Wayne Wilson on Companies in Transition

KISS* applies to more than sales

Most sales professionals are familiar with the KISS formula - “Keep it Simple, Stupid!” New sales professionals have a tendency to want to tell a prospect everything they know about the product or service they are selling without regard to the prospect’s knowledge, needs, or interest, and the sales manager or trainer must continually remind them to dial back on all the technical stuff.

Josh Cunningham’s recent post about his web philosophy on joshcanhelp.com reminded me that the KISS formula could add value to most business activities, not just sales. Here is my take on Josh’s version of the KISS formula:

1.      Look for the path of least resistance.

How often do we struggle to solve a problem with a big, complex (“impressive”) solution when a much simpler option is readily available if only we will open our eyes and look around? Sometimes that means asking others for advice, sometimes just doing a bit more research.

I once had a neighbor who seemed to always have the answer for everything from appliances, to TVs, to lawnmowers. After the first two times, I just called Jim when I needed to buy something. He already knew what and where the best deals were.

2.      Have a goal in mind

Remember the distress call from Apollo 13? “Houston, we have a problem.” Clearly, the goal for the Apollo 13 crew was to get home safely. Not every business challenge has such a straightforward desired outcome.

What do you do with the customer who constantly demands special privileges every time he calls? What about the brilliant scientist in R&D whom no one wants to work with?

Thinking carefully about your desired outcome will help you better weigh the available options.

3.      Always consider performance

Everyone wants improved performance. But like goals, performance monitoring requires that metrics be defined and agreed upon before the task or process begins. Only then can performance be objectively assessed.

Cunningham was referring to web page performance – how quick does a page load? How long does it take to refresh? Customers and prospects are impatient: keep them waiting for very long and they will go somewhere else.

Investors think the same way. Managers work for investors, not the other way around. What do investors want? Usually, dividends and share appreciation. Figure out how to do it and give it to them.

4.      Put your best foot forward

In the modern globally interconnected world, we, as individuals, as well as our companies, are always on display. There is virtually no room to hide on the Internet. Misbehave or treat a customer shabbily and sooner or later it will come out thanks to YouTube, twitter, and Facebook.

There’s enough foolishness and nonsense in the world. Just do it because it’s the right thing to do. The rest will take care of itself.

6 Critical Areas of Business Management

Here are 6 critical areas that every business owner must constantly monitor and manage:

Business Planning – Business planning involves a regular review of your strategies and tactics for achieving your business’ goals. How is the new store location doing? Is your web site producing a steady stream of sales leads? Are the Friday specials attracting new customers?

Financial Management – Is the business profitable and generating sufficient cash to pay bills, salaries and needed capital improvements? How strong is your banking relationship? What is your backup plan if sales slow down?

Project Management – Major projects and initiatives such as marketing campaigns tend to work out better if carried out on the basis of a well thought out and executed project plan. What are the tasks to be accomplished? Who is responsible for each? What resources are required? When will the tasks be accomplished?

Ownership Transition Planning – Every business needs a succession plan to address continuity in the event of illness, disability or retirement of the owner and other key managers. Lack of a transition plan may result in the business losing value or being unable to continue as a going concern.

Human Resources Management – Your people are your most important asset. Without your associates, who would service your customers and support your business? What types of associates does your business need? Where will you find them? How will you attract and retain them? Despite the recession, good people are always in demand.

Marketing/Business Development – Marketing is about finding, attracting, and connecting with customers. Business development is usually taken to mean developing new markets or major business partner (vendor or customer) relationships. Both are important components of a successful business strategy, but don’t forget about sales. Your sales activities are the one which actually close transactions with customers, move product and bring in the cash.

Rate your performance in each of these areas with a simple one-page, two-column analysis for each area. Label one column "What's working well" and label the other column "What's NOT working well". List 5 or 6 positives in the first column and 5 or 6 negatives in the other. Then at the bottom of each page, list the three most important actions which you could take to improve your performance in that area.

After completing this process for all six areas, summarize and prioritize all of the potential action items, and resolve to work on the top three or four items over the next three months.

You will be amazed at what you can accomplish!

Where there's a will, there's a way (or two or three)

Entrepreneurial success in business is often driven by the combination of three forces:

1. Opportunity - someone has an unmet product or service need

2. Ingenuity - an entrepreneur figures out how to address that need and make a profit doing it

3. Hard work - the entrepreneur stays the course, doing whatever is necessary to make the product successful

And sometimes, the entrepreneur must overcome additional or unusual obstacles to reach his / her goals. Here's an example from Smartbrief on Entretreneurs about Doing business the old-fashioned way:

"Miller Farm, a Pennsylvania producer of nutrient-rich foods, has more than doubled its sales to $1.8 million in just four years -- without the benefit of cell phones, Web access or office machines. The Amish-run family business relies on snail mail and a single landline telephone to maintain connections with the outside world. The company also uses trade show appearances to help bring more foodies into the fold." (Read the full article at BusinessWeek )

The Amish farmer in the story is a classic entrepreneur - he saw an opportunity, figured out how to meet the customer need while staying faithful to the Amish community's constraints and way of life. And he did it with a farm!

Maybe some of our best business opportunities are just outside our windows.

Riding the roller coaster

Coming to another year-end always reminds me of the roller coaster. You know the one: it’s the one you ride every day.

Running a business is like riding a roller coaster. You work, work, huff and puff climbing that big hill to get your business going (or get it out of the ditch). Finally, one day, you reach the top, and with a great sigh of satisfaction, you start to relax to enjoy the view for a bit. But, while the car has slowed to a crawl, it has not stopped moving, and then…

Flying down the other side you go fighting the next crisis, competitor, or just the next quarter’s numbers. And they call this fun? And here’s the best part – as long as you stay on the ride, it never ends. Round and round you go…

What are some of the lessons here?

• Life, nature and business run in cycles / seasons – get used to it unless you have a craving to be road kill.

• Different strategies work best at different points in the cycle. Think about approaching a sharp curve in the road. You slow down, or even brake, a bit as you enter the curve, and then you re-accelerate coming out the other side. This maneuver lessens the chance of a crash while maintaining your overall momentum.

• Anticipating change works better than reacting to it. Recognizing your approach to the top of the ride allows you time to grab the rails anew and take a few deep breaths before going over the top, thereby reducing the chance of losing your hat, your wallet or your lunch.

Facing a sudden challenge or crisis with a calm demeanor works a lot better than wide-eyed panic. Trust me on this.

Speed is not the problem

Debates run rampant these days about whether businesses (or governments) are moving fast enough to solve their problems. Speed is not the problem.

The real challenges are:

• Leadership
• The Right Plans
• Decisiveness
• Steadfastness
• Patience

Effective transformational change requires leadership. This week’s example: Ed Whitacre, GM’s new chairman, is taking firm control of the carmaker with a swift reorganization of GM’s creaking management bureaucracy.

Before taking action a leader must have the right plans. How does one know which plans are the right ones? Start by identifying which ones are not right:

• Plans that have not worked in the past
• Plans that protect vested interests and inhibit initiative and change
• Plans that rely on top-down management direction or government regulation

Plans, once developed, must be implemented decisively. Time is always of the essence, and a failure to move swiftly can severely limit the effectiveness of the chosen plans because competitors and enemies are not sitting still waiting for us to make our move.

Steadfastness means staying the course even when results are sparse and support wanes. Making course corrections to address changing circumstances does not mean fundamentally changing your objectives.

Patience and urgency are two sides of the same coin. Effective action often requires that a leader move quickly, but that does not mean that results will come quickly. They usually do not. Bringing about effective change is more like turning the proverbial battleship – it will take awhile. Stay with it and you just might get there.

Truth telling

As children most of us were taught to always tell the truth. As we grew to adulthood, we learned that there were multiple versions of the truth and some kinds of truth should not be spoken such as those that might hurt other people’s feelings (like telling your sister her dress was ugly – even if it was!).

Telling the truth in business can also be hazardous to your health and we’re not talking about illegalities or allegations of impropriety. For example, investment analyst “sell” ratings remain highly problematic, even unpopular. [1] Investors and analysts benefit when stock prices rise; few benefit when prices fall.

But “truth telling” is a critical element of efficiently functioning markets, and the same is true for business organizations. Here are three examples:

• CFOs talk about “creating one version of the truth” – all units and personnel using the same information systems so that everyone is looking at the same set of numbers.

• Savvy general managers and CEOs routinely talk with outsiders and people down the organization to find out what’s really going on rather than rely on the sanitized reports that come up through their staffs.

• Investment decisions based on inaccurate or erroneous information will likely yield sub optimal returns, if not losses.

Are you telling / hearing the truth or are you just kidding yourself?

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[1] “A Tough ‘Sell’ for Jeffries Analyst,” WSJ, 11/20/09, p. C1

Managing Business Risks

The first risk management problem for both executives and directors is identifying the risks they need to be worried about. Some of the biggest problems are stealth risks – they seem to come out of nowhere.

At a recent seminar for corporate directors, the seminar leader, Dr. Krishna Palepu of Harvard Business School, suggested the following matrix as a good place to start.

Types of Risks

- Strategic – did you pick the right strategy?

- Execution – can you effectively execute the strategy you picked?

- Reputation – how could your corporate reputation be damaged?

- Compliance/Fraud – something bad happened; will it be caught in time?

- Legal – regulators, customers, etc sue the company.

Sources of Risks

Internal

- Pressure to perform – the hill is too high

- Incentives – the compensation system encourages inappropriate behavior

- Rationalization – people have a unique ability to convince themselves that what they are doing is okay when it is not.

External

- Competition/markets – aggressive competitors or changing markets

- Regulatory changes – someone changed the rules or the level of enforcement

- Technology – new technologies make what you are doing obsolete

- Society – the larger society decides it does not like something you are doing

While not exhaustive, the above lists can point you in the right direction.

Chasing excess profits

Every entrepreneur dreams of capturing excess profits. Excess profits greatly increase the value of a business and therefore the wealth of the owner(s). Excess profits are the reward for the outsized effort and risk undertaken by entrepreneurs.

What do we mean by “excess profits”? In economics, “excess profits” is usually defined as profits earned by a business in excess of the opportunity costs of labor and capital employed in the business. They often result from oligopoly or monopoly situations where one or a few companies dominate a particular market either through differentiated products (initially) or market muscle (eventually).

Can excess profits be sustained? Research conducted by McKinsey [1] suggests that strategic differentiation (and therefore sustained competitive advantage leading to excess profits) is inherently unsustainable in most markets. Competitors constantly “scrutinize one another’s products, prices and marketing” reacting quickly to counter any competitor initiative which might allow the competitor to gain an advantage. As strategic differentiation diminishes, industry margins shrink as well.

What about companies like Google and Microsoft? They are exceptions proving the rule. Both achieved market dominance in their respective spheres through technological innovation combined with aggressively seizing a first mover advantage. [2] But such companies are few in number, and competitors, emerging technologies, or anti-trust regulators will eventually erode their market dominance. Nothing lasts forever.

What’s an entrepreneur to do? Relentless innovation must drive everything you do, and then run like hell lest someone be gaining on you.

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[1] “When best practice isn’t enough,” McKinsey Quarterly, August 2004

[2] While neither company was the initial market innovator in their respective spaces, both were able to quickly pull away from the pack and thus gain the equivalent market power of a first mover advantage.

Planning and Planting

Fall is for planning and planting. Approaching Labor Day and the end of summer, many business owner/CEOs and their management teams are beginning to think about planning for 2010 – not an enviable task given the roller coaster of the last year.

Planning itself is the critical act, not so much the exact shape of the plan that results. Bywords for 2010 might include:

1. Conservative assumptions – the current recession is unprecedented in modern times. No one really knows what a recovery will look like or when it will become meaningful.
2. Multiple scenarios – Economists talk about recession-recovery cycles in terms of V’s, U’s, W’s, and Lazy L’s (you don’t really want to know about that one). Each type of cycle could require a different response from your business. Prepare thoroughly for the most likely variations.
3. Flexibility – The greatest learning of last year’s market contractions was how quickly the markets and economic environment can change. In the face of such volatility, those who were able to move nimbly tended to fair better.
4. Contingency plans – Your scenarios should include extreme variations (sales down 40-50%) even if the likelihood is low. See 3 above.

Then comes the fall planting when you consider and commit to the business and operational investments that will drive your revenue and profit plans for next year. Making those investments may require reducing other costs now, but they are absolutely essential to your future success.

Playing for time…

Surviving during the recession is often about playing for time. A California architectural firm hangs on by reducing staff due to lack of work. A large insurance company pushes vendors for lower prices and bigger guarantees. Sales of high-end golf equipment have gone AWOL in some markets. And on and on…

Other companies are making time. I’ve heard three new startup stories in just the last week. At least one software company is preparing for an IPO. And would-be entrepreneurs are coming out of the woodwork.

It was the best of times; it was the worst of times… [1] The relative mix of those doing well versus those not doing so well is clearly out of balance compared to our recent history, but at 9.5% unemployment, 90% of the people are still working. They need services and they are buying products. Companies focused today on emerging consumer trends, needs, and desires will be tomorrow’s winners.

The times are what we make them. The choice is yours. What will you do?

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[1] Charles Dickens in A Tale of Two Cities