Introduction
This article is a culmination of 20 years research and working with small and medium sized businesses through every stage of the economic cycle. It will explore the essential 10 things you need to get right to grow your business in a recession.
The 10 things you need to get right in order to grow your business in a recession is:
- Leadership
- Culture
- Strategy
- Building an “A” team
- Strategy Execution
- Making the business stand out
- Putting your employees first
- Systems and Processes
- Productivity
- Measuring Performance
We will explore these areas in more depth and show you the necessary analytical tools and supplementary books that you can use to gain a better understanding of how to implement the changes in your business, so that you can come out stronger and get ahead of the competition.
Overall Strategy to Grow a Business in a Recession?
So, what is the overall game plan?
Read the following story to get more insight into what your overall business strategy should look like in a recession:
Two men were walking through a forest and spotted an aggressive-looking bear.
The first man took his running shoes out of his backpack and started to put them on. The second man said, “Do you really think you can outrun that bear?”.
The first man replied, “Don’t have to … I just have to outrun you!”
That’s all you need to do. Outrunning the competition is essential, and this means getting better at running your business. It also means you will come out of the recession stronger than you went in. The good news is that everybody can improve what they do. Nobody gets it right 100% of the time, but the point about a recession is that you have to work harder at everything to make the same progress that you would have done before.
This article is designed to help you become more adept in the 10 core competencies of your business.
Foundations
Before we explore the 10 areas in more detail, we need to explore some of the fundamentals in business which will impact on your ability to deliver growth.
From working with a lot of entrepreneurs, I have observed three 3 keys to business success that, if not present, will mean that you will ultimately fail. They are:
- Passion/Purpose
- Vision – have a clear picture of what you want (you may not know how to get there)!
- Drive/Execution – ruthless execution is usually driven by metrics and a blind belief you can problem solve as you go
Passion/Purpose
For me, you shouldn’t be running a business if you do not have a passion for what you do. The leader has to embody the passion and purpose for the business. Over the years I have met quite a few “burnt out” business owners.
My coaching with these leaders was simply to help them re-ignite that passion by showing them different options to get out of their current situation, which may have ground them down making it hard to see the options.
Vision
Once you understand what your passion is, you need a clear vision of what you want to do.
Note: it’s okay to have no idea of how you will achieve that vision. When Richard Branson decided to launch an airline, he had never run an airline before, and so his success was born out of strong vision. At the point he decided that he was going to pursue his vision, the plan to achieve the goal would have been high-level while lacking a lot of detail about the specific moving parts.
Drive/Execution
It’s great having a clear vision, but it will remain just that unless you commit to a plan and make sure it gets made into a reality. As the famous quote from Brian Tracy says:
“A goal without a plan is only a dream.”
So, what tools do we have to help us?
Simon Sinek, “Start With Why”
Before anybody will actually buy from you, you need to be clear as to why people buy from your company- this isn’t about your product/ service, it’s about you and where you should have positioned your branding.
What is that you believe in? Why should people care about you do? What makes you get up in the morning?
Golden Circle from Sinek, S. (2009) “Start with Why”. Penguin
For me, this concept was very powerful in that, in the first time in my life, I really understood what it meant to have a vision/purpose to my passion for business. It took me 3 months to really evaluate what I was doing, why I wasn’t as successful as I could be and to focus on what was important to me and my customers.
Action
Read this book or watch the 20-minute video on YouTube, and then before you do anything else, determine what is your WHY? What really drives you and inspires you?
Being the Best You Can Be
In an economic downturn, there is less activity, and so you need to stand head and shoulders above the competition.
In his book, Jim Collins wrote about the “Hedgehog Principle”, which is all about creating a business around what you are passionate about, what you are good at, and what makes a sustainable income for yourself. By doing so, you immediately set yourself apart from any burnt out MDs who lost their passion long ago.
If you have never read Jim Collins, Good to Great, then you should. There are a number of really useful business tools that he discovered by working with a large variety of companies. We will be referring to a number of them, as they apply to all sizes of businesses at different stages of growth.
The first one, the “Hedgehog Principle”, is vital for ensuring that, as a business, you stay focused on the end goal.
Hedgehog Principle from Jim Collins, J. (2001), “Good to Great”, Random House
So how do you develop your hedgehog? We have already explored the importance of having a passion for your business. That was the starting point. The next stage is to determine what your company can be the best at. Customers will pay for quality (although this is more challenging in a recession where budgets are often constrained).
So, when you know what you are best at that customers are willing to pay for then you can develop an economic engine. What is an economic engine you say?
The economic engine is another way of saying how a company makes money. I would suggest that it’s more than that. It’s about which of your business activities gives you a regular profitable income and generates cash for the business on a regular basis. Companies need a regular cash generative income so that they can pay their overheads without stress each month.
Action
So, what are you:
- Deeply passionate about?
- Best at or at least very proficient at?
- Product/service that generates a regular income
Find some quiet time and think deeply about these questions and then talk them through with your team. Are you doing what you believe in or simply trying to make a quick buck?
Getting Momentum (The Flywheel Effect)
When you have a solid base on which to grow the company you then need to consider how to accelerate growth. What factors do you need in place to grow? This is where the Flywheel Effect comes in which Jim Collins described in Good to Great.
Flywheel Principle from Jim Collins, J. (2001), “Good to Great”, Random House
There are two phases to the flywheel effect.
- Build-up
- Breakthrough
The first is all about getting the groundwork in place. This means being the best leader you can be. We will explore how you can do that later, including how to assemble your “A” team and making sure everyone is suitably motivated. The next stage is to have a disciplined approach to running the business.
Good to Great talks about confronting the brutal facts. This is hard for most people. However, tackling the hard things first is the key to making progress.
In Steven Covey’s The 7 Habits of Effective People, he talks about filling an old fashioned Kilner Jar with rocks, gravel, sand and water. If you put the large rocks in first, everything else fits around them. Do it in reverse and you won’t get the rocks in- the same goes for the building blocks of your business.
The other discipline is to “stick to the knitting”- i.e., stick to what you know, do it really well, and innovate and develop in such a way that you get better at what you do, rather than going after the latest enticing idea that will take you in a different direction entirely.
Note the hedgehog is at the cusp of the breakthrough. There is a good reason for this. If you have a great team, have a disciplined approach and have tackled the hard problems you just need to do more of what you are good at to accelerate growth. You can’t do that if you get distracted.
The next stage of disciplined action means that you execute your strategy consistently. Only at this point will technology come to aid. This is because technology is great if you need to do something regularly and consistently by sticking to a process.
Action
Work through each of the stages in the Flywheel. Where are you up to? What needs working on? Update your business action plan.
Growing Your Business is a Process
From years of practical experience and research, I believe there are 10 core competencies that a business owner has to manage if they are to be successful.
These are:
- Leadership
- Culture
- Strategy
- Building an “A” team
- Strategy implementation
- Making the business stand out
- Putting your employees first
- Systems and processes
- Productivity
- Measuring performance
If you get these right then you will quickly get ahead of your competition through having an engaged team, a clear focus and good business systems, as well as systems and processes to support you through the most challenging of times.
The 5 Levels of Leadership
In his book, Good to Great, Jim Collins describes 5 levels of leadership.
Level 5 leaders (who are the most proficient leadership) display a powerful mixture of personal humility and indomitable will. They’re incredibly ambitious, but their ambition is first and foremost for the cause, for the organisation and its purpose, not themselves.
The hierarchy is shown here:
Level 5 Leadership from Jim Collins, J. (2001), “Good to Great”, Random House
So, the question you ask is what do I need to do to become a Level 5 Leader? In their book, The Leadership Challenge, James Kouzes and Barry Posner break this down into practical steps that you can take to develop your leadership style.
They broke down the term leadership down into 5 elements:
- Model the Way
- Inspire a Shared Value with your team
- Challenge the Process
- Enable Others to Act
- Encourage the Heart
So, what does this mean?
Action
Research the term Level 5 leadership. What does that mean? What can you practically apply now and what do you need to work on?
Model the Way
Hopefully the days where managers keep their team informed on a ‘need to know’ basis and operate under the mantra of “do as I say, not as I do” are long gone. Moving away from this deeply flawed model of ‘leadership’, what do you actually need to do to demonstrate good leadership to your team?
If you are to truly lead your business to success, then you need to believe in what you do and demonstrate this in your actions. This is why Simon Sinek’s Start with Why is so important. You need to understand your WHY. What drives you?
Once you are clear on what you want to achieve, you need to share it with your team in what you say and what you do. That is, you need to model the way. You need to be clear in your values and ensure the team you recruit to help you share those values.
You then need to make sure your values are reflected in your actions as humans are very good at spotting leaders who are acting (saying they believe in what they believe in but doing something else).
Action
Over the next few months, look at your own behaviour and reflect whether the way you behave is what you want reflected in your team. What can you change for the better?
Inspire a Shared Value
If you are clear on your purpose and have a sustainable business model, then for superior performance, you need a team that shares the same values as you.
This doesn’t mean they are all clones of you, but that they believe in what you believe in and exhibit that through values which you all share. Values such as professionalism, doing a good job etc.
You need to communicate your values and vision with your team. Paint a picture of what the future might look like. Use broad brush strokes of what the future might look like. Stay away from the detail when you are painting a picture of the future as it rarely ends up as to what you originally envisaged.
Instead imagine with your team what the future may hold and, in vague terms, how you are going to get there. The values you share mean that you will be able to navigate the path through the challenges that inevitably come with a journey.
Action
Review your shared values and then communicate these with your team.
Challenge The Process
The world your business works in is constantly changing and this is amplified in economically turbulent times. This means you need to be constantly looking at and monitoring every aspect of your business. When was the last time you did a root and branches review of your business? What aspects are key to its survival and which add no value?
You and your team need to be regularly challenging your processes. This is not about change for change sake. This is about asking whether a process can be improved- can it be done more effectively by other means or has it become redundant?
I recently worked at a company where their process for accounting for bookkeeping was simply an electronic copy of how ledgers would have been used 30 years. The process was time-consuming, inefficient, and it didn’t give them the control they really needed, despite all the paper they printed off. By using modern technology, it was easy to remove a lot of these unnecessary processes, whilst giving them more control and information. Before, they had simply never thought to challenge the process.
In his theory of the Aggregation of Marginal Gains, which enabled him to build a world-beating women’s cycling team at the Beijing Olympics, Dave Brailsford advises to look for small gains in all areas. These small gains ultimately lead to large gains.
In practice, this means constantly searching for opportunities for improvements and then seizing the opportunity to make them where appropriate. Involve the team in this process so that they are involved in how changes should be implemented as they are at the ‘coal face’ and will have a better idea of what would work.
Build an ethos into the team that change is the new constant. Get used to initiating, designing and carrying out small experiments or pilots, something that’s of benefit whenever I test out an idea before making large changes. Generating small wins on a regular basis gives the feeling that change can be positive and rewarding which then encourages further ideas for challenging the process.
Action
What do you do to challenge the process? How do your team challenge the process so that they feel comfortable doing it?
Enable Others to Act
If you try to do everything yourself, you’re severely limiting your opportunities for development and growth. You need your whole team to have the opportunity to work on the business. Your front-line staff will be aware of the limitations in your processes and may have ideas on how these can be fixed. How do you make it so that they can help you develop the business?
Foster collaboration by building trust and facilitating relationships within your team. Strengthen others by helping to develop their experience and so increase their confidence and competencies. This will help them increase their self-determination. This means that over time as they increase their own leadership skills, they can help you work to the shared vision.
Action
How do you enable others to act? How do you support them so that they feel safe if things don’t go to plan? Are they allowed to fail so that they can learn?
Encourage the Heart
Recognition is a key feedback loop in the process of getting your team to follow you and help you towards the shared goals. Find ways that you are comfortable with to recognise the contributions of others. Larger organisations have to introduce schemes that mechanically manage this process, but for smaller companies, it’s all about remembering the small things like just saying thank you for a job well done, occasional free sandwiches in an informal setting where staff can network, ice creams on a sunny day etc.
We will look into this later, but money is not a motivator for most people except salespeople.
The key thing is to stop and recognise and celebrate small victories so that the team sees progress and creates the feeling of community that comes with achieving success together.
Action
How do you encourage the heart? What do you do to say a genuine thank you?
Establishing Good Habits
The seminal book by Stephen R Covey, “The 7 Habits of Highly Effective People” identifies the key personal habits that you need to develop if you are to be a successful leader.
7 Habits from Covey, Stephen R. (2004), “The 7 Habits of Highly Effective People”. FranklinCovey
These habits are well documented and if you do a search you will find plenty of summaries.
In summary, the 7 habits are:
- Be proactive
- Begin with the end in mind
- First things first
- Think win-win
- Seek first to understand, then to be understood
- Synergise
- Sharpen the Saw
So, what does this mean in practice?
Action
If you get chance, find a summary of the book or, if you, have time read the book.
Be Proactive
So, what does it mean to be proactive? It simply means trying to envision what will happen next in a particular situation, and if it is something you have control over, then do something about it. Take the lead, don’t wait for things to happen to you. Make things happen. Take time out to dream about your future state, what can you influence?
In the book, the idea of circles of influence are described. There is the inner circle of what you can control and the outer circle of what you can’t. Research shows that if you concentrate on what you can control then you will increase your influence. If you try to control those things that you can’t influence, then this will lead to increased frustration and a reduction in your circle of influence.
Action
What can you control? What can you focus on? When you come across a challenging situation think about you can influence.
Begin With the End in Mind
When running a business in a recession, you need to have a clear view of what you want to achieve. This is what Steven Covey had in mind with his second habit. Quite often how something is going to be achieved is less than clear or sometimes completely obscure.
However, if you have a clear picture of what you want to achieve then this is what this habit means. Begin whatever you plan to do with the end goal in mind. This will help you make the right choices that will get you to what you want to achieve.
As the famous paraphrase of the conversation between Alice and The Cheshire Cat from Lewis Carroll’s, Alice in Wonderland says, “If you don’t know where you’re going, any road will get you there.” Knowing where you want to go will help you make the right choices that will help get you there.
Action
What’s your end goal? What do you want to achieve? Write down your personal and business goals and stick them somewhere prominent to remind you what your end goal is.
First Things First
Quite often when we are deciding what to do, we tend to do the easy tasks first in the belief it will get us started. However, this is seldom helpful because we use valuable creative working time when we are at our best on trivial tasks.
This habit is all about what is important and what is urgent. For any leader, priority should be given to non-urgent but important tasks and projects like this is where you are working ON the business. What are you currently working on? Does it move the business forward?
A summary of the matrix is given below:
The Eisenhower Decision Matrix
The order of how you prioritise your time is important. After completing items in the urgent and important quadrant, you should then spend the majority of your time on non-urgent but important quadrants as this is where you will spend time working ON the business. The remaining two quadrants are tasks that should be delegated or eliminated as they are not important for you as a leader to deal with.
Action
Make the Eisenhower Decision Matrix a key tool to help you manage your time so that you spend your time working on what will move you to your end goals.
Think Win-Win
You might be forgiven in thinking in our highly competitive world that we work in, that it’s all about winning. If you win some work today with no regard for the consequences (you often hear it on reality business shows, the candidates want to win at all costs, and they aren’t bothered about what other people think of them). I have no idea where the idea came from that it’s okay to railroad your own objectives over others, but it is the complete opposite of what you need to do to build a sustainable business. People have long memories, stray from your ethics to attain a quick profit now and you will lose later. For example, years from now people will ask, what did YOU do during the COVID19 lockdowns?
So, when entering a negotiation, think about what’s in it for both parties. What are the objectives of the other party? How can both achieve their respective goals and achieve a win-win? This type of thinking means you will become a trusted partner and will lead to future collaboration which would be impossible if both sides didn’t trust each other.
Action
How can you collaborate with your suppliers and key partners so that everyone wins?
Seek First to Understand, then to be Understood
You might be forgiven in thinking in our highly competitive world that we work in, that it’s all about winning. If you win some work today with no regard for the consequences (you often hear it on reality business shows, the candidates want to win at all costs, and they aren’t bothered about what other people think of them). I have no idea where the idea came from that it’s okay to railroad your own objectives over others, but it is the complete opposite of what you need to do to build a sustainable business. People have long memories, stray from your ethics to attain a quick profit now and you will lose later. For example, years from now people will ask, what did YOU do during the COVID19 lockdowns?
So, when entering a negotiation, think about what’s in it for both parties. What are the objectives of the other party? How can both achieve their respective goals and achieve a win-win? This type of thinking means you will become a trusted partner and will lead to future collaboration which would be impossible if both sides didn’t trust each other.
Action
You have two ears and a mouth and they should be used in a conversation in that order. When you are next investigating a problem in your business, try to observe yourself and think, have you really understand the other person’s point of view? On most occasions, the differences between people’s opinions are different sides of the same coin and somebody else’s perspective is equally as valid.
Synergise!
You might be forgiven in thinking in our highly competitive world that we work in, that it’s all about winning. If you win some work today with no regard for the consequences (you often hear it on reality business shows, the candidates want to win at all costs, and they aren’t bothered about what other people think of them). I have no idea where the idea came from that it’s okay to railroad your own objectives over others, but it is the complete opposite of what you need to do to build a sustainable business. People have long memories, stray from your ethics to attain a quick profit now and you will lose later. For example, years from now people will ask, what did YOU do during the COVID19 lockdowns?
So, when entering a negotiation, think about what’s in it for both parties. What are the objectives of the other party? How can both achieve their respective goals and achieve a win-win? This type of thinking means you will become a trusted partner and will lead to future collaboration which would be impossible if both sides didn’t trust each other.
Action
As the world becomes more complex and integrated then you will hear the phrase strategic partnerships used more. This is where synergy becomes critical. If you are working with another business or organisation, are both parties benefiting from the working relationship? If not can it be fixed or do both parties need to move on
Sharpen The Saw
Sharpen the saw from Stephen Covey, is all about continuous development for both you as a leader and the business. Change is the new constant which means training, development and innovation should be core processes in your business. What are you doing to sharpen yours and your teams’ skills? Driving a business through a recession can be tough on your mental resilience? What are you doing to stay strong?
This is crucial. The business world, especially recently, is littered with global businesses completely missing new emerging markets that have completely destroyed their businesses such as Kodak and Blockbusters.
Don’t let your business have a “Kodak Moment”.
Leaders Eat Last
There are countless books on leadership. So, what does a good book on leadership look like? Having researched a considerable number and attended workshops, seminars and webinars on leadership it came as a relief when I read Simon Sinek’s book, Leaders Eat Last. Sinek has created an easy to read book that makes sense and has some great ideas on how you can become a better leader.
Simon Sinek, (2014), “Leaders Eat Last”, Penguin
Back to Simon Sinek and this time with his book, Leaders Eat Last.
This book, for me, is a great summary of the competencies that you need to develop if you are to become a good leader. This is a very readable book and covers the key points:
- The Leader drives culture
- People need to feel safe
- Togetherness
- Culture
- Courage to do the right thing
- Authority to those with the information
I see it less these days, but in my early days as working as a self-employed business advisor for the Government’s Business Link service, I would be asked by business owners why employees didn’t do what they were told. Working with my fellow advisors, I quickly saw that it was actually the business owner that was the problem because essentially they were putting themselves first and, with regular shouting and bawling, the staff did not feel safe or together (other than opposition to their common enemy of the boss).
Sinek documents the modern approach to leadership which is more authentic, and it’s now what the leader can do for their team and not the reverse in more traditional businesses.
The leader drives the culture of the business. So, at the end of the day, you get the team you deserve.
During troubled times you need to make your staff feel safe. This is where having a good understanding of your numbers, generating a flow of new enquiries and maintaining the perception of stability is important. This is the hard part for any business owner or team running a business. The employees do not have any control of the company’s finances and so they have to trust you that you know what you are doing. So, make sure you think through what information you share with your employees, as it’s your job to help them feel safe.
The next element that you need to get right is a sense of belonging and togetherness. Can your team identify with you and the company? If you were to metaphorically cut them open would they be like a stick of rock and does your brand run through them?
Sinek reiterates a point made by other respected authors, and that is for you to have the courage to do the right thing. One of the things I have seen is that when given two options, the right one always seems to be the hardest of the options. Not sure how that works and maybe it’s my personal experience. Jim Collins in his book, Good to Great calls it “Confront(ing) the Brutal Facts”.
I was brought up in a generation that was given facts on a need to know basis which has never worked for me. If you are tasked with a job, then yes maybe that’s fine but most jobs these days involve new situations for which there is no precedent and so your team needs to know a lot more than what was originally envisaged. Get used to sharing information with your team whether you feel they need to know or not as problems tend to be multi-faceted and you don’t know everything. If the team has the information and the training on how to use it then they should also be given the authority so that they can get on without constant recourse to you.
For me, Mahatma Gandhi, the great leader of India summed up leadership for me when he said, “Be the change you want to see…”
Action
For me the action is to read the book. Its an easy read and has many examples of what good looks like.
What is Your Culture?
Peter Drucker, the legendary management consultant is quoted as saying, “Culture eats strategy for breakfast”. To be clear he didn’t mean that strategy was unimportant but rather that a powerful and empowering culture was a surer route to business. How strong is your culture? What can you do to improve it?
Developing the right culture is a book in its own right because it’s about building the right sense of community, maintaining and adapting so that it is appropriate for the business environment that the business finds itself operating in.
In their book, Fundamentals of Strategy by Gerry Johnson, Richard Whittington, and Kevan Scholes described The Cultural Web which provided an approach for looking at and changing your organisation’s culture. Their approach means that you can expose the assumptions and practices that make up the culture and if necessary be able to work on them so that they align with what you are looking to achieve.
So, what are the elements of the Cultural Web?
Gerry Johnson, Richard Whittington, and Kevan Scholes (1992), “Fundamentals of Strategy”, Perfect Paperback
The elements of the Cultural Web are:
Stories – What are the stories that people talk about? Who features in the stories and what values and behaviour do they espouse?
Symbols – The visual representations of the company including logos, how plush the offices are, and the formal or informal dress codes.
Rituals and Routines – The daily behaviour and actions of people that signal what is acceptable. This determines what is expected to happen in certain situations, and what is valued by management.
Power Structures – Where is the real power in the company? In any business, power and influence aren’t always held by those who have the label of authority. Power and influence aren’t always down to the position someone has in the business. For example, I have seen financial coordinators who are not part of the senior management team hold considerable influence over a business.
Organisational Structure – This includes both the structure defined by the organisation chart, and the unwritten lines of power and influence that indicate whose contributions are most valued.
Control Systems – The ways that the organisation is controlled. These include financial systems, quality systems, and rewards (including the way they are measured and distributed within the organisation).
Action
What does your cultural web look like? Take your time and document your cultural web. Then share it with your team. They will bring another perspective and together you will know its strengths and weaknesses and where action is required to create a strong culture.
What Values are Important?
When working with a company the tools I use mean that I get on to the inevitable question of what their values are. There are various tools that can be used to determine a company’s values. A search of Google will unearth countless tools which often come with expensive consultants. My thoughts are that most over complicate the process of uncovering your company’s values. So, how would you describe your company’s values? What are the top 4-5 values that you can articulate?
For a couple of years, I ran a peer to peer group of Managing Directors of small to mid-sized businesses in the North West of England. On getting the group to present to each other I asked them to do a presentation about their business and to include in that presentation what their values were. We didn’t use any fancy tools or consultants, the business owners held meetings with their staff, and they talked through what they felt their values should be. What was fascinating was that all the business owners had very similar values to my own.
I have now done this exercise with many more business owners and the values that most people espouse to are:
- Professional/Integrity/Honesty/Trust/Job Well Done
- Customer Service/Going Beyond/Falling Over Backwards
- Initiative/Self Starting/Innovation/Passion
- Teamwork/Collaboration/
- Respect/Diversity/Environment
Once you have agreed your core values, you should hire, and fire based on these values. All team members need to display these values. If you don’t live by these values then your staff will not feel safe as it’s a basic human instinct to want to be part of a community with shared values.
I have tried to group together values that I feel are essentially encapsulating the same values. So, what are your values, how different are they from this list?
Action
Sit down with your team and work out what your values are. Then over the following months refer back to your values when making decisions. Are the choices you and your team are making inline with your stated values or are they simply aspirational?
Strategy
Defining Your Business Model
Alex Osterwalder and Yves Pigneur published the business model canvas in the book Business Model Generation. For me, this was a game-changer for quickly capturing and analysing the core components of a business and testing whether the business model actually made sense.
I have never been a big fan of the traditional business plan because they took ages to write, they were out of date as soon as they were written, and you were none the wiser about whether the business model had any gaps in it or not. The business model canvas gets around that because it has captured the essence of a business on one page. The book explains how each of the elements interacts with each other.
Alex Osterwalder, Yves Pigneur (2010), “Business Model Generation”, Wiley
When I use the Business Model Canvas, I always start with the Customer Segments box. This is because, at the end of it, the customer is everything. Your business needs to be driven by customer demand. Without it, you have no business.
A customer segment is a group of customers who share similar characteristics in what and how they buy from you. You should be able to define a customer segment based on geography, industry, job title, demographics, problem/desire they are trying to solve etc. You may sell to multiple segments but make sure you identify the ones that substantially contribute to the company’s sales.
The next stage is to look at how you manage the relationships with customers and document it in the Customer Relationships box. Are you an eCommerce business and so the relationship is via technology? Are you a solutions-based business selling higher cost machinery, technology or services and so need a personal relationship due to the more sophisticated sales process?
The ‘Channels’ box is for you to write down which channels you communicate through. This can be email, webchat, telephone, via systems, personal advisors etc. The responses in this box need to fit with how you maintain your relationships with customers. Are they consistent?
So now you know the different demands of the customers and who and how you communicate with them and so you need to capture how you provide value. This is by far the hardest box to complete. We will be taking a look at the Value Proposition Canvas by the same authors as this is a subject on its own.
The top left boxes are easier to complete. In the ‘Key Activities’ box, you need to write down your key processes such as finance, marketing, operations. HR etc. What are the key things you need to do in order to deliver value to the customer? Review everything you do.
As you do, consider whether you should be doing it and whether it should be outsourced. (The Make or Buy decision.) The corresponding box the Key Resources captures key personnel and assets that you rely on. ‘Key Partners’ is the list of key partners that you couldn’t easily replace. Usually, these are key suppliers to your processes, not your bank or telephone company as ultimately, they are replaceable.
The underpinning boxes are completed as you have now captured how you deliver to your customers and the structure you need to deliver that value. Start with the Revenue Streams. What revenue do you receive on a recurring basis, sales that can be expected, the average value of projects achieved each month? You are looking for the Economic engine that we looked at in the Hedgehog principle. What revenue streams really drive your business?
Finally, we look at your cost structures. Here you need to split them into direct costs, i.e. those attributable to the activity to deliver value to the customer and overheads which are generally constant and are needed simply to be in business such as office space and admin support.
In terms of the financial business model, the Revenue Streams and Cost Structures boxes only capture the headlines and overall financial strategy. This should now be modelled in detail in a spreadsheet to confirm that it is consistent and will generate the required profitability.
For more information on the Strategyzer range of books and methodology, please go to www.strategyzer.com.
Action
Download the business model canvas and either with a business coach or with the book complete it for your business. Involve key members of your team and agree what your business model should look like. Try to model the revenue streams and costs in a spreadsheet and then reconcile them with your management accounts. Is what you have modelled reflected in reality?
Strategy Documentation
You now have a model of your business captured in words and in a financial model. The next stage is to document your strategy for growing it.
The book that for me has successfully created an easy to follow the process for documenting strategy and its subsequent implementation was Traction by Gino Wickman. It lays out a simple path to follow the process, which I have successfully used in many companies as it’s part of my process when helping a company identify what they should be focussing on.
Gino and his team have developed a process around business growth and have made all the tools freely available for download at www.eosworldwide.com.
The key document in Traction™ is a document called Vision/Traction Organizer™ or V/TO™
and this can be downloaded from www.eosworldwide.com/vto
The first page is used to capture:
- Values
- Purpose
- Niche
- Target Market Profile
- Differentiation (What makes you different)
- Process which ensures you deliver right first time, every time
- Reduce Purchase Risk – How do you minimize the risk to the customer
- Your 10-year vision or BHAG (Big Hairy Audacious Goal)
I can’t reproduce the page from Traction™ is copyright and trademark protected. However, the document is free to download from www.eosworldwide.com and so I would commend you to download your copy.
None of the 8 questions that are posed are unique. I have been involved with helping companies develop successful strategies over many years. What Wickman has done is identify the 8 priority questions and created an easy to complete document that leadership teams can understand. In addition, the process doesn’t require a huge amount of time which means it is quick and easy to update. Which means that such an important task actually gets done.
Core Values
We addressed the discovery of your business’s core values earlier. These simply need to be documented.
Core Focus or WHY
The core focus is your WHY, which you worked on earlier. It’s important that you are clear on why you and your team are running your business as this will help you make difficult choices as you are faced with competing demands. Following the Hedgehog Principle staying focussed will mean that you will produce the best results for the business.
10-Year Goal or BHAG (Big Hairy Audacious Goal)
As business owner, you need to be clear on what you want to achieve in the long term. This will affect how you turn your WHY into a business.
Traction™ suggests that you set a 10-Year goal. In his book, Good to Great, Jim Collins talks about an organisation having a 30-year goal or Big Hairy Audacious Goal. Personally, I have found it hard with smaller businesses for them to think past 5 years let alone 10. For me, the longer-term goal needs to have something with stretch in, which involves doing a lot more than business as normal.
This goal, regardless of the chosen timescale, needs to push your boundaries of what you think is possible. Then you will start to think about the choices you need to make in order to get there, which by definition, are going to have to be different from business as it exists today. More of the same shouldn’t be enough if you have set the right goals.
Marketing Strategy
The first thing with any marketing strategy is to agree on who you are selling to. So many rookie business owners try to sell to everyone. This simply does not work because everyone has different wants and needs. What may be a priority for one person may be a distraction to somebody else.
Customer segments are characterised by their problems or desires. You need to group your customer list by these characteristics to create customer segments. The profile of these customers then becomes the target market. These need to be the customers who buy the core products or services were highlighted in the Hedgehog Principle you worked on earlier.
How you differentiate yourself in the marketplace is how you win and keep new business. We will be doing a deep dive later into how you differentiate yourself. So initially when completing the first page of the V/TO™ you need to document what you feel are the 2-4 things that when combined create a unique proposition that delivers what the customer wants and needs.
Any marketing strategy will fail if there is no proven process that the company follows to ensure what is promised if delivered right the first time every time. I find this an interesting question to ask, and it usually involves quite a discussion as to what processes the company has got in place and documented.
Finally, the last part of the discussion on marketing strategy is about a guarantee. If you are selling to consumers, then there is considerable legislation as to what you have to offer in the way of money back etc.
The point about the question of a guarantee is more about how you take away the risk of the purchase from the customer. Some businesses offer money-back guarantees, you can run pilots, you can provide samples etc. Every business is different and so you need to think rather than what guarantee do I need to give but think more about how I can reduce or eliminate the risk of the purchase.
Three Year Picture
Most clients I work with enjoy this part of the strategy process. Deciding on what the business will look like in three years time is far enough away to allow them to bring their dreams to life without worrying too much about the specifics of how they will achieve it but close enough for them to be specific about what they want to achieve.
There are some specific targets such as future date (usually their year-end date + 3), sales revenue and profit that need to be completed to give the narrative context.
The most useful part of this question is when they paint a picture of what the company will be doing, how big it will be, how it might be working with its customers etc. Take your time over this section and try to really imagine what the business will look and feel like in three years’ time.
Action
Executing Your Strategy
Quarterly Objectives
You now have your strategy documented. So how do you make sure you achieve your goal? American inventor Thomas Edison is quoted as saying, “Genius is one per cent inspiration and ninety-nine per cent perspiration. Great accomplishments depend not so much on ingenuity as on hard work.”
Gino Traction captures this in the second page of the Vision/Traction Organiser ™ documenting the essential elements as:
- One-year vision or goals and objectives
- 90 Day objectives (for the next 90 days) or Rocks (Traction™)
- Future Objectives or Issues (Traction™)
Verne Harnish in his book, Mastering The Rockefeller Habits documented the use of setting new objectives every 90 days. So, if you set small achievable goals every quarter you have 4 times more opportunities to hit your objectives than if you only set them once per year.
This is illustrated in the following diagram which shows that if you increase the frequency you will create a faster rhythm to the business which means you will execute your strategy faster and so achieve your goals sooner.
In Traction™, the terms Rocks and Issues are used in place of 90 Day Objectives and Issues respectively. The term, Rocks comes from the Kilner jar story from Stephen Covey, The 7 Habits of Highly Effective People, and so focuses on the top priority issues that need to be addressed. I prefer using the term 90 Day Objectives as it makes it easier for busy business owners to understand.
The companies I work with either use the second page of the Vision/Traction Organizer™, or they use a spreadsheet or some form of cloud-based task/project management software like Monday.com. It’s entirely up to you, it’s whatever works for you and your team. It’s about setting the goals and working your way to them.
Action
Now complete the second page of the V/TO™.
Executing Your Strategy Faster
In general, smaller companies do not have the time or money to do massive change. They have to evolve from one state to the next. They call this a Pivot. Generally, only by looking back can you see a change in direction has been affected.
I have worked with a lot of businesses over the years helping them implement their strategy. One thing I observed was that it was like a journey of a thousand miles, always starting with the first step and then the next. For me, it’s about working through the challenges. It’s also about working smarter. You can’t grow a company by simply working harder. In any situation, you need to be thinking, whether you should be doing it in the first place, if you do, how can it be done more efficiently. Can it be done in a better way?
In 2012 Sir Dave Brailsford explained the idea of marginal gains to the BBC. He said: “The whole principle came from the idea that if you broke down everything you could think of, that goes into riding a bike and then improved it by 1%, you will get a significant increase when you put them all together.” He used this approach to help the women’s cycling in Beijing to bring home 7 golds out of a possible 10. They repeated this at the following Olympics.
If you combine the theory of the aggregation of marginal gains with increasing the rhythm of the frequency of goal setting and you have a process of increasing the speed of the growth of the company.
Action
Think about what you want to achieve with your business and then think back from the end goal of all the smaller tasks that you need to do to get there. Keep chunking these jobs down until you are clear on what you need to do tomorrow. Relentlessly working through the challenges with the end goal in mind will enable to you reach your end goal.
Mastering The Rockefeller Habits
In his book, Mastering the Rockefeller Habits, Verne Harnish outlined how Rockefeller grew his very successful businesses. What does Rockefeller’s pyramid of accountability tell us about how to structure accountability in a business and how daily activities link to achieving the overall vision?
In my experience, many companies have a lot of meetings, but they lack structure and accountability so have too many that are ineffective. Traction by Gino Wickman also addresses the issues of meetings and again provides an effective meeting structure with accountability. I suspect it doesn’t matter which system you opt for. The meeting structure in Traction™ is probably easier to implement and more suitable for smaller businesses.
I include the Rockefeller pyramid of accountability as it illustrates the importance of core values and the organisation’s WHY. The pyramid illustrates that core values and your WHY form the foundation of the business and should be used as a reference point which other shorter-term strategies and tactics should refer back to.
The other notable part is the need for daily stand-up meetings in your business. Most businesses need faster and better communication and information needs to flow up a business as well as down. When I ran a UK wide business with 100 employees, it was incredibly hard to get information from the coalface back up to me. There were sub-layers of management that restricted that flow.
That’s why I am a big fan of short daily stand-up meetings especially in organisations which are big enough to have functional specialists such as bookkeepers, sales, and operations. Daily stand-up meetings should just be that. Everyone stands up, usually around a board of metrics and issues logs, and in 10 minutes, reviews what needs to be done that day as well as any relevant statistics. Senior management should make a point of regularly visiting these meetings. For a smaller business of fewer than 5 employees, a bi-weekly or weekly meeting seems to work more effectively.
Action
Review your current meeting structure. Is it working for you? How do you hold people accountable? Do your team feel and display ownership of the tasks they are accountable for?
Functional Objectives
Traditionally, I have used the company’s organisation chart to determine accountability. However, this is flawed in that it assumes that there is just one individual doing that role, who reports only to one person.
The reality is a lot more complex with gaps in accountability in that no one owns a particular process, or that an individual is responsible for more than they should be. So, I developed this process for identifying who is responsible for what within a small to medium-sized business.
The traffic light system is subjective as to whether a function is working well, needs improvement or needs work. It is based on how the business owner or senior management team feel about a function. If hard objectives have been set for each function, then it’s possible to be a lot more objective. So, how does your business fare? How many functions in your business has somebody accountable for that function’s success?
To build the functional organisation chart, take the following steps:
- In the first row, list out all the functions in your business with a column for the owner as shown in the table above. Think marketing, sales, operations, finance, HR, technology etc as the main headings.
- Then for each function break down, write down the key jobs that each function does. For the accounting function, you might have bookkeeping, cash flow management, reporting and financial strategy.
- To check that you have everything, review your customer journey step by step so that you get sufficient detail into the project as it’s generally the forgotten jobs where the gaps in ownership are.
- Then try to assign an owner to each job/function. Don’t be surprised if you find that not every job/function has an accountable owner.
- Finally, review each job in each function. Initially, you might not have any metrics and so you need to rely on how you feel about how well each job is being done. If you are happy with it at the moment, it’s green, if it needs improvement then orange and if it needs more urgent work then red.
This process highlights those areas of the business that need urgent attention, where there is no accountability and where individuals are stretched. Document these priorities in the strategic plan and ensure that you track progress on their improvement.
Action
Complete a functional objective chart for your business. What’s working and what development needs to be included in the action plan you started earlier in the V/TO?
Making it Happen
For some smaller businesses, they warrant a simpler system that what I have outlined above. I have had numerous contracts with various Government/EU sponsored initiatives to provide business support.
A few years ago, a document was created, called the Growth Action Plan. The main problem with this was that it was a Word document and although very useful at making an action plan accessible to the smallest of businesses because it was time-consuming to update and it quickly ran out of space for any size of business.
So, rather than use a template you are far better off using one of the cloud-based task/project management systems such as Monday.com™, Trello™, Asana™, Basecamp™ etc.
The key elements you need are:
- Vital Few – What key things do you have to get right?
- How – What projects are needed to achieve the Vital Few?
- Who – Who will drive each project?
- When – When will the project be completed?
- Measures – What does success look like?
Any of the systems that I listed will allow you to create a project with the above as columns so that it becomes a lot easier as to what your rocks/90-day objectives/vital few need to be.
The point about all this is that you and your team are clear on what needs to be done and by when with somebody accountable for each project so that jobs get done.
Action
Review the available options on the market and review them with your team. This will only be a success if your team are on board with the idea. This can’t be sold to them, it has to be used by everyone and only then will it be kept up to date and be useful.
Make The Business Stand Out
Introduction
This section is all about how you can make your business stand out from the competition. We will take a look at the tools that are available to you that will help you do a deep analysis of the value you create for your customers. In any market where competition is challenging there is generally an over-supply and so you have to understand your market and deliver better value than the competition.
Understanding Your Market
There are numerous books available on marketing today. What are the key elements that are helpful to understanding the market that will help make a difference?
Taking each of the segments in turn:
- Customer segment – Which customers share the same buying characteristics?
- Customer needs – What do you customers really need and want?
- What are the key issues in your market that need to be addressed?
- What are the switching costs for a customer to move from you to a competitor?
- How attractive is the market you are operating in? How easy is it to make the right level of profit?
You may provide products and services to a range of customers. It’s important that you break your customer base down into segments that have the same needs or desires.
We will explore how to really understand your customer needs and key issues later. By the way the reason some poor-performing businesses still operate is because there may be little competition or that the switching costs are higher. Think, when was the last time you switched accountant or bank?
Action
Document your understanding of the market and share it with your team. Have you captured all the aspects in the diagram? What issues in your market are opportunities or challenges? What changes do you need to make to your business in order continue to grow?
How Does Your Business Stand-Out?
Do you know why customers buy from you? Most businesses operating today have competition in one form or another. None of us work in a vacuum. Think of 3 or 4 things that you do that when combined together create a uniqueness that sets you apart.
So now we need to review this in more detail. It may be after working through this section that you update your V/TO™.
So, on what basis do your customers buy from you?
If you have a lot of customers, then you may need to use something like SurveyMonkey™ to find out why people buy from you. Remember, they may buy from you for different reasons than you think.
Here are ways that small and medium-sized businesses differentiate themselves. I do ask this question to attendees of the webinars I have been running during lockdown and generally the responses are multiple rather than a single answer.
Differentiation through:
- Excellence
- Quality
- Customer Service
- Expertise
- Scarcity/Uniqueness of Product/Service
- Convenience (Local/Delivery/Stock availability)
- Price
Action
How do you differentiate yourself? What makes customers buy from you?
Your Value Proposition Canvas
Do you really understand why your customers buy from you? How do you systematically review the value you create for your customers? How do you know whether the products and services you supply fit with the customers’ needs? I refer you to a book from the team at www.strategyzer.com. The book is, “Value Proposition Design” by Alex Osterwalder, Yves Pigneur, Greg Bernarda & Alan Smith. You can download the template from www.strategyzer.com/vpd . This book and template transformed how I help companies identify the value they create because it’s a straightforward objective process that takes away a lot of the guesswork. If done honestly will highlight key areas for improvement.
The book isn’t expensive, and it takes you through the process in more detail than I can here. However, to get you started I will summarise what I do when working with clients.
I always start with identifying which customer segment that needs to be worked on. Although there is no place to document this on the diagram, I tend to write the target list of customers on the top right-hand corner. This means for larger businesses I will work with a number of these diagrams for the business.
Once you know which customer segment you are working on then you need to identify the typical job title that they may have. The job title means that you will have a better idea of what would normally be expected of that role. Think of what job description that person would have.
The first job then is to work out what jobs would that person be tasked with doing. What problems do they face on a regular basis in order for them to do their job? In the ‘customer jobs box’, write down all the jobs your customer might do in relation to the products and services. For example, if you are selling accounting software to a financial controller then you only need to list the jobs relating to managing a company’s financial affairs.
The next box to complete is the Pains quadrant. This quadrant is for those problems that are core to the problems that a buyer needs to solve. These are the pains that your product or service needs to solve in order to be considered a solution.
The next box to complete after that is the ‘Gains box’. By the way, these are not the opposite of the pains. This box is for problems that it would be nice to have fixed but isn’t mandatory as a need. This is where the customer “wants” goes. These are the nice to have, their wishes if they could have them. This is where you can differentiate yourself. If you can fix items on the wish list without making yourself uncompetitive then that’s how you can differentiate yourself and be more competitive. It’s worth spending time on the pains and gains quadrant.
The next quadrant to complete is the one for your products and services. Just simply enter the relevant products and services that you would supply to the customer.
For the Pain Relievers quadrant, you need to enter the features that fix the needs of the customer. Ideally, but not always the case, you need to fix all of the customers’ pains.
The most interesting quadrant in this exercise is what you put in the Gain Creators quadrant. These should be features/benefits of your service that give add value/extras that in some way meets the gains the customer is looking for over and above what they would expect to fix their pain.
Often, it’s the accumulation of low cost (to you) extras that make all the difference. It could be something as simple as a service with a smile or access to an online system that is easy to use and gives them more control.
Action
Download the Value Proposition Canvas and either with the aid of the book or a business coach/trusted advisor create your value proposition canvas. The key quadrant for me is the Gain Creators as this is where you will stand out from the competition and will play a key part in growing your business in a recession.
Reducing the Power of Your Competitors
Businesses should always be looking for ways to differentiate themselves from the competition. To find out how to differentiate your own business, you need to look at what problems your customers are actually trying to solve and address the core of the problem.
But how do you find the route of your customers problem?
When somebody buys a shovel, it might be because they want to dig a hole so that they can plant a tree. But the core of the problem isn’t that they didn’t have the tools to dig a hole, the real problem could be that they just want something pleasant to look at.
So instead of being the person to sell the shovel, you could offer a tree-planting service, a solution that cuts to the core of what the customer wants. This is trivialising an important concept, but in these days of radical change, we can all-too-easily lose sight of the end goal of the customer.
The next strategy I am going to refer to comes from the book Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne. There are a number of tools and downloads which explain the process without the need to buy the book in the first instance. Go to: www.blueoceanstrategy.com to get free resources.
For me, this depicts what competition can be like in some industries. The goal of this exercise is to understand how can you compete in a ‘blue’ ocean, rather than competing with the ‘sharks’.
The first step is to list the main features of your product or service in a spreadsheet in a column in a spreadsheet. In the next column, score between 1-10 for how well each feature meets the needs of your customers.
It’s important you are brutally honest with yourself- if you’re not, nothing will improve and the exercise will be a waste of time.
Next, identify 3 of your top competitors and, being objective, score how well they meet the customers’ needs. There will be some things they are better at than you, and some things that you are.
Then plot the results in a graph. The resultant graph is called your ‘strategy curve’, and you can compare it with the performance of your selected competitors.
If you have been honest with yourself, there should be things you are good at and some aspects where you are weaker. This is normal. The exercise is not about finding areas where you can improve based on what the competition is doing. It’s to identify areas that you have missed that are important to the customer.
Review each of the features. If you have the resources, you could also do a survey using a cloud-based tool like SurveyMonkey™ to identify what your customers think is important.
So thinking of companies like EasyJet when they first launched, they used new technology (the internet) to get rid of the intermediaries like travel agents and humans to do the booking. In one go, they gave the customer control and saved a lot of overhead costs. They then made it fast and easy to embark and with faster turnarounds on the planes. They got rid of the bulk of the onboard food.
Before they launched, they must have used a process very similar to the Blue Ocean Strategy to carve a very profitable niche in what was thought to be an extremely competitive market place.
The next stage is to look at each, what can you:
- START doing?
- Do MORE of?
- Do LESS of?
- STOP doing?
More can sometimes mean less, and by that, can you move to a no-frills model as airlines and hotels have done? The simple answer is yes. EasyJet started a whole new industry in Europe. Travelodge did the same to the hotel industry, but then unfortunately then lost their way.
Ask yourself: What can you do more of, do less of, start or stop doing that will better meet the needs of your customers while changing the rules of your industry? What can you do to disrupt your sector whilst gaining a competitive advantage?
Action
Turning Your Ideas into Action
Given that change is a constant and something that every business should have as a core process, what does the innovation process look like?
The process of identifying new opportunities comes as part of the DNA of an entrepreneur. They have a clear vision and understand the problems in the marketplace that can be addressed profitably with the right product or service.
Taking each element in turn.
- Depending on when you are the most creative, think of WHY you do what you do. Think about what your customers are trying to achieve. If you have done the previous exercises you should have a clear idea of what you need to do to develop your products and services. You then need to prioritise the new feature that will give you the most competitive advantage.
- For the market congruence box, take that feature and do a detailed study of your marketplace. What does that feature need to do? How much will the customer pay for it? What will the benefit be to the customer? How much would the customer value it?
- When a marketing plan has been developed which addresses the concerns then you need to agree on an action plan for implementation.
- If necessary, adjust your marketing dashboard to reflect the changes and monitor performance before and after the changes. Regularly review the performance of your marketing and check that the changes have had the desired impact.
- Repeat the cycle on a quarterly basis so that you give time for any changes to have any measurable impact and that you are not changing the user experience too often.
Action
Develop and document an innovation process in your business. Look to building the process in to the way you do business.Options for Selling More
I have run quite a few business growth workshops over the years and I am always surprised how many people, when confronted with falling sales, say that they will diversify. Diversification is about selling new products to new markets, which means that you are in completely new territory with new products which you know nothing about.
The Ansoff Matrix from Igor Ansoff in his book, Corporate Strategy, illustrated the risk factors in various strategies for growth.
So, what are the options?
From the diagram, you can see that you have more knowledge and experience if you are selling more to your existing customer base with your existing products and services. This is therefore the lowest risk strategy to growing your sales.
When the Ansoff Matrix was developed in 1957, it was easier to capture an audiences attention and raise your brand awareness, although product information was hard to get hold of (there was no internet).
These days getting a customer’s attention (market penetration) is a lot trickier, and so for me, the next lowest risk category is the product development quadrant. This is because you have already got access to your customers through your social media, email newsletter, existing sales channels etc.
Finally, you’ll have market development where you sell existing products to a new market, but in reality, this isn’t much different from full diversification where you are selling new products to a new market. This is because it’s likely that your products and services will need to be modified to a new market.
It also means that, unless you have found a niche that nobody else has spotted, which is highly unlikely, you will be coming up against highly experienced competitors. In recessionary times when there is less to go round, it’s going to mean you are going to have to spend a lot more to get the desired results.
So, in recessionary times you need to be working hard to protect your current income from your existing market, and this may mean developing, adapting or adding to the products or services that you offer.
Action
Plot your products and services on the diagram. Review your chart, what makes sense? Do you need to rationalise or develop your products and services? When you are growing your business in a recession, what carries least risk while also having a worthwhile reward?
Cash is King – Which Products or Services?
So which products or services will help or hinder you through a recessionary time?
The Boston Consulting Group Matrix developed by the Boston Consulting Group is a helpful tool. This tool has been around for a long time and it was designed for larger companies but it’s a useful tool to remind us that some products and services generate cash and others take money from the business.
The Boston Matrix categorises products and services into one of four different areas, based on:
- Market share – does the product being sold have a low or high market share?
- Market growth – are the numbers of potential customers in the market growing or not.
The four quadrants can be described as follows:
- Stars are high growth products competing in markets where they are strong compared with the competition. Often Stars need heavy investment to sustain growth. Eventually, growth will slow and, assuming they keep their market share, Stars will become Cash Cows.
- Cash Cows are low-growth products with a high market share. These are mature, successful products with relatively little need for investment. They need to be managed for continued profit – so that they continue to generate the strong cash flows that the company needs for its Stars.
- Wild Cats are products with low market share operating in high growth markets. This suggests that they have potential, but may need substantial investment to grow market share at the expense of larger competitors. You need to think hard about ‘Wild Cats’ – which ones should they invest in? Which ones should be withdrawn as they are a drain on cash? Most new products and services, when launched, start out as Wild Cats, as by definition, they will have low market share when launched.
- Dogs refer to products that have a low market share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Any products or services like this should be withdrawn from the market.
Ideally, a business should have products in all categories except dogs in order to generate cash for now and the future to develop a balanced portfolio of products.
Action
Plot your products and services on the Boston Consulting Matrix. Do you have any Dogs or Wild Cats? What do you need to drop? What do you need to double down on?
What can you do?
So, what can you do during economically challenging times?- Profitability – Which products and services make you money?
- Squeeze – Can you sell more volume/increase average order value to your existing customers?
- Products/Services – Create new products/services to sell to existing customers?
- Excellence – What could you do better that customers value? What could stop doing that they don’t value?
Building an ‘A’ Team
Introduction
You often hear from business leaders that people are their most important asset- or put another way, you wouldn’t have a business without employees.
So, if you want to grow your business, you need to ensure you have the ‘right people in the right seats on your bus’. This phrase comes from Jim Collins, Good to Great. It’s all about getting the right people on the team. The goal is to keep an eye on the performance of your staff and either improve/develop or release team members that are not performing.
One of the things that has changed during the economic downturn following COVID-19 is different from previous recessions in that there is a lot of free online training available that wasn’t available previously.
So, whereas in previous recessions, the training and marketing budgets are traditionally cut, this recession can be different. With some smart thinking, you can increase training so that you can continue to develop your staff at no or little cost to the business.
So how do you know whether you have the right team? Traction by Gino Wickman goes into some detail on this subject and provides free tools. The approach he takes appears to be around the ideas in Good to Great.
Building your ideal team is a complex project and many books have been written on it. For me, these are the key questions that you need to ask yourself:
- Who in your team takes ownership?
- Who gets things done whilst keeping the team onside?
- Who eats, sleeps and breathes your values?
- Who goes that extra mile for colleagues and customers?
Action
Who are your “A” Team? What development plans do you have for them? Do you they feel valued? What can you do to keep them loyal to you?
People First
I am a great believer that if you help your team get better at what they do and help them to be proactive with ideas on how to develop the business, they will stay engaged and invested in your business and its values.
You will be familiar with the traditional hierarchical organisational structure and that it normally looks like a pyramid.
I want to introduce you to the Inverted Pyramid, where the leader asks what he can do for the team and not what the team can do for them. It changes the whole perspective of the team’s focus, and the team can focus on their real employer – the customer (as it’s the customer who pays the bill).
Key points:
- Servant Leadership – What can you do for your team?
- Inverted Pyramid – What can your team do for your customers?
- Training – How can your team get better?
- Quality – How can you help them get it right the first time?
- Safety – How can you keep your people safe?
Action
What does your organisation look like? Are your team working for your customers or you? Each morning, do you think to yourself what do my team need of me today?
What Really Motivates People?
I am often asked as to whether a company’s latest bonus scheme will motivate their team to do more. Fortunately, Daniel Pink wrote a seminal book, called Drive, on what really motivates people. It turns out that, apart from salespeople, everybody else is motivated by other things than money.
The book is an easy read, and the key learning points are that it’s not money that motivates people. Instead, it’s the basic human need to feel they are valued, and that what they are doing is valued, and are given the permission and training to do it as best they can.
In summary:
- Autonomy – Allowed to get on with the job
- Mastery – Trained & Competent
- Purpose – Can see how the job fits with the whole
Hopefully, you can see that keeping your staff trained and up to date with clear direction on what the company is looking to achieve can go a long way to improving the competitiveness of the business.
Autonomy is harder to implement for some businesses who may be using presenteeism for performance management rather than agreeing objectives and letting the team get on with it and then reviewing the results. If you operate an inverted pyramid where the focus is on customer results, then this should be easier to develop individual autonomy because the performance stats are around customer satisfaction and not some system contrived by management.
Action
Daniel Pink has a newsletter which is well worth signing up to. Think about your business. How do you train and develop people so that they are masters at what they do? Have you communicated what you are trying to achieve with the business? What autonomy can you give them so that they can get on with their job?
Systems & Processes
This is a huge subject and is something that often gets ignored in a lot of companies. There are a lot of consultants and companies that specialise in helping companies improve their processes. If you are not aware of them, simply type, “lean manufacturing” and “agile working” into Google.
There are well-respected textbooks on this, such as the Goal by Eliyahu M Goldratt and Jeff Cox which is very readable. There’s also The Machine that Changed the World by James Womack, Daniel Jones and Daniel Roos, which I must admit I struggled with, but it’s seen as the definitive book on the story of lean production. Over the years, these concepts and approaches have been greatly expanded.
So, rather going into great detail I have summarised what you might want to consider as a business owner.
Right First Time, Every Time: This is the objective that whenever an order is received, the product or service is delivered right the first time. No system is perfect, and so it’s a continual journey of business improvement. You will also need to decide on a metric that will be used to judge whether something has been completed without issue.
Customer-Centric/One View: A common frustration with customers is that a business doesn’t have a single view of them and, as they are passed between departments, information has to be repeated. This can be solved with a Customer Relationship Management (CRM) system. It’s not a quick fix as you have to get everybody to use it and enter accurate data, but, if done well, can improve customer relations and help towards ensuring that the customer gets what they ordered.
Self-Service: In an always-on world, how can you, as a business, remove the friction when a customer wants to buy from you or use your services? With practically everything now in the cloud in one form or the other, it’s becoming a lot easier to provide customers with secure access to parts of your systems. The other way is to provide chatbots so that even at midnight or the weekend, prospects and customers can get easy access to frequently asked questions and even resolve common problems where a short diagnostic dialogue is required.
Identifying Friction in your business: Yet another area where you can potentially get some quick wins is to follow the customer journey through your business. Where do things get stuck? How easy is it for a customer to do business with you? You would be surprised where friction appears and mars the customer experience.
Minimising Waste – Timwood – Minimising waste in a business should be on the agenda of anybody tasked with running a business. In lean manufacturing, there is an acronym called TIMWOOD. For me, this highlights the wastes that need to be addressed before a business can deem itself as efficient.
TIMWOOD stands for:
- Transport: Unnecessary movement of products, equipment, and people which results in waste time.
- Inventory: Often thought of excess inventory when selling products but it can include services where you have excess technology, office space (which everyone is currently reviewing).
- Movement/Motion: If you are constantly travelling between meetings, unnecessary movement in a warehouse etc. can be wasteful and are where accidents and losses can happen. The recent lockdowns show just how much time we waste driving to work.
- Waiting and Delays: Waiting is often an easy waste to overlook. However, if you have to wait for a previous task to be completed, then you have to go on to something else while having to keep checking back to see if what you need has arrived so that you can resume. You can then spend another 5-10 minutes trying to recall where you were up to. There are a number of office-based jobs that can be significantly affected by interruptions.
- Overproduction: When production exceeds customer demand, facilities are left with excessive inventory to store and manage.
- Over Processing: A product or service that has more features or capabilities than required or expected by the company would be considered over-processing. It is important for businesses to understand what their customer requires from the product and eliminating any tasks or processes that are not useful or necessary to those requirements.
- Defects: Many consider defects to be the worst of the seven wastes. These are products or services that do not meet a company’s minimum standards and some form of rectification is required.
Keeping things Straight, Tidy and Sustainable – Lean manufacturing has a concept of 5S. It comes from the Japanese Toyota Production methods of the 1950’s but it is highly relevant today.
What Does 5S Stand For? – 5S refers to five Japanese terms used to describe the steps of the 5S system of visual management. Each term starts with an S. In Japanese, the five S’s are Seiri, Seiton, Seiso, Seiketsu, and Shitsuke. In English, the five S’s are translated as Sort, Set in Order, Shine, Standardize, and Sustain. For me, 5S refers to manufacturing and office environments.
There are five key practices involved in 5S. They are as follows:
- Sort: Sort through materials, keeping only the essential items needed to complete tasks. This applies to an office as well as the factory floor. A place for everything, everything in its place.
- Straighten: Ensure that all items are organized, and each item has a designated place.
- Sweep: Proactive efforts to keep workplaces clean and orderly to ensure purpose-driven work. Generally, this means spending the last 10 minutes of the working day sorting out your work. For an office worker, this might mean writing a list for the next day.
- Standardise: Create a set of standards for both organization and processes.
- Sustain: Sustain new practices and conduct audits to maintain discipline.
Flow Charts: I am a big fan of flowcharting your processes. They are a great way to quickly document a process. Within minutes, you can quickly capture a process, document it and share it back to the team for their comments. It can be used in a formal quality system and is helpful for auditors (whether internal or external) to really understand what is supposed to happen.
Action
As a start, consider flow charting all the key processes in the business with your team. You will be surprised how is broken or needs improvement. I once did this on a multi-million pound business and it was incredible how many processes were inefficient or simply broken.
Productivity
There is a very simple and crude productivity figure that you can use to compare the performance of your business with that of a competitor. If you divide your sales revenue by the number of full-time equivalent employees, you will come up with a number between £25k – £100k per employee.
Cleaning companies tend to be at the bottom end of the scale while manufacturing and high value-adding service companies like software can be in excess of £100k/employee. The important element is not where you are on that scale, but how well you compare to your competitors, and ultimately, what you require as a return on investment.
Fundamentally, there are only 3 real variables in business:
- Sales Volume – Can you sell more?
- Sales Price – Could you charge more?
- Costs – Could you buy cheaper (Direct & Overheads)?
So, as an exercise:
- What can you do to increase volume (without reducing price)?
- What can you do to increase prices (which won’t significantly reduce volume)?
- What can you do to reduce costs (without affecting the quality of your products/services?)
A useful exercise you can do is to create a spreadsheet with the 3 variables in and increase volume and prices by 1% and reduce costs by 1%. What happens to your profitability? If you did the exercise with a 25% gross profit, you would find your profit would increase by 11%. It’s surprising how subtle changes in the variables can import your bottom line.
Once you have your spreadsheet of values for all 3, try to forecast what might happen to them over the next 3 years. You will need to make assumptions on what will happen in the wider economy and the impact on your business. You may need to work off a number of assumptions to start to create the variables. You can then start to adjust them and watch the effect of the change on the final numbers.
Once you have completed the spreadsheet, you can query it. How do they vary over time? Has cost crept in? Has productivity improved? What actions can you take that will improve the trends?
Your goal should be to improve productivity over time, and so the exercise may indicate work that you need to do.
Action
Calculate the productivity of your business and then of your nearest competitions as most credit checking companies provide sufficient information for you to be able to estimate. How do the productivity figures compare?
Measuring Performance
Balanced Scorecard
As Peter Drucker, an internally respected management consultant said, ”What gets measured, gets done.” From working with many companies over the years, I am always surprised to find that few people actually measure what they do. The other thing I have found is that it’s an uphill battle to get a company dashboard in place, even with a keen business owner.
There are a number of frameworks for creating a company dashboard, and for me, the system developed by Kaplan and Norton is the best system as it’s simple and easy to understand.
I have greatly simplified the original work. The original reference is, The Strategy-Focused Organisation by Robert Kaplan and David Norton. There are also numerous books to support implementation.
The Balanced Scorecard, “The Strategy-Focused Organisation”, Robert Kaplan & David Norton
The Balanced Scorecard has four quadrants:
Customers: This is external facing. In Kaplan and Norton’s book this is called the Customer Perspective, and it’s about performance indicators that record activity around bringing sales into the business. Typically, these are indicators such as number of enquiries or value of sales etc.
Operations: This is internal facing. In Kaplan and Norton’s book this is called the Internal Perspective. It’s all about indicators for the operational aspects of the business such as work in process, staff productivity, sickness, productivity etc. These indicators are all about ensuring the work whether that is supplying products or services is done effectively and efficiently.
Finance: This is backward facing. In Kaplan and Norton’s book this is called the Shareholder Perspective. It’s all about indicators for the financial success of the business. It’s about accounting for the work that has been done.
Innovation: This is forward facing. In Kaplan and Norton’s book this is called the Innovation and Learning Perspective. For most companies this is the hardest quadrant to identify suitable indicators for. Generally, in business, this is the quadrant as a whole that gets ignored. Typical indicators might be around training or new product/service development.
Action
Draw up your own Balanced Scorecard. Do you have a mixture of financial and non-financial performance indicators? Do you have indicators in each of the segments so that you are measuring the performance across the whole business?
SMART Objectives
Before you can decide what you need to measure, then you need to identify your objectives. These need to relate to the aims and purpose of the business.
Objectives need to have a specific purpose and so you will probably be familiar with the acronym of SMART Objectives.
A SMART objective needs to be:
- Specific – What needs to be done?
- Measurable – Can it be measured?
- Assignable – Who will be accountable?
- Realistic – Is possible to attain?
- Timely – Is the specific end date?
So, when setting key performance indicators such as sales and profit targets ensure they are SMART. Don’t be the naïve business leader who sets unrealistic sales targets that the business has no chance of achieving, which simply demotivates everybody.
Action
There will be a few key indicators in your business that tell you whether you are on track or not. For my business, working capital (cash in the bank, project work in hand and debtors) is a key indicator. Or what is known as a sleep well on Friday night number. What is yours?
Keeping Score – Building a Company Dashboard
To build a company dashboard, you need to have agreed on your overall objectives and how they translate into increased sales, more production, better systems, more training, new products etc.
Ideally, you will identify performance indicators from all the functions in the business, otherwise how will you hold those functions and those running them accountable?
So, functions to consider are:
Marketing – Finding more prospective customers
Sales – Converting prospects to customers
Operations (Production or Service Delivery) – Creating value for the customer via products or services
Accounting – Collecting monies owed and owing, measuring the financial performance of the business.
HR – Keeping tabs on sickness, agency staff etc
Innovation – Creating new products or services
Typically, you might have a spreadsheet that records monthly values and their associated target values for the following:
- Marketing Measures (Calls made /Website visitors/ Business cards collected/1-2-1 Meetings etc)
- Enquiries received
- Sales revenue (Value and Number of Orders)
- Gross Profit
- Overheads (As a percentage of sales revenue)
- Net Profit
- Debtors
- Cash at bank
- Number of Customers (Regular/Recurring – Lifeblood)
A useful approach is to highlight on your profit and loss spreadsheet key indicators and divide by the sales revenue. This is a great way to account for changes in volume in sales. So, if sales are increasing then gross profit margin (gross profit/sales revenue) should stay the same. On the other hand, if sales are increasing then cash at bank will need to increase proportionately in order to accommodate the increased working capital requirement.
Whatever your business then you need to keep score with a company dashboard.
Action
Compile your company dashboard and regularly share it with your team.
Staying Fit and Healthy
All of the above becomes pointless if you let your health and well-being suffer.
For most business owners (and even medium sized companies), you have no business if you are sick or performing poorly through eating rubbish & not sleeping.
There are several things you can consider doing to take care of your health and wellbeing:
- Find an exercise that you can regularly do – can you create a new habit?
- Consider getting a FitBit or equivalent – are your stats in range?
- Review your diet – could it be improved?
- Do you get all the sleep you need (7-8 hours)?
- How do you get a mental break from the business?- are you spending time in green space?
Business is becoming ever more complex and so you need to keep focused. Stephen Covey’s recognition of this with his 7th habit of Sharpen the saw is testament to that. You need to stay one step ahead and a fundamental part of that is to stay fit and healthy.
Action
What are you doing to stay fit and healthy? There are thousands of books on this but find a system for both fitness and diet that you are comfortable with. Set yourself a target and work to it. For most people this is a journey of a thousand miles and so you just need keep taking one step at a time. If you fall off your programme, dust yourself down and restart it. As a diabetic who has achieved remission its a continual battle that will last a lifetime. Develop a lifestyle that you can manage but which will take you in the right direction.
What next?
So, what next? I hope this article has inspired you and provided some background on some of the tools and approaches you can use to diagnose and get your business on track for growth, even through these challenging times.
I offer online coaching sessions at £95+VAT per hour. The nature of online coaching, especially using these tools is very efficient, and we can get through a lot in a short space of time. There is no contract or schedule. We can create one based on the above or you can simply take one step at a time. You can meet once per week, month, quarter or year. It’s entirely up to you and how quickly you get through the tasks.
So message me through Chat (bottom left corner of the screen on the website), send me an email to growth@kub-uk.com or call me on 0333 050 9053 to set up a time to have a chat about your business. The first 30 mins are free with no obligation to continue.
We hope that you find this guide to growing your business in a recession informative and that it provides you with the ideas, tools and confidence to get your business growing in a recession. If you have any questions, get in touch, and we’ll be happy to help.
