Posts Tagged ‘markets’

3 Strategies – Good, Fast or Cheap

Tuesday, March 31st, 2015

When I first saw this picture a couple of weeks ago, I had a really good chuckle.Good, fast or cheap - which strategy will you choose to grow your business?

Then I realized – it illustrated the key aspects of both strategy development and execution far more effectively than all of the books and articles ever written.

You’re a business owner, the company’s done well, but you know there’s room to grow and you know where you want your company to be in 3 years’ time.

To get there, you will have to do a number of things.

One of the most important is you’ll have to make choices.

You can be a low-cost provider, the cheapest supplier in town, low margins offset by high turnover.

To prevent those skinny margins disappearing, you will have to keep 2 things low:

•  The cost of making or buying your product or service. That will affect quality.
•  Your overhead – which means you won’t be offering the best delivery or support around.

So being cheap is OK but your service won’t be perceived as good or fast and you’ll be continually fighting to protect, or expand, your market share on price alone.

OR

You can differentiate your products/services by providing good quality, fast service or both. Lower turnover is offset by greatly improved margins.

•  Your cost of making, or developing, your product or service will be higher because you’ll use the best materials and skilled labour.
•  Your overhead will be higher too. Fast delivery requires competent people and good infrastructure; maintaining a reputation for quality requires research and development and innovation.

So you can be good, fast, or both but you’ll be well up the price range. Perhaps even in the wonderful world of premium pricing.

But you won’t be cheap.

OR

You can focus on a specific market, segment of a market, or niche and build the reputation for specialized knowledge and expertise.

In this case, you shouldn’t have to be cheap since your expertise should create the perception that you’re good.

If you’re really good, you can, to at least some extent, choose how fast you want to be. Why? – Because people will wait for the best specialist to fix their problem.

To wrap up, let me return to the point I made about the picture earlier – it’s taken me almost 300 words to say what it said in 26! And I’m sure I haven’t made you laugh once.

 

If you enjoyed this post you’ll also enjoy Want Your Company To Grow? Here Are 3 Words To Live By

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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3 Reasons Growth Slows In Good Companies

Tuesday, June 18th, 2013

It caught my attention immediately.Periodic slow-downs in growth are inevitable, even in solid companies

A blog post about why successful companies stop growing. A topic I was tempted, only last week, to call an obsession.

While the examples Ron Ashkenas uses are all large corporations, it really doesn’t matter.

The points he makes apply equally well to business owners and family businesses.

Ashkenas argues that periodic slow-downs in growth are inevitable – even for solid companies. That doesn’t mean that business owners and their management teams can’t do anything to slow the decline or to reverse it quickly.

First, however, they have to understand the 3 forces that Ashkenas says always slow down high-flying companies. Here they are.

1.  The Law of Large Numbers

When revenues are $5 million, targeting annual growth of 20% means adding $1 million to the top line. When they’re $50 million, chasing 20% growth means adding $10 million in sales in 12 months.

It takes significantly more resources to support $10 million in new sales than it does to add $1 million. And some of them, e.g. people with the skills and experience required, can’t always be found quickly and easily.

Then there’s the size and growth rate of the market. If it’s $100 million and growing quickly, adding $1 million in sales means taking, at most, 1% more market share. However, adding $10 million in a mature or declining market means getting 10% more market share – and that probably means taking it away from competitors.

2.  Market Maturity

When a market turns hot, competitors multiply like mosquitos. That limits the potential for price increases, which are a relatively easy way to increase revenues.

Some companies build stronger brand loyalty than others, slowing the ability of the weaker competitors to grow. Some products become commoditized, price becomes king and margins become thin, affecting bottom line growth.

Eventually markets become saturated and the bigger, stronger players either gobble up the weaker ones or force them out.

3.  Psychological Self-Protection

Ashkenas describes this as pressure to maintain the base business and unwillingness to risk it with innovative new products.

In the companies we’ve worked with, it often appears in a different form (and perhaps deserves a different name). As these companies grow, the management team spends more and more time focusing on meeting the increasing demand while maintaining quality. This is often caused by weak processes, lack of discipline and lack of accountability.

In both cases, however, management is the cause of the declining growth.

No company grows forever without hitting some bumps along the way. The challenge for the business owner is to recognize what’s really going on and to deal with it.

Sometimes it takes an external, third party to be able to do that.

You can read Ron Ashkenas’ full post here.

 

If you enjoyed this post you’ll also enjoy Why Would Anyone Hire A Management Consultant? and Why Would Anyone Hire A Management Consultant? – Part 2.

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The Single Biggest Thing A Business Needs To Grow

Tuesday, March 12th, 2013

I’ve been working with business owners for almost 15 years. So, when someone asked me…The need for, and a willingness to change in order to grow successfully

“What’s the single biggest thing that you think separates companies which grow successfully from those which don’t?”

…I realized that I needed some time to think about it.

As I weighed one thing, then another, over the next few days, I came to the conclusion that the answer is NOT about having:

•    Plenty of cash
•    A price advantage
•    Top quality products and services
•    Products or services protected by patents
•    A broad customer base, not just 1 or 2 really big ones
•    A presence in several markets
•    Great people (which you will know, if you read this blog, I think is huge)
•    A winning strategy
•    A great culture.

Yes, you need all of those things – and others I haven’t mentioned. But they become worthless if one thing is missing.

The single biggest thing that I think separates companies which grow successfully from those which don’t IS…the business owner understands that he or she personally will have to change, and they are willing to make those changes.

At first I thought the answer was just the owner understanding that she or he needed to change.

Then I remembered that we’ve worked with entrepreneurs who have demonstrated that. But they have subsequently been unwilling to make the changes.

In some cases, what we perceived as unwillingness may have actually been inability to change – either because they couldn’t see the need or they lacked the skill to make the changes required.

The owner’s role remains constant – to provide the direction and to put the people, processes and other resources into place in order for the company to grow. However, as each revenue plateau is reached, the way in which they do that has to change in order for the company to successfully scale the next one.

They not only need to learn new things and hire people with the skills they lack, but they may also have to adapt their management/leadership style and even their behaviour.

And they have to do that while ensuring that the other challenges – for example, adapting to changes in the market or industry; funding growth; maintaining product/service quality; recruiting good people, fending off competitive action – are dealt with.

This is not easy. So it shouldn’t be surprising that some owners either choose not to do it or that some simply can’t.

I don’t believe that it’s for us, or anyone else, to judge a business owner by whether or not they do or do not grow their company. Just starting and building a business requires courage and the willingness to accept a level of risk that many people can’t, or won’t, take.

So that’s not my point.

It’s simply my opinion that the single biggest thing that separates companies that grow successfully from those that don’t is the owner’s understanding and willingness to change him or her self.

 

If you enjoyed this post you’ll also enjoy 3 Times When You May Need To Change Your Strategy

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5 Reasons Why I Love Execution

Thursday, November 25th, 2010

I think I may be in love.

I’m reading Larry Bossidy and Ram Charan’s book “Execution – The Discipline of Getting Things Done”. Although I’m only one third of the way through it, I believe it’s the most rational, practical book about strategy that I’ve read in years.

Why do I think that? Well, for a start I buy into their fundamental premises. Here are 5 that I think are particularly important:

1. The difference between a company and its competitors is often the ability to execute.

All business owners have access to the same business books, webinars, training programs, coaches and consultants etc. Why then do 2 companies in the same industry, operating in the same markets and with similar strategies, produce different results?

The only remaining variable is execution. Which doesn’t mean the market leader is executing well – they’re just executing better than the other players. As an old friend used to say – “In the kingdom of the blind the one-eyed man is king”.

Some of you may argue that we haven’t considered culture or leadership. In that case, read on.

2. Execution is the biggest issue facing business today – and nobody has explained it satisfactorily.

Bossidy and Charan make several great points. Over the years, a great deal of thought has been given to strategy development – the result of which has been thousands of books and articles. You can hire a strategy consulting firm (including mine) who will guide you through the various “models”. The same is true – or rapidly becoming true – of leadership development and culture.

But how much thought has been given to how to execute? Not much. (Although, I have to say, our firm has always emphasised it). Perhaps execution has been neglected because it’s traditionally been confused with tactics. But it’s not – execution is integral to strategy.

You could argue that the field of project management is concerned with execution. But is it? Or is it concerned with how to manage the projects that someone else decided have to be executed?

3. Execution is the major job of the business leader. The leader who executes puts in place a culture and processes for executing.

If execution is the biggest issue in business today it had better be the #1 job of every business owner. But there are a couple of bear traps here.

Entrepreneurs have to avoid the temptation to execute or do everything by themselves. They also have to avoid micro-managing or being too hands-on. If the owners don’t do that they lose sight of the forest and only see trees. They stop being strategic and get lost in tactics.

The authors say the most effective approach is “active involvement”. That means getting things done through people. But having such a detailed knowledge of how the business makes money that an owner can constantly probe and ask the right questions – leading people to develop the right solutions.

The owner/leader has to find the correct balance if she is to lead by example and make execution part of the culture.

4. Execution is a discipline, a specific set of behaviours and techniques that, if mastered, will give you a competitive advantage.

The “easy” parts of the statement are that there are specific techniques, they can be mastered and, if you pull that off, you will gain competitive advantage.

The more difficult part is that there are a specific set of behaviours to be mastered also. Human nature being what it is, changing behaviour – even our own – usually takes far more effort than learning a technique. But perhaps that’s where the discipline is required.

5. Execution includes mechanisms for changing assumptions as the environment changes.

This is my personal favourite. Many of the owners and management teams we work with get the intellectual concept of “no fault, no blame” when following up on plans and finding they haven’t worked quite as intended.

But even they find it hard to put guilt and value judgements aside when targets are missed because assumptions were “wrong”. The authors’ stress need for “realism” in running a business. Realistically then, has anyone ever been able to accurately predict the future? Let’s put the fault, guilt, and blame away for good.

In case you hadn’t noticed, I’m excited. There is just so much common sense in this book I’m looking forward to reading the rest of it. I should have read it years ago………but there goes the guilt thing again!

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