Posts Tagged ‘profits’

Purpose, People, Profits

Tuesday, March 10th, 2015

 

This week’s guest is Mark Lukens, a Founding Partner of Method3, a global management consulting firm, and Tack3, a business and non-profit consultancy. He has 20 plus years of C-Level experience across multiple sectors including healthcare, education, government, and people and potential (aka HR). Most of Mark’s writing involves theoretical considerations and practical applications, academics, change leadership, and other topics at the intersection of business, society, and humanity.

 

In the 1980s we were told that profit was king. The whole economy was restructured to put this focus before all else, on the basis that if we did that right then everything else would follow. But the reality is very different. Profit itself follows from putting a sense of wider purpose first, and from looking after people in the way that such a purpose ensures.

Purpose

To put profit first is to let someone else set our direction. It is to act as if we have no choice, when what we are really doing is choosing the easiest path, the one that makes us least distinctive.

But taking the immediate easiest path is never taking the most beneficial path in the long term, because so many others are following the same path, all fighting for scraps of the same short-term benefits. This creates situations like the current housing market, which creates financial bubbles rather than new housing for those who most need it, even though a different path could solve the shortage in less than a generation.

If you want to create something that stands out, something that endures, then first you have to choose your path, not let the market choose it for you, whether that purpose is social housing, radical design or an alternative approach to cloud solutions. Start with what you want to achieve.

People

An organization with a sense of purpose will naturally end up serving the people who share that sense of purpose, as innovations to assist that cause also assist them.

Improvements to the battery life of the Tesla Roadster provide an example of this. The company wants to provide more efficient environmentally friendly ways to drive, and their customers want the same thing. As they achieve improvements to this technology, like a battery that can go further between charges, they come closer to their aim of better environmentally friendly cars, while also providing a better service to the people driving those cars. Over time, this will increase the number of people using their products, through better service and value for money.

Tesla Motors are no mere novelty. They are a company on the rise, financially and in terms of profile. That rise comes from serving a purpose, and so serving people.

Profits

Across the globe, there are signs that a sense of purpose can lead companies to profit by better serving people.

Like Tesla Motors or Woetzel, Mischke and Ram’s schemes for a better housing market, the Fairtrade movement finds it purpose in a grand cause, aiming to provide a better income for poor third world producers. This directly puts people first, and has led to profit for organizations large and small, from African mango growers to London boutique shops.

But a purpose doesn’t need to be political or social to benefit a company. Apple’s sense of purpose has long been built around providing technological innovation and user-friendly products. This has provided customers with products they never knew that they wanted but now can’t live without, such as the iPhone, and a design aesthetic that has a huge cult-like following. Their strong sense of purpose has provided for people, and ultimately for huge profits.

PPP

Putting purpose first is about recognizing that profit is not an end in itself, but a way of supporting companies and those who invest in them. If your purpose is something that people value then those people will naturally be served by your work, and profit will flow from that.

It’s not about ignoring profit. It’s about putting purpose first.

You can reach Mark at marklukens@gmail.com or visit his website at http://www.marklukens.com

Share

7 Ways to Hold Consultants Accountable Now

Tuesday, September 23rd, 2014

7 ways to hold consultants accountable nowMy wife will tell you I like giving other people advice.

That’s probably why I’m a management consultant.

But even consultants have to take some of their own advice – and change in order to grow.

For example, we must find a process for linking our compensation to our results in a meaningful way.

There’s no doubt this is hard to do. But that’s no excuse for refusing to try.

However, at the risk of making a huge understatement, it’s going to take time.

So, while we’re waiting, what can a business owner do to make sure the consultants they hire actually deliver results?

1. I talked about our own solution to linking compensation to results last year in a post called “Let’s Hold Consultants Responsible For Results”. It isn’t perfect, but it’s better than the traditional model.

2. Four years ago I suggested how owners can keep control when they work with consultants.

3. Around the same time I highlighted 3 reasons why consulting engagements fail. It’s really not difficult to avoid making them.

4. Look for consultants who have had practical, “hands on” experience operating a company. They have 2 clear advantages over consultants who have spent their entire career in consulting roles, as I pointed out in 2011.

5. There are also clues that you can listen for. Consultants who are effective tend to say certain things.

Here are 2 more things that I thought about this week.

6. Yesterday I was talking to a business owner who had been referred by an existing client. He asked if I would go out and meet him. I agreed immediately because that’s the only way to determine if there’s any chemistry between us.

Some people might consider the idea of “chemistry” to be foolish. But I can tell you from experience, that without it, the risk of a project failing increases dramatically.

7. Ask what success will look like. It’s more than just a description of what the consultant’s going to do and the services they’ll deliver. It’s about knowing how, when and what they will do to help you get the results you want.

Success, they say, comes not from doing one big thing well, but from doing many little things well. Perhaps change is like that too.

We at ProfitPATH, and lots of other consultants, are chipping away, doing the necessary things that will bring change to our business.

Click here and automatically receive our latest blog posts.

Jim StewartJim 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

One Big Reason Why Strategies Fail

Tuesday, September 9th, 2014

the main reason a strategy fails is based in how it’s executedI often argue that a strategy isn’t important.

It’s the benefits a strategy delivers – more profit, increasing the value of a company – that are important. They put more money in the owner’s pocket.

To reap those benefits the strategy must, of course, be successful.

A strategy can fail for many reasons.

It could just be a lousy strategy. But that happens less often than you might think.

Even a poorly conceived strategy can deliver results – if it’s executed with focus, energy and passion.

I believe the main reason a strategy fails is based in how it’s executed.

For example:

  • There’s no link between the strategy and the actions which have to be completed if it’s to be successful.
  • Most people don’t know what the strategy is – and the part their job has to play in making it successful.
  • People, at all levels, do know what their role is – but there’s no accountability if they miss targets.

Some examples are less evident.

One in particular is quite insidious. It goes like this.

After intense discussion, the owner and management team reach a consensus on the strategy for the next 3 years. Everyone goes off determined to do the right things to execute it successfully.

However, since much of their time is taken up with running the business day-to-day, after a while, that begins to affect their perspective.

And that gradual, subtle change in perspective can have a major impact on the execution of their strategy.

It is possible to detect it and fix it. But that requires the discipline to do 2 things.

First, hold regular strategy review meetings. Second, keep the agenda off day-to-day stuff, and on measuring progress toward the 3-year goal.

Any shift in perspective can be spotted by asking one question. “Are all of the projects being discussed integrated/aligned with the strategy we chose for the next 3 years?”

The odds are there will be some drift.

That’s because the company is made up of people. And people tend to have their own priorities, concerns, agenda, and goals – which may be directly opposed to the next person’s. In the face of day-to-day pressures, people find it hard to keep the whole company perspective in mind.

But it can be restored – and one big reason why execution fails can be easily avoided.

If you enjoyed this post you’ll also enjoy Strategy Execution – How You Do What You Do

Click here and automatically receive our latest blog posts.

Jim StewartJim 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

Stick to Your Knitting or Reinvent Yourself? What’s the Right Answer?

Tuesday, August 19th, 2014

Don't knowIf you focus on what you do best, you’ll prosper. Look at Coca-Cola or Southwest Airlines or Disney.

So, understand your core competencies and stick to your knitting.

Good advice, correct?

But what about companies like Kodak and Nokia? They stayed focused on what they did best. And it really didn’t work so well for them.

So, perhaps it’s not such good advice after all.

My Dad used to say “rules are for the guidance of wise men – and the blind obedience of fools.”

Just because we drop that magic word ‘strategy’ – as in strategic consistency – into a rule, that doesn’t make it an exception to be followed blindly.

Kodak, Nokia, and a host of others like them, did understand their core competencies. But they either didn’t see, couldn’t understand – or simply ignored – a reality.

Something else started going on in their industry that made those core competencies obsolete or insufficient. In Kodak’s case, it was digital photography; in Nokia’s, the advent of the smartphone.

Perhaps a better rule for business owners is to stick to the knitting, but keep looking outside of the company in case something fundamental begins to change.

And as soon as that change becomes evident, begin reinventing – around the capabilities that brought success to the company in the first place.

That’s what Lou Gerstner did at IBM and Andy Grove did at Intel. (Much as I dislike using only large corporate entities for examples in my blog posts, they are usually well enough known for everyone to be aware of them.)

So the reinvention comes from adding new capabilities to the ones that brought success in the first place.

Ken Favaro, who wrote the article, that inspired this post and for whom I have the greatest respect, says that if you do this, you can manage the tension between strategic consistency and reinvention.

Perhaps I’m over simplifying but I see it as using common sense to deal with the changes that have, and always will occur in an industry.

But, as Stephen Covey pointed out, common sense is not that common. And it’s particularly difficult to hang on to it in the face of never ending pressure to make deadlines, maintain quality, fight off competitors, keep staff motivated – and, of course, make the payroll.

 

If you enjoyed this post you’ll also enjoy Strategy Working? Then Don’t Make These 5 Mistakes

Click here and automatically receive our latest blog posts.

 

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

Strategy And The Evil ‘Gang Of 5’

Tuesday, August 12th, 2014

Ken Favaro calls them the “Gang of 5”.the evil 'gang of 5' adversely affects strategy

He talks about them with reference to large, public companies.

But every business owner we’ve dealt with over the last 13 years would recognize them.

That’s because entrepreneurs are only too familiar with the challenge of making this year’s top and bottom line, while simultaneously investing in the future.

The Gang of 5 draws its strength from the:

  • Resulting competition between the needs of short and long-term priorities and,
  • The belief that this trade off has to exist.

Let me introduce them and you’ll see what I mean.

Let’s begin with the 2 members that cause too little investment in the future.

1.  Financial engineering – or working the numbers by cutting costs to make the current year’s bottom line or continually postponing expenditure on, for example, training, hiring or replacing aging equipment, from one year to another.

2.  Price leadership – or price-cutting. This is worse, because it’s a very public tactic. Once you’ve lowered prices, how easy is it to put them back up again? It’s not.

Then there’s the 3 members who show up when a company does spend – but unwisely or excessively.

3.  Innovation leadership – gone wrong. Symptoms of a misguided approach to innovation are, for example, not launching a product until it is “perfect”; expecting customers to buy a service developed without their input; cost overruns and products launched way behind schedule.

4.  Cross selling – can be a good thing but not if it leads to the development of products which are “bundled” for sale at reduced margins to a few “key” accounts. Double jeopardy occurs when the customers’ business changes or key decision-makers leave.

5.  Market leadership – or “we have to be the biggest” comes from the misguided belief that to make maximum profits, a company has to be the market leader. We’ve worked with many companies that quietly carve themselves a specialized niche in a market and make superb margins as a result.

The reality is that a business has to find a way to make a profit and invest in the future every year.

How do you, as a business owner, do that?

One way is to have a clear picture of where you want your company, not just your sales, to be in 3 years’ time. Then, before making key decisions, asking how the outcome will help get you there.

 

If you enjoyed this post you’ll also enjoy 2 Things That Cause Bad Strategy

Click here and automatically receive our latest blog posts.

 

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

10 Commandments of Business Development

Tuesday, May 21st, 2013

10 Commandments of Business Development

I’m not enjoying the after-effects of the 2007/2008 financial crisis.

And I’m certainly not a fan of the banks, investment and other, which I believe were a significant contributor to the mess.

But, while my wife may disagree, I like to think I keep an open mind.

So when I saw an article talking about how Goldman Sachs grew from mid-tier firm to global player in a few decades I had to peek.

John Whitehead, a co-head of the firm in 1970, wrote the following 10 commandments that guided their business development efforts:

1.   Don’t waste your time going after business you don’t really want.
2.   The boss usually decides — not the assistant treasurer. Do you know the boss?
3.   It is just as easy to get a first-rate piece of business as a second-rate one.
4.   You never learn anything when you’re talking.
5.   The client’s objective is more important than yours.
6.   The respect of one person is worth more than an acquaintance with 100 people.
7.   When there’s business to be found, go out and get it!
8.   Important people like to deal with other important people. Are you one?
9.   There’s nothing worse than an unhappy client.
10.  If you get the business, it’s up to you to see that it’s well-handled.

I love them. They’re full of common sense and they’re very practical. Written in 1970, these 10 commandments add to my belief that the basic, common sense principles of business never change.

Here are 4 things that business owners today can take from them.

First of all, being clear about what business they want and avoiding the temptation to grab every deal that comes along in order to increase revenue. Only take deals that provide good margins, with companies who pay on time.

Hold out for the first-rate piece of business. That’s the one that allows a company to do what it’s good at. Second-rate deals require the company to reinvent its core competency at short notice, for difficult customers who are price shopping and who never buy from the same vendor twice.

Companies, and sales people, that really understand that it’s the client’s objective that’s important, don’t have unhappy clients. Hard driving entrepreneurs sometimes forget that in their rush to achieve their objectives. As a service provider, I try never to take on an assignment unless I understand the deliverable. For example, I’ll say to a client: “Imagine we’ve just finished your offsite and you’re telling me how pleased you are that we achieved your goals. What has happened, what do you have, that’s making you say that?”

Finally, the last of Whitehead’s principles emphasizes the importance of focusing the company culture on customer satisfaction.

Mark Graham, who wrote, the article says that he’s built his business by putting integrity first, even if it seems at times he has to sacrifice short-term profits. He’s right – and that could be the 11th commandment.

 

If you enjoyed this post you’ll also enjoy 5 Tips for Fast Growth in a Slow Economy

Click here and automatically receive our latest blog posts.

Do You Think Of The Chicken When You’re Eating An Omelette?

Tuesday, April 30th, 2013

For some people, breakfast, if they even call it that, is just a cup of coffee. For others, it’s cereal or a cooked breakfast.

But, regardless of what we reach for, we do it to provide fuel for our bodies and minds. That’s the result we want.To create an omelette, chickens are the strategy

Imagine for a moment that you’re an omelette person. You start every day eating your personal favourite – maybe it’s mushroom, or western, or jalapeño.

The result is you go to work feeling good, ready for the challenges of the day.

Fine, but what on earth do omelettes and strategy consulting have in common?

Think of it this way.

While the ingredients required for the filling vary with each person’s taste, every omelette – every single one – needs eggs. And to get eggs you need chickens.

Now I don’t know about you, but when I’m rushing around in the morning, getting dressed and so on, I’m already thinking about what I have to achieve during the day.

When – if – I spare a thought for the omelette, it’s about the result it will give me, the energy to get through the day.

If someone stopped me, in that frenetic time between getting out of bed and leaving the house, and tried to tell me that the chicken and the egg were what mattered, I’d brush them off.

Chickens are the strategy and energy is the result.

I know that to get my result a chicken is required because I must have eggs to make my omelette. But, on a day-to-day basis, it’s the result I’m interested in, not the chicken, the eggs or the omelette.

Business owners want results – growth in sales and profits – the strategies that produce them are just a means to that end.

So they don’t buy strategies; they buy what strategies, successfully executed, will do for them. I have to admit that, when I started consulting, it took me a couple of years to figure that out.

That doesn’t mean to say that business owners won’t stay abreast of developments in strategy development and execution. The ones we work with most certainly do.

But that’s like me reading up on whether free-range, grain-fed chickens are better than battery hens and whether omelettes made with egg whites are healthier than those made with yolks.

Knowing about the chickens and how to make omelettes helps me make choices about how to improve the result I want – in this case getting the energy and staying healthier.

Staying abreast of the developments in strategy and execution (e.g., Roger Martin’s 5 questions, how to build flexibility into the process) helps business owners understand how to improve their results. Strategy is still required even in today’s fast-changing business world.

But, in the final analysis, all they want are the results.

 

If you enjoyed this post you’ll also enjoy Strategy – Don’t Think It, Experience It.

Click here and automatically receive our latest blog posts.

Putting The Horse Before The Cart – That’s Strategy!

Tuesday, April 16th, 2013

According to Ken Favaro¹,  we often confuse “some version of a vision, a mission, a purpose, a plan, or a set of goals for a strategy”.Develop a strategy first, then execute it

Why is that important?

While these 5 things (he calls them the ‘corporate 5’) play a part in the execution of a strategy they “do not give you” a strategy.

Surprised?

To quote Favaro, “If the corporate five are the cart and strategy is the horse, leaders who put the cart first often end up with no horse at all.”

Or in my words – you’ll get better results (higher profits, a better valuation) if you first develop a strategy and then execute it – not the other way around.

In the interest of full disclosure Favaro said that corporate executives are guilty of this type of confusion.

But, guess what, in our experience the owners of family businesses and privately-owned companies are just as guilty and do exactly the same thing.

Favaro says there are 5 more fundamental questions (the ‘strategic 5’) that have to be answered before worrying about visions, plans and goals:

• What business should we be in?
• How do we add value to our business?
• Who are the target customers?
• What is our value proposition for those target customers?
• What capabilities are essential for adding value and achieving differentiation?

There’s a reason this is way more than just interesting.

Roger Martin talks about² strategy being “an integrated set of 5 choices” which are made by answering 5 questions:

• What’s our winning aspiration (or the purpose of the business)?
• Where will we play (which cities/provinces/countries, for which end users)?
• How will we win (what is our value proposition or competitive advantage)?
• What capabilities must be in place?
• What management systems are required?

See any similarities?

Martin and Lafley also talk about what strategy isn’t. They say that many leaders (thus including entrepreneurs/business owners) approach strategy in ineffective ways, for example they define strategy as a vision or as a plan.

Again, see the similarities?

Yes, I am back on the topic of the many and incredible ways in which the word strategy has been, and still is, misused. And I love it when people agree with me. Particularly when their reputation (or at least their profile) is bigger than mine.

But why should anyone who makes a living in the real world care?

Because more business owners will make better profits and add more value to their companies if they get better at executing their strategy.

And the first step is to be clear about what strategy is.

                                                                        

¹ “How Leaders Mistake Execution for Strategy (and Why That Damages Both)”, Strategy + Business, 11 February 2013
² “Playing To Win”, A. G. Lafley and Roger L. Martin, Harvard Business Review Press, 2013, pages 3 – 15

 

If you enjoyed this post you’ll also enjoy Strategy Made Practical

Click here and automatically receive our latest blog posts.

Increase Your Profits In 20 Minutes A Day…

Tuesday, July 31st, 2012

Our guest this week is Adam Green, founder of Maple North Internet Marketing, a Toronto-based online marketing firm specializing in search engine marketing, social media marketing and Google Analytics consulting.

The title may read like an overused infomercial – but if you’re reading this, you are interested in the offer.

We drive traffic to clients’ websites to generate sales, leads or increase brand exposure to help their business grow. So I’m often asked: “What’s the secret to online marketing?”

It’s really quite simple. Look at your analytics stats daily. Analytics, in the online world, are your website statistics. They track your visitor activity, traffic levels, goals and so much more.

So step 1, make sure you have some form of analytics installed starting today. I recommend Google Analytics as the system is quite robust – and it’s free.

Think of your website like a retail store or sales person on the road. How do people interact at your location/with your people and what types of behaviour have lead to sales in the past?

Write these ideas down on a list. Let me help you with a few:

1. We tend to close a sale when our sales reps use a case study.
2. We often get a “yes” when we discuss a specific service offering.
3. Customers purchase our products when they spend more than 5 minutes in our store or come back 3 times.

Step 2 is to consider how these questions relate to your website and what information it delivers. Do you have the case study in question on your website? How often is it visited? Can a visitor find the case study easily in your navigation? Should you make it available on your home page?

If your business gets more sales through an entry level service, how is that service portrayed on your website? How many people visit the page and what path do they take to get there?

If your retail stats show your customers’ purchase behaviour increases after “x” amount of store visits… guess what? You can see how often they visit your site in your analytics stats also.

Step 3 is to encourage repeat visits. Take some time each day and look at your web stats. Are you leveraging your email marketing list? Are you engaged in banner advertising and remarketing to drive traffic back to your website?

Create a baseline and begin to test ways to improve your website to grow your profits.

These 3 simple steps embody much of the secret to online marketing. Start using them and, in the 20 minutes a day you spend on them, you will increase your profits.

You can contact Adam at adam@maplenorth.com or by phone at 416-616-8597

4 Things Every Business Owner Must Think About

Monday, November 7th, 2011

A few years ago one of our clients was unexpectedly made an offer for her company. It took her totally by surprise and so we had to react quickly to the situation.

She thought the offer was low and she tried to negotiate it up.

That’s when I realized that, until then, she’d given no thought to selling and even less to maximizing the valuation of the company.

That situation taught me there are 4 things every owner of a successful business must think about. Here they are.

1. The 6 Reasons A Company Is Sold. We now tell business owners that there are 6 things that will make them sell their company. They:

1. Accept an unsolicited offer.
2. Become so ill they are no longer fit to continue running the company.
3. Die young and unexpectedly.
4. Choose to retire.
5. Are no longer able to run the company – but this time because of old age.
6. Die of old age.

Some of the owners laugh saying that it will never happen to them. Some get annoyed that we even bring it up saying things like “I’m far too young to have to worry about that now” or “I’m not ready to retire/I will never retire.”

But the one thing they cannot do is argue that the 6 reasons are illogical or incorrect.

2. The 2 Common Factors. Then we tell them there are 2 factors common to all 6 situations:

a) They will only get an unsolicited offer, for top dollars, if the potential buyer believes that the business is profitable and strong.
b) They may not have to sell if they become ill – even so ill they can’t run the business – or if they retire. But if they retain ownership the company will have to run without them. And to do that it has to be profitable and strong.
c) If they do have to sell because of illness or when they retire, they will only maximize the return on their hard work – get top dollar – if the business is profitable and strong.
d) If they choose to retire; become too old to continue running the business; or die – young or old – they, their estate or their heirs have the same choice. They can either retain ownership or sell. And, once again, to get the most money out of the business it needs to be profitable and strong.

So what does it mean to be “profitable” and “strong”.

3. A “Profitable” Company is one that consistently produces industry beating profits.

Why consistently?  Because that’s the only test that making a profit was more than just luck. (As an old friend used to say – never confuse success with a growth market.)

Why industry beating?  Because what’s to say that even consistent profits couldn’t be improved. What better comparison than with other companies in the same industry? It removes one major variable – because every company in the industry goes through each phase of the economic cycle at the same time. And key indicators are available by either looking at the annual reports of public companies or by using the industry data published either by (some) associations or magazines like Inc.

4. A “Strong” Company can meet 2 criteria. One, it can maintain profitable operations despite the loss of 1 – or more – key personnel. Who are key personnel – the owner and anyone with specialist knowledge which would be hard to replace. Two, all key balance sheet ratios – liquidity, debt to equity etc. – are in great shape – in other words the company could borrow money from the most conservative of lenders.

What makes a company profitable and strong? I’ll tell you in another post.

By the way there are at least 2 other reasons a company could be sold – divorce and the break-up of a partnership. We’ll also deal with those in another post.

Post History