Posts Tagged ‘value’

Time for a Change #23: Getting Your Team into Flow

by William Reed on August 16, 2012

Individual and Team Flow

No one truly works alone. We all depend on other people to earn and provide a livelihood. But the quality of our work experience, the quantity of our productive output, and the sustainability of our engagement all depend on the degree to which we are able to maintain individual and team flow over time.

Individual flow is often described as an experience of relaxed concentration, the enjoyment of high performance, challenge, and mastery. Athletes call it being in the zone, musicians in the groove, business people call it full engagement.

Alas it is easy to be pulled out of individual flow by a mismatch of talent and task, leading to boredom or anxiety; and by a mismatch of team energy, whereby other people pull you out of flow. You are in flow if you have a real reason to go to work. You have a passion for what you do. You would do it anyway, and not just because you are getting paid. Considering how much time and life energy we spend on work and careers, finding your flow is urgent and important business.

To gain deeper insights into your individual and team flow take the Talent Dynamics Profile Test online and get immediate results in the form of a profile graph and detailed report. Visiting the website will also help you learn more about the 8 Talent Dynamics Profiles shown in the illustration, and how this approach is used in business.

Team members also depend on one another to get into and keep working in flow. This requires an appreciation of differences in styles and strengths, and the ability to communicate and collaborate with people who share your workspace. This cannot easily be achieved with just a pleasant smile and a cooperative attitude. Once you understand the profiles, strengths and weaknesses, and flow requirements of each individual in your team, it is easy to understand who and what is missing in your composite profile. This will also help define your identity and style as a team, as well as help you determine and attract the outer edge supporters and providers who can help balance and fortify your team.

A high performance team is a priceless asset. Think of what happens to a band when a key member leaves, or how highly interdependent are the members of a sports team. The team’s performance is highly dependent on the team and team members remaining in flow.

Shared Mission and Motivation

Sun Tzu’s classic strategy on winning without fighting applies equally well to what happens inside the team, as it does to the opposition. To be successful it is critical that the team have a shared mission, which is more than a mission statement. What holds it together is an emotional commitment, the genuine feeling that we are in this together.

Working together should be a pleasure, your team an extended family. The team that plays together stays together. Having fun at work makes it easier and more natural to socialize with your team outside of work, within the bounds of friendship, and not as a forced obligation. All for one and one for all is not a bad thing to aspire to if it is felt from the inside.

Shared motivation is the other half of the coin that keeps the team together. Motivation depends on a good match of talent and task, role and responsibility. Players in position, passing the ball to the right person at the right time, and celebrating your success. Talent Dynamics gives you a framework for determining both roles and strategy.

Life/Work Balance

One challenge of full engagement in your work is that it can absorb time, money, and resources that might otherwise be devoted to health, financial planning, family and friends, study, personal development, leisure, or even volunteer activities. Almost by default your work will occupy the lion’s share of your time. Hopefully it will also make the other areas of your life better, but the balance is likely to be asymmetrical.

Management guru Peter Drucker found that people who were only successful in business were often quite unsuccessful and unhappy in other areas of their life. Revisit Drucker’s thinking on this through a book by Bruce Rosenstein, who interviewed Drucker at the end of his life, which I reviewed in a separate article, Living in More than One World.

Value and Leverage

Looking at the Talent Dynamics square in the illustration, you can see it as composed of a vertical Value axis, and a horizontal Leverage axis. To a business, Value represents the things that its customers are willing to pay for, its products and services. Leverage represents the way in which value is made known and available, through its people and systems.

The questions to ask on the vertical axis are what is it worth and when? DYNAMO energy in the green triangle is where you find innovation and ideas in the form of products; whereas TEMPO energy in the yellow triangle is where you find timing and sensory experience in the form of services.

The questions to ask on the horizontal axis are who will deliver it and how? BLAZE energy in the red triangle is where you find people who can make the company’s value known and available; whereas  STEEL energy in the grey triangle is where you find the systems and distribution mechanisms which make the company’s products and services readily available.

Making Magic

The Great Multiplication is where you multiply Value X Leverage, which results in sales and profits for the company, as well as increased value delivered to the customers. Companies which do this well over time are able to grow and continue to deliver additional value to customers at higher levels. Amazon.com started out as an online bookstore, but now sells all kinds of products in many consumer categories. It also offers customers a chance to resell used books, and even has a credit card service. They deliver more things, faster and more cheaply, so they continue to grow. But behind the scenes, this is all made possible because many of the individuals and teams working at Amazon.com are themselves in flow. Companies which drive sales and performance by forcing their people out of flow are not able to sustain growth.

Who are gonna call to make magic? Call EMC Quest and we can show you how to make the most of your energy, mind, and creativity when it is time for a change in your business.

For a summary of this article and reminders of next steps to take, download a PDF file COLLABORATION MANDALA.

Time For a Change #16: A Rewarding Business

by William Reed on May 31, 2012

Finding your path of least resistance

To better understand the Wealth Dynamics Square featured here, a brilliant creation by entrepreneur and founder of Wealth Dynamics, Roger J. Hamilton, it is best to start with the Wealth Dynamics Profile Test, which gives you a measure of where you start, and how far you can go, as well as which direction represents your path of least resistance to Wealth.

Even if you are not an entrepreneur, it will help you understand Wealth Creation, which is a major function of any business, and increasingly an imperative for educational institutions and non-profit organizations, which cannot depend on donations to keep their operations afloat.

There isn’t space here to go into the details of the 8 profiles, except to note that they are supported by successful entrepreneurs and business models in each category, and based on the concepts developed by Carl Jung, and derived from Asian philosophy. More importantly, the Wealth Dynamics Square is like a codex for understanding how people interact with people to create the ideas, networks, products, services and systems that make the business world go around.

Keeping your perspective

There are so many elements to manage in business that it is easy to lose your perspective. By focussing too much on one area at the expense of others, it is easy to win the battle but lose the war. The Mandala Chart can give you flexible focus, like a zoom lens which can look at the bird’s eye view of the whole, the insect’s eye for detail, and the fish’s eye for the connections.

As a guide to navigating and actually applying the concepts in the Wealth Dynamics Square, I suggest 8 categories you can use for Business: Value, Leverage, Wealth, Business Model, Strategy, Platform, Resources, and Network. Download a BUSINESS MANDALA featuring key questions for each of these categories, so that you can begin to create your own customized approach to a rewarding business.

A. Value

Without value you have no business. The challenge is that the value that is obvious to you may not be obvious, and may not even be noticed by the people who have the ability to pay for it. To be successful you need to create value, brand and package it in a way that is easy and attractive for others. This is an ongoing process, if your business is to survive the eroding forces of competition and shifting values. You must have energy and commitment to be at your best.

➀ What is your Wealth Profile, your path of least resistance?

➁ What is your personal platform, you means of showing your value to others?

➂ What is your process and plan for increasing your value over time?

Click here to find out more about the Wealth Dynamics Profile Test.

B. Leverage

Value without leverage is mere potential, a good idea waiting to be implemented. Leverage is how a concept is made known, tangible, deliverable, and ready to use or consume. Leverage is made possible by working with people in complementary profiles who can carry the concept forward into action. It depends on trust, tools, and systems for reliability.

➀ Which profiles offer the most leverage for your value?

➁ What strategies outside of your profile can you engage in to increase your leverage?

➂ What is your process and plan for increasing trust among your leverage partners?

C. Wealth

According to Roger J. Hamilton, Value X Leverage = Wealth (V x L = W). This is higher level of value for business partners, customers, and society, and the reason why a business stays in business. It is also what contributes to the lasting value, or legacy of the business.

➀ What types of value will you create for your business partners and stakeholders?

➁ What type of value do you create for your customers?

➂ What value do you create for society, and what legacy will you leave?

D. Business Model

All successful businesses operate on a structure, or business model that keeps processes running smoothly, and is the key to duplication, repetition, and sustainability. Some business models can be copied, as often happens with franchises. However, the ultimate success depends on the people involved, and not the mechanics of the business.

➀ What are the key elements and processes in your business model?

➁ Can you articulate them in the Business Model Toolbox?

➂ Do you have agreements or contracts in place to communicate and protect your business model?

Click here to learn more about business model generation, as well as tools for generating your own business model.

E. Strategy

While the business model is the vehicle, strategy is the map, the plan that shows where you are going and how you will get there. Strategies should allow flexibility to adapt the plan as you go, without losing sight of the end goal.

❐ Do you have scenarios and simulations for your business potential?

❐ Do you have a business plan?

❐ Do you have a platform for implementing your Strategy?

Click here to learn about a tool that can give you Accelerated Action with GOALSCAPE

F. Platform

In a world which is flooded with information and driven to distraction, you need a platform to be noticed, and to attract people to your products and services. Although there seems to be no limit of choices in how you build your digital or analog platform, the options are increasingly affordable and provide greater reach at a lower cost. The effectiveness of your platform depends on having a sound business model and a good strategy.

❐ What is your digital platform, website, social media, software?

❐ What is your analog platform, brochure, business card, one sheets?

❐ What is your process and plan for leveraging your platform?

G. Resources

No business can last without resources, not only financial, but information, contacts, ideas, all of the things that support and sustain your business as it grows. Pay close attention to and protect your resources.

❐ Do you keep an inventory of your resources?

❐ Do you polish, protect, and use your resources?

❐ What is your process and plan for outsourcing when you do not have particular resources?

H. Network

Ultimately it is the people in your network who make everything possible for your business. You need to identify who they are, and take care of your network well if you would have people take care of you in turn.

❐ Who are the people that can help you?

❐ Who are the people that you can help?

❐ Do you have a process and plan to cultivate and increase your Wealth Network?

Click here to read about the anatomy of your Wealth Network

Developing a rewarding business is hard work, but it becomes easier once you identify and coordinate the elements that support it. The great thing about being or even thinking like an entrepreneur is that you navigate your own course, rather than following instructions to navigate someone else’s course. Use the Business Mandala to keep your perspective and develop your work into a rewarding business.

Two factors comprise the market potential for any product or service – demand and attachment.  Demand is about quantity – how many people want what you sell.  Attachment is about quality, how much do people want what you sell.

There are some products and services for which there is obvious demand.  For example, almost everyone needs a grocery store, a cell phone and the occasional cup of coffee. Universal demand creates extraordinary opportunity.  But universal demand also spawns burgeoning supply and intense competition.  The harsh reality is, in virtually every sector, supply exceeds demand in a way that isn’t cyclical.  We’ve crashed full speed, head first into a world where we have more stuff to sell than people want to buy.  And yet, a number of companies in highly contested categories are growing dramatically, even exponentially.  How do they do that? What’s their secret?

Attachment

Their secret is attachment.  Attachment is about how much your prospects and customers value the product or service you provide.  It’s about the extent to which you improve their lives.  And at the highest level, it’s about how your product or service defines or supports your customer’s aspiration and self-image.

There are five fundamental value platforms – what you might think of as the five basic reasons that any customer is motivated to make any purchase.  They are:

  • Price/Value
  • Location/Convenience
  • Quality/Functionality
  • Style/Status
  • Experience/Lifestyle

The platforms of Price/Value and Location/Convenience are rational platforms and very seldom create much attachment.  If a Walmart customer discovers that Target has a lower price on laundry detergent this week, that Walmart customer will probably hot-foot it over to Target and load up.  She’s not attached to Walmart, she’s attached to the low price, which is relatively easy to replicate.

At the other end of the spectrum, a Nordstrom’s shopper who is motivated by Style/Status or Experience/Lifestyle is unlikely to darken the door of JC Penney, even if JC Penney has the same item at a lower price.  Style/Status and Experience/Lifestyle are emotional platforms.  They have the potential to invoke powerful feelings and create strong attachment which are almost impossible to replicate.

Effect of Attachment

Let’s think about the effect of attachment in one of the categories with universal demand, grocery stores.  Have you ever met a customer of Trader Joe’s?  They are borderline rabid.  Given half a chance, they’ll regale you (endlessly) of their Trader Joe’s favorites:  Two Buck Chuck, Green Papaya Salad, Mango Butter or Chili Feta.  To say these folks are attached to Trader Joe’s might be the understatement of the century.  And that attachment translates directly into revenue.  Think about this:  According to Fortune Magazine, Trader Joe’s averages $1,750.00 per square foot in sales.  That’s more than double the sales per square foot of competitor, Whole Foods Market.

Now let’s turn our attention ro cell phones.  Ever try to pry an iPhone out of the hands of an Apple fanatic?  That’s attachment in every sense of the word, attachment that has led to astonishing growth for Apple.  Since being released in 2007, well over 100 million iPhones have been sold and Apple has become the most valuable tech company on the planet.

Attachment means your product has become an essential, even indispensable, part of your customer’s life.  When that happens, you have a shot at exponential growth that few can match with, let alone surpass!

Lessons From Our Past

by Guy Ralfe on February 3, 2010

I have been riding the Massachusetts Bay Transportation Authority (MBTA) Commuter rail service for 5 years and the service has not changed much in this time, but year on year the cost of a ticket rises, often more than inflation. In addition the daily parking rates received a 100% increase a year ago supposedly to help cover MBTA staff costs and yet the only way you can pay at most stations is by stuffing one dollar bills through a slot – no monthly contracts, pay by credit card etc that are commonly available in many municipal parking lots across the country.

I am moaning but I am trying to make a point here too – on February 1, 2010 a new rule has been put in place where commuters must only board where there is a conductor present. In effect about a 30% reduction in the number of places to board a train that already only has an entrance at each end of the carriage. I doubt in the history of rail service, its  origins date back to 1889, has this situation ever been the case and it is sad that our modern day educated commuter cannot let themselves on or off a train unescorted.

Most commuter systems around the world are being redesigned to eliminate the human element and to abstract the ticket management to before the actual commute, which is the prime purpose of the conductors on the MBTA. Even the T, the metro system in Boston, running alongside this same service operates with just a driver.

What I observe happening is that people with power today are making decisions because they operate in the vacuum of state/municipal organization, thinking they are immune to the consequences of the value their organization produces. At the end of the day the leaders of the MBTA are exposed to the same market pressures as any other free market business.  When the marginal utility or value does not exist passengers will consider alternative means of transport – it has happened before. When the cost of operation exceeds the value paid by customers and from the state taxes, it will draw significant attention by both disgruntled commuters and non-commuters who will see it as a waste of their tax dollars. It will not be perceived as a necessity but a problem.

Where there are problems there are opportunities… successful businesses thrive on the vulnerability of these sorts of problems. When opportunistic businesses, observe organizations entwined by their own history, they quickly swoop in with fresh ideas not constrained by the existing historical standards and cultures. Today’s impossibilities will become tomorrow’s opportunities. These options will sound welcoming and fresh to a disgruntled commuter and tax base. Although things generally move slowly in state/municipal processes once a movement starts it is hard to stop the momentum of the masses.

When this shift takes place it will become quickly apparent that even the state/municipal organizations are competing in a global marketplace irrespective of if the infrastructure is immovable such as in a train infrastructure. People and organizational practices can always be changed – it depends who holds the most compelling and valuable story at the time, which is what business is essentially. There are many transport service companies all over the globe that given the opportunity, and having no sentiment for existing established policies or traditions, will gladly start anew – possibly without a conductor or possibly one to keep all the doors open for their valued customers.

No customers  = no service, the value has to be there, and if you are not producing value with existing assets and opportunities there are a lot of companies out there determined to make better use of established assets like a rail network. Of late has been the acquisition by Warren Buffett’s Berkshire Hathaway investment company of Burlington Northern Santa Fe, the nation’s second-largest railroad for $34 Billion, their biggest acquisition yet.

Surprisingly this lesson has not been learned by the MBTA where this situation has already transpired in Boston’s Transportation History to quote

“The West End Street Railway had a virtual monopoly on all streetcar lines in greater Boston, but high profits, poor service, high fares and a general lack of concern for the public had resulted in alienation of the West End’s management from its customers. On December 9, 1897, under the supervision of the Transit Commission, a lease was entered into with the West End Street Railway by which the property of that company was leased to the Boston Elevated Railway Company”

Remember I told you so!

Quality #10: Inspection can be a waste if…

by Tanmay Vora on November 20, 2009

Quality InspectionWelcome to the tenth post in this 12-part series on QUALITY, titled #QUALITYtweet – 12 Ideas to Build a Quality Culture.

Here are the first nine posts, in case you would like to go back and take a look:

  1. Quality #1: Quality is a long term differentiator
  2. Quality #2: Cure Precedes Prevention
  3. Quality #3: Great People + Good Processes = Great Quality
  4. Quality #4: Simplifying Processes
  5. Quality #5: Customers are your “Quality Partners”
  6. Quality #6: Knowing what needs improvement
  7. Quality #7: Productivity and Quality
  8. Quality #8: Best Practices are Contextual
  9. Quality #9: Quality of Relationship and Communication

#QUALITYtweet Formal inspections can be a

huge waste of resources if you have not invested

in getting it right the first time

The goal of any process improvement initiative is to prevent same problems from occurring again. New problems are an opportunity to identify areas of improvement but same problems occurring repetitively is a sign of stagnation.

As someone rightly said, “Quality can never be inspected in a product; it has to be built first.” Processes have to help identify the quality expectations from the customers and translate those expectations into a practical action plan to build/verify quality constantly.

Inspections done at the tail end of product life cycle can eat a huge chunk of your budget because later the problems are found, costlier the resolutions. On top of that, if you have not “engineered” quality in a product, inspections can be a huge waste. You can never verify something you have not built upfront.

In manufacturing world, it is very unlikely to find that a component is inspected after it is integrated in the product. The very idea of inspecting everything after completing all product development is a dangerous one – one that has many business and financial risks associated with it.

This is where “prevention” is always better than “cure”.

Don’t get me wrong. Inspections are still one of the best ways to find problems. The timing of inspection is very important.

When inspections are done earlier in development process:

  • Fixing problems is less costly
  • Early identification of critical risks helps you manage them proactively
  • Lower risk of failure at the end

Following are some very simplified guidelines on how inspection activity can be leveraged to generate value and lower risks for your customers. Each one of these points can be a process in itself.

  • Know customer’s quality expectations early and educate team
  • Clarify the exact customer requirements (and be ready for change)
  • Give thoughtful consideration to a robust product design
  • Plan actions to ascertain that quality expectations are built in the product
  • Inspect Early and Inspect Often in cycles
  • Each cycle of early inspection reduces risk of failure
  • With this, final cycles of inspection can focus on “value-delivered-to-customer” rather than “defects-found-at-the-tail-end”.

The process of inspection can be your biggest asset if you have invested early efforts in building quality and then inspecting it. Else, it can be a huge waste.  Reduce this waste and you will automatically start forming a culture where “building quality” always takes precedence over inspecting. Your journey towards a quality-oriented culture begins there

It is the ROI, not the ROC, Stupid!

by Himanshu Jhamb on September 30, 2009

ROI ROCIn my earlier post on June 10, 2009 I shared an example of what ROI looks like. In this post, I am writing about if ROI is not seen as ROI, how your possibilities get killed even before you start to act on them. This happens when customers confuse the ROI (Return on Investment) with the ROC (Return on Cost).

ROI is a constitutive component of how we measure Value; so needless to say, it is a critical part of how we choose to transact (or not), in any situation. Then there is the Investment which is a critical part of the ROI. The biggest pitfall is how this shows up for your customers. Consider this example:

You are at the crossroads of your career. You work very hard at your job, day in day out… day in day out… day in day out… you get the picture. The more hard work you put in, the more of the same results are being produced (e.g. getting only a 2-5% raise year after year after year… ). There is no certainty of the promotion you’d hoped you’d get in your upcoming review. You met your goals, you fulfilled your promises and all that happens at the time of review cycle is you’re told the company did not meet its numbers so you’ll just get a 2% raise or worse, nothing at all.

At this point, you say “This is not working”. I need to go learn some new things. I need to look for where I can get more education… different education and with that you set out looking for it. Then you come across two choices; one education costs $20,000/year and the other $2,000/year. This is the crossroads at which you make a choice and the importance of this choice is huge because it will have an impact on perhaps your entire life.

The choice is made in how you think about this. Before I go further lets clearly distinguish that the “I=Investment” IS NOT “C=Cost”. Cost is usually thought of as something you have to pay in order to get something else RIGHT NOW. Investment is thought in the context of something you have to pay in order to get something bigger (than what you paid) in the future .

Most people look at the ROI as the ROC and that conversation closes the opportunity there and then. So, when you are talking to your customers about the value of what you are offering, make sure you CLEARLY bring forth that the price tag associated with your offer, is not a COST to them, it is, in fact an INVESTMENT, that they are making into a future possibility that will MORE THAN cover the investment they are making at that point.

If they still insist on looking at the “I” as the “C” ask them a simple question: “It is clear that you have considered the Cost of doing this. Have you considered the cost of NOT DOING IT!”

Try this in your next conversation. It works in bringing forth the ROI very clearly… and the results will show for themselves.

No one wants to see your Demo

by Wayne Turmel on September 21, 2009

dreamstime_9754785I have bad news for anyone who does product demos over the web: No one wants to see them. Seriously. Once you realize that it will be much easier to sell your software.

To clarify: They might have signed up for a demo OR they might have clicked a box on your website asking you to please schedule them for one OR they might have even agreed to watch it to learn what you’ve got, but they probably “want” to see it like you “want” to go to the bank on a long-weekend Friday. The point is: Yes, it does serve an important function but it’s no one’s idea of fun.

Understanding what customers want in a demo is critical in changing the demos from time-consuming events that are a necessary part of the sales process to a step in a shortened sales cycle that helps customers get on with their lives and makes them glad they met you.

Here are some tips – I apologize for any hurt feelings:

  • Customers have only one question on their mind- “Can this thing solve my current business problem?. If the answer is yes, you’re on your way to a sale, if it’s no, don’t waste their (and your) valuable time. Ask plenty of questions before you start presenting, even if it means you never get to actually demo the product. And don’t take all day getting to the stuff they care about or you’ll lose them.
  • Buyers don’t care how cool your technology is This one is a little hard to take, especially since many of us doing demos built the products in question and are quite impressed with it ourselves. The genius of your algorithm or the glory of your GUI means nothing if it doesn’t help the customer in some way: either it helps  them generate more revenue, lower their cost or simply makes their job easier. Lots of us like to show off all the features because it’s “value added”. Since it’s not valuable unless the customer says it really is, in most of the cases it’s really “time added”, and not “value added”.
  • Don’t talk like a programmer Odds are that early in the sales cycle the person watching the demo is not as technically adept as you are. They are probably not even IT people – they’re in Finance, or Sales or even HR- whichever group is actually going to use it.  Use a “programmer-to-mortal” dictionary if you have to and use their language not yours.
  • They need to know you understand their issues Two things will help put them at ease.
    • Tell success stories that relate to their business. If they’re a small business, don’t just tell them IBM uses your product and loves it (they’ll think you’re too complicated and expensive). Conversely if you’re selling to a big enterprise, don’t just tell them about the little company that uses it (you won’t scale to their needs). Make your success stories relevant to their business.
    • Use their examples. If they are in HR, show them how to do the task they need done. Don’t use a sales example to the IT group. And if they call it a “screen” instead of an “interface”, you can too.

    No one signs up for a web demo with a Slurpee ,a  jumbo bag of popcorn and a comfy chair. They want their questions answered, their problem solved and their lives back. You probably have better things to do, too.  Stop treating demos as presentations and more like sales calls and you’ll go a long way in achieving the purpose of the demo!


    Wayne Turmel PicThis article is contributed by Wayne Turmel, the founder and president of GreatWebMeetings and the host of The Cranky Middle Manager Show podcast. You can follow him on twitter at @greatwebmeeting.

    How and Where to Leverage Your Power

    by Guy Ralfe on August 26, 2009

    One million dollar question is –

    Big fish in a small pond or small fish in a big pond?big fish small pond

    As I was pondering on the above question, I couldn’t resist reflecting on my conversations with my Father a few years ago.

    So, here is some background:

    My father always said to me – “It is better to be a big fish in a small pond rather than to be a small fish in a big pond.

    This comment was typically in reference to divisions that he would transact with when it comes to banking, accounting, legal etc.

    I particularly remember his choice to bank at the local branch when many of the other businessmen he interacted with drove many miles to have an account at the supposed Main branch of the bank in the nearest city.

    A relative of mine was one who believed in dealing at the main branch, he spoke of only getting an appointment with the manager if they booked well in advance. He often complained of the effort it took to get loans approved and how the service was consistently on the shoddy side, but they still stuck with banking at the main branch because it made them feel they were a part of something big and important and this was where all the power was.

    On the other hand our bank manager was our account manager. On many occasions they visited us and discussed business as long as it took. I recall the manager staying for lunch on many occasions. When we went to the branch we were always known and treated as a valued client. The support staff often knew what we were coming into the branch for, as they recognized us from a previous visit or when we spoke on the phone.

    When it came to requesting new business loans people were often surprised how quickly my father could get an approval, what good rates he was able to secure and the extent of the leverage on the account the bank was prepared to offer. We were not getting any preferential treatment or having any rules flaunted for us, but still things were moving fast.

    The reason: It was the relative power we held at the small branch that gave us the advantage.

    Let us analyze what happened a bit more.

    Let us assume that the average transaction value as a metric of worth to the branch.

    Typically, the Main branch where the average account is of large corporations, requiring extensive services and producing large revenues for the branch. Assume the main branch had an average transaction of $50,000 and the local branch had an average transaction of $5,000.

    If my average transaction is $10,000, at the main branch I will be an “expensive” customer – who costs a lot to service per transaction. At the local branch, I will be one of the higher contributors to the banks operations and so will be deemed a more favorable client. The local branch will likely go out of their way to keep my business as I can better help the branch meet its goals. Note in both instances I have the same average transaction value.

    So my circumstances are the same but the situation values them differently.

    The results my Father experiences to this day are due to this relative valuation. Both branch managers have access to the same credit and loans departments, but you can see how the local branch manager is compelled to present a stronger case for a like request than the main branch manager would.

    So, my point:

    This is the way the marketplace works. Always be conscious not only of what offers you can make, but where you make them.

    Be the big fish by choosing the right pond!

    Manage that financial belt…or it will get you!

    by Guy Ralfe on July 15, 2009

    tightening-budgetsEntrepreneurial business ventures have the same business concerns as their conglomerate competitors – they all want to turn a profit. They want their revenues to be significantly larger than their costs.

    Keeping it simple, to increase profit we have two approaches:
    ~ increase our revenues relative to the cost
    ~ reduce our costs relative to our revenues

    During times of economic prosperity companies often deal with challenges associated with growth, in their operations, by sacrificing operational efficiency. Typical examples are acquiring equipment when we expand our orders rather than reworking the scheduling; hiring additional staff rather than reorganizing the process.

    I will use an example to simulate a company going through a growth and contraction to highlight the effect:

    A sample company produces 1000 widgets per month at $5/piece, produced by 2 machines costing $2,000/month each. Throughput is 500 units per machine.

    Through economic prosperity, production increases to 2,000 widgets per month, however this production requires 5 machines because along the way as each successive machine is acquired, the sudden capacity relief resulted in a decline in efficiency. This efficiency is not regained as you approach each successive machine capacity limit. Throughput is now 400 per machine.

    In a market contraction,  production reduces back to 1,000 widgets. This is half the peak value so the machines scale back at this new throughput rate of 400 units per machine (1000/400=2.5) This requires 2.5 machines which we obviously can’t have, so now we need 3 machines to produce our 1000 units per month.

    If we look at these three scenarios from a profit margin point of view (below) the accumulated inefficiency during growth has a drastic effect on the profitability when operations have to be scaled down. This example used machines but the same concept applies to all resources.

    chart numbers

    Going back to the factors that influence profitability, this translates into value, which is what we are prepared to pay for items:

    • the value produced for customers through product offerings – this will preserve the revenue side of the equation through both expansion and contraction.
    • the value to the organization of resources (assets, employees, cash) – cost is the component that seems to creep out of hand quickest and can be difficult to reign in again once you have established a lower value to the organization. This usually shows up in falling utilization (% of productive time) and realization (% of potential revenue)

    The market is cyclical and the challenges faced in prosperity are the same that will haunt you during contraction. So as your business grows, pay attention to which notch you keep the belt on!