, just like the petrol flow to your car engine driven by the mechanics of the motor as it turns over.
- Simply subtract the cash out from cash in, and carry the total over to the following week, “rinse and repeat” for every week in the rolling three months. A very simple spreadsheet will do it for you, so long as the numbers are put in, either from your accounting system, or for micro businesses, from the pile on your desk/in your inbox, that you often manage to ignore.
- If you have a cash shortfall forecast at any time, you have the time to do something about it. Ever gone to the bank and asked for an extension to your overdraft activated tomorrow? They will laugh at you, but go to them and ask for an extension because you will need it in 6 weeks, and chances are they will give it to you.
2. Are you making a profit? Pretty basic question that many small business owners cannot answer. To answer the question you need an “Income Statement” or as it is often called a “Profit & Loss” statement. This should be done monthly, and as with the cash flow statement, is essential to maintaining business health, and to continue the petrol analogy is a bit like knowing that your petrol gauge is accurate, and that there is not a leak in the tank, or the youngster down the road is not sneaking in at night to keep his tank full at the expense of yours. Again, the formula is pretty simple.
- Total booked sales less expenses incurred. Sales are pretty simple, although I like to track gross sales, before any discounts, and record discounts as an expense.
- Expenses come in two forms, fixed expenses, those that happen irrespective of sales, like rent, salaries, insurance, and many others. Secondly variable costs, those that occur that enable you to make the sale such as discounts, commissions, freight, advertising, and usually most importantly, the cost of the goods you have sold, which could be manufacturing costs, or some sort of acquisition costs, commonly called “Cost of goods sold” (COGS).
- Simplistically the formula is: Sales – COGS – Variable costs – fixed costs = Profit. When you do an income statement monthly, and build up a bit of history, it becomes very easy to see what needs to be changed, and the impact that even modest changes can have on the profitability of your business. As with the cash flow, a simple spreadsheet can offer great insights and direction. What happens to your profit if you increase your sales by 5%, or decrease your COGS 2.5% when you are working with a 40% margin? Easy to calculate, and then you set out to do what is necessary to move the percentages around, although sales always remains at 100%.
3. Are you creating or destroying wealth? This question is more longer term that the P&L or cash flow statements, and is often done just twice a year. It has less immediacy than either, although if you go to your bank because you will be short of cash in 6 weeks, they will always want the most recent balance sheet. Partly this is hard wired into banker DNA, and partly it is reassurance that the longer term health of the business means they will get their money back, with interest. Again, the formula is pretty simple.
- When you start, you in effect make a loan to the business, and in return take equity in, or ownership, of the business.
- The business then uses those funds to make sales, pay all the business costs, borrow more money to operate, buy/lease equipment, and hopefully create the wealth that can deliver an return on your initial investment.
- The in principal formula is: (Fixed assets + liquid assets) – (long term liabilities + short term liabilities) = Equity. It is not usually expressed this way in financial statements because equity is technically a liability of the company, but this simpler way is easier to see and understand for those “number-phobics” out there. It is also complicated by all sorts of differing treatments of all the variables that can occur, such as the treatment of depreciation, and how much of Suzies long service leave has been brought to account over time. Perhaps the best example to use is the equity you have in your house. Your equity is the difference between what you owe on the mortgage, and what the house is worth if you sold it, which is rarely what you paid for it.
4. Do you have a plan? George Patton once said “unless you have a plan you are just a tourist” which is absolutely true. If you do not know where you are, or where you are going, any route can get you there. Having a plan is so essential, it is left off many lists, and to many others, it is just an exercise in extrapolation, which although easy, is not what it is all about. Good planning is all about the examination of the assumptions that underlay your business, the assumptions about costs, customers, markets, and competition. At the very least, it offers as my old marketing mentor, Jim Hagler of Harvard used to say, (or rather rumble) “at least you know the point from which you departed”
Most of the help you will need that shows you how to do all this stuff is available on Youtube, and all electronic accounting systems, no matter how simple, have as a core part of their reporting the first three reports. They just need some setting up, and once done, so long as they are maintained, will continue to deliver the numbers essential to the insights needed to make profits.
The last, you need to do in a much more hands on manner. Whilst there are many templates which can be of value, there is no template I have ever seen that will create a plan by itself. You need to do the numbers and research, make the enquiries, incorporate the testing that offers the chance to learn, and then most importantly, implement, measure and adjust.
The response to these questions offers an insight into the strength of the foundations of a business. We all know that any structure lasts better on a solid foundation, and no matter how fancy the edifice, it will not last on quicksand.
To build a really solid foundation, you may need the assistance of someone who has done it all many times, and knows the right questions to ask.
