Getting your Company Lean, Mean and Efficient

Getting your Company Lean, Mean and Efficient

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Left, right and centre I hear business owners talk of their “strategies.”  It sounds as if everybody can do it. Yet when last can you remember a strategy break away that actually produced real results?

Yes, it’s easy to set revenue and profit targets, then make plans how to market and sell better so that we can increase revenue.  It’s as easy to increase our margin and therefore our profit by cutting costs.

So, there you have it, what could be clearer than that?  Market better and cut costs – that’s your strategic planning. All that’s needed to complete your strategy weekend is a powerful rah-rah session from you, the CEO.  Usually along the lines of: “If you can dream it, you can do it!”  So, if the strategy fails it’s an issue of everybody not having pulled their weight and the search for culprits begins. What a cheap shot, don’t you think?

Business strategy in a nutshell

Unfortunately what you have been doing is at best an exercise in efficiency and optimisation:  Trying to make your company more profitable by being more efficient. You can call it strategy if you want, but it misses the really difficult nut to crack.

Hard core strategy goes beyond an exercise in efficiency and optimisation because it requires you to take a long, hard, critical look at the stuff that you must do to get you company lean, mean, efficient and functioning at its optimum.

Let me explain.  There are three indispensable features of efficiency and optimisation that you need to execute if you want to remain in business:

  1. You need to deliver quality
  2. You need to remain close to your customers
  3. You need to benchmark to assure that you don’t fall behind your competitors.

These are all good things that you must do and nobody that ignores these will remain in business for any length of time.

From ‘what if’ to success

Hard core strategy takes the opposite tack. Hard core strategy asks “What if?” questions:

  • What if my quality is too good? What if there is a low quality competitor waiting to wipe me out?
  • What if I am too close to my customers so that I have become blind what newcomers to the market want?
  • What if my benchmarking let me improve, but in the process I destroy my differentiation in the industry?

Hard core strategy questions the assumptions of everyday business efficiency. Let me give you some examples.

Can quality ever be a bad thing?  Yes, if the client can make do with less. Sometimes, would you believe it, they just don’t care! A good example is the media industry. Newspapers had well designed, cool websites but then came this crazy individual Craig Newmark with Craigslist and destroyed the most profitable part of newspapers, the listings advertisements.

Craig hat crappy design quality, but he single-handedly destroyed an industry. We all know Gumtree, another good example that you don’t need crisp well-designed typography to take on the big boys! Do yourself a favour and go to www.vg.no ( I don’t expect you t read the Norwegian!) and see how this website looks that is most successful in attracting, readers, keeping them and monetising.

In the high-tech industry I have seen so many companies hell bent on competing on quality and going out of business, instead of saving on the hight costs of quality and competing on a different, less expensive value proposition.

Keeping customers close

This brings me to the second point: How can keeping close to your customers be a bad thing?  Clayton Christensen convincingly demonstrated this in one of the two or three business books that the great entrepreneurs in the world such as Andy Grove and Marc Andreessen recommend: The innovator’s dilemma.”

He treated the hard drive industry and earth excavating equipment. In both cases the powerful incumbents were so close to their customers that they did not recognise a new market opening up. The guys making hard drives for desktops heard their clients telling them, bigger, bigger, more memory, faster, faster.

In the mean time the laptop market was opening up and there bigger was a problem and customers would willingly sacrifice speed for smaller. The big hard disk manufacturers lost control of the industry because they were eaten up by the poorer quality products. In the end they did not even retain their hold in what they were good at! History repeated itself when flash memory developed.

None of the incumbents understood how important super mobility and super small was, even though that was how they conquered the big hard drive manufacturers! Hard core strategy asks: “What if the client does not know best?!”

Finally, what is wrong with benchmarking?  First of all there are some features where you should be worse than your competition! Better “in every aspect” costs money, too much money. It means that you sacrifice margin and therefore profits!

Secondly, if bench marking results in you erasing the differences between yourself and the competition, you destroy your ultimate competitive advantage, the holy grail of strategy: DIFFERENTIATION.  Hard core strategy requires you to say no to each and every improvement and pick those improvements that will enhance your differentiation.

Sometimes you should even intentionally scale down on features where you are too good without them contribution to you differentiation.

Anybody for hard core strategy?

Bertie du Plessis
Bertie du Plessis founded his successful consultancy firm, MindPilot, 17 years ago. He names several of South Africa’s blue chip corporations among his client list and has taught as a lecturer and guest lecturer in six different disciplines at tertiary institutions. His fin24.com blog is the most read business blog on the 24.com domain. Visit Bertie Du Plessis's website for more information.
  • jacquesdv

    Hi Bertie, Thanks for the link to the Norwegian website. In the good ol days of websites a whole bunch of marketers said you should create ‘ugly websites’ with good sales copy. I think a ‘cheap and nasty’ look and feel like Craigslist may work in a B2C environment. What is your feeling on the B2B market when it comes to a low quality website vs a high quality website? Surely, there should be more of an effort on portraying a decent brand when it comes to B2B. Not sure I would want to do business with a business that has a website that looks like a spaza shop when it comes to B2B.