• Money makes it stronger

    24 October 2015
    516 Views

    Use your budget to juice your strategy

    A few years ago I wrote an article about why it’s important to do both strategic planning and budgeting. It even has a link to a fun old Reese’s commercial.

    So let’s look at what is involved in an annual budgeting process.

    There are 4 basic components:

    • The revenue forecast
    • The baseline budget
    • The strategic investment portfolio
    • The profit allocation

    For those of you in my Strategic Leader and Rising Leader programs, we’ll be talking about how to do each step in upcoming webinars. But for now, let me give a quick overview of them.

    The reason most people don’t do a revenue forecast is because of the uncertainty of trying to predict future sales. That uncertainty is pronounced in small businesses – though revenue starts to get more predictable in Stage 2, and that’s why a revenue forecast starts to become a good idea. But a poor revenue forecast is better than no forecast at all, and you’ll get better each year you do them. (Warning: if you have a poor forecast, do not rely on it for major spending decisions!) If you just end up with a range of “between $1.2MM and 2.0MM” or an observation of “our forecast only gets us to 40% of this year’s revenue level,” those are still useful in charting your strategic course.

    The baseline budget has all the costs that are involved in continuing your business. The easiest way to start to come up with the baseline budget is to take last year’s budget and replicate it. I suggest you group expenses into meaningful categories – it’s more useful to know your combined spending on rent, insurance, utilities, and other basics is, say, 30% of the budget, than to have each of those items listed separately.

    The strategic investment portfolio comes out of your strategic planning – it’s the investments needed to accomplish the goals you’ve set. That information should come from business cases you do for each of the major goals you have. (Detailed instructions for a business case are part of our Strategy Toolkit that is included in our Starter Kit.)

    Finally, the profit allocation divides the profit that’s left over into 3 buckets that show how much is actually free and available, and how much is reinvested in the business.

    Remember that these steps can be adjusted to be simpler or more sophisticated for your business. To turn an old phrase…it’s the budgeting, not the budget, that matters.

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  • What the market wants

    20 January 2015
    700 Views

    “We have to stop talking about what we want, and start doing what the market is telling us to do,” said a COO in a recent meeting I was leading to talk about changing the way the company serves customers.

    10 years ago, the company served its customers start-to-finish, and the profits that it made enabled it to take good care of those customer if anything went wrong in the project.

    Now, more customers than ever are contacting them to buy their service, but fewer want the start-to-finish service.  This was creating tension within the business, as frontline employees tried to force these new customers into the old model – a model that the new customers don’t want and don’t want to pay for.

    We’d started the meeting describing the new way that we’d be working with customers, but the ideas were meeting resistance as people tried to fit the new model into their old mindset.

    Until, after growing frustration, the COO stopped the discussion with his emphatic reminder that the answers to strategic questions start with what the market wants.

    With that clear, we then set off identifying the questions and issues that would need to be addressed to meet customers on their terms.  It involves a lot of new thinking, and it is a 2-3 year project, but the team is well aware of the tensions and problems that it has trying to stay with the old model.  So, we’ve targeted a few short-term changes we can make in the short-term so we can create momentum, and we’ve also highlighted some complicated issues that will take prolonged effort.

    The lesson for you leaders:  when you’re starting in on a strategy, or a strategic discussion, start with what your customers and your markets are telling you they need.  And if you haven’t talked with your team about what that is in the past year, include that in your next strategy meeting.

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  • Taylor Swift Teaches Market Strategy

    5 November 2014
    810 Views

    In case you were thinking that some people haven’t had to rethink their business model to the “New Normal,” Taylor Swift provided a reminder that, well, that’s true!

    While the rest of the world is gravitating toward streaming music services – which apparently don’t pay what purchased downloads do, let alone what good old fashioned CD sales used to – Taylor Swift pulled her new album from Spotify.  If Spotify’s users want to listen to Shake It Off or any other song from her, they’ll have to buy it.  (I’m a Spotify subscriber who ponies up the $10/month for the premium service, for the very reason that I want artists to be paid for their work.)

    Her leverage in this case is unusual, which gives her the flexibility to take the risk to pull her product from a major distribution channel.  Wouldn’t you like to have that leverage in your market?

    So, what has Taylor Swift done to put herself in this position:

    –          Worked hard for a decade to develop her skills, brand, awareness, and business

    –          Put out a quality product that the market wants

    –          Was authentic in her product and brand

    The various promotional strategies her team has used for each album and tour certainly made a difference – for example, I don’t think it was a fluke that she gave Spotify users access to Shake It Off for a short time, so that they could get hooked on the song.  But the core elements of hard work, wanted-product, and authenticity were the start of her success.

    What can you do to increase your market leverage by improving these core pieces?

    –          Do the hard work and tackle the hard issues

    –          Ask your customers what they want, or look at which of your offerings sell the most and do more of that

    –          Describe your company’s personality and culture and make sure those come out in your marketing (not just in what you say, but also in what you do)

    Congratulations, Ms. Swift.  I haven’t decided yet whether I’ll be buying your songs or just waiting for them to come back to Spotify (I expect they will come back), but I respect you for forcing me to make that decision.

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  • Can you handle Exponential Growth?

    13 October 2014
    3688 Views

    Loch McCabe of Shepherd Advisors uses an interesting frame for thinking about your company’s health and growth.  What would it take to double your revenues – and then double them again?  Loch recently spent an hour with me describing his process for creating Exponential Growth, as he calls it.

    Those kind of results aren’t easy to achieve, but there’s definitely a formula that works, and Loch is good at describing that formula.  (And he’ll be sharing it during his upcoming workshops 10/22 in Ann Arbor and 10/24 in Saginaw.)

    What stands out for me in Loch’s process is the focus on customers and markets.  At the heart of Exponential Growth is customer-based strategy – using insights about your customers to identify the “leverage points” that will give you outsized returns for the investments you make.

    From there, he goes beyond your current customers to look at emerging market trends.  An important part of exponential success is being able to ride the right market waves, and Loch’s process highlights which ones to jump on.

    Loch has asked me to talk about the organizational-development aspects of Exponential Growth during the workshops.  So, when you get the strategy part right, what does it take from a leadership, teamwork, organization, and culture perspective to manage and execute that growth.

    Let me give you a sneak peek of my thoughts here…

    Organic Growth is more accommodating of cracks and stresses in your organization.  Don’t have the right VP of Ops?  Haven’t solidified your sales process?  Don’t have a solid pipeline of talent?  With Organic Growth, those issues are OK – they’ll need to be addressed, and will be over time, but they won’t create any serious risk.

    Exponential Growth, on the other hand, forces and enables you to get your house in order.  It magnifies the strengths and weaknesses of the organization.  It offers a carrot and a stick for dealing with your issues – solve them and you see big results; avoid them and you’ll feel the pain.

    Honestly, Exponential Growth is not for most people.  It requires strong leadership, solid teamwork, effective operations, and a dynamic culture.  Of course, that’s what most companies are aiming for – and struggling with.  And that, I think, is the opportunity that an Exponential Growth vision offers.  It’s like saying we’ll put a man on the moon – it’s a rallying vision to get people to break out of the patterns they have and address the issues that can linger and smolder for years and years if the goal is just Organic Growth.

    What could a game plan for Exponential Growth do for your company?  If you find it intriguing to think about, you should talk with Loch or attend one of the workshops to find out more – see the links above, or let me know you’re interested and I’ll connect you.

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  • Giving Your SWOT More Swagger

    18 September 2014
    3579 Views
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    I like SWOT assessments (you know – strengths, weaknesses, opportunities, and threats) for getting people’s thinking out of the day-to-day and into a creative, strategic “space.”  Unfortunately, I often see SWOT assessments that are just marginally useful.

    Here are some tips on how to get more value out of your SWOTs.

    If you can take a bullet and put it on someone else’s SWOT without changing it, then you’re not specific enough.  One of the favorites to put under Strengths is “Our People”…which is also a good example of a bullet that is not specific enough to be useful in the planning process.  What is it about your people?  Their experience?  Their deep knowledge?  Their ability to be generalists?  Once I know what’s special about your people, then I can create some possibilities about how to leverage that into a better advantage.

    Work hard to look at the future.  We live our lives in the day-to-day, so it’s hard to look ahead several years.  And that’s why it’s an advantage to do – because most people don’t.

    Put “the hard stuff” on the list.  Every business has issues that it doesn’t like to talk about.  The problem customer.  The problem owner.  The problem staffer.  Without knowing the details, I can tell you that those issues consume a large amount of resources.  So they need to be on your SWOT – though it will probably take some diplomatic phrasing.  (For example:  “Some customers are easier to work with than others,” “Owners are not always aligned on decisions,” and “Spotty follow-through.”)

    Make sure you have bullets that cover the whole breadth of the areas you’re involved in.  Often, leadership teams focus more on certain areas, and that bias comes through on the SWOT.  But the non-focus areas are often the places where there is the most opportunity, especially for companies that are developing from the lean-and-mean start-up to a more complete and sustainable enterprise.

    So, here’s the question to ask about your SWOT to see if you’re getting the value out of it:  “Does it give us insight into where we should commit significant resources over the next 3 years to improve our chances of success?”  If it gives you that, then you’re getting the value you should.  If it doesn’t, then you should take steps to upgrade it – which I’ll cover in my next post.

     

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  • Is Your Sales Process Setting the Stage for Success — or Frustration?

    18 September 2014
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    Your sales process sets up the success or failure of your production team.

    I’ve often been in meetings with operational people who are overwhelmed and not hitting their targets.  They struggle to get more efficient or productive, and desperately seek more resources that rarely come.

    But when I see a target that is missed more than 5% of the time, I ask, “How did you set the target?”

    It’s then that we find out that there is no good rationale for the target.  It’s also often the case that the sales team is part of the problem.

    Although it certainly makes it easier in the short run for salespeople to tell customers they can have whatever they want, it usually ends up costing the company money.  Why?  Because it puts excessive burden on the production team to meet targets that aren’t a good fit for the business.

    Most customers can be managed.  When they understand the costs and risks of different options, they will make a reasonable selection.  But it requires a sales team that is able and willing to talk with customers in an educational, supportive, and firm way.

    If your operations team is struggling, dig into your sales process, and understand how you’re setting customer expectations.  It’s likely to have a huge impact on your operations team – and will likely improve your profitability too.

    How good is your business’ radar system?

    Do you have a radar system for your business?

    For my clients who are using my 12-month strategic planning process – and for those of you who want to create a system for sustainable success – summer is the time we wrap up our survey of market trends and forces.  So, as I look back on the process I’ve been through over the last 3 months with my clients, it’s interesting to think about the RADAR system we’ve built for their companies.

    How can you build a radar system for your business?

    You can build a system on the cheap by using what your company already has:

    • New project or product ideas customers have asked for over the last year
    • Recent customer requests
    • Internal brainstorming about new ideas
    • Clippings of trade journal articles that you can collect throughout the year

    You can build a more robust system by adding some resources:

    • Using a consultant or service (or intern!) once a year to get more information about your markets – through web searches, customer interviews, and/or research reports
    • Building a searchable database of market intelligence facts
    • Naming one of your managers Trend Czar or Head Trendie, and

    Once you have your company’s radar system built, then you have to read what it’s showing you.  There are 5 steps to turning your “readings” into action:

    1.       Determine what resources you can devote to pursuing trends and new areas of business (as opposed to improving or expanding your current lines of business)

    2.       Assemble a long list (at least 12) of important trends from all the data you’ve collected

    3.       Filter your long list down to a short list (at most 5) by evaluating the general impact and potential of the trends

    4.       Determine which short-list trends will get resources by evaluating the details of the opportunity, the likelihood of your company’s success, the investment needed, and the risks.

    5.       Create an action plan for the trends that will get resources

    Like any radar system, yours will give you advance notice of issues coming your way, so that you have time to prepare and react.

     

     

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  • What’s Powering Your Performance?

    16 May 2014
    4285 Views
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    I spent the last 2 days in a workshop learning about performance and accountability from Shane Yount of Process-Based Leadership.  His model is a terrific match for the strategy work I do – once you know where you want to go, then you need to activate the organization in a consistent, engaging, disciplined-but-flexible process.

    I often talk with my clients about “strategic management,” which is the on-going ability of the organization to identify the right things to work on, and then to actually work on them – as opposed to getting consumed by day-to-day work that puts things off-track.

    What powers Shane’s performance system is a “culture of accountability.”  What does that look like?

    –          There are clear priorities for each team – and the company as a whole – to focus on

    –          There is a sense of urgency in each team – Shane is a strong proponent of a weekly cycle

    –          There are “non-negotiable rules” that people hold themselves, others, and the organization to – things like showing up for meetings on time, coming to meetings prepared, and taking responsibility for “re-negotiating” commitments if they are not met

    –          The dialogue is about what people do, not how they feel

    How do you know if you need it?

    –          The performance of your company or team is driven by the force of the leader’s personality (and if that wasn’t there, who knows what would happen…)

    –          The company or team focuses on whatever is in front of it at the moment

    –          There is selective engagement – people are able to set their own level of effort and contribution

    Many companies don’t need or want a complete structured performance system like what Shane offers.  But whether you’re talking about my “strategic management,” or Shane’s “process-based leadership,” every company needs its own “management toolbox” to drive performance.

    Is your company’s performance saying you have the right tools?

     


     

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  • “If It’s Easy…It’s Wrong”

    10 March 2014
    693 Views
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    My 11-year-old son started playing hockey goalie this year.  At a recent goalie clinic, his coach said something I think applies to business leaders… 

    “Goalie is a hard position.  It’s hard to be in your stance through the whole game, it’s hard to shuffle across the crease while you follow the puck, it’s hard to move out to challenge the shooter.  But those are the right things to do – those are what will help you make the save.  You can play the easy way, but you won’t be successful.  So, I want you to remember a simple phrase to help guide you while you’re in practice and in games…If it’s easy, it’s wrong.  If it’s hard, it’s right.”

    Let me review some of the easy things that I see business leaders do:

    • Make important decisions before understanding the consequences
    • Make important decisions without involving the people who will carry them out
    • Focus on feel-good marketing activity rather than figuring out their marketing ROI
    • React to sales opportunities rather than focus on the ones that are best for their business
    • Hire someone that they like
    • Keep someone they shouldn’t have hired
    • Avoid the hard decisions during strategy meetings, so that the decisions are left for people in the field to deal with when they’re faced with a problem
    • Assume they know what their customers or markets want without asking them
    • Don’t question their own biases and blindspots
    In every one of those situations, it’s hard to do the right thing.  It would be nice if they weren’t hard, or if there was a magic wand that would make them easy.  But that’s not how those situations work.  And what happens if you handle them the easy way?  Things take longer, you create more problems, you spend more money.  In short, the easy way is actually not the easy way. 

    So, here’s the key message I want you to remember as a business leader:  When you’re in a complex or important situation, the hard way is actually the easiest way in the long run, if you’re aiming for long-term business success.

    I know it’s not easy, but please do the right thing.  It’s what your company, customers, markets and communities need from you.

     

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  • “Once you replace negative thoughts with positive ones, you’ll start having positive results.”

    2 January 2014
    1531 Views

    The standard chunk of Lorem Ipsum used since the 1500s is reproduced below for those interested. Sections 1.10.32 and 1.10.33 from “de Finibus Bonorum et Malorum” by Cicero are also reproduced in their exact original form, accompanied by English versions from the 1914 translation by H. Rackham.

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  • Empathy & Profitability

    27 June 2013
    1059 Views
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    Many of my clients are proud of the “family feel” of their companies. They care about their people, see the whole person, and create a bond of trust that moves them well beyond an “employer-employee” relationship.

    The last few years have been hard for the leaders of these companies, because they haven’t been able to protect their employees from the tumultuous market environment that their companies are operating in. Bonuses have been cancelled, raises postponed, training missed, and some of the “family” have even been let go.

    In a discussion this week with a leadership team that was debating how to balance the benefits of a family feel with the realities of operating a company within the rules of business, I pointed out that it is profitability that provides the flexibility to treat employees well.

    Look at a company that treats its employees well, and you’ll also be looking at a company that has a profitable business model.

    At a Board meeting with one of my family business clients a few weeks ago – a company that has been passed down through several generations – they said it another way: “Always protect the money tree first.”

    After yesterday’s meeting, I thought, “If profitability is the foundation of an empathetic company, what is the foundation of profitability?”

    The answer has many parts, of course – strategy, productivity, discipline, teamwork, culture, accountability, etc. But I’d say the thing that comes first, before making the profitability happen, is…empathy. The ability to empathize with your customers, so that you understand what they need and how to make their lives better, in a way that they value.

    If you want to empathize with your employees – if you want to create that great family feel – empathize with your customers.

    There are many values that a company can live by. If you haven’t considered having Empathy as one of your company’s core values, it’s worth a look. And if you haven’t defined any of your core values…we should talk.

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