Winning in business is not easy – customers demand more and more value for less cost while competitors try every trick in the book to steal them from under your nose.
Add to this one of the worst economic downturns in over a decade and signs that things will worsen before they improve and you realise that now is the time for the fastest, smartest strategy you and your team have ever had to plan and execute.The two “How-To” components of this feature are designed to give you the very best tools to strengthen your business’s prospects of not only surviving the downturn but, more importantly, being positioned for the upswing that will inevitably come.
You need to Set the Tone
Goal Lower The Anxiety Level In The Office By Being Candid About The Challenges – And Opportunities – Ahead
It’s easy to blame the economy for all the reasons a company is suffering: Customers are cutting back on their expenses, advertisers are trimming their budgets and stock prices are sliding. These problems may, in fact, be attributable in part to the downturn, but going with the “It’s the economy” defence sends a subtle but potentially dangerous message to employees: It implies that the situation is totally out of the company’s hands and left in large part to fate. This is exactly the kind of attitude that raises anxiety levels in the office and disrupts employees’ focus on the problem at hand: turning a business around.
- Don’t just rely on a message
An email from the top explaining why the company is in the red can’t tell employees all they need to know. Speak to them in small groups and be as candid as possible about where the company stands. This is also a good time to suss out any rumours.
- Open the books
Giving employees the numbers behind company performance clarifies where the business needs to change and how their jobs connect to the bigger picture. But be warned: “If you’re going to be transparent, take the necessary time to teach employees about how the business works,” says Rich Armstrong, general manager of the Great Game of Business, a coaching firm that teaches open-book management. He advises managers to start with what employees probably already understand, like operational numbers, and then connect the dots with how those numbers increase gross margin and generate cash flow. Above all, keep finance jargon to a minimum.
- Focus on the future
There’s no need to sugar coat it. Pulling the company through the downturn isn’t going to be easy, but emphasising the challenge can have its benefits. “It’s a great time for your employees to realise that they can play a role in discovering opportunities for the company,” says Vince Thompson, a former manager at AOL and author of the book Ignited.
2. Enlist the Team to Fix What’s Broken
Goal Motivate Employees And Find Out How And Where The Business Needs To Change
Traditionally, the top execs decide the strategy and let it trickle down. The problem with this tactic is that it rarely makes the emotional case needed to mobilise employees around a common goal, says Paul Bromfield, a principal at Katzenbach Partners, which has advised companies like Aetna, Credit Suisse, and Pfizer. “This is about problem-solving and discipline, and that’s where employees come in,” he says. “Companies should be harnessing employees in the effort to identify where to cut costs and how.”
Not only will utilising workers’ expertise make them more invested in the company’s success, it also gives management a more honest look at what’s not working. Senior leadership tends to focus on just one area of cost-cutting, Bromfield says, like products, headcount, or moving operations offshore. Employees, on the other hand, can use their collective wisdom to eliminate clumsy (and costly) procedures across divisions. Here are four guidelines for involving staff in the process:
- Identify key influencers
“If you’re really going to mobilise people, you can’t do it from the top,” Bromfield says. Find the key employees who hold sway in their departments and get them to embrace and spread the change effort. These are the people who know how things really work (not just the way they’re supposed to work) and have a way of bringing together the right people to get things done.
- Let teams do the problem solving
Form groups around the influencers and motivate (rather than mandate) employees to identify what’s slowing down business. Often the best place to start is to look for processes and bureaucracies that annoy the team. Set a basic timeframe to achieve cost savings, but let each group work at its own pace.
- Make it a conversation
Schedule brown-bag lunches or other informal occasions to talk to employees about their findings and where they might be hitting roadblocks. In the early 1990s, Bromfield’s former client Texas Commerce Bank held focus groups with thousands of its employees to find out what procedures most frustrated bankers and customers. Using the feedback, the company nearly doubled its $50 million cost-savings goal.
- Follow through
Many cost-saving programmes fail because management implements the initiative halfway or lets inefficiencies creep back after meeting short-term goals, which doesn’t sit well with employees. Adopt the changes wholesale or not at all.
3. Get Back to Work That Matters
Goal Make Sure Your Team Is Tuned In To Growth Opportunities
The problem with a downturn is that while cost cutting is absolutely necessary, it can make everyone gun-shy about pursuing new initiatives and opportunities for investment. However, if your department, and in turn the company, is going to emerge from the slump in a competitive position, there are a few key investments you can’t afford not to fight for now.
Learn about the customers of your weakest competitors, writes Michael Roberto, a blogger for Harvard Business Publishing and management professor at Bryant University. While competitors are busy shoring up their relationships with large, established clients, it could be the perfect time to swoop in and court their smaller customers.
- Research and Development
Take a cue from Apple’s Steve Jobs. When asked by Fortune magazine recently about Apple’s strategy for the downturn, Jobs pointed to how the company survived the 2001 tech bust by upping its R&D budget. “It worked, and that’s exactly what we’ll do this time,” he told the magazine.
Separate the value-added activities from the wheel-spinning exercises, Thompson suggests in Ignited. Instead of giving up on new projects in a downturn, shift focus so that the team is investing time in identifying and prioritising the projects that will generate the most benefit for the company. Even if the final product will have to wait until more resources are available, doing the legwork now means the product will go to market faster when the time is right – and employees will stay engaged in the meantime.
4. Acknowledge and Reward Deserving Employees
Goal Recognise Achievement, Even If Resources Are Scarce
Employee bonuses and raises are among some of the first expenses that upper management cuts during a downturn. But even if extra compensation isn’t in the budget, that doesn’t excuse managers from rewarding employees. “We have always had a policy of rewarding our top sales executives and managers,’ says Ivor Jones, CEO of KreditInform, a highly profitable South African company.
Lack of recognition, both financially and verbally, is one of the things that does the most damage,” says David Sirota, founder of the management-consulting firm Sirota Survey Intelligence.
One easy, no-cost way of recognising valuable employees is to improve their quality of life. “The best reward you can give people is autonomy over how they spend their time,” says Jody Thompson, a former Best Buy human resources manager who, along with Cali Ressler, helped create the company’s Results-Only Work Environment programme. That means giving employees your trust and the flexibility to work at home (or wherever suits them) whenever they want to – without any judgements. This gives workers more control over their time, and sometimes even a little extra cash. Sun Microsystems has found that employees who worked an average of 2,5 days at home each week saved $1 700 (approximately R13 000) a year in fuel and vehicle wear-and-tear.
Danger, danger, danger
Save Rewards For The Worthy
Keeping your employees engaged doesn’t mean rewarding them just for doing their jobs. The most effective rewards are significant but well deserved. Libby Sartain became head of Yahoo’s human resources department in 2001, just as the company received a hard knock from the dot-com bust. She decided that instead of quietly giving large bonuses to over-achievers, which wasn’t providing much bang for the buck, Yahoo needed to regularly single out the top 15 to 20 stellar individuals and teams – not only to reward them, but to help the rest of the company understand what made these employees outstanding.
The following year, the company gave its first Superstar Awards. Candidates were nominated by their peers for significant achievements and awarded cash prizes ranging from $5 000 (R39 000) to $50 000 (R390 000). The Yahoo Superstar Awards programme is now in its seventh year and has honoured employees for contributions like creating the Panama advertising system, inventing a way to advertise on instant messages and fixing a troublesome accounting problem. “This isn’t egalitarian, this is a meritocracy,” Sartain says, acknowledging that some managers resisted the idea at first. “When people saw the winners, they understood why they won, and it took hold and became part of the culture.”
As a result of the positive response to the online worksheets that accompanied the May 2008 Entrepreneur magazine article entitled Benefit or Bust: Managing Your Business in an Economic Downturn, as well as their relevance to this article, they are included as tools to assist owners and managers in their quest to ensure success during the tough months that lie ahead. In order to get maximum benefit from them it is recommended that you carefully work though the questions and exercises. Write down your answers and follow up on what you write. Just reading without ever doing will never deliver the results that drive success and wealth creation.
1. Focus On Value
Identify the value that your product or service creates:
- What customer problem does your product or service solve? Describe the problem.
- How does your product or service solve this problem effectively? Describe the solution.
- How is it different from products or services designed by competitors to solve the same problem?
Identify the target market for your product or service:
- Who are the people, or the businesses, with the problem that your product or service is trying to solve?
- What drives their buying decisions?
- Will the driver of their buying decisions change under tighter economic conditions? If so, how?
Recognise the link between your target market and your value offering:
- Why do the people in the target market (described in task 2) want what you offer (as described in task 1)? Identify specific reasons why your target market should buy from you.
Craft a marketing message that highlights the match between your target market’s needs and the product or service you offer.
- Assume that you are sending a short email – only a few lines long – to all your customers and prospects telling them how you can solve a specific problem that they have. Write the email down.
- Integrate the message into all your communication over the next 90 days.
2. Look To Solve Alternative Problems
Identify new customer needs:
- Take some time to brainstorm – alone or with others in your business – new customer needs that have arisen as a result of the changing economic environment
- Create a mind map of ‘new’ customer needs that relate to the product or service offering of your business:
Questions to prompt your thought process:
- What has changed in my line of work?
- What are people or businesses struggling with?
- Where are the needs of people or businesses not met?
- Where have we seen the majority of customer complaints of late?
- Discuss each of the needs on the mind map; circle those that could be turned into viable new business opportunities.
- Do some high level research into each of the needs identified and write up a mini business plan (no more than three pages) for at least three of the needs identified in this analysis. If you brainstormed in a group allocate each member of the group one need to research and write a mini business plan. Agree to meet in two weeks to review and discuss the business plans and decide which ones to take forward.
- Identify three geographic markets in which you currently don’t operate that you think may offer attractive expansion options.
- Identify people you know in each of these locations who will be able to give you insight into the market including the opportunities and risks.
- Make contacts with each of the people identified in task 2 and get their opinion on advantages and disadvantages of the new market for your product or service. Write down your key findings.
- Look for additional information on the Internet about advantages and disadvantages of the new markets you are looking at. Write down your key findings.
- Based on this evaluation, identify the most promising new market and plan a business trip to investigate this market. Evaluate which product or service offering would work in such markets, and whether trading in or servicing such markets would be viable.
- If things still look promising, plan a business experiment in the new market – take your product or service into the new market for a limited period with a limited pre-determined investment cap. This will allow you to assess whether there is potential for long-term growth in the new market, without risking too much up-front.
4. Focus On Efficiency
- Review all processes and activities in your business
- Identify core processes in the business for developing and delivering products or services to customers
- Within each process identify the key steps related to that process, the costs that are being incurred, and question whether each cost can be eliminated or perhaps reduced.
- Review a monthly profit and loss statement (income statement) for your business and identify unnecessary costs that could be eliminated or scaled down.
- Make a list of monthly costs to be eliminated or reduced.
- From the monthly income statement, identify large fixed costs. Discuss with others in the business whether it would be viable to translate any of the fixed costs into variable costs.
- Create a competition for employees encouraging them to identify unnecessary expenditure and inefficiencies in the business. Reward people who uncover significant savings for the business.
6 Common Decision-Making Blunders That Could Kill Your Business
Among the logical errors nearly everybody makes is thinking only everybody else makes logical errors.
Humans are often very irrational. If you’ve ever explored behavioural economics or psychology, you may have found a host of examples demonstrating situations when we make objectively bad decisions.
Below are six of the largest decision-making blunders we all make. Avoiding them will dramatically improve your decision-making, your quality of life and success.
1. Sunk-cost fallacy
Of all the ones on this list, the sunk-cost fallacy is the most common. Many of the decisions we make are final or difficult to change. For example, let’s say you invest R1 000 in Facebook, and the price of the stock goes down to R600 the following day. The fact that you put in R1 000 initially is irrelevant to the situation at hand; you now have R600 worth of Facebook shares.
What this means is that once the decision is made and our cost is incurred, there’s no point thinking back. You already put in the time, money or other form of investment. Considering that in any future decision is illogical, despite how tempting it is. Instead, present yourself with the new options at hand — without considering the sunk cost.
2. Narrow framing
Would you take this bet? You pay me R1 000 if a flipped coin lands on heads and I pay you R1 200 if it lands on tails. Most people would say no. We tend to be risk-averse, unwilling to risk something like R1 000, despite the reward being a bit greater.
Now, what if I offered you that bet, but I promised we would flip 100 coins? Each time, the loser pays up. Would you take it then?
Almost certainly, right? The chances that you lose money, overall, are extremely slim. This idea can be applied throughout life. When we’re in situations that will repeat themselves over time, we should take a step back and play a game of averages.
3. Confirmation bias
Another common one in the worlds of psychological and behavioural economy is confirmation bias. It hurts our ability to keep an open mind and shift our opinion. When we have a held belief, we typically look for information that confirms our opinion while ignoring data points that tell the opposite story.
For example, if I’m really excited about a new software product that I just integrated into my business, with ten of my employees as users, I might have made up my mind about the quality of the service before we put it to use. I would then be more likely to listen to the three employees who enjoy it, not the seven who don’t.
There’s almost always information that will validate our opinions, no matter how wrong they might be. That means we need to always look for conflicting evidence and, from there, make judgements based on more well-rounded information.
4. Emotionally driven decisions
When we’re angry or upset, we’re much worse decision-makers. When you have to make an important decision and happen to be in a bad mood, you should hold off. Instead, wait until you cool down and can think more clearly. It will remove the outside influences and let you think more rationally.
5. Ego depletion
This one makes intuitive sense, but it’s one of the most common ways to make bad decisions. The idea of ego depletion is that when we’re drained, physically or mentally, we’re less likely to think critically. Think about the times you’ve been exhausted after a long day of work. In those moments, you don’t want to have to think hard about anything. Instead, you want your brain to work automatically.
What that means is that when you’re tired and faced with challenging choices, you’ll rely more on your instinct or automatic processes as opposed to analysis and thought. That can be extremely problematic in situations that require effort.
6. Halo effect
The halo effect says that once we like somebody, we’re more likely to look for his or her positive characteristics and avoid the negative ones. This is similar to confirmation bias, but it’s oriented around people.
Related: 10 Stupid Mistakes Smart People Make
For example, let’s say I just hired someone named John, who was great during his interviews. Through his first few weeks, John does a few things well at work, but he also does many things poorly. The halo effect — brought on by his wonderful interview persona — could cause me to ignore his poor attributes and emphasise his good traits.
This can be detrimental to our ability to make judgements about others. We have to realise our biases toward certain people and eliminate them.
These are a handful of the many decision-making errors we’re all prone to. Although it’s challenging to scrutinise your preconceived notions, doing so is worthwhile. It gets easier over time and will, ultimately, make you a more effective decision-maker — personally and as a business owner.
This article was originally posted here on Entrepreneur.com.
8 Reasons Why Failure And Focus Are Essential To Business Success
There are two Fs that define the long-term and sustainable success of your business – Failure and Focus.
There is an event that runs globally across countries such as the United States, Spain, France, Brazil and Israel. It is a conference that is aimed at the entrepreneur, the investor, the developer and the designer. It also caters exclusively for failure – FailCon asks the entrepreneur, specifically within the technology space, to embrace failure. However, this focus on failure isn’t about leaping blindly into the ball pit of collapsed dreams and wallowing in its sorrow as you shout ‘Bazinga!’. It’s about being comfortable with the idea that failure can happen and using it to drive your business focus and long-term success. These eight steps define exactly how…
1. Not big, iterative
Giving someone advice to fail big isn’t practical. It isn’t the kind of attitude that investors will be drawn to either. Instead, embracing failure is about being open to the fact that it may very well happen to you and some of your ideas. It isn’t necessarily going to be a gigantic failure on a scale of company-wide collapse. It could just be that you had an idea, and it wasn’t a very good idea so it failed.
2. Focus on your agenda
If you’re not focused on your end game and business agenda, don’t expect your staff to be. This level of focus is critical as it gives people direction. They then understand exactly where the business is going, what it hopes to achieve, and the role that they play in taking it there.
If you don’t have this level of focus, your staff don’t have anything to latch onto.
This is where your ability to fail is of value. You need to test your assumptions and ideas and then use their failures to learn more about how they could potentially succeed in the future. You have to learn from your mistakes. Don’t drown in self-doubt, take the mistakes and move them towards enhancing your business.
4. Success isn’t easy
Look, if being a hugely successful entrepreneur was easy, everybody would do it. You need to keep the focus and intensity you brought on your first day all the way through to today. Create short term goals and objectives that give you endless purpose and a sense of achievement and use their success to drive you onwards towards your final destination.
5. Build in plenty of goalposts
Justify every decision and long-term goal through relentless measurement to ensure they are the right decisions. The last thing you want is to hit your goal in 10 years and discover that it wasn’t the right one, your business hasn’t gone anywhere and you’ve worked incredibly hard for nothing. The effectiveness of your time, decision making and execution is critical.
6. Define failure
What does failure mean to you? Understand how you define it and then use this as a barometer to define your idea of success. As long as you have clear objectives for both, you can assess your business, its effectiveness and your results. As mentioned in above, always set goals and objectives so you give your company and people a sense of purpose.
7. Your ideas aren’t always that good
Some of your ideas are not going to fly. They’re going to collapse with an embarrassed sigh. The lesson is that you should be constantly questioning yourself so when you are in a situation where your ideas don’t work, you can objectively examine why they failed and use these learnings to change and adapt.
There needs to be a healthy tension between learning through theory and practice. The latter is learning to win and to handle defeat in real time with real results.
Related: Your Business Failure is Your Fault
8. Get over it
It’s quite easy to wallow in your failure misery and lose years to personalised anguish. It’s harder to just get over it and move on. The thing is, it’s moving on that counts. Those who get up, dust themselves off and start again are those who end up thriving. The ability to compartmentalise and learn is invaluable as you take your business from your first idea through to a sustainable, epic enterprise.
How To Embrace An Exponential Mindset For Your Business
In the age of exponential technologies, it’s a risk not to take a risk.
Think global and exponential
If you’re an entrepreneur trying to establish a successful business, it’ll be dead before it even takes off, if you don’t build it for the future. You have to think three to five years ahead, so when it launches, it’s still relevant.
Think like former Canadian pro ice hockey player Wayne Gretzky, who said: “I skate to where the puck is going to be, not where it has been.” And these days it’s easier for entrepreneurs to predict the future thanks to technology and data insights.
Consider what Singularity University co-founder Ray Kurzweil calls The Law of Accelerating Returns. He says the only thing that’s constant is change and that change itself is accelerating exponentially. As per Moore’s Law, information-enabled industries are doubling their performance and halving their price every 18 months, according to the price-performance ratio. The field of biotechnology has managed to surpass that.
There’s no time to slow down, your business has to constantly evolve, and you have to keep asking “what’s next”. Encourage experimentation and innovation in your company. Innovation focuses on incrementally improving your already existing products and services, while experimentation allows for fresh outlooks and breakthrough strategies that leapfrog old ways.
We should reprogramme our linear mindset into an exponential one. Don’t aim to grow your business by 10 per cent year-on-year, but rather 10 times. The first thing I learned at Singularity University is the potential of exponential growth. If you take 30 linear steps, you only move 30 places, but if you move 30 exponential steps your place doubles with each step and by the 30th step, you’ve moved over a billion places.
We’ve seen this happen with unicorns – not the magical creatures, but start-up companies that are valued at over $1 billion within their first year – like Slack (cloud-based team collaboration tools and services) and Square Inc. (a mobile payment company). It once took around 20 years for American companies to reach the billion-dollar valuation mark, now it may take less than a year.
In the early stages – until your third step – your progress may seem linear. Many exponentially-geared companies give up at this point – just as their growth rate is about to explode. Persevere!
A few decades ago it was unthinkable for an individual or start-up to disrupt entire industries. Start thinking globally, not locally. Use staff-on-demand and crowd souring to propel your business ahead of the competition. It’s unlikely that you have the world’s smartest minds working for you, however with the power of the crowd, you just might.
If you’re struggling to find a solution, turn the challenge into a game and offer prize money. You’ll have thousands of people attempting to solve your problem, but will only pay for the best solution. Kaggle is a platform for predictive modelling and analytics competitions. It lets statisticians and data miners compete to produce the best models for predicting and describing data. Mining company Gold Corp placed its geological data online and offered money to anyone who could locate gold at their Canadian mine. Four of the five winning entries struck gold. And in 2011 it took a team of gamers 10 days to solve an enzyme riddle that could hold the key to curing AIDS.
The six Ds of tech
As companies become information-enabled they should internalise what Singularity University co-founder Peter Diamandis calls the six-step growth cycle of digital technologies. These Six Ds of Tech Disruption are digitisation, deception, disruption, demonetisation, dematerialisation, and democratisation.
The first step is digitisation. Once something enters the digital realm it gains the potential for exponential growth. Think of the radio and CDs. You no longer need either, instead you can stream online, listen via YouTube or download music. After digitisation, growth appears slow, even deceptive. Sadly that’s when many companies opt out. Be patient!
No one imagined Kodak would disappear after a century. Kodak thought they were in the business of printing photographs, while they were in the business of memories. Think about the need your business solves. Kodak invented the digital camera, but was too scared to disrupt its own industry. It didn’t realise that people were no longer taking photographs in the same way, so their competitors disrupted the industry instead.
Today, the camera has become part of the smartphone and photographs are predominantly shared via social media. Instagram epitomises the next step in the equation: demonetisation. With time technology becomes cheaper and even free. Instead of printing photographs, many people instantly share them on a free smartphone app like Instagram.
Next comes dematerialisation. The radio, camera, video recorder, GPS, calculator and calendar are disappearing from the physical world as they’re being built into the smartphone. The wallet will dematerialise next with the advent of online transactions and cryptocurrencies.
Finally, democratisation happens when government, corporates and the wealthy no longer hold control and masses of people have access. Just think, the average South African with a smartphone has access to much more information than the president of the United States of America had 20 years ago.
In the age of exponential technologies, it’s a risk not to take a risk.
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