In my work as a fractional CMO, I am often helping small businesses navigate the transition from sales-driven revenue to marketing-driven revenue. This is no small feat, because of the time and investment it takes.
I just had lunch with the managing partner of a $5MM services firm. He was telling me how hard it was to ask his partners to spend money on marketing – and he was talking about $20K, which was a fraction of what they would need to really become a marketing-driven company. Why were his partners dubious? Because the ROI was not going to be fast or definite enough.
Compare that with a strategy meeting I was in last week for a $10MM services firm in which a partner – who was one of the biggest skeptics of marketing 2 years ago – said, “If we hadn’t invested in marketing over the last 2 years, I’m not sure we’d still be here today.” (To his credit, he was a skeptic, but an open-minded one.)
Let me tell you something that marketing agencies have a hard time telling you: the ROI of marketing almost assuredly looks terrible for the first 12 months you’re doing it. And may look terrible the second 12 months.
But if you’ve made the right investments in that time, you almost assuredly will be reaping the rewards of your marketing machine by your third year. And they are rewards that are beyond the scope of anything you could have generated with a sales-driven strategy. In other words, marketing can get your business to the next level – but it’s going to cost you.
It’s not easy for leaders to invest in something that is unproven and takes 12-24 months to start paying off – especially given the “black art” nature of marketing, which means that you can never really “arrive” at a marketing strategy that you can lock in and forget about. Each company’s marketing recipe is different. There are generalizations you can start from, but at least 1/3 of those generalizations will be wrong.
Why “waste” all that money marketing, then? Because building a marketing machine is like driving a car instead of pedaling a bike. If you’re happy biking and it takes you where you want to go…great. Stick with your sales-driven approach, and don’t bother building a marketing machine. But if your market is getting more competitive, or your customers are more price sensitive, or your buying cycle is getting longer…that bike probably isn’t going to be enough anymore.
What do I mean by prioritizing your priorities? Why is it important? Why is it hard?
It’s fairly easy for any business to come up with a dozen ideas for improvement – and most businesses wouldn’t stop there, generating dozens of possibilities. The challenge for any leadership team is to pick the right priorities to focus extra attention on among all those many options.
It’s easy to say, “You should have 3 big rocks that you focus on.” It’s muuuuch harder to say, “These are the 3 rocks that will give you the best outcome.” Why is it harder? Because there are many variables to consider in coming up with the answer. I’ll highlight 2 as examples:
- What’s the balance between financial outcomes and intangible outcomes? You could work your staff hard for two years, get your financial results up, and then sell your business for great personal gain. But many small companies have more connection to their employees, and so are willing to support work-life balance at the expense of financial performance. In that case, you can’t just decide on priorities based on financial ROI.
- What if short-term success and long-term gain are not aligned? Often they aren’t! Short-term, it almost never makes sense to upgrade your systems. But if you never upgrade systems, that will eventually undermine your results. How do you balance those competing interests? How do you decide whether long-term payoff is the right thing to aim for now?
So this is a hard task. Why not just avoid it?
Because focus is a key part of success. Spread yourself too thin, and you won’t have the energy to see your initiatives through to success. As we all know, juggling 6 balls is far harder than juggling 3 balls.
Although there are tools that can help you prioritize your priorities, this is not something that is driven by tools. A SWOT or Gap analysis will not solve this problem. A 1-page sheet that puts long-term vision, annual goals, and quarterly objectives…will not solve this problem.
The center of this solution is wisdom and judgment. It takes experience, insight, creativity, foresight, and thoughtfulness to prioritize your priorities. Whereas operating a business is more akin to an industrial “assembly line” process, guiding a business is a craft that has as much art as science. That’s why venture capital looks foremost at people when considering an investment.
One of the great things about working with Stage 2 companies is that there is usually a strong team operating the business, and any gaps they have in operations can usually be filled with a toolkit from EOS or e-Myth or Rockefeller Rules. Whether they are a strong team leading the business depends a lot on their ability to prioritize their priorities and pick the right things to choose on.
I’ll be posting a self-assessment soon for you to gauge how your team is at leading your business. So…well…this is just the placeholder until I get that! But if you’re reading this and are interested, send me an email – or give me a call and I’ll share what I have in draft form.
I got to spend a couple hours talking about hiring last week with Miche Rayment, who runs The Hire Effect and wrote a book by the same name. Since we’ve both worked with growing companies to define hiring processes and hire key positions, we shared some stories and developed some tools to help people decide how they should approach hiring.
I had the most fun when we were brainstorming what to call the “hiring strategy” of the many companies that, well, don’t have a hiring strategy. It went something like this…
“They just decide they’re going to hire someone, and start looking, and then find somebody and hire them.”
“It’s like they just go pull someone in.”
“It’s like a vacuum. They flip a switch, and then wave around a tube that’s sucking in whatever gets near it.”
“That’s it – it’s the Suck Strategy of hiring!”
“How do you hire? We suck! Hahahaha.”
That was the most fun part of the conversation. The most interesting to me was when we talked about how much time a company should spend on a hire.
Let’s be honest – most companies don’t have the flexibility or discipline to go through a highly rigorous process with every hire. (Some hiring guides espouse taking months with each candidate! That is just unrealistic for most companies.) On the other hand, some roles and situations demand a lot of structure and steps in the hiring process.
So, what are the factors that a small company leader should look at to decide how much time to spend on a hire? There are just a few I look at:
- Importance of the role: bigger impact of the role = more time hiring
- Newness of the role: uncertainty of what the role is and what kind of person to hire for it = more time hiring
- Availability of talent: hard to replace a bad hire = more time hiring
- Pace of growth: faster growth = more growth issues coming up faster = more need to hire the right person = more time hiring
- Degree of competition: more competition = higher need to perform = more need to hire a strong performer = more time hiring
There are many situations when a company can just Suck to find an acceptable employee. But if any of the factors I list above apply to you or a position you have available, you should spend the “extra” time in your hiring process to find the right/best person. In those situations, the consequences of hiring are significant.
I recently gave a webinar for the SPARK.grow program on high-potential employees – how companies can identify, foster, and be attractive to high-potential employees, and how high-potentials can identify, develop, and be attractive to high-potential roles. (The recording of the webinar is here.)
I described a “High-Potential Talent Stack.” That stack has 6 levels – the bottom 3 are the factors that enable someone to perform at any job, and the top 3 levels are the factors that enable someone to perform as a leader. I want to describe each level…
Performance – this is how well the person gets work done
Results Focus – this is the ability to not just put in the effort, but to figure out a way to go around roadblocks and keep at a task until you get the result that is needed
Learning – high-potentials are always expanding their toolkit of skills, and learning about the work they do
Investment Thinking – this is the ability to think in terms of Return on Investment
Maturity – high-potentials handle themselves well, in different situations and with different people
Leadership – this is the combination of skills that are needed to get a team to perform at a level and in a direction that they wouldn’t get to on their own
This stack is a powerful tool. It shows what a company can look for when hiring new staff, and what they can train and develop to improve their high-potentials – and shows high-potentials what skills to develop for further growth.
Each level of the stack has 3 more specific components. The target is to score a total of 12 or higher when each of those components is rated on a 1-5 scale. Scores of 4-4-4, 5-4-3, or 5-5-2 would all qualify; scores of 5-3-3, 4-4-3, 5-5-1 would not qualify. It’s a high hurdle – but the people that meet that standard are often the “10x-ers” – the ones who have 10x the impact on your business than your typical employee.
Almost universally, small businesses underinvest in their high potentials. There’s too much potential ROI for you to do that.
Most people recognize that markets don’t stand still. Customers, competitors, and technology are constantly changing.
Although most people recognize that, many don’t appreciate the imperative that that dynamic places on them as leaders. The simplest way I’ve learned to describe that imperative is this…
Your business model is a depreciating asset.
In other words, the way you do business – whether that’s how you find customers, how you produce what you offer, how you deliver what you sell – is losing value every day.
Like other depreciating assets you have – your house, car, refrigerator, computer – you have to maintain it simply for it to keep working the way it’s supposed to. And you have to more-fundamentally change or replace it on some kind of predictable cycle – 3-4 years for a computer, 5-10 for a refrigerator.
How quickly your business model depreciates is mostly a function of the degree of change in your market. And, since there’s more change in every market these days, we all need to put our leadership teams on notice that we’re going to have to reinvent our business model sooner than we’re used to. Rule of thumb: the cycle is probably half what it used to be. (So if the model used to last 10 years, it’s best to plan for it to last 5.)
If your leadership team is skeptical when you tell them this, offer the following true story. I know a smart, tech-savvy teenager who has a nose for online businesses. He found an opportunity last Fall that he liked. Here’s how that played out:
- Week 0 – discovered opportunity
- Week 1 – supply chain set up
- Week 2 – open for business
- Week 5 – profits to date: $200K
- Week 11 – profits to date $500K
- Week 13 – rejected offer to purchase business for $100K
- Week 16 – competitors raise cost of advertising to a level that the economics no longer work, business model no longer profitable, business closed
To summarize, that’s a business model that was able to net $500K in 4 months – I know $15MM businesses that aren’t generating that profit for the year – but whose value depreciated to $0 in that same 4 months.
If you talk about markets changing, it seems like something “out there” that may not impact you. If you talk about your business model depreciating around you week by week, it gets much clearer that you need to act with some urgency.
It’s Valentine’s Day – a day when we celebrate the role that marketing and sales plays in our personal lives. And in honor of Valentine’s Day, let’s take a look at a new trend in marketing and sales.
Many of my clients love sales and hate marketing. Sales is short-term, tangible, clear – what’s not to like about sales?! On the other hand, marketing is long-term, more subtle and intangible, and much less clear. Unfortunately, many business owners never get past that black/white dynamic to see that marketing is one of the most important pieces of the puzzle to grow a business.
Good marketing – at the small/mid-sized business level – has always been about driving revenue – getting more people to buy more, sooner, at higher margins. But that’s often overlooked when marketing focuses on tweets and clicks and likes and pretty graphics.
Fortunately, there’s a new trend that focuses more on the good kind of marketing – that trend is Sales Enablement.
Sales Enablement is how marketing helps sales – it’s the tools, systems, content, and support that salespeople use to engage prospects efficiently. Because there is more competition today than there used to be, businesses cannot afford the inefficiency in the sales process that used to be OK. Marketing brings scale, consistency, and clarity that brings down the costs of making the sale.
At a recent marketing and sales retreat I led, we reviewed a Hubspot video on Sales Enablement. It said that 70% of the buyer’s decision is made before they even talk to a salesperson. In other words, most of “sales” actually happens during the phase that is usually handled by marketing.
What does the trend toward Sales Enablement mean for you?
- Most small businesses are overinvesting in salespeople and underinvesting in their marketing.
- Sales needs to describe to marketing what it’s hearing from prospects and customers, and what it needs to address buyer concerns.
- Marketing needs to create for sales standardized tools and strong, consistent messages to make the sales process more efficient.
- You need to appreciate what a strong connection there is between educating prospects about their needs, and making sales. Buyers are making their decisions while they’re learning…in fact, because of what they are learning.
Sales Enablement can help you generate more revenue more efficiently. If you think your sales and marketing are not keeping up with the times, you should use the topic of Sales Enablement to open a discussion among your leadership team about how your approach could change.
I was in a meeting this week with a client, and they were talking about the gigantic case they take to trade shows – which is called “The Coffin” and may have cost an employee a finger (the story wasn’t clear and I didn’t want to ask). The person who bought it, and still saw it’s utility, countered the jokes and jabs by saying, “Well, actually, it’s light if you have a forklift.” I’m not sure if it was a joke or a legitimate argument, but it got me thinking…
There are a number of pitfalls that will trip up people who don’t have a lot of experience with strategic planning. One of the more regular ones – especially in retreats where people are asked to free their thinking – is not taking into account limited resources.
All kinds of amazing things are possible to dream up if you assume you have unlimited time, effort, strength, brainpower, flexibility, etc.
That case is light (if a forklift is available where we’re going, and we have the money to pay for it)
That metal is flexible (if we have a sledgehammer and the strength to wield it)
That market is accessible (if we have the VP of Sales who knows the right people and can use their trust to benefit our product)
That new initiative is going to be easy for people to support (if we have a culture that is very adaptive and a leader who consistently pushes it)
Options that look good with unlimited resources often look terrible when limitations come into play. So it’s important to take resources – money, bandwidth, expertise, relationships – into account when choosing a strategy.
Overlooking resource constraints is just one form of a broader category that undermines strategy – the hidden assumption.
There’s no way to avoid hidden assumptions – we all have them lurking in our blindspots. But there are things you can do in your planning to reduce the likelihood that assumptions will lead you into a bad decision:
- Include people with different perspectives in your discussions – and listen to them all
- Ask, “Why is this a stupid idea?” or “Why would this fail?”
- Think of other decisions that ended badly and were driven by hidden assumptions, and assess if there are similarities
- Clarify the criteria that you use to evaluate your options
One of the things that separates good strategists from poor ones is the ability to see what’s missing and hidden. It’s a hard skill to develop – it takes knowledge and experience and inquisitiveness and discipline.
But it’s a really valuable skill. If you reflect on the worst decisions you’ve made, they are usually built on top of a hidden assumption that turned out to be way more off base, and way more important, than you’d have imagined…if you’d known to think about it.
How could I not take up the challenge of finding the link between the 50 Shades juggernaut and my beloved Stage 2 small business clients!?!
Putting aside the more mundane topics of what Christian Grey’s DISC profile is, the importance of proper inventory processes, and the merits of NDAs, I’m struck by the similarity between Christian’s dominant role and how Shane Yount, owner of the Process-Based Leadership system, describes some companies:[Managing by position, proximity, or persuasion] creates dependency. Employees become dependent on their leaders to make the decisions, to solve the problems, to show them what to do and when to do it. Certainly managing by position, proximity and persuasion gets short-term results. But dependency is dysfunctional.
It may seem extreme to draw a parallel between 50 Shades’ dominant/submissive relationship and how many small business leaders operate, but there’s probably more truth to it than many owners would like to admit.
Recently I talked with a group of Stage 2 company CEOs, and one of their big a-ha moments was when they realized how dependent their organizations are on the leader’s opinion, intuition, and judgment.
If you realize that your leadership is out of balance, or if your employees start to refer to you as Mr/Ms Grey…what can you do?
The first step is creating a dialogue with your managers. You want a process to be guiding the company, not a person, and to do that, you need to start a process that involves your leaders in key decisions – and then you need to stay committed to it. And, if you’ve been doing a lot of the talking, start listening more. Don’t totally hand over the reins, but start to share them.
What should you talk about? To start, I like to focus on today – what is working, what isn’t working? Once you have things working OK, then you can start looking out farther on the horizon – to the next few months, and then to the next year, and then to the next 2-3 years.
Let’s be honest about something Christian Grey knows – it’s fun and exciting to be in charge, to be The One Who Makes the Calls. But it’s also not sustainable, and if you’re looking for your business to prosper for the long-run, you need to mature as a leader and expand how you relate to your business.
AI and machine learning have exploded onto the business scene in 2017. If you haven’t gotten an email asking you if you want to learn how IBM’s Watson can help your business, you will be soon. And we’re just getting started.
The bots are coming, and if you’re thinking your business is immune, I don’t think you’ll feel the same way by 2020.
What should you be doing in 2018 to prepare?
Many small companies are not going to have the budget needed to use AI. But if you’re in a small company, you should still learn about what it can do and how it can be used. By hearing how AI is being used in your sector, you can make your offerings better and your operations more efficient – even if you don’t spend a dollar on AI technology itself.
You should also figure out your company’s algorithms. AI works through algorithms – coded logic about how to interpret data. You may not have Big Data to work with, but you have algorithms operating in your company…like which customers are better to work with, what products help with what needs that a customer has, and which of your staff to assign to which types of projects.
Back in the old days, this was called Experience, or Tribal Knowledge. Now…we call it Algorithms.
Your algorithms will probably start simple – like which customers are better to work with. But that’s just the start. The real power comes when you think about branches that you can build to make the thinking more complex. For example, once you identify what services help with what needs, then you can identify if customers of one service are more likely to buy another service you offer. Where are the connections and patterns in your business?
Many of the small businesses I work with know these algorithms intuitively – they’re operating all the time in the heads of the staff who have been there more than 10 years. Often the first reaction I get when I bring up the idea of capturing the company’s algorithms is, “Oh, we don’t need to do that. We know that already…in our heads.”
Which is great…but right now, someone is working on coding into a computer the algorithms that are needed to run your type of business. It’s happening. Right now. Believe me.
And the need to document your algorithms will be much clearer – and more urgent – when your staff person is competing with a machine that costs less than a month of that person’s salary and doesn’t need health care. When that happens, you’re going to wish that you’d asked your staff to outline how they make the decisions that run your business. And that staff person is going to wish that they’d been thinking about how to build value on top of their knowledge, rather than clinging to the knowledge itself as the differentiator.
What do you do when knowledge and experience are no longer differentiators? What will the differentiators be? I have some guesses, that I’ll outline another time…
So, I don’t know how all of this will play out. I’m sure bots, at some point, will be able to do most of what we rely on workers to do now…and that there will be needs that bots can’t handle. But while we’re waiting for that to play out, you can use the thinking of AI designers to make your business better and be in better control of your destiny. And you can do that whether you can afford the actual AI technology or not.
Pretend that you’re designing your own bots, give them fun/interesting names (Watson! Alexa! Siri!), and have some interesting discussions with your Leadership Team about the algorithms driving your business.
As a small business coach, I’m always interested when the conversations I’m having in my client strategy meetings are echoed in news from the Fortune 500. And we had one such example last week – ESPN’s transition of their on-air talent from specialists to generalists.
Specifically, ESPN’s President John Skipper said, “Dynamic change demands an increased focus on versatility.”
Many of my clients are professional services firms – they are selling their people’s skills and thinking. Several weeks ago, in a quarterly strategy meeting with a 40-person services firm, the leaders asked me what I thought about a shift they were considering to organize themselves in specialized teams that could create deep expertise in certain areas. Here’s what I said:
- There is a lot of uncertainty in the market. That means that you don’t know what kind of work will come in, or when it will come in. (I am seeing this across my client base.)
- As a result, you have to have flexibility in who you assign to different jobs, because your talent assignments are probably not going to work the way you plan them.
- The only way you can have the flexibility you need to handle work in this uncertain environment is to actively develop cross-discipline agility – you have to make sure that people’s “downtime” is spent developing new skills.
In other words, you need to have a talent base that has a lot of flexibility in what and how it works – which is exactly why ESPN is making the shift they are, to multi-dimensional on-air talent.
Creating a flexible staff is no small task for small businesses. The large majority of small businesses under-develop their talent – that is to say, their talent development is mostly opportunistic and accidental assignments that happen to build new skills. That’s often OK – but it’s less likely to be OK these days, and companies who don’t get better at talent development are going to feel the pinch and pain of less-agile workers more and more, since the market will continue to be an uncertain place.
What’s needed to actively develop your people? How should they fill their downtime? Have your people…
- Explore new areas by looking through trade publications or surfing industry web sites
- Hold regular lunch-and-learns for your staff to educate each other
- Shadow each other doing work that’s new to them
- Sit in on internal or customer meetings that involve new areas for them
Are you developing the generalists your business needs – the ones with the skills and agility to navigate the uncertain environment we all face?