Thursday, March 31, 2005

In Business, In Life, What's Important?

What’s Important?

Do you like what you do? Are you good at what you do? Does what you do excite you and motivate you to get going every day? Do you believe that you are actually accomplishing something?

Do you sometimes think that because you care your going crazy? Or you wish sometimes that you would not care, but you cannot stop caring? Do you think you can change the world?

Do you believe? I said, “Do you Believe?” Brothers and Sisters, “Do you Believe?” (feel a little Southern Gospel, that Holy Roller kind of atmosphere).

See yourself as Jake Blues (The Blues Brothers) in cheap sunglasses with the Light shining into your face through the church window. “Do you Believe?”
“You Got To Believe!”

Believe what you say? If you don’t know that already, the fire inside you has probably flamed out some time ago and you need to find some kind of work or activity that can rekindle the fire, or decide that it is not worth it and plod along quietly. But I think that most of you already know what to believe is, it’s inside you and it needs no explanation.

If your answer is, “Yes, yes, I believe!” (although I think Jake said, “The Band!”)
Then either your ready to, or are already “Living the Dream”. And you can say that and feel that if your day is going well or if your mired in the muck of your business day.

My friend Bull would always tell us that he was “living the dream” because even in the muck, if he pushed through hard enough he could still create the value that he knew he could. That is the save value you know you can create and the satisfaction of accomplishment will still emerge.

That is “Living the Dream!”.

Thursday, March 17, 2005

Customer Profitability

Contribution Management- CTS

In previous posts I have tried to hammer home the thought that the most important thing in your business is your customer’s order. Nothing else has value except that. It is, without exception the most important thing. As a relatively famous young singer would say, “Oops I’ve done it again”.

Once you decide that the order IS the most important asset in your company, then you need to find out how that order is taken care of. Not how you THINK it is taken care of, but how it is ACTUALLY taken care of.

Another one of my repetitions is know that you know, don’t think that you know. So many managers and executives have been out of the details for some time and they like to think things are as they were or as they should be according to them. Wrong! Get in the weeds and dig around once in a while to be sure, your customers and your employees will both benefit from your being back in the weeds for a time (that’s Living The Dream).

(For those of you who want to look into this area sooner than later I would recommend that you read “Staple Yourself to An Order” by Shapiro et al from the Harvard Business Review and for the article which is worth the $6.00 to download.

Now to the heart of the matter.: Are you familiar with CTS? Not the new Cadillac (though I love the “V” model which is much too fast), but the business CTS? The acronym means ‘cost to serve’.

Once your business is aligned on the customer order being the most important part of your business, and you know how that order is being handled end-to-end, then you can begin to work on understanding what the cost of that order is.

This is not about developing a complex activity based costing program, but knowing what the major direct and indirect costs are for an order. Don’t get paralysis by analysis here, just give it a rational approach and you will be able to come pretty close to the reality.

Once you have the cost to serve, preferably by product or service, then you can begin to understand profitability by customer. Of course this is an operating profit. Don’t try to build in regional, departmental, national or global overheads. Keep everything local. Then you know if the customers order is producing contribution to those overheads or not.

Too often we try to figure out national or global profitability and the information is not good, our ability to aggregate the information is suspect all the reasons that have kept you from going after many larger questions that required aggregated information. Draw your data from the transactional level (which is probably pretty good) and understand.

Studies have shown that between 20% and 40% of the customer orders a typical company services DO NOT cover the cost to serve and thereby do not contribute to overheads. Too often we apply the 80/20 rule, 20% of the customers produce 80% of the revenues or profits. In today’s environment that rule does not hold true as much as it used to. Smaller orders more often from more customers skews 80/20.

Even if 80/20 is true for your company, think of the 80% that produce 20% of your revenues and/or profits. Many of those produce nothing except cost. Break your customers into A, B, C, D categories.

The A’s are the big customers with large volumes and usually profitable but not the highest profit per order or by % of revenue, some might even be losses by the time CTS is applied. The B’s are the medium sized customers and it is here many times that you find the MOST profitable customers in terms of profit per order or % of revenue.

The C’s are marginal at best, they sometimes contribute something and sometimes may not. Could be order size, delivery costs, variability, amount of service required etc. The D’s are losers.

So now that you KNOW, what do you do? You look at the order process and make sure that you’re A’s and B’s get fabulous service and priority handling. Never miss on these for these are where your bread and butter are (with a little icing on top). Give a back order to a C before you don’t have stock for an A or B.

Also for A’s and B’s you need to be sure that your marketing, sales and customer service are building relationships with these customers if you don’t already have them. If you do, do more! For C’s you need to work on them to see if they can become A’s or B’s. Could be price increases, could be limiting services that you are giving away and not being compensated for or a number of things. Find out what they want and what they are willing to pay for.

For D’s, raise prices instantly to cover your ‘cost to serve’ plus a healthy margin. Some will accept it and become high C’s or maybe B’s. Some will leave and you need to let them go. They will become a drain on your competitors who are not using Contribution Management techniques and your profits and free cash flow will improve without their drain on your resources. Your people will have more time to spend on the A’s and B’s and begin to move the C’s into better positions.

Once this is done, you can drive it to contribution by product, by department, and the like. But first is to understand the contribution of your customers because you don’t want your most valuable asset (their order) to cost you money!


Tuesday, March 08, 2005

Get Over...Now Listen

Things move too fast, time accelerates. It’s March and I am not sure what happened to February. The faster you go the more patience you need (LTD Business Rule #10), and patience is needed to listen.

“Generous Listening” as it is noted by Larry Cone in his article Four Skills of Generous Listening at the IT toolbox Blogs. Mr. Cone mentions the four skills as; paying attention, replication, recreation and co-creation. Unfortunately in his post he only defines the first two.

Listening, much more important than speaking. Too often we are in a hurry to say what we think, to show what we know, to make the first point, to get it over with so we can move on, or we just like to listen to ourselves. Not many admit it, but there are plenty of folks that do just like to listen to themselves and it has become such a habit that they don’t realize what they are doing.

How many times have you finished someone else’s sentence? Think about that, be honest now, and it will be more than it should. In my younger years I was terrible about that. I cant say that I have completely eliminated it, but it has been significantly reduced.

Someone who is speaking deserves the courtesy to be allowed to finish their own sentence. You give them value and self worth when you patiently wait for them to finish. Try that with your spouse and your relationship will improve quickly!

A wonderful mentor of mine once told me not to let my intelligence get me into trouble. Other people don’t think as fast as you, they don’t see the whole picture the way you do and they don’t construct solutions as fast as you do, but what they have to say is as important as what you say. I must say it took too long to actually live that.

Be the last to speak and earn their respect. Try being the last to speak on a topic in a meeting. Hold out and keep it back, even if someone else puts your thought forward first, you then have the opportunity to support them and add some detail if you have it. That will show them some respect and make you a team player.

People will learn how smart you are by the wisdom and actions you demonstrate through patience and courtesy, and then give you the respect you want and have earned. Speak over them, drive your solutions first and press on aggressively and they will see you as arrogant and your ‘smart’ will be suspect.

While thinking about listening I came across a site where there are strategies to improve your listening skills. Bruce Wilson of Wilson Strategies has put together a great site focused on leadership, relationships, conflict resolution and negotiation.

Mr Wilson states: Listening means the gathering and making sense out of information. Listening is the only way to learn how to improve your leadership, marketing and negotiating skills, your ability to motivate and your overall business performance. The time and money you save by listening effectively can make the difference between success and failure.

The section on How to Listen starts off just right, “Get Over Yourself”.

We all need to get a spray can of “Instant Humble” and squirt some on ourselves to remember that “its not about me”. The project, the new customer, the new product, the teamwork, the whatever is NOT ABOUT YOU (OR ME). We have to get over ourselves.

Larry Cone is his post “Is it What I Said, or What They Heard?” says, “I have come to the understanding that the quality of your listening determines how well you are heard”. Your commitment to hearing what others say earns you a commitment to what you want to say.

Even the Good Book has something to say about this. … let every person be quick to hear, slow to speak, and slow to anger … (James 1:19)
No link here, just pick up the Book and look.

Now that we are over ourselves….. are you listening?


Saturday, March 05, 2005

New Position-Dont Look Inside Until....

In Tuesday’s Wall Street Journal Marketplace section under the heading MANAGING YOUR CAREER was an article by Joann S. Lublin titled, “Winning New Position with Same Employer Requires Trying Harder” in which Ms Lublin takes the position that you “need to spend more time preparing for an in-house move…” Polish the brass, do more research, find out what the hiring managers like or dislike and on and on.

The article states that fewer than a third of the internal applicants for positions get them. Businesses are notorious for hiring from outside. As businesses downsized and leaned themselves over the last few years, the position you have is the one the company wants you in. You are good at it and they want that to continue. In other words, you are pigeon-holed.

“Try harder!” Prepare more! The example given in the article has a 15 year employee feeling guilty for being over confident when she did not land any of THREE positions that she was working toward as her’s was being eliminated.

An old farming adage tells us, if you are in the cornfield (your position is at risk) you should expect the harvester to come. Your position would not be eliminated, or you would have been offered another postion if it were not about you. That does not mean anything about your skills and qualities per se, but in the eyes of the business, there is not enough value there.

Today’s companies are made up of functional specialties and specialists are what they want. So when something else comes up that is needed, you are not qualified for that from their perspective. They know you too well and you know them too well. The business wants the experience from the outside to help with new ideas, new processes and functionality. Never mind that they have never asked your opinion or had you participate in cross functional teams outside your specialty.

With the internet employment clearing houses you can find people with EXACTLY the skills you think you need as an employer. No one you have now will be that in their eyes. There is no time to train you, to develop you, to grow you even if you have given them 15 good years, they want what they want and they want it now. That means they will go outside to get it.

So what do you do when you hear the harvester in the distance? Do all the preparations, do all the polishing, do all the resume development and take it to the marketplace. There is where you will find someone looking for exactly what YOU are. There is your place to grow and be what you want to be.

Don’t want to really leave that comfortable company you have been at? Then once you have an offer from someone else, bring it back to the home business. Tell them you have an outside offer but would like to stay at home. When they see that another business or competitor has seen value in you that they did not, they might just have a new look and give you that position you have been thinking of. Your validation by an outside company is much more valuable than your supposition that inside the business they really do recognize your full suite of abilities. If not, take the walk and get over it.

Several times in my career I have staffed myself out of my job by developing and promoting people from the team. On some occasions the company had nothing else for me to do and we parted on good terms. The rest of the time the company gave me something else to do but each time it turned into the cornfield.

And you can never forget that once the corn ripens, it will be harvested. No one leaves mature corn on the stalk.

Please don’t misunderstand, there are some firms that are exceptions to the rule and promote from within as a priority (one of them a much misunderstood big box retailer). And my wish for you is that you are not in a cornfield, and don’t end up in one someday but if you do, don’t follow the best solution as noted in the WSJ article.

“Spend more time preparing for an in-house move than for an outside vacancy. Internal hiring managers expect you to grasp every nuance of the business because you enjoy tremendous access to co-workers and corporate data.”

WRONG! Spend more time getting an outside job and bring back that acceptance in the marketplace to your current employer and your chances of staying (if that is what you really want to do) are better. You will never meet the standards of internal managers. Again, they can know too much about you and you about them and that is a deal breaker right from the start.

Bring credibility and credentials validated by your marketplace. That is the prize winning ear of corn. Otherwise, take on the new farm and see how you can do with tomatoes!


Tuesday, March 01, 2005

Business and Battle

“War is hell! “ the old general says as he surveys the smoldering battlefield and then turns away puffing on his cigar, looking old as he walks back to his jeep.

Business is like war too. It may not be as bloody, but it is no less competitive, no less stressful, no less cutthroat, no less demanding, no less intense and certainly no less about taking no prisoners.

The one thing that is more difficult about business is that most battles are highly intense for very short periods of time. Intense, deadly and very quick. Most over in a matter of seconds or minutes.

Forays into the business markets last longer and carry on with all the negative effects of battle prolonged for various periods of time. In the battle you win or lose, survive or die in a matter of seconds or minutes or even hours but rarely days and weeks. In business you can struggle for weeks, months and years.

In battle the fight is external against a known enemy (you may not know where they are, but you know who they are). In business you may or may not know your enemy, and that enemy can be either inside or outside your business.

Not sure about inside your business? How many different agenda’s do you run across in your business?. Each of those is a little struggle unto itself, a battle if you will.

Everyone, everyday has to produce to a target either by individual or by team. Do so, and the battle will be with your competitors and the market. Fail to do so, and the battle comes home to validate the very survival or existence of your department, your team, your plant or your product.

Here are some rules to keep in mind (SOF Rules):
●Take the initiative. Don’t wait for answers from the top, they are probably not available.
●Things are rarely fair. Don’t count on the exception.
●Truth changes. The first report is always suspect.
●Expect the unexpected. Anticipate and prepare.
●Plan and prepare as if there were no rules.
●Always preserve your freedom of action.
●Never make decisions that box you in.

Also, I would encourage you to go and subscribe to one of my favorite newsletters, “The Art of Corporate Warfare” at ( . The reading will be thought provoking and support your battles.

Keep your head down, and Fight the Good Fight!