Archive for September, 2014|Monthly archive page

4 rules for running a business

Many companies in mature sectors have been known to embrace the latest management thinking (or fad) to help cope with low market growth, margin compression and lack of differentiation. Examples of these “big ideas” include lean management, outsourcing, business process re-engineering, offshoring and, lately, social business and cloud computing. Despite considerable effort and investment, most of these firms have been unable to outperform their peers over the long term, often due to weak strategic fit, poor planning or flawed execution.

In fact, only 344 of 25,000 public companies analyzed in the Harvard Business Review by Michael Raynor and Mumtaz Ahmed of Deloitte consistently produced above average return on assets from 1966 to 2010.

What made these firms special? Two rules identified in the study — noteworthy for their simplicity, reliability and practicality — helped drive the extraordinary business performance. Below them, I’ve included two other rules for achieving exceptional performance well worthy of consideration.

Better before cheaper

Companies need to focus first on service, quality, design or distribution — not on being the lowest-price competitor. Non-price differentiated brands tend to command richer margins, which can support further product and marketing investments, which, over time, further sustain the firm’s competitive position and profitability.

Revenue growth before costs

Leaders should prioritize top-line revenue by driving volume gains, competing in growing categories and taking advantage of every opportunity to maximize pricing. Volume increases also bring other benefits, including scale economies and channel optimization, which help drive down operating costs and block out competition.

Brands matter

“Brand equity might be the only asset that consistently generates differentiation, higher margins and long-term revenue streams,” says Jerry Mancini, president, Dole Packaged Foods Company. “Dole’s focus on value, quality and brand-building has helped deliver almost 100% brand awareness in close to 100 countries. This allows us, for example, to provide transient consumers around the world with the same quality and unique products they are familiar with, wherever they go.” This strong brand equity has enabled Dole to more easily tap new markets and categories — and drive higher volumes.

Maximize human capital

“Competition, technology and customers are never static,” says Paul Bruner, a partner with McCracken Executive Search. “The key to long-term success is attracting and developing leaders of exceptional character, with the brains, passion and resourcefulness to adapt to and lead through changing circumstances.” Organizations need to focus on recruiting and training the right employees and reinforcing positive behaviours through innovative training and compensation programs.

To be clear, the above four rules suggest a direction, not specific strategies and tactics; it is up to management to make the tough strategic choices and back them up with good plans and sufficient investment. Leaders still need to understand where they should compete (i.e., which markets with which value proposition) and what they are especially good at (i.e., organizational and asset fit). They’ll also need to support their mission by assembling the right capabilities and cultivating them through a culture of continuous improvement and adaptability. Finally, the company and shareholders must recognize they are playing the long game — they will need patience and resilience as well as management systems that reinforce long-term thinking.

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

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Maintaining a winning customer experience

A customer experience strategy is an amalgam of practices, systems and values that guide interactions with customers and prospects across different sales channels, platforms and geographies. In an increasingly competitive and commoditized marketplace, creating a ‘wow’ customer experience is one of the few tools left for companies to retain customers, sustain margins and build a long-term competitive advantage.

Elements of a good customer experience strategy include customer-centric process design, passion-driven employee engagement, coherent interactions across multiple touch points and operational integration. Companies as diverse as Nordstrom, Lexus, Disney and Singapore Airlines have built industry-leading market share, profitability and shareholder value by consistently delivering ‘wow’ (i.e., higher than expected) customer experiences at every interaction.

In many cases, however, designing the ideal experience is the easy part, particularly if it is built on a foundation of product, brand and service excellence. The tougher challenge is maintaining this capability over time. Companies can preserve their winning customer experience by (1) developing real-world measurement systems, (2) institutionalizing key values and (3) staying close to changing customer needs and requirements.

Dropping the ball

Ten years ago, my company worked with the functional teams of a large IT solutions company to develop a customer experience strategy for their sales, support and professional services. The model was developed by working backward from their desired client interaction, and tailored to their different segments, customer types and channels. The new customer service strategy embraced every touch point, from the sales teams scripts and customer on-boarding practices to support triaging and billing processes. After only 12 months in market, the new model was credited with boosting loyalty as well as cross selling rates.

Three years out, however, the firm’s growth stalled. The metrics showed declines in customer satisfaction, online engagement and service levels. A deeper analysis indicated that their customer experience had degraded due to a variety of factors: changing client requirements and expectations (they went higher); a lack of organizational continuity (increased turnover of front-line staff prevented the inculcation of customer experience values into new employees); and clumsy integration of new enterprise software (which reduced service levels and complicated processes). Ultimately, a gap had developed between the initial customer experience strategy and its supporting capabilities.

Sustaining your customer experience strategy

Companies can preempt these issues by better institutionalizing their customer experience management practices and values. Some ways to do this include:

  • Frequently research your customers to stay in sync with their dynamic needs and requirements as well as ensuring your customer experience is consistent through new sales and support channels.
  • Make cultural fit and internal alignment a priority. Every customer-facing employee must inculcate customer experience purpose and values (e.g., ‘the customer is always right’). Rotating customer ownership through senior leaders in key departments is a good way of keeping focus and alignment.
  • Develop early warning systems to track progress, identify problems and generate learnings that can improve existing programs. These systems should track actionable metrics that align to each department’s and individual’s performance goals.
    A Canadian leader

One company that does a good job of maintaining a compelling customer experience is Sun Life Financial. The insurance and wealth leader did all the right things when they designed their customer experience in 2012, such as linking the program to key business metrics and adopting a global and holistic business view. Moreover, Sun Life Financial did not leave the program on auto-pilot.

To ensure focus and follow through, Sun Life Financial created a global working group made up of senior leaders from many departments, including marketing, finance and operations. This group meets often to track and review a variety of customer metrics, including net promoter scores and how they are tracking against improvement measures across all lines of business, as well as to review the latest customer and brand research. Importantly, they are not a corporate rubber stamp body: Their strategic mandate includes exploring opportunities for scale economies, sharing learning between regions and businesses and recommending changes in tactics (if necessary) so that customer needs are placed first and foremost.

“Our customer experience program reinforces the philosophy that the customer is at the centre of everything we do,” says Mary De Paoli, Executive Vice-President, Public & Corporate Affairs and Chief Marketing Officer, Sun Life Financial. “Delivering exceptional customer experiences requires a commitment to asking your customers, regularly, how you can improve the products and services they depend on from you. We believe this is the number one driver of the long-term success of our business.” Although it is still early days for the working group, the program has been credited with creating a winning online experience and better enabling the channel (e.g., plan sponsors, brokers and consultants) experience.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Unleash performance

Every company wants to improve margins, be more agile and generate higher levels of innovation — and they often spend a considerable amount of effort trying to get there. Improving business performance, however, is easier said than done. The executives we speak with bemoan their organization’s challenges such as lack of flexibility, poor employee engagement, and stagnant productivity. Is this feedback the entire story, or does something else account for the gap between intent and results?

Any productivity and performance discussion inevitably comes down to what the employee is doing and how does the organization enable their success. When we ask workers what frustrates them we get an earful. The first culprit is their long task list, which often limits focus and follow through on any one activity. Their second frustration is the need to adhere to corporate policies and practices that seem to be disconnected with their performance priorities and the firm’s strategic goals. Both these issues have a basis in two important but often unexplored areas.

Psychological barriers Individual frustration with their workload has some form of psychological underpinning. While many managers complain about being overloaded with responsibilities, very few are willing to jettison any of them. For one thing, they are hesitant to stop things because they don’t want to admit that they are doing low-value or unnecessary work. This is especially true in recessionary times or when firms are in cost-cutting mode. Second, some employees are workaholics who take pride in having a full plate. These individuals will take on more work even when they know it’s counter-productive for them or the company. Finally, many people fall victim to the sunk cost fallacy i.e. they are reluctant to quit something after they have invested so much time and reputation in it. Productivity strategies that fail to address these psychological considerations will likely fail.

Organizational dynamics Well-meaning, but onerous, corporate norms and practices can drag down operational performance and drive up hidden costs. Examples of these obligations include the need to regularly engage multiple stakeholders for input or buy-in even when they are not critical to an initiative’s outcome, or; the requirement to perform certain time-consuming, administrative tasks that generate more effort and cost than they were intended to save. These types of over-management can have unexpected consequences. For one, it creates an organizational paradox: companies regularly start new things — forms, committees, initiatives — but have a much harder time stopping ones that exist. The result is ever-increasing complexity. Furthermore, when managers over-react to problems by instituting new policies or processes, they can inadvertently reduce business performance by distracting people from their objectives, fragmenting their effort and slowing down operational tempo. Leaders need to carefully consider the long-term implications before adding or changing processes and practices.

The interplay of all of these factors drive organizational complexity, extend project lead times and foster operational inefficiency. Given the powerful institutional and psychological factors, how can you unshackle your organization?

Plan better

Leaders need to take into account their firm’s actual capabilities and capacity during their planning exercises. This allows them to better match their resources and skills with project and activity demands. Furthermore, using portfolio management methodologies can help pre-empt misaligned priorities and resource conflicts.

Tweak the performance management system

There is a strong correlation between what workers are measured on and how they behave. Many companies evaluate employee performance based on effort and number of tasks, not results or value. While effort should count for something, performance measurement systems must prioritize individual value creation on strategic or “lights on” activities that link directly to key goals and key performance indicators, not “busy work.”

Focus on strategic execution

As every company knows, execution is often the difference between a winning strategy and business failure. Looking at execution “strategically” and not as an afterthought can significantly improve project outcomes and reduce cost. For example, there should be clear visibility across the organization to what is being done, where and by whom with particular clarity and alignment as to “who owns what” decisions and interdependencies. All projects and practices should be regularly evaluated for relevance and efficient deployment. Finally, each project and committee should have a charter, which stipulates end-of-life dates so people understand things come to an end.

Address collectively

The best way to accelerate individual and initiative performance — given their psychological and cross-functional basis — is to employ a cross-functional team to analyze and tackle the root cause problems. This approach, though time-consuming, ensures issues become visible, collaboration is maximized and cross-organizational action is triggered.

For more information on our services and work, please visit the Quanta Consulting Inc., web site.