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Business Acumen Drives Results
This book review originally appeared in Baltimore, Washington and Philadelphia SmartCEO Magazine.
I’m often asked what I believe is the most important trait to succeed in sales or business. Anyone who knows me knows my answer – business acumen. Today, more than ever, those individuals who possess business acumen have a tremendous advantage over those that don’t.
This is especially true in sales. It’s funny (sad really), but if you were Rip Van Winkle having just awakened from a 50-year sleep, and you walked into most small and mid-market sales organizations, you probably wouldn’t be able to tell the difference.
All too often, sales reps are making the same boring phone calls and making the same mindless pitches chasing fewer and fewer dollars. Sales managers track the same activity numbers that have absolutely no correlation to sales success whatsoever.
Sales training budgets have increased much, and, what’s worse the focus of that training is still primarily on product knowledge and some version of sales skills. But, ask yourself this: Have the trillions of dollars that companies have invested in sales training, salesforce automation and marketing really paid off?
The results of the last four years clearly answer that question – they haven’t! If you look at any meaningful measure of business success, the news is bad. Profit margins, return on equity, and assets are down. Sales costs are rising, and price pressure is at an all time high as procurement departments have seized unprecedented power in buying decisions.
As an executive, you should remember two quotes that should be at the top of your mind when you look at your sales efforts:
- The problems we face today cannot be solved at the same level of thinking we were at when we created them – Albert Einstein
- The definition of insanity is to do the same thing again and again, and expect a different result – Thomas Edison
It is crucial that you stop, and ask yourself what are the critical components that will allow your salespeople to be insanely successful? Don’t stop at the clichés like personality or persistence. Sure, those characteristics are important, but they do not cause success. There are just as many (or more) personable, persistent salespeople that fail as those that succeed.
If your products and services require a meaningful investment from your customers or you claim to make a significant impact on customer’s results, there are two critical pieces that absolutely must be present: business acumen and judgment. These characteristics are really flip sides of the same coin, as good judgment comes from business acumen. If you want to break free from the commoditized treadmill, where so many small and mid-market companies find themselves, you must develop business acumen in your salespeople.
Kevin Cope, author of Seeing The Big Picture: Business Acumen to Build Your Credibility, Career and Company and founder of Acumen Learning, defines business acumen as the “keen, fundamental street-smart insight into how your business operates and how it makes money and sustains profitable growth, now and in the future.”
Businesses are complex, and the issues they’re dealing with face greater and greater complexity. One small problem or change can have a ripple effect through the entire company. The only way you can successfully cut through this complexity is to understand the critical drivers of a business. Cope point out five: cash, profits, assets, growth and people.
To get the action (and margin) that you most likely want for your products and services, your salespeople must be able to influence real decision makers in organizations. Seeing the Big Picture, accurately points out five abilities needed to do this:
- See the “big picture” of the organization – how the key drivers of a business relate to each other, work together and produce profitable growth, and relate to the “job” your product/service does.
- Understand important company communication and data, including (and I’d add, especially) financial statements.
- Use your knowledge to make good decisions.
- Understand how your products/services impact key company measures and objectives.
- Effectively communicate your ideas to employees, managers and executives.
While Cope’s book is written for the reader within a company, the book is a tremendous resource for developing business acumen for any application. It’s a book you should give to every salesperson.
My 3 Lessons From Steve Jobs
This book review originally appeared in Baltimore, Washington and Philadelphia SmartCEO Magazine February 2012 issue.
Anyone whose followed my columns, blog or speeches, knows what a fan I am of Apple and it’s late-CEO Steve Jobs. So, it was with great interest that I downloaded Walter Isaacson’s biography of him.
Isaacson, author of several great biographies, is a fabulous writer and does a great job of providing an enticing narration of Jobs’ life in an historical context. Reading the book left me with three key insights that I hope to take into my business on a regular basis.
It’s About Execution
The myth about Steve Jobs is that the underlying causes of his success are his imagination and creativity. While Jobs certainly is strong in both areas, it was the ability to maniacally focus on execution that led to Apple becoming the most valuable company in the world.
Jobs, more than anything, was a managing editor. He could certainly conceive of technology that didn’t exist before; he wasn’t rare there. His ability to see what didn’t belong and to force his highly creative designers and engineers to stay focused on fewer projects and to bring out the essence of each product are what made Apple foundationally different.A great example is the myth that Jobs merely ripped off Xerox’s graphical interface in creating the Mac. While Jobs’ discovery at Xerox PARC did a lot to inspire the Mac, Isaacson does a great job chronicling how Apple’s execution is what enabled success.
The Goal Can’t Be Profit
When you look at companies like Starbucks (in their heyday), Apple and Facebook, you quickly realize that product is a byproduct, not a focus in itself. As Howard Schultz shares in his autobiography Pour Your Heart Into It, Starbucks’ aim was to make a great cup of coffee and provide a special experience to its customers. By staying focused on that, a great company (and tremendous wealth) was built.
I truly enjoyed reading about the genesis of the iPod, the product most responsible for launching Apple into the stratosphere as a consumer products company. Isaacson documents the inside story how Apple brought the iPod to life, and how Microsoft reacted.
Bill Gates, CEO of Microsoft at the time, realized what a game change the iPod could be, so he invested in what ultimately became one of Microsoft’s most high-profile failures – the Zune music player. One of my favorite quotes in the book is when Jobs says:
“The older I get, the more I see how much motivations matter. The Zune was crappy because the people at Microsoft don’t really love music or art the way we do. We won because we personally love music. We made the iPod for ourselves, and when you’re doing something for yourself, or your best friend or family, you’re not going to cheese out. If you don’t love something, you’re not going to go the extra mile, work the extra weekend, challenge the status quo as much.”
You Have to Break Rules
When I consult with companies who desire to accelerate their growth by breaking through their growth barriers; I caution them that the fundamental challenge is making the appropriate changes to the business without killing the unique dysfunction that makes them what they are. Too often consultants come in, apply their “rules” and take away the uniqueness that made the business effective.
Steve Jobs succeeded his way. He was control oriented, famous for berating employees (and friends), was aloof and moody. Apple, beloved by its customers, is not a particularly engaging firm. They don’t tweet and don’t really listen to the customers all that much.Simply put, if I made a list of the consensus rules for management and growing a company in an interconnected world – Apple and Steve Jobs would violate most of the rules. And it worked for them.
The biggest insight I gained from reading Steve Jobs is that his way worked for him. It probably wouldn’t work for anyone else. The key is to learn from what he did. Then make it work – our way.
It’s probably the great Jobs legacy – to succeed, we must leave our mark.
Simplicity Leads to Amazing Results
This book review originally appeared in Baltimore, Washington and Philadelphia SmartCEO Magazine June issue.
Nearly six years ago I wrote a blog post about my fascination with the simplicity of music.
Think about it, there are only 12 notes in music (and from what I understand only 5 notes are used 80% of the time). Despite that we can enjoy music as complex as Bach and Beethoven, as simple as a Cars tune, as mind numbing as The Grateful Dead or Pink Floyd and as rocking as a Springsteen or Gun ‘N Roses anthem.
In twenty years working with more than 1,500 small and mid-market companies, I’ve learned that business and music have an awful lot in common. Building a successful, highly profitable growth business is a complex result; however, the process of getting there is a simple one.
The most common reason businesses fail to reach their potential, and instead stall, is because the entrepreneur or business leader embraces too much complexity. Companies are constantly trying to “differentiate” themselves. They are constantly trying to “add value” and “innovate.” Too often, companies make things complex for the sake of making things complex.
Sure, they claim the complexity is necessary so that their clients and prospects will understand how they are different. They say their solutions are complicated and they don’t want to “dumb things down.” The reality is that the complexity merely commoditizes them in the marketplace and confuses the people inside the business.
Just as John Williams used only five simple notes to compose one of the most memorable and intense themes (Star Wars), the key for business executives is to find the simple rules that will guide every aspect of their decision making.
With those thoughts in mind, I came across Andy Kessler’s most recent book: Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs. For those that don’t know Kessler, he’s an enigmatic, contrarian ex-hedge fund manager. If that description hasn’t turned you off, it’s a good bet you’ll enjoy his books.
Kessler is one of my favorite business authors for three reasons. First, he is the prototypical cynic; second, he takes nothing for granted and investigates everything; and third, he is an entertaining writer. In Eat People, Kessler investigates the cause for the massive wealth creation he has witnessed.
He calls these wealth creators “Free Radicals” as they operate outside the norms of business and create great wealth for themselves and for the greater society through the impact their endeavors have. He shares 13 simple rules that should be followed by anyone desiring such success.
Here are his rules:
- If It Doesn’t Scale, It Will Get Stale
- Waste What’s Abundant to Make Up for What’s Scarce
- When In Doubt, Get Horizontal
- Intelligence Moves Out to the Edge of the Network
- Wealth Comes From Productivity, Everything Else is Gravy
- Adapt to Humans; Don’t Make Them Adapt to You
- Be Soylent – Eat People
- Markets Make Better Decisions Than Managers
- Embrace Exceptionalism
- Be a Market Entrepreneur and Attack Political Entrepreneurs
- Use Zero Marginal Cost to Create a Flood (or Someone Else Will)
- Create Your Own Scarcity with a Virtual Pipe
- Money Sloshes to the Highest Returns
Kessler has spent most of his life making money in the technology sector and his rules are geared to the technology industry. While his stories are entertaining, the real value is not the rules he comes up with, or the stories he tells (though they will make you a hit at the next cocktail party); it’s the process he used to come up with his rules and in how he applies his rules to make decisions.
Success in business requires three key components: effective systems, the right people to support those systems and the tools/resources that support the people and the systems. Management guru W. Edwards Deming taught that every business problem, at its heart, is a systems problem. Yet most businesses treat everything as a people problem.
Kessler doesn’t teach a business system in Eat People, but he goes a long way to making the extraordinarily complex, remarkably simple. And that may be the most difficult task in business.
Stop Differentiating – Start Enchanting
This book review originally appeared in Baltimore, Washington and Philadelphia SmartCEO Magazine May issue.
Two of my absolutely least favorite marketing terms are: differentiate and brand. The reason I hate these words is because they are both results that a whole bunch of marketing agencies and advisory firms turned into means so they could both make the process insanely complicated and therefore charge ridiculous fees for it.
My distaste for these words is far more than merely semantics. My problem is that when companies focus on differentiation and/or branding, in the traditional sense, they are focusing on the wrong things. Both words cause you to focus either internally or on your competition; neither of which are effective for driving profitable growth in today’s hyper-competitive times.
Why Differentiation Is Not Enough
I regularly advise CEOs to stop differentiating, and instead just be different. In working with thousands of small and mid-market companies (and studying thousands more companies) I’ve observed that the only companies that spend significant time on differentiation strategies are the ones that aren’t different.
Think about it. If your business is different, how difficult should it be for someone to realize that? How hard should you have to work to “differentiate”? Companies that are different are differentiated, those that aren’t – are not.
In my experience, I’ve seen what happens when differentiation becomes the focus of company executives. They stop focusing on the critical questions about their customers and what really matters to them.
Instead their center of focus becomes the competition. They start asking, “Is this our unique selling proposition,” rather than, “What would absolutely delight the people with whom we want to do business?”
Without meaning to, they commit the very sin they were trying to avoid – they start feeling and acting just like every other company. They quickly become what I call a “Me-Too” company.
The Problem With Branding
Don’t get me started on branding (okay, too late). The biggest myth in marketing is the idea that businesses can brand themselves or control their brand – they can’t! Business don’t control their brands, their customers do!
The problem with branding is very similar to the problem I have with differentiation – the questions branding leads executives to answering are bad questions.
Branding isn’t something companies do to their customers; it’s something customers do to businesses. It’s not about telling your story; it’s about having our stories understood.
Branding isn’t about logo’s, brochures, ad slicks, and any of the other trivial things that businesses do in an effort to “re-brand.” Rather, it’s about ensuring that that what your business is, is what it is supposed to be. It’s about delighting your customers and creating meaningful experiences for everyone that comes in contact with you. Far more than merely being liked, branding is about being valued.
If Not Differentiating or Branding, Then What?
For the last five years I’ve been sharing my discovery about the fundamental difference between great companies and non-great companies. I’ve learned that great companies have mastered five simple rules that others have either ignored or failed to master. I call these The Five Unbreakable Rules for Creating Demand.
Summarized these rules state that the key to creating a great company (and anyone can do this) is to focus – manically – on who your customer is and how can you delight them.
It’s as simple as this:
- Great companies know who their
customer is – and who they are not. They never confuse the two. - When you are delighting your customers, you don’t have to worry about differentiating anything – your customers will take care of that for you.
There is probably no greater example of how to do this than Apple. In the 3 Acts of Apple they have delighted a core group of customers so deeply that they achieved a cult-like status, they’ve failed to delight customers and nearly went bankrupt, and in Act 3 they returned to delighting customers and are the single best performing company in the last 15 years.
While I try not to review the most popular books in the business space in this column and instead try to highlight authors and books that readers of SmartCEO may not be as familiar with, I’ve decided to make an exception.
Guy Kawasaki was there for Apple’s first act, heck, he was Apple’s Chief Evangelist. Since he left Apple he’s been delighting a core group of customers. He newest book Enchantment: The Art of Changing Hearts, Minds and Actions is an absolute must read for anybody in business.
From their first sentences in Chapter 1, “The world will not beat a path to your door for an insanely great mousetrap. In fact, the greater the mousetrap, the more difficult it is to get people to embrace it …” Kawasaki enchants readers with simple how-to’s to stand out, resonate and build great businesses.
So stop differentiating and start enchanting.
Focus On Your Core
This book review originally appeared in Baltimore and Washington SmartCEO Magazine February issue.
When I was a wealth management advisor at Merrill Lynch, I used to keep a sign in my office that said, “Don’t confuse brains with a bull market.” For the last five years, I’ve been telling senior executives and salespeople at mid-market companies, “just because the fish are jumping in your boat, doesn’t mean you an expert angler.”
As businesses put growth back at the top of their agenda and try to put the issues of the “Great Recession” behind them, they are discovering a fatal flaw:
They’ve lost their core business (or they’ve never had a core business).
For far too long, businesses have been selling to the lowest common denominator, simply because general demand was growing rapidly. For 25 years, from 1982 through 2007, executives could count on the record growth of markets to mask many of the errors that were taking place beneath their businesses.
Now, in response to the economic displacement companies are struggling to find new formulas for growth. If growth is on your agenda this year, there are two things you should understand and focus on.
1. Maybe Your Business Was Never As Big As You Thought It Was
I work with a client who did $38 million of business in 2007, did almost $62 million dollars in 2008, and did $30 million in 2009. Demand in the market dropped by more than 50% as a result of the recession. Now, I don’t care how well you manage your business –that type of loss hurts.
As we worked with them to put together a strategy that would allow them to return to profitability, we discovered something quite interesting: They had lost their core.
So we did a “core business analysis” to deterimine what their core business really was. We found that, at the peak, their core business was about $19 million. In 2009, when the business was down nearly 50%, the core part of their business was only down 20%. Plus, their core business had gross margins that were 25-75% above their other lines of business.
Here’s what I know, and what we told them. If they had viewed their business as a $19 million business (their core) instead of a $62 million business and fully focused on that business there are certainly a couple of things that would have happened:
- The core business would have been larger than $19 million. Now, the company probably wouldn’t have grown to be $62 million; but their core business would have been bigger had they focused on it.
- The business would have been more profitable – in good times and bad.
We recommended they follow the strategy implemented by Steve Jobs when he retook over the reins at Apple and announced, “Apple will get bigger by first getting smaller. We will refocus on our core and we will continue to grow for our core.” No suprise, that Apple is the top performing stock since Jobs came back.
2. Good Is No Longer Good Enough
Famous investor Warren Buffet is fond of saying, “It’s only when the tide goes out that you learn who’s been swimming naked.” In the post-recession, “new normal” good is the equivelent of swimming naked. It works for you if the tide is in your favor, but once the tide turns you’re in toruble.
Simply put, there are only two types of companies in the world. You are either:
- The Best, or
- Me Too
And, no matter how good you think you may be, you cannot be the “best” for everyone. To be the best you must focus on the key activities and the key customers where you can excel. You must disproportionately invest and allocate your resources to those areas. You must take away resources, such as time and attention, from the areas where you have determined you will not be the best.
When you’re the best, you earn margin premiums that allow you to further invest in expanding your competitive advantage. If you’re a “Me Too” company, then you’ll be forced to compete with everybody for the table scraps.
Executives that are intersted in what is involved in both identifying and exploiting their core business would benefit from reading Chris Zook’s Profit From The Core: A Return to Growth In Turbulent Times. Zook, a consultant with the Bain Consultants, shares the research Bain Capital has conducted into what businesses must do to trigger real growth.
According to Zook, even in good times nine out of ten management teams fail to gain real growth profitably. When you factor in natural growth, fewer than one in ten companies deliver growth and return greater than the cost of capital. Not suprisingly, 80% of those companies focus on their core.
The Mistakes, Myths and Truths About Accountability
This book review originally appeared in Baltimore and Washington SmartCEO Magazine November 2010 issue.
Stop for a moment and ask yourself, “What is the most important driver of success in great companies?” Go ahead, jot down a few ideas. If you’re like most people, you’ve probably written things down like great products, great marketing, word-of-mouth or luck.
One of the most overlooked success drivers is developing a culture of accountability. In my experience, accountability, or more appropriately the lack of it, is the biggest reason businesses fail to reach their potential. Millions of dollars of income and billions of dollars of valuation are lost within small and mid-market growth companies because of a lack of accountability.
Accountability is more than simply doing what you say you’re going to do (though that is a key component). Accountability is a comprehensive approach that ensures all aspects of communication – both internally and externally – are completely aligned with intent and, further, that all action aligns with desired intent as well. There is probably nothing more complicated – or more valuable – than creating a culture of accountability.
It is for this reason that any time a book comes along promising meaningful insight into creating and maintaining accountability, I jump on it. While on vacation this summer, I came across just that. Roger Connors and Tom Smith have been writing about accountability for years, most notably in the their previous bestseller The Oz Principle.
In their newest book, How Did That Happen: Holding People Accountable for Results the Positive, Principled Way, Connors and Smith take concepts that have previously focused on creating individual accountability and apply them to creating organizational accountability. The authors have been consulting with corporate America for many years and promise to provide readers with a comprehensive how-to manual for creating accountability in any organization. They achieve about half of the promise.
Connors and Smith share a simple four-step process for effectively establishing expectations. Establishing clear expectations, as the authors point out, is the critical first step in establishing accountability. Without clear expectations, you have no chance to create real alignment.
The first step in the process is forming the expectation. Mark Twain once said, “Great communications isn’t about communicating so that you can be understood; it’s about communicating so that you can not be misunderstood.” The same is true when it comes to establishing expectations.
The difficulty associated with creating this type of clarity is probably the main reason that that vast majority of people tend to overlook this step and jump right into action. While forming expectations can be difficult, the time spent creating clarity will return at least a five-fold factor.
Connors and Smith point out that this type of clarity is required up and down the “expectations chain.” That means anybody involved in creating the desire result needs to be considered – whether their position is above yours, several levels below yours, or even outside your organization through the vendors you use.
To make the effort easier, the authors provide the acronym “FORM” – Frame-able, Obtainable, Repeatable and Measurable.
The second step in the process is to clearly communicate the expectations. Communicating why the expectations are important is every bit as important as communicating the desired results. While you can certainly “command” certain actions, in today’s hectic, change-constant world, it is important that you enroll people’s hearts as well as their heads. When people clearly understand why something is important, they are far more capable of adjusting on their own as circumstances dictate.
The third step in the process is to ensure they are aligned. “When it comes to achieving key expectations, it is important to recognize that there are different levels of alignment. The high level that brings full ownership and personal investment is what we call ‘Complete Alignment.’ All other levels of alignment, with their lower level of buy-in, fall into the category that we call ‘Complyment.’”
It is my experience that the vast majority of small and mid-size business executives confuse “complyment” with “complete alignment.” This mistake is the primary reason that managers often complain about employees’ commitment.
The final step in setting clear expectations is to inspect. As the saying goes, “inspect what you expect.” Probably the biggest surprise I’ve had working with small and mid-market growth companies is just how little they inspect their expectations. Some of this is on account of simple laziness, but a bigger cause is the apparent fear that executives have that they may turn off their top performers by “micro-managing” them. As the authors point out, the reality is quite the opposite.
With the challenges coming your way, creating a culture of accountability will no longer be an optional advantage for businesses, but a critical “ticket to the ball game.”
Creating Equity Value For Your Business
This book review originally appeared in Baltimore and Washington SmartCEO Magazine October 2010 issue.
It’s the dream of every entrepreneur. Start a business, build the business, grow a great team of people, have a lot of fun doing it and then sell it for millions of dollars, creating financial independence on one hand and a great feeling of accomplishment on the other.
The reality for the vast majority of entrepreneurs, however, is quite the opposite. Often saddled by meeting expenses, managing the complexities of growth and people and, today, saddled with a difficult economy most entrepreneurs ended “owning a job,” and if they are even able to sell the business are able to extract the equivalent of an income for a few years; and even that is becoming increasingly difficult.
There comes a point in time when business owner must make the critical and philosophical decision:
Is my goal to build a business that will create equity value (and, hence, can be sold) or is my goal to build a cash flow stream that can support me and my family for the future?
This question has perplexed business owners and entrepreneurs since the beginning of capital markets; and there are few, if any, questions that can get the blood boiling between entrepreneurs than this one.
This is a critical question that every business owner (and I mean every one) needs to answer as early in their business career as possible (that means that if you haven’t answered the question yet – do it now!) The steps you take, and the rules to follow for building a business that is designed to create cash flow are very different from the ones for building a business designed to create equity value.
The unfortunate mistake that most business owners make is that they take the middle ground, focusing on cash flow today, while hoping to create equity value in the future. Please don’t misunderstand, building a business for equity value does not mean that you don’t focus on creating cash flow – the key question is how is that cash flow created and managed.
If you are building a business for maximize cash flow, you should:
Exploit the capabilities of key employees – typically the founder
Focus your hiring strategies on leverage the capabilities of those key employees (this typically results in a few highly capable people and lots of support people)
Broaden your scope of services to take advantage of the unique talents of those people and to gain an advantage in the marketplace
Customize, customize, customize
Looking at this list if services oriented businesses like law firms, consultancies, engineering firms, accounting firms, etc., don’t be surprised. The vast majority of services businesses fall into the category businesses that build cash flow.
If you are building a business to create equity value, you should:
Narrow the scope of your offerings so that they can be sold, delivered and serviced through the development and maintenance of process.
Build a team of people that make any one (or few) employees unnecessary. This results in building a highly capable senior team where the founder is often not even the senior officer.
Rather than customization, focus on replication and consistency.
This list, on it’s surface, is often not considered to be conducive to services firms, and it is, most often, services firms that find their founders stuck in the trap of “owning a job” rather than “owning a business.”
There is good news for those professional services business that desire to create equity value, rather than solely creating cash flow, in John Warrillow’s new book: Built to Sell: Turn Your Business Into One You Can Sell. Built to Sell tells the story of fictional advertising agency owner Alex Stapleton.
Anyone who has ever started a business will be able to identify with Stapleton. Whether it’s dealing with the under-performing employees, good performers who are primma donnas, or dealing with un-appreciative clients who don’t listen to you, but produce so much revenue that you feel like your stuck with the client – Stapleton represents the hopes, dreams, and frustrations of every person who has started a business.
Stapleton’s agency is stuck. Alex had hoped to build a great agency, do great advertising campaigns, and work with a group of highly talented people doing super creative work. Unfortunately, Alex spent more time dealing trying to figure out how he could get his next project to keep the team billable and continue to make ends meet.
He meets up with Ted Goran, an old family friend, who had inspired Alex to become an entrepreneur. Ted is a successful serial entrepreneur who has built and sold several businesses in his career. Through the book , Ted teaches Alex the keys to building a business that create equity value and we get to experience the journey of what it really takes to sell a business.
While the story itself is a bit hackneyed, the lessons taught are excellent – and valuable – to entrepreneurs who want to focus on creating a business that creates income for them or building a business that can be sold.
New Times Call For New Thinking
This book review originally appeared in Baltimore and Washington SmartCEO Magazine August 2010 issue.
Running a business used to be about analyzing options, determining a path, and solving the problems that presented themselves along that path. This approach is no longer enough, as more and more, successfully leading a business means that you must continuously manage what have become known as “wicked problems.”
Wicked problems, as defined by brand strategist Marty Neumeier, are “problems so persistent that they seem insoluble. Unlike the relatively tame problems found in math, chess or cost accounting, wicked problems tend to shift disconcertingly with every attempt to solve them. Moreover, the solutions are never right or wrong, just better or worse.”
You know the list:
- Unemployment
- The gulf coast oil spill
- Managing the client experience
- Determining where to invest your limited resources
- Growing your company
Albert Einstein once said, “Problems cannot be solved at the same level of awareness that created them.” As growth-oriented businesses begin to get back to the focus of growing profits, rather than surviving the recession, they must find new ways to attack markets, they must find new methods of thinking, and most importantly they must find new ways to guide planning and execution.
Traditional strategic planning has run its course, and is no longer enough to guide companies through the wicked problems they are sure to encounter. The fundamental problem with strategic planning as it is most often practiced is that it requires companies, and the people within them, to make a fundamental trade-off decision that kills. Businesses must choose between:
- Exploration – the search for new knowledge, and new opportunities. We typically think of the “great entrepreneurs” as being strong here. Intuitive thinking is the dominant position here, supported by the philosophy that “no great product was ever created by a comprehensive double blind market analysis.”
- Exploitation – the maximization of payoff from existing knowledge. Most large companies focus on exploitation where analytical thinking is the dominant approach.
We tend to view start-up businesses as excelling at exploration, and then we trade exploration for exploitation, in order to scale the business. The problem with this approach is that it forces executives to chose the “right” type of thinking, when the reality is that neither approach is right – or wrong.
The time has come for a new form of thinking. A form of thinking that embraces the fact that neither analysis or intuition is enough – the type of thinking applied by the greatest businesses and organizations in the world today. From Apple and IDEO to Proctor and Gamble and The US Military. This new form of thinking is called Design Thinking.
Roger Martin’s new book The Design of Business: Why Design Thinking Is The Next Competitive Advantage addresses these issues as well as any book I’ve come across. Martin defines design thinking as the space that sits squarely between the past-data driven world of analytical thinking and the knowing-without-reasoning world of intuitive thinking. The dominant approach here is abductive logic.
Martin argues, and I agree, that most businesses choose exploitation over exploration because they favor reliability over validity. I’ve lost count of the number of times businesses continue to do the same thing – again and again – only to expect a different result; which is, of course, Einstein’s definition of insanity. They chose this path, not because they are necessarily insane (though I admit that sometimes I wonder), but because it is “safe” and known.
Businesses must embrace the philosophy of Charles Sanders Pierce, a turn-of-the-twentieth-century philosopher, whose great insight was that it is not possible to prove any new thought, concept or idea in advance. The only way to validate them is by applying them. To succeed we must move away from the standard definitions of proof and the false certainty of the past. We must accept the mysteries and have the courage to ask “what could be?”
Pierce called these decisions “logical leaps of faith.” Martin uses McDonalds as a clear example of a company that, in its heyday, applied design thinking. Ray Kroc, and before him the McDonald brothers, had no “proof” that their ideas would work, but they did not lack logic.
With product life cycles shrinking to unimaginable lengths and customer demands increasing every day, businesses have gotten tougher than ever. When you combine that with unprecedented levels of competition and economic disruption, it should not take an intelligent executive long to realize that there are no past lessons to learn from.
Businesses and their leaders must abandon traditional, linear thinking of yesterday, whether it’s based in analysis or intuition. Instead, they must replace with the evolving approach of design thinking. Continuously explore the mysteries of today, hypothesize, trial, error, refine, and explore yet again. The businesses that do that will have the advantage tomorrow, and Martin’s new book is a great place to start.
If You Want to Own a Job, Listen to Coultier
A friend of mine pointed me to an article in Entreprenuer Magazine by business consultant and self-purported turnaround expert George Cloutier. In it he writes, “I’m a big proponent of the “just view me as God” school of management.”
I first became aware of Cloutier when I was asked by his PR firm to review his book: Profits Aren’t Everything, They’re the Only Thing. Cloutier promises to share the “real truth” with small business owners. I didn’t review the book because I thought his ideas were a bit too over-the-top or caricatured for my tastes.
Over the last few months, I’ve heard his name and/or been pointed to his stuff several times. So I’ve decided to add my thoughts.
Cloutier says that small business owners focus far too much on being liked and don’t provide the necessary leadership. Now, let me be clear – I completely, 100% agree with this. My problem – and it’s a big problem – is with his solution.
His prescription (in both the column and the book) include gems like these:
- Be a dictator.
- Tell your employees: “Don’t think–obey.”
- Forget your likability score.
- Be a feared general.
- Fear is the best motivator.
If Cloutier is giving this advice in a situation where catastrophe and bankruptcy are the next step, I can certainly understand. However, as best I can tell, Coutier is advising small business owners to run their businesses like this all of the time. His advice is like an intense diet – you’ll lose weight (turn things around) fast, but there is simply no way you can sustain the approach.
Business is far too complex, chaotic and fast moving today. Autocratic approaches like these aren’t just unpopular, they’re ineffective. As Cloutier himself writes, “many small-business owners forget one important thing: They have to execute their battle plans with as few flaws as possible.” Today, anyone not thinking kills your ability to execute.
Frankly, his opinion IMHO falls into the category of lazy thinking. Just as it’s easier to go on a strict diet to lose weight than it is to adjust your life to a healthy lifestyle, it’s far easier to be a dictator than it is to create the processes that enable your business to succeed.
Look, I used to oversee the people who worked for me like a dictator. I excused by obnoxious, narcissistic behavior by saying things like, “we all have a job to do,” or “my focus is on the customer and if I have to break a few eggs to make the customer happy, then so be it.” What I learned was that if I didn’t let people own their jobs, and allow them to think, they’d never be able to do the great things I needed them to do. I also learned that once I gave my people the freedom they needed to perform, they became much smarter than me.
If you want to own a job rather than a business, Cloutier’s approach may work. Just remember that if you take his approach, don’t complain that your people don’t show initiative, don’t show empathy to the customer, or simply don’t care.
One of Cloutier’s favorite analogies shows just how flawed his thinking is. He likens his approach to the feared general. Yet, even the U.S. military has learned just how important collaboration is. They’ve learned that in war (as in business), sh*t happens and if the people responsible for executing the tactics aren’t a part of developing the tactics, the approach will blow up.
What’s unfortunate is that I think Cloutier has some good ideas. His hard talk about the need for owners to understand they own the business, and therefore they own the results is often heard, but not adequately understood. His advice that the “nicest” thing you can do for the people who work at the company is to make sure that everyone in their job owns their results and executes maniacally needs to be understood.
I just wish he’d talk about how to do it sustainably. Of course, if he really believes everything he’s writing, we’d all be better off just ignore him.
Dealing With Crazy-Busy Buyers
This book review originally appeared in Baltimore and Washington SmartCEO Magazine July 2010 issue.
One of the major points that I make to CEOs and salespeople whenever I speak with them (and a point you may want to make note of) is: NOBODY WANTS YOUR STUFF!! Nobody wants to buy anything from you. Early in my sales career, I had a coach who told me that everyone woke up in the morning with the same goal in mind. When I asked him what that goal was, he told me: “They don’t want to meet you.”
I’ve spent more than 20 years immersed in the world of selling, sales training, and sales leadership. Over that time, I’ve gotten more and more discouraged with the vast majority of approaches to selling. It’s not that the approaches, per se, are wrong or bad. The issue is much more nuanced than that. The fundamental problem with the vast majority of traditional, solutions-oriented sales approaches is that they all presume the prospect’s interest and/or awareness of their need for the product or service being sold.
This approach is fine for markets that have abundant demand, limited supply, and clear differences between one product/service and another. However, in busy, hectic, and complex markets where sellers are aggressive and everyone claims superiority, this approach leads to an ever-accelerating rate of commoditization.
On my blog, I’ve written a lot about The Drought that virtually every seller is experiencing. Today:
- There are fewer buyers and the buyers that are left have lower budgets.
- Despite the decrease in demand, competition and choice is as plentiful as ever.
- Buyers have less time and that means they have less attention to give to sellers or to understand a seller’s offerings.
The Drought is a double-edged sword for sellers. Fewer buyers and greater competition is a major obstacle in its own right. But, the bigger barrier is that solutions today are more complex than ever (especially if you are providing any type of superior offering), and the differences between your offerings and your competition are more nuanced than ever. Be honest for a moment. While you may provide the best alternative for your prospects (I certainly hope you think you do), they are more than enough adequate alternatives. The fact that prospects and customers have less attention to give you, creates an extreme barrier that enables them to understand the complexity of your offerings.
Selling organizations and salespeople must fundamentally change their approach in order to be successful tomorrow. Merely mastering sales techniques and being persistent are no longer enough to survive in the competitive jungle.
Jill Konrath, author and selling consultant, echoes this in her new book SNAP Selling: Speed Up Sales and Win More Business With Today’s Frazzled Customers. I became aware of Jill’s book and she was kind enough to send me a copy to review. Jill is a superstar saleswoman and has been helping small and mid-market businesses successfully sell to big companies for years.
She shares her story of how these changes virtually killed her business and the adjustments she had to make in order to thrive. Luckily for us, she shares these insights openly. SNAP Selling is one of the few books (or articles) that I’ve come across that accurately reflects just how customers really view salespeople today. The reality check she provides makes it worth the read itself.
While I’m not a fan of manufactured anagrams, SNAP Selling does address four critical success factors in selling today.
- Simple – Sellers today must eliminate complexity from the decision making process. Too often sellers, in the efforts to demonstrate just how great they are, make the process seem even more complicated than it is. This is proved by a recent survey of buyers that revealed that more than 40% of buy processes are ending in a no-decision.
- Invaluable – The only viable success strategy when there are so many adequate alternatives is to become absolutely indispensable to your customers. This is also true for salespeople. To succeed, salespeople need to be critical resources for their customer, not merely peddlers.
- Aligned – You must be customer centric today. The single, most important action a salesperson can take is to view the purchasing process from their buyer’s eyes. This will ensure that you stay relevant through the entire buying process and will speed up the process as well.
- Priority – Here’s the paradox: buyers have always been swayed by the tyranny of the urgent. Sellers, by helping buyers get a picture of the long-term, could overcome by clearly demonstrating importance. Today, your offering must be important and urgent.
Only by understanding the mindset, life, and needs of your buyers will you be able to position your offerings and your sales process to be successful. SNAP Selling provides a great place to start that understanding.
June’s Demand Creator Newsletter
Here are the highlight’s for this month’s The Demand Creator Newsletter. If you aren’t yet subscribing and would like to receive a copy, just email info (at) imaginellc dot com; and put Newsletter in the subject field.
June Demand Creator Newsletter Message from Doug Davidoff on Vimeo.
A Letter From Your Customer
Jill Konrath just released her newest book SNAP Selling: Speed Up Sales and Win More Business with Today’s Frazzled Customers. Jill was kind enough to provide me with an advance copy and I’ve just finished reading the book and it is one of the few books that clearly gets and addresses the issues of dealing with buyers in today’s Drought.
I’ll share a fuller review next month when my SmartCEO column comes out. In the mean time, Jill has given me permission to share a portion of the book. She shares a “letter from your customer,” that simply nails the psychology of buyers today.
Read it below – then digest it.
Dear Seller,
I have only a few minutes, but I understand you’re interested in selling me something. As far as I’m concerned, that’s pretty self-serving.
The truth is, you have no idea what my life is like. You may think you do, but you don’t – and you need to if you’re going to get my business.
I got to the office early this morning so I could have some uninterrupted time to work on a project –something I can’t seem to squeeze into the normal business day.
By 9:00 a.m., all my good intentions were dashed when my boss asked me to drop everything in order to put together a head-count reduction plan. Revenue slumped last quarter, and we need to cut costs.
Then Engineering informed me that our new product won’t be available for the upcoming trade show. Sales will go ballistic when they hear this. That’s the last thing I need to have happen.
Get the picture? Welcome to my world of everyday chaos, where as hard as I try to make progress, I keep slipping further behind. Right now I have at least 59 hours of work piled on my desk. I have no idea when I’ll get it all done.
Did I mention email? I get over 150 each day. Then, add to that at least 30 phone calls from sellers just like you who’d “love to meet with me.”
In short, I have way to much to do, ever-increasing expectations, impossible deadlines, and constant interruptions from people wanting my attention.
Time is my most precious commodity, and I protect it at all costs. I live with the status quo as long as I can – even if I’m not happy with it. Why? Because change creates more work and eats up my time.
Which gets us back to you. In your well-intentioned but misguided attempts to turn me into a customer, you fail woefully to capture and keep my attention. Let me be blunt: I don’t care about your product, service or solution.
I quickly scan your e-mails and letters looking for any self-promotional talk that glorifies your offering or your company. The minute it jumps out at me, you’re gone. Zapped from my in-box or tossed into the trashcan. Say it in your voice mail message and I delete you immediately. Delete, delete, delete.
When you spend an entire meeting blathering about your unique methodologies, great technology or extraordinary service, my mind wanders to important tasks that need to get done. Sure, I even occasionally check my Blackberry for messages while you’re speaking. But you would too if you were in my position.
I’m not always like this. Occasionally a savvy seller captures my attention, entices me to meet with them, shows me why I should change, and then makes it easy for me to work with them.
What are they doing? They’re completely focused on my business and the impact they can have on it. That’s what I care about – not their pitch.
If you focus on helping me achieve my objectives, I’ll listen to you all day long. But you can’t rope me in with the good stuff, then slip back into that trash talk. If so, you’re gonzo.
Make sense? I hope so, because I’m late for a meeting, and while I’ve been writing this, the phone’s been ringing off the hook.
Best regards,
Your Customer
Excerpted from SNAP SELLING: SPEED UP SALES AND WIN MORE BUSINESS WITH TODAY”S FRAZZLED CUTOMERS by Jill Konrath by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright (c) Jill Konrath, 2010What implications does this have on your business and sales efforts?
Roadmap to Success
This book review originally appeared in Baltimore and Washington SmartCEO Magazine June 2010 issue.
The toughest lesson I’ve ever learned about business, or any performance-related issue, is that often times a clear sign of progress is encountering new struggles. From my work with hundreds of small and mid-market businesses all around North America, I know I’m not alone here.
Now, thanks to Les McKeown and his new book Predictable Success: Getting Your Organization on the Growth Track – And Keeping It There, I finally understand just why this is true, and, more importantly, what I need to do about it. McKeown is a highly intriguing person to be writing a book such as a Predictable Success. An accountant by training, a bit of a serial entrepreneur by habit, and an advisor to mid-market companies as a profession, McKeown may be one of the few people who have seen as many businesses from the “backstage” as I have.
Predictable Success is best explained by a comment Jeff Immelt, Chairman and CEO of General Electric, made about his company, “When you put your foot on the gas in this company, it goes forward.” Every business owner or senior executive that I’ve ever met understands just how simple this sounds, and just how difficult it is to achieve.
McKeown shares his experience in both running organizations and advising others. McKeown introduces one of the most valuable constructs I’ve seen in business in recent years. He describes the life cycle a business goes through as defined stages:
Early Struggle: Defined as the time where a business struggles to:
- Making sure there is enough cash to keep you going.
- Clearly establishing that there is a sustainable market for your product or service.
The business mortality rate is, obviously, very high.
Fun: You’ve got the cash and the customers to keep you going. Business seems to become effortless. You’re close to your customers, your staff is excited, you’re “kicking butt and taking names.” Life is fast paced and exciting here. As the owner, you finally feel “successful.” The exclusive focus here is sales, because sales is profit.
Whitewater: You hit a wall. The very success that made everything so much fun in the previous stage sets the seeds for “Whitewater.” Suddenly, everything becomes complicated. You often feel like you’ve fallen backward as the focus, once again, goes from sales to profits.
You need to put systems in place here, but getting those systems to work is far more difficult than you could ever have imagined. “The organization seems to be going through an identity crisis, and you may even be doubting your leadership and management skills.”
Predictable Success: Simply put, you set goals and objectives with a predictable degree of success. “You know why you are successful, and you can use that information to sustain growth in the long-term.”
Treadmill: While there is no reason that a business can’t stay at Predictable Success, the reality is that most will decline over time, as their systems and processes become emphasized too much. Creativity and risk-taking wane as “the organization becomes increasingly formulaic and arthritic.”
The Big Rut: If creativity and risk-taking aren’t re-injected in the business the organization enters, well, The Big Rut.
Death Rattle: Bureaucracy takes hold and the business dies.
There are two key rules for how the Predictable Success Model works:
- First, a business must progress through each stage – no stage can be skipped. That doesn’t mean that you have to spend a lot of time at each stage, but you cannot skip any.
- Second, with the exception of “Early Struggle”, a business can advance or regress one stage at a time. At “Early Struggle”, there is no regression.
I have to admit that when I first read that you can’t skip stages, I was quite disappointed. As I read the book I was intent on proving that McKeown was wrong, that if you knew enough going in you could skip the stages you didn’t want to go through. After reading Predictable Success I’ve realized just how important each stage is, and not only can you not skip a stage, the attempt to skip it is potentially fatal.
I’ve spent most of my life working with businesses that find themselves on the left side of McKeown’s Predictable Success Model. I’ve found that most small and mid-market business owners make the deadly mistake of confusing the “Fun” stage with success. Then when they hit “Whitewater” they react as if they were regressing rather than progressing. From there, a series of errors are made and the business finds itself resembling the “Early Struggle” phase and a vicious circle ensues.
Those of you who take this recommendation and get Predictable Success will know what to do about it.
Maybe Your Company Was Never As Big As You Thought It Was
When I was a financial advisor with Merrill Lynch, I was working with a couple who worked for Nextel. It was following the tech bubble burst of 2000/2001 and we were discussing diversifying their holdings to provide for their future. Their net worth at the time was roughly $2 million, down from a peak of about $3.7 million as a result of the depressed stock. They agreed with every recommendation, but added, “We want to wait for the stock to recover before we do this. I just can’t bring myself to sell a stock for $30 that was worth $60 just a year ago (emphasis added by me).” I responded by saying that you could look at it as being worth ½ of what it was worth a year ago, or 30 times what it was worth two years ago. They didn’t listen, the rest was history, and last I heard their net worth was less than $100,000, and they planned to work for some time.
I was reminded of this story recently as I presented our program on Creating Demand to a group of CEO’s. The topic we were discussing focused on understanding your clients better than they understand themselves. One of the attendees said, “the only thing my customers think about right now is cutting costs – there is nothing else.”
I shared with them my thinking about the psychology of cost cutting and emphasized the need to recontextualize the conversation. Another attendee responded, “when your industry is down 25% and a competitor is willing to provide it at half the price you are, marketing can’t get you out of that mess.”
While I agree that marketing (at least how its’ defined by most executives) is not the answer to every question, I’ve now had time to think about the situation. My response today would be, “Maybe your company was never as big as you thought it was.”
Let me explain.
For at least the past 50 years, margins and financial performance, as measured by percentages, have been on the decline for businesses. When margins compress, the only way you can increase profits is to increase your volume at a greater rate that your margins are compressing.
So, for the last 50 years, businesses (as a whole) have been focused on increasing volume over margins – the center of what most people call commoditization. This resulted in businesses leveraging themselves to greater degrees to: a) increase the resources they had to chase volume, and b) increase perceived rates of return. The problem with this approach is that when relative demand decreases, profits are drained (what many analysts call a “profits recession” which the US has been in since about 1998); and when absolute demand decreases (as it has over the last 24 months), businesses are destroyed.
Fred Reichald talks about good profits and bad profits in the bestselling book The Ultimate Question. While I like Reichald’s definition, we have a slightly different definition:
- Good profits – those revenues and profits that earned because of the unique problems you solve for your target customers. I refer to this as your core business
- Bad profits – any revenue or profit earned from anything other than your core value proposition. I refer to this as your non-core business.
Bad profits are okay so long as you use them to reinforce your good profits and core business. Great companies to this religiously, average companies rationalize that they are being opportunistic.
As the economy appears to be reemerging from its doldrums, it is now more important than ever to remember what great companies do to make recoveries last. They refocus on their core and grow from there, even if that means they must be smaller than they were.
Draw A Line In The Sand
I just got a pre-release version of Rework by Jason Fried & David Heinemeier Hansson (the founders of 37Signals). I’ll provide a deeper review when I’m finished with the book, but suffice it to say, if you like to read a series of ditties describing a contrarian business philosophy that works, you’ll want to read this book.
The section “Draw a Line In The Sand,” is worth it alone. Here are some of my favorite excerpts from the section:
- Great businesses have a point of view, not just a product or service. You have to believe in something. You need to have a backbone.
- Strong opinions aren’t free. You’ll turn some people off.
- Lots of people hate us because our products do less than the competition’s. (My note: This thought alone should dry some people’s heads and the ones that really grasp it will be the one’s that succeed.) …we’re just as proud of what our products don’t do as we are of what they do.
- When you don’t know what you believe, everything becomes an argument. Everything is debatable. But when you stand for something, decisions are obvious.
That’s just the highlights.
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Resources
Doug's Washington Business Journal Columns- Intelligent Growth Articles
Third Wave Selling Blog
Products to Grow
