Blog

How to improve business results

2011-05-04T17:30:38Z

Photo by Carlos Lemes Flickr CC

The purpose of a business is to convert raw materials in such a way that clients are willing to pay for the transformation. But, that is not enough - you have to find the potential clients, guide them to your business, help them chose, pay and receive what you offer. This guidance of your clients is sometimes called the marketing funnel.

Herd as many along as possible

Between every step in the marketing funnel you will lose a number of people, or money if you want. It's just as in the supermarket, you look at much more products than you put into the basket. Sometimes you will even take things out of the basket on your way to the check-out line. When you do put things back, it is a loss in the grocer's marketing funnel.

Double your business

Its a dramatic improvement if you can manage to have only 8 out of 10 leave empty-handed if your normal rate is 9 - actually your business will double.

The secret

The secret is to find the step where you have the highest losses. That step is the weakest link and the only one you are interested in improving. To strengthen a link, other than the weakest, will not make the chain stronger.

So, summing up, by knowing your marketing funnel's weakest link you can get the best return on the investment of money and effort. Over to you, does this sound reasonable?

Be an optimist for the day

2011-03-22T10:08:13Z

Are you an optimist, realist or pessimist? Does it matter for your future?

Photo by Steve B Flickr CC

You get what you deserve

Great accidents happen, "force majeur" events like earthquakes, lightning strikes and storms are of a magnitude and impact outside control. But, excluding these disasters, you really get what you deserve and it all comes down to your outlook on life - if you are a optimist, realist or pessimist.

The pessimist lives in a shrinking world

If you beleive that bad things are bound to happen, you are right, they will. The important thing is how you react to them. Stress is not caused by the event itself but by your reaction to it.

When you start to avoid problems, you also start to defend what you have. Only playing defence is a strategy that will make you say no to new opportunities. And, as things sometimes go wrong, over time you will lose some of the things you have achieved without using new opportunities to replace them - your world shrinks.

The realist is a bit depressive

The only really important time is now - it is the only one we live in. To be a "realist" you plan for future bad events, things like paying insurance. This is very good within reason. The problem is defining what is reasonable.

The problem with the future is that it is very fluid, things change all the time. If you can manage to not become emotionally drained by preparing for possible disasters you might have a good recipee for a successful life. But the optimist have more fun.

The optimist is happier

The ancient recipee for happiness is to live in the present, to recognize the oppportunities and act in the moment. To have a strategy is a "realist's" trait, but the warriors of old saw it only as a preparation, not something dictating your actions. The optimist is more opportunistic, less bogged down by doubt, more directed towards action.

As well-being goes, nothing beats "positive action". To feel a bit down and then do something makes the clouds go away. The optimist will go through a happier life, looking for new opportunities and through that find new adventures.

How about be an optimist, at least for the day?

Do your people have Mojo?

2011-02-28T14:38:28Z

Are the people you lead on the move? Can they influence and do they have impact? This is how you know:

Photo by Make Lemon Flickr CC

What is Mojo?

Wikipedia defines Mojo as "Mojo, a slang word for self-confidence, self-esteem or sex appeal". But wait, there is more to it than that!

Executive Coach Marshall Goldsmith just published a book called "Mojo: How to Get It, How to Keep It, How to Get It Back if You Lose It".

"Mojo moves us to define who we are in a new and illuminating way! Mojo is a guidebook for the leaders of the future!" says Frances Hesselbein, Distinguished Chair of Leadership, U.S. Military Academy, West Point; winner, U.S. Presidential Medal of Freedom; former CEO, Girl Scouts of the U.S.A.

The four components of Mojo

According to Goldsmith Mojo is the moment when we do something that's purposeful, powerful, and positive and the rest of the world recognizes it.

There are four factors:

Who you think you are - identity.
What you have done lately - achievement.
Who do other people think you are - reputation.
What can you change, and what to let go - acceptance.

Classify your players

How about ranking the players in your team according to Mojo potential? I suggest that the ones with the highest scores are potentially your best allies and could develop into your worst enemies. If you don't have them on your side, you're in trouble. The first thing to do is assuring that they agree to the company strategy and plans.

Do you know your players with the highest Mojo potential? Do you find this concept interesting and motivating?

Knowledge management and writing business reports

2011-02-22T10:39:59Z

With the use of social networks, Wikis, Lotus Notes and other tools for cooperation, there is a great risk that the basic skills of how to write a business report is being lost.

Photo by Peter Denton Flickr CC

Reports build knowledge

In a well working company or society, each generation stands on the shoulders of their forefathers. What this means is that knowledge is not lost, that it is documented and retrievable. Sounds easy but it's not. The art of building a collective memory is a huge challenge, at the same time it is crucial for creating value and "invisible".

The "invisible" part is risky. If you don't do the work, very few will notice at first and thus it is not rewarding. There is no individual and immediate Return on Investment, but failure to build knowledge transforms the company into a stumbling beginner in all areas and all the time.

Expected sections

To make a report efficient, the readers expect a certain structure leading up to clear and brash recommendations at the end. These are the most common sections:

1. Title Section. Could be just the front cover or include Terms of Reference, Table of Contents and so on.

2. Summary. Give a clear and very concise account of the main points, main conclusions and main recommendations. Keep it very short, a few percent of the total length. Some people, especially senior managers, may not read anything else so write as if it were a stand-alone document. Write it last, but do not copy and paste from the report itself.

3. Introduction. Use one sentence for each idea, maximum four sentences to build a paragraph and a thought. The first few words has to make your readers interested, you have to earn your right to their attention. Explain why the report is important and how it is structured.

4. Main Body. Here you state the facts of what you have found about "the problem". It might well be structured in sections and sub-sections with subtitles. Write things in order of priority and you could include a "Discussion" section where you present different points of view and interpretations of the data.

5. Conclusions. Present the logical conclusions. Offer options for the way forward. Many people will read this section. If you have included a discussion then this section may be quite short.

6. Recommendations. What do you suggest should be done? State your recommendations in order of priority.

7. Appendices. Heavy details go here, information for the specialists. Tony Atherton suggests that "As a guide, if some detail is essential to your argument then include it in the main body, if it merely supports the argument then it could go in an appendix".

Over to you, is there a section you think is missing?

Manage by Tracking Progress

2011-02-21T15:57:09Z

Positive feedback is so much better than destructive criticism.

Photo by goldenfish2010 Flickr CC

Train yourself with positive feedback

Everything from circus bears and goldfish to you yourself can be effectively trained by positive feedback. Did you know that the current champion goldfish masters 17 games?

The way it is done is by giving yourself a small reward at every step on the way, slowly building up the whole sequence of events. For example a bear that plays basketball, when he turns towards the hoop he gets a small reward. Later when he touches the ball he gets a reward, then when he pushes the ball towards the hoop - a new reward, etc. Little by little, by positive reinforcement they learn to do the most amazing tricks. You can use the same technique on yourself and those you manage.

Snapshots of positive experiences

Everyone has a bad day, something goes bad and you feel worthless. Imagine that you had a file with some notes of your daily small victories, just opening your file with positive snapshots you would start to feel better - a little bit like the goldfish making a move in the right direction and getting a small tidbit, a positive reward.

Now imagine that your manager asked you to share your positive snapshots, wouldn't that be more fulfilling than looking for weak areas and establishing corrective action? If you are managing others, why not use the same principles as a group. By now someone is sure to say, wait a minute! We're not circus animals, this is offending! And they would be right of course, still this is the way a good sports coach work, and most other coaches for that matter.

A positive experience is something taking you closer to the goal

If you know your goals and values, and if they are in the same directions as the company's, then what is good for you is also good for the people around you.

Personally I keep a daily journal that I call my victory list, I also recommend it to anyone with a quest or a purpose. It keeps me motivated and boost my confidence. I also feel very good when I manage to boost the confidence and motivation of those working with me - to me it is one of the success factors of Open Management.

Finding the keys to success

Ralph Waldo Emerson once said:

Sow a thought, reap an action.
Sow an action, reap a habit.
Sow a habit, reap a character.
Sow a character, reap a destiny.

By reinforcing positive action, by making clear the positive consequences of a what was just done, by identifying the keys to success that brings both the individual and the company forward towards common goals can't be bad.

Over to you, do you think this is to touchy feely or manipulative? Do you think Grizzly bears can be trained this way?

Follow the fewest possible

2011-02-18T09:43:30Z

Numbers have to be shown in context to be understood.

Choose the Key figures well

What you focus will be resolved. It is easy to get carried away and try to get into every detail, but it will not be beneficial to the organization. The trick is to start from the strategy and find very few Key Performance Indicators (KPI:s) to follow on a relevant scale. The ideal is one, never more than three.

If your machines break down three hours at a time, there is no sense in following stoppage on a 5 minute level. First you map the frequency of three hours stops, when they are resolved you start to follow one hour stops - and so on.

Show them in context

Figures have to be given a context, they have to be compared or explained, there are several ways of doing that:

Compare the figures to historical data.
Compare the figures by benchmarking with competition or other inspirational sources.
Insert the figures into a larger context as for example the Du Pont structure for ROE and ROI.

Show them with illustrations

A picture is really worth more than a thousand words. For those who work every day with numbers it is easy to remember if a certain figure going down translates into heaven or hell, but to engage everyone else the communication has to be clearer. Here are some suggestions:

Use an excel dashboard (some suggestions can be found here).
Put a smiley green face beside a good result, a yellow straight face when there is no evolution and a red sad face beside a bad outcome.
Put a red arrow pointing in the direction of worsening results when you prepare a diagram and a green in the positive direction.
Add a line, in your diagram, with the best result achieved as a reminder of what has been possible to accomplished in the past.

I hope you find these suggestions practical, do you have any other suggestions or comments?

A company health-check

2011-02-17T14:51:51Z

Just like a person, any company needs periodic health-checks, I propose that you keep track of pulse and temperature, plus have a look at the throat.

Photo by Claus Rebler Flickr CC

Share the analysis

To cooperate means working towards a common goal, and progress can only be evaluated if it is measured. If the measures are difficult and have to be interpreted, then most of their value is lost.

We need to find a way of communicating the company's current position that can be easily understood by all, even those that have not been trained in management. One thing more, financials are not enough. There are many critics against the way we measure company performance, and they might be right, but it is the best we have - so for the time being I suggest we use a simplified structure to describe return on investment and add two more measures.

A look at the throat, get a feel for general performance

When the MD looks down your throat he looks for signs of infection or any other anomaly. It is the same thing we do when we look at a monthly financial report, we are interested in seeing if something seems out of order and if there are signs of infection. It is a kind of snapshot and does not really give any idea of progress, we don't know if the patient is getting better or worse, only if there are reasons for concern or not.

In the 1920's the Du Pont corporation developed a formula for calculating the return the investors get from the firm.

ROE = (Profit margin)*(Asset turnover)*(Equity multiplier) = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)= (Net Profit/Equity)

Operating efficiency (measured by profit margin)
Asset use efficiency (measured by asset turnover)
Financial leverage (measured by equity multiplier)

To make the measures easier to understand, Du Pont made a diagram where the numbers could be filled in and made the formula easier to digest and others have developed it further using excel (see the link).

Take the temperature to see if the machine is running well

The Du Pont formula is not enough, it is very important since a shareholder without return is a very unhappy shareholder, but still it is not enough. You need to know if all the investments done in the company is being used to its full capacity or not. The Total Quality movement defined a concept called "Overall Equipment Efficiency" which has proven to be very capable to communicate how machines are performing.

OEE = Actual output / Theoretical maximum output
OEE = Availability Ratio x Performance Ratio x Quality Ratio

What this means is that the OEE is a measure of how the process is performing in comparison to an ideal situation. Often this number is very low, it might be a bit disheartening but at the same time shows how much can be done. Improvements in OEE has a very direct impact on ROE since it makes the profit margin increase dramatically.

Check the pulse to see if the machine is running or just strolling

The winner in the game of evolution is who adapts the fastest to changing circumstances. To adapt fast you need many brains working, it is not enough with one genius and a lot of slaves - you need raw brain power, tons of it.

An adult human brain weighs about 1300-1400 grams, if you create policies and incentives that make all employees contribute your total brain capacity goes up immediately. Maybe you can't get tons of grey matter working for you, but it is worth the effort to get as much as possible.

Pulse = Number of implemented improvements per worker and year

The measure I propose for pulse is rather tough. It is not enough to have an idea, it has to be implemented to count. Toyota reportedly achieves the fantastic number of 42 implemented improvements per worker and year, the best I've ever seen is 10. Still, that company was doing very well and Toyota has managed to become the world largest car manufacturer.

So what do you think, would these three measures be enough?

Presentations make me drowsy

2011-02-15T10:59:53Z

A good way of putting an audience to sleep is to read out loud instead of talking.

Photo by Gabriela Camerotti Flickr CC

Reading is dangerous

Recently I took part in a conference where the keynote speaker read his talk. It made me lose interest and start to write this post. This is a double danger: First I lost what was an important message, secondly I could well have shared my frustration via Twitter or posted to the blog in real time, which would not have been fair to the speaker.

Presenting is a dialogue

Even if presenting to a large conference might be unidirectional, there must be a feeling of involvement and exchange of ideas. All the classical rules of non-verbal communication apply. If there is no eye contact, probably there is none at all. If there is no expression of emotion, the audience will not be touched.

All that is remembered is the emotion

The day after the speech, all the audience will remember is the feeling. If. The feeling is strong, then from that starting point we are able to recall the rest. As I write a new speaker has taken to the floor, the slides are just as life-less but the voice is more modulated and he is looking at the audience, much better!

The way forward

Some time back, at another conference, the speaker gave his speech a Twitter hashtag and kept reading comments from the audience - suddenly there was dialogue! The investment was zero, the audience used their cell phones to Twitter, all it took was the application of an existing technology. As of yet, I've not been at a conference with comments via Facebook, but it should be interesting, does anyone have any experience to share?

Resilience is the secret weapon

2011-02-14T15:07:07Z

The capacity to bounce, to be struck down and come right back - that is the secret weapon shared by most successful people.

Photo by Ken Curtis Flickr CC

Autobiographies of the successful

I find autobiographies fascinating, the most fantastic thing is that the story seems to repeat itself and only the name and dates change.

Invariably someone goes from an acceptable situation and then loose everything. From the very bottom our hero will take a chance, see an opportunity, go all in and take the prize. The examples are everywhere, Donald Trump was in terrible debt, then came back, regained his fortune and became a TV star. Richard Branson built Virgin the record company on one title "Tubular bells", then had to sell it all. He now owns more than 250 companies and his empire continues to grow.

From rejection to riches

There are many more examples, just as fascinating but less famous. Last Friday The Wall Street Jornal ran a fantastic article on people finding a business opportunity in having been dumped by their fiancee. How about these examples:

One man was left by his fiancee after three months and when he tried to return the 10.000 dollar engagement ring, he found that jewelers only would pay a third when buying back. His solution was to start a website (www.IDoNowIDont.com) connecting those looking to buy rings with those who suddenly had one too much. In the first year the site made a million dollars in turnover, the man found closure and is now happily married.
One young woman felt lousy after her boyfriend left her and sent her self some flowers and a card. She felt so much better that she launched a successful website called www.PinkKisses.com.

Are you this resilient, could you do the same?

Tao te ching

2011-02-11T09:16:01Z

To manage is to get things done, it is about how you handle and process things in your life. To lead is to get others to do it for you. Might seem cynical and at times it can be.

Photo by suneko Flickr CC

Tao te ching verse 17

At first, at best,
people hardly notice a leader.
Next they adore and acclaim him,
then come to fear him,
in the end despise him.
Thus lost faith breeds lost faith.

Be nondirective, make
your few words precious.
When the work is done, end
gained, everyone will say:
We did it by ourselves,
naturally.

True leadership is very little about being seen, it's about what is being done.

José Mourinho the world's foremost soccer coach

In a interview yesterday, after having been choosen once more as the world's foremost soccer coach, José Mourinho said that "the goal is not to be working in the best clubs, the goal is to win matches".

A coaching leadership style might have things in common with soccer, it's not the coach that scores - it is the players. The coach get others to do it.

Over to you, what are your impressions?