Monthly CEO Challenge for July 2010
8 Ways to Listen to Your Market
by Jane Adamson :: July 6th, 2010
Look OUT, not IN! If you’re following our CEO Challenge articles, speaking or consulting work, you’ve heard this mantra a lot. More often than not, answers to your most important business questions aren’t inside your organization; the answers lie out there with your customers. As Betsy Morris wrote in her excellent Fortune Magazine article The New Rules, “No business can afford to focus its energies on its own navel. An inward-looking culture can leave firms vulnerable in a business world that is changing at a breakneck pace.”
Tough questions
We constantly stress how you must understand what’s important to your market. What problems are they facing? How is your firm REALLY doing at solving those problems? How do they make decisions? What’s the image they have of your firm versus your competitors? How much value do you really bring? How consistent and predictable is your service? Do you know what your customers wish you did better? And so on.
You’ve all been very eager to follow through on this strategy. As a result, there’s a question that we’re hearing with more frequency and urgency: “How do we gather this research?”
The big question: How?
Fortune 500-size companies, especially those that sell to large consumer markets, spend a great deal of money on market and customer research. They hire expensive firms which employ the latest technology to delve into the minds and buying habits of various segments. They’re armed with statistics, mounds of research data, complex software, and teams of field operatives in the effort.
Small and mid-size companies, however, often don’t have the resources for expensive research, or they may feel that their markets are too small to warrant a formal research program. Are there smart techniques you can use to listen to your market without breaking the bank?
Solution
To answer this question for this month’s Challenge, Rick and I talked with many of our own customers and colleagues including Tim McPartlin, the EVP of Lieberman Research Worldwide. Please enjoy their insights below!
ACTION PLAN: 8 WAYS TO LISTEN
1. Have your own staff talk with, record, track and segment specific conversations with current and past customers on a regular basis.
The danger here is that it’s difficult for your own team to be truly objective. Thus, it’s easy to jump to conclusions based on a single judgment or an isolated incident. Yet you can protect the company from that danger and make these conversations valuable by keeping on-going records so that you can notice trends. For example, one customer complaint about your invoicing system may be a lone voice. Five customers saying the same thing in separate circumstances may be a shout from the mountaintop. Without good records and consistent feedback, you may not detect the difference.
Segmentation is critical so that you can understand and apply what you’re hearing accurately and better identify root causes, strategies and solutions for the right audiences. Common segmentation categories include:
- New/old customers
- High wallet share/ low wallet share
- Regular ordering/irregular ordering
- Different buyer types
- Different offers
2. Send out short (< 5 minutes) customer surveys via email or postcard to ask a few critical key questions, then follow up!
After each project, one firm we interviewed sends a short survey asking the highest contact to rate their performance on key criteria using a scale from 1 to 5. The firm tracks historical response rates and ratings for each question, and they immediately follow up with any client that didn’t rate them a 5. Why? They believe that a “4″ rating is significantly different from a “5.” In their view, if you want to dominate a niche, “good enough” (a 4) is not good enough.
3. Hire an objective professional to conduct phone surveys with select individuals – current customers, former customers, prospects, or companies in your niche.
By using an outside party, you’ll avoid injecting an insider’s inherent bias into the process. The survey should be about the industry and market in general versus your company in particular; it’s best if the customer doesn’t know who is sponsoring the survey.
4. Send an executive to regular 1-on-1 customer meetings to engage in creative, in-depth, strategic discussions.
There are many benefits to these meetings — information gathering, relationship building, and signaling the importance and value of customers to your organization. It also helps executives mobilize to prevent isolation and inward-thinking in your company.
5. Take advantage of inexpensive and easy-to-use online survey system (Survey Monkey, Zoomerang) to send regular, customized, anonymous surveys to specific audiences.
For example, you can ask:
- What is the experience with your company like to a first time buyer?
- How responsive is your firm?
- How many other companies does your customer use for the same product/service? Why?
- What problem does your customer wish you would solve for them?
- What is the primary reason your customer uses you?
6. Leverage your trade show participation by proactively meeting with your customers.
Most companies try to take some advantage of trade shows to meet with clients for golf, dinner or a cocktail party. Go further than that. Instead of just trying to sell at the show, set this goal: “What can we learn from our key customers and strategic prospects?” This is an excellent opportunity to talk about bigger business issues, so connect with senior executives to find out what their future looks like. Share with them your plans and discuss how their needs and your new developments support each other. Learn what else you can you do to improve their business. Test your assumptions about what they really value.
By learning about your clients’ big business challenges, you’ll better understand how compelling your offers really are. You can also uncover opportunities to add even more value through focus, process changes and/or new offer development.
We’ve written about the dangers of making assumptions and the necessity of testing assumptions that, if proven to be incorrect, could have a significant impact on the business. A neutral third party is often the best choice for such field verification testing. In field verification, a 3rd party actually talks with a select number of people in-person in order to learn about a specific issue. For example, this technique is frequently used for:
- Launching a new product or service. What value would the new service/product bring to a prospective buyer and what price would they consider reasonable? More importantly, what reasons do they have for not buying?
- Discovering why prospects chose not to buy or why a client left. Simple surveys will frequently point to false answers to this question. It’s easy for someone to answer that the price was too high or the need wasn’t there. However, the answer is frequently quite different and a false reading will cause a company to proceed with even more dangerous assumptions.
- Learning where true value lies. A common (mis)assumption is often made concerning what the customer does or does not truly value. Frequently, we see what we’ve termed “value creep” where companies keep adding “stuff” in the false assumption that it’s valuable to the client. In other cases, what a customer truly DOES value ( more likely in how something is done rather than what is done) is not understood, not adequately funded, or not expanded upon.
8. Post-mortem meetings are an excellent way to both deepen client relationships and to learn.
The objective of a post mortem is to sit down with all parties in a project and review what went well and what could be improved upon next time. The meeting should take place as soon after the conclusion of a project as possible while issues and experiences are still fresh.
As long as all parties come to the table for the sole purpose of continuous improvement, this methodology is highly effective and instructional for increasing value, reducing defects, and streamlining process. It also positions companies as partners and collaborators as opposed to vendors and clients.
Conclusion
What are your ideas for keeping on top of what’s important to your clients and prospects? Please join the conversation and share ideas and experiences with the other readers of the CEO Challenge.
Please share your thoughts and experiences with us here!
Monthly CEO Challenge for June 2010
What are you selling? The answers may surprise you.
by Jane Adamson :: June 8th, 2010
Pop quiz! Right now, right after you finish reading this article, go to each member of your leadership team and ask them this question:
What are we selling?
For good measure, write down exactly what you hear and from whom. Then, back at your desk, review the results. Are the answers:
A) Inconsistent?
B) Describing a stand-alone product (e.g. solar panels) or service (e.g. web design)?
If either (A) or (B) is yes, then the company has a problem.
How will customers understand?
Inconsistency, (A), is a major problem. After all, if the executive team can’t consistently define what you sell, then how on earth will customers or prospects do it?
If you’re in this boat, you have plenty of company. For example, when we engage with new clients, we send out a survey to the leadership teams that includes that question. And we almost always see vastly different answers. Some responses describe a product or service (“technology services”). Others offer a sound bite that seems appropriate (“end to end software solutions”) while others provide a vague value statement (“a path for lowering your overhead”).
No matter what you sell, customers probably have plenty of options to meet their needs. So if they’re not crystal clear on why they should choose you, then you’ve already lost the revenue game.
In addition to confusing customers, inconsistency also confuses referral sources and partners. Clients and colleagues often ask, “ Why is it so difficult to get referrals?” Well, one reason is that people only refer companies when they are clear about what those companies can do and for whom. If a referrer or a partner isn’t quite positive about how you can help someone, they’ll keep quiet and referral business will continue to elude you.
People don’t buy products.
It’s equally common to see quiz results that are dominated by descriptions of products and services. The problem here is that people don’t buy products. Instead, they buy offers. By that I mean that decisions are never made on the basis of the product alone; they’re made on a combination of factors that include what a company sells and how they sell it.
Here’s a simple example. Think back to the last time you purchased office furniture. The product may have been a desk and chair. But the decision on who to give your money to may have depended on a myriad of factors:
- Did the seller deliver?
- Was a refund available if the furniture didn’t look good in your office?
- Did you see the desk while shopping at a retailer like OfficeMax?
- Did the desk appear expensive?
- Did the payment terms work for you?
- How user-friendly was the website?
- What was the image the pieces conveyed? Did you want that image?
- And so forth.
Notice that many of these questions aren’t related to specific features and benefits. Instead, they consider ALL of the components of the sale – features, benefits and terms. We call this marriage “the offer.” Salespeople all too often behave and talk as though the features and benefits are the deciding factor in a buying decision, but it’s ALL of the pieces of the offer that count.
Customers don’t buy products. They buy offers.
ACTION PLAN
1. Understand what’s important to your customers.
A friend recently told me about a “fast pitch” competition in which startups had 90 seconds to pitch their companies to a panel of investors who rated their pitches. Interestingly, very few companies described the problems and needs of their prospective customers; instead, they just pitched products. Guess who scored highest with investors? The companies that proved that they knew their customers.
You can replicate this concept in your company through a competitive role playing game. Divide your sales team into buyers and sellers and get them in front of their peers. Then ask the “seller” to talk with the “buyer” for 5 minutes without mentioning your product, features or benefits. The audience handles the scoring by counting the “violations,” and the seller with the lowest score wins.
To increase the difficulty, you can later expand this challenge to a 10-minute and even 20-minute round, or do the exercise regularly at each sales meeting. As a result, your “sellers” will become better listeners by learning to shift their focus to the buyer problems and pain rather than your “stuff.” The seller will get better and better at asking questions and qualifying real buyers on what you are selling versus thinking that “telling is selling.”
2. Ensure that everyone on your team understands the difference between a “strength” and a “differentiator”.
Company strengths are part of the offer, but they’re typically just requirements to play the game. For example, we frequently hear leadership teams describe their “outstanding customer service”. Excellent. Customer service is an important and necessary strength. But it is outstanding enough to be a real differentiator for customers – enough to create a sustainable competitive advantage? That’s a lot more difficult and uncommon.
A differentiator is something specific that your competition cannot claim. Typically it’s a combination of what you do and how you do it in order to create value for your market.
Can’t find a real differentiator? Time to create one!
3. Invest in messages and rehearse!
Now it’s time for messaging so that everyone on the team can answer key questions (like “what do you do?”) consistently. You need a short version (aka the “elevator pitch”) and a longer version for more in-depth conversations.
Messages contain four components in a specific sequence. Everyone needs to know and practice the delivery of the first two parts. The last two parts can be conversational and personalized for the listener as long as the basic information stays consistent.
- Part I: The Theme. Captures the essence of your company and elicits an emotional response. Example: “At BMW, we build the ultimate driving machine.”
- Part II: The Big Picture. Finds a way to put listeners in the picture so they can visualize themselves with your offer . For example, you might say “If you enjoy the pure pleasure of driving…”
- Part III: Value Proposition. Features and benefits personalized for the listener – for example, “This model offers a convertible top, bluetooth enabled …”
- Part IV: Solidification & Proof. Provides listeners with the comfort that this offer will work for them. For example, you can note the safety record or financing details.
Notice that the what (features and benefits) comes in parts III and IV of the message, NOT I and II.
Good messages are very hard to develop because they need to be specific, compelling and emotional if possible. You may need help from a professional copywriter. It will be money well spent.
4. Measure and revise.
As your team practices your new messages in the real world, have keep score of how listeners react. Is it creating dialogue? Are people curious to learn more? If it’s working the impact will be measurable in words, physical response, questions / statements, emotion or actions. This is another cased where role playing or shadowing can help. But don’t just measure the results – use the data you collect to improve them consistently over time.
Conclusion
Experience tells us that after reading this article, many of you will be more confused about what your company is selling. Good! Now you have an opportunity to address it!
What is your company selling? What is your OFFER? We’d love to hear about it.
What do you think? Please share your thoughts and experiences with us here!
Monthly CEO Challenge for May 2010
Have we entered a New Normal? Hardly.
by Jane Adamson :: May 4th, 2010
I have a bone to pick with the phrase “The New Normal” and how frequently it’s being tossed around these days. Yes, we’re emerging from a disastrous global economic crisis. In the aftermath of a tsunami, it’s tempting to look around and call the new landscape “The New Normal.”
My discomfort derives from the implied assumption that there is a “normal” at all. It’s dangerous for businesspeople to be thinking that way. It lulls companies into complacency and blinds them to the constant evolution that takes place in the marketplace every day.
There really is only one normal … change.
Recessions are normal.
We experienced two recessions in this past decade. Over the last half century, we’ve averaged one every 5.5 years. For example, in this graph we see recessions in red and the US civilian unemployment rate in blue. Recessions are regular and normal. Changing employment rates are normal. Just look at the graph:
Here’s another example: the annual change in commercial and industrial loans in the US each year. Over a few short years, the fluctuation can be significant:
I could put up a hundred graphs to that show there is no “normal.” The business environment is constantly changing, and companies can’t afford to be complacent about anything. Executives need to constantly look outward to make sure that their strategies and tactics are evolving with the landscape. Even if your company is small, your customers are niche or your business is primarily local, you must be proactive.
I’m reminded of a meeting Rick and I attended three years ago. A group of housing contractors downplayed the need for a proactive revenue strategy since, as they said, “the phones are ringing off the hook without us having to do anything.” Housing is one of the most volatile industries out there, but they were lulled by the constant phone calls over those few short years. How quickly that environment changed.
Think about it. Have you seen changes in any of these variables in the last few years?
- The competitive landscape: How many competitors you have, how they’re funded, their geographic coverage, strategies, technologies, offerings, prices, value proposition, messaging
- Technologies used in your business and what’s in store for your products and services, your suppliers and partners, your marketing campaigns, even the way your employees communicate
- Needs of customers: What’s happening in the personal lives or business lives of your customers? How does change affect their wants and needs?
- Changes in distribution infrastructure, channel players, costs, competitive threats and mores
- Suppliers: Are there more or less suppliers available to you? How concentrated is their market power? What will that mean for pricing, delivery times, level of service?
- Your target market: How has the size of your market changed? What about the rate of growth (or contraction)? Physical location?
- Prices: Are they constant or evolving? What about relative prices including services and other intangibles? In what direction are they headed?
- Employee engagement: How is morale? Innovation? The general talent level of your team? Any movement there? (Hint: it’s probably changed a great deal.)
It’s not difficult
Staying aligned or even ahead of change isn’t a difficult task to add to an already-full calendar. Instead, it’s a proactive strategy that is built into the fabric of how you do business. It starts with a desire and a willingness to start the process. And like all worthwhile goals, it doesn’t just happen naturally.
Action Plan
1. Adopt a learning mindset.
It doesn’t matter how you learn – reading, lectures, groups, events. What matters is that you establish habits for keeping yourself informed. Establishing a habit takes away the discretionary nature of deciding whether or not something is worth the time. And there are lots of learning habits you can indulge:
- Join a mastermind group that meets regularly
- Join some on-line discussion groups that you check in with every morning
- Read one non-fiction book a month
- Sign up for two webinars every month on different topics
- Listen to podcasts and audio-books in the car on your way to work
- Join organizations like Vistage where business people get together regularly to discuss leadership issues & hear speakers
- Listen to weekly speeches or lectures through YouTube Education
- Sign up for thoughtful blogs
What’s important is that learning becomes habitual and continuous. Keep your mind open to whatever is happening in the world marketplace. By setting aside time for thought and reflection, you will naturally start seeing the signals and applying what you learn to your business.
2. Know your customer
A recent study by Ernst and Young showed that less than 20% of medium-sized companies ever call, write or visit their customers to obtain feedback. The truth is, even if we do visit them, it’s likely that we’re visiting them to sell them something, not to learn. How well can you answer these questions?
- Do you know how your employees are treating your customers?
- Do you know what it’s like to be a customer of your company?
- Do you know what frustrations your customers have about your company?
- Do you know what your customers wish you did better?
- Do you know what your competitors are telling your customers?
We talk a lot about “the marketplace,” but that’s just a euphemism for people. How are people thinking, acting, buying, shopping, and choosing differently than they were last month or last year? Keeping abreast of your customers helps you maintain a valuable relationship and learn how they’re thinking. Do you think General Motors might be in a different position today if they had reacted to their customers’ changing attitudes instead of telling their customers what they should buy?
3. Have conversations, not presentations.
Some time ago Rick and I were invited into a company for a revenue strategic planning session. The company was entering a new market to introduce a creative new approach that could have substantial value for their customers. Before we started the session, the CEO proudly showed us the presentation they were using with prospective customers.
The presentation was a spectacular PowerPoint with beautiful graphics, impressive charts, and lots of bells and whistles. However, what became painfully clear during the planning session was that the company didn’t know their prospective clients at all. They were so busy “presenting” that they forgot to listen.
One of the most important skills to develop in an organization is to teach sales, customer service, and leaders how to have conversations with customers as opposed to presentations. Too often we “present” a solution or an idea before we truly understand. This isn’t as natural as it sounds. Salespeople take a variety of training classes on how to talk but rarely on how to listen. Yes, they ask standard questions, but they don’t often truly probe for understanding. Conversations take time. Conversations require a willingness to be wrong or admit that your solution may not be the best one. Conversations demand creative thinking and sound judgment.
However, conversations also increase understanding, build relationships, and spark new ideas. Start right now by finding ways to turn your presentations into conversations.
4. Challenge assumptions
In the March Challenge article we wrote about the importance of challenging assumptions. We’re adding it again here to put some additional context around the issue.
One of the reasons this recession hit some companies so hard is that they did not have a culture of challenging assumptions in place beforehand. Where would we be if more of these assumptions had been challenged?
- Housing prices will continue to rise
- Big companies know what they are doing
- Smart people at the top are making sure that this will work
- The phone will continue to ring
- Our clients love us too much to leave
- We’re better than the competition
5. Set and monitor external metrics.
Rick talks a lot about external metrics in this post. If you want to spot trends, you need to track, measure and discuss external metrics that can impact your business. Don’t just look at the Business Journal for clues – keep on top of your environment directly and you’ll have greater opportunity to see trends, protect your investments and create value for your customers.
CONCLUSION
The marketplace is always in transition. Don’t get caught up in the notion that things will settle down soon when the “new normal” kicks in. Adopt a more sustainable model of observing trends, truly knowing your customer, and challenging the status quo. Your organization can then be nimble enough to make small incremental changes all along the way instead of being flattened by one giant jolt.
What do you think? Please share your thoughts and experiences with us here!
Monthly CEO Challenge for April 2010
Your business model, strategy, organization & execution: A year of CEO Challenges!
by Rick McPartlin :: April 6th, 2010
It seems like only yesterday that we were throwing around ideas for what would become the CEO Challenge. It’s been a year now, and we’re so pleased with the feedback we’ve received from clients, colleagues and collaborators. Seems we’ve struck a few chords, and that’s great to hear, especially because our messages aren’t always pleasant. “Your business model is Best of the Worst! Your organization is in chaos! You need to think like a Chief Revenue Officer!”
This month, Jane and I decided to revisit the twelve posts we’ve published to date. For those of you who have been reading a while … how many of these Challenges have you accepted? Have you implemented the action plans?
Most importantly, have you made any lasting changes?
Our goal has been to help you think more like a Chief Revenue Officer. We’ve reminded you that consistent, profitable revenue growth doesn’t come from thin air. It isn’t magic or hocus pocus. And it isn’t something that your sales team just delivers. Voila! Rain!
No. It doesn’t happen that way. Consistent, profitable revenue is a reward for delivering value to very specific customers. Period, end of story. And if your company isn’t meeting your revenue goals, look inside. Your business model might be completely off. Your strategy could be weak, or maybe it’s your company’s execution. Perhaps your organization isn’t aligned around the same revenue goals.
In our experience, very few organizations approach revenue generation as a science. It’s shocking. After all, without consistent, profitable revenue, there is no business.
But enough about that. Let’s get to the solution. Below you’ll find a description, links and downloadable PDFs for our first year’s worth of CEO Challenges, or you can download all 13 files in this single ZIP folder (you’ll need to uncompress the files).
BUSINESS MODEL & STRATEGIES
Are you a “Best of the Worst” Company?
In boom times, BOTW companies are enormously confident in and proud of their performance. But then the environment changes. The market sours, the economy tanks, new competitors show up, legislation kicks in, or some other external variable shifts. Sales and profits plummet.
What do BOTW companies do? They blame these uncontrollable external variables for their woes. Then they just try to survive until the boom times return. They aren’t really market leaders; they’re just fulfilling accelerating demand. When that huge demand takes a nosedive, they point fingers because they don’t recognize this painful truth: Their problem is internal.
How to Fix a BOTW Business Model
In this article, we discuss how to evolve a Best of the Worst (“BOTW”) business model to Best of the Best (“BOTB”). In particular, we focus on fixing three key issues:
1. Marketing strategies that care most about the quantity of prospects rather than the quality
2. Inflexible cost structures based on random external demand, not the specific needs of a specific, strategic target market
3. The dangerous attitude that customers buy from because the seller and the product is “good.”
Have the Courage to Create a Brand!
No brand? You’re no different. In an age where your customers can choose from a huge swell of service providers from around the globe, choosing anonymity is a dangerous decision indeed. If you don’t answer the question of “why me,” a competitor surely will.
Very simply, branding gives customers a reason to buy from you without you having to plead, prod, and cajole a sale because you’re very clear about who you are and what specific customer segment you best serve. Thus, done correctly, branding is discomforting for a small to mid-size company because it requires a courageous and counter-intuitive choice to limit your market. After all, when you’re very specific about your target customers, you leave out other customers that don’t perfectly fit your target. For a small company fighting for survival, decisions don’t get much tougher than that.
Thought Leadership is a Business Strategy
Thought leadership is often bandied about as if it’s a marketing campaign. But thought leadership is a long-term business strategy that drives everything the organization does each day and at all levels. A thought leader is an innovator in a very specific niche, and customers in that niche recognize, value, and – most importantly – are willing to pay for that innovation, that leadership position.
True thought leaders can demand substantial price premiums for their solutions because they can clearly articulate a compelling value proposition for a very specific market niche. They also enjoy shorter sales cycles, greater repeat business, and strategic opportunities that their competitors miss.
That’s why thought leadership is typically so difficult.
REVENUE GENERATION AS A SCIENCE
“I have people who handle marketing and sales. What’s a CRO and why do we need one?”
You have a sales team and a marketing director, but they’re in constant combat. Your revenue growth is flat. Margins are shrinking. And whether you realize it or not, you’re drastically overpaying for results. It’s a common problem, but the companies who solve it can remove 10-15 points of cost while driving their top line to generate predictable results.
How can you solve this issue? By becoming a Chief Revenue Officer, or CRO. No, you don’t necessarily need to hire a CRO – you just need to add “CRO Thinking” to your own job description and “act like a CRO.”
“I’m Lying Awake Worrying About Sales!”
When it comes to sleep deprivation, CEOs have plenty of issues to blame. In our experience, the top culprit is typically revenue-related. CEOs are tossing and turning over questions like “Is my sales manager doing a good job?” “Is my star salesperson going to quit?” “Why does one salesperson excel while others struggle?”
This stress frequently stems from two faulty beliefs: First, that consistent revenue generation depends on the talents of a few select individuals, and second, that those individuals operate in a world lacking both structure and predictability.
Good news: Revenue generation is a science similar to other disciplines inside your organization. It can be predictable, profitable, and far less stressful than you ever imagined.
“Why Can’t We Hire a VP Sales Who Can Deliver?”
“We need a sales leader who can build our team, lead us into the market and close business,” CEOs will tell me. ”I’ve spent a million dollars hiring, firing, and starting over. How can I stop the churn and hire someone who will deliver?”
Here’s the problem: A great sales VP won’t accept a job where there is no revenue generation strategy, infrastructure or organizational alignment. Top people know that this chaos impedes their success, and they can spot issues a mile away.
Even if they do join a chaotic company, great sales leaders eventually find themselves in lose-lose situations at exactly the time you need their expertise most. They take the blame for organizational problems and leave you to start the vicious cycle again.
“We have plenty of leads but can’t seem to convert!”
We hear this problem all the time, and it’s a function of what we call “the desperate pipeline.” You know the desperate pipeline – you’re probably caught in several of them right now. Somewhere, somehow you crossed a seller’s path, and now you receive endless calls and emails trying to sell you something that you will never buy. But you’re still a prospect because you have a name, an email address, a phone number and a pulse.
Don’t be one of those desperate companies. A fat sales funnel has dramatic hidden costs and creates a barrier for consistent, profitable revenue growth. Marketing programs that focus on attracting as many leads as possible are no different from aggressive salespeople who pitch every breathing soul at every trade show, networking meeting and playground.
The solution? Shrink your pipeline!
How to Survive an Investor’s Due Diligence
This isn’t a good time to raise capital for your company, but according to this New York Times article, it may be a good time to sell. Even if an exit isn’t in the cards right now, you should consider bringing in outside counsel to evaluate the company from an investor’s perspective. Why? Because outside advice could help you improve your strategy and profitability, leading to a higher valuation if you later decide to take the next step.
But is your business ready for due diligence? Be careful with your answer — I’ve seen many CEOs and small business owners assume that since the company is profitable now, it will continue to be profitable in the future.
Unfortunately, yet buyers and investors aren’t making that assumption at all. In fact, they’re doing just the opposite — they’re looking for evidence that the company CAN’T maintain and grow profitability. Your mission is to convincingly demonstrate that your revenue and profits are repeatable and sustainable. And by “convincingly,” I mean that you need a clearly-defined long-term revenue strategy along with the process and structure to create that reality.
PROCESS, STRUCTURE & EXECUTION
The Cost of Chaos
A recent AP article proclaimed that “Americans’ job satisfaction lowest in 22 years … if the job satisfaction trend is not reversed, economists say, it could stifle innovation and hurt America’s competitiveness and productivity. It also could make unhappy older workers less inclined to take the time to share their knowledge and skills with younger workers.”
This decline has somber implications for businesses, and executive teams need to address this issue in their organizations. And guess what? It affects your revenue generation and profitability as well. In this issue of the CEO Challenge, we discuss three common examples of organizational misalignment that cause frustration, anger, confusion and, eventually, disengagement. We call this misalignment “The Cost of Chaos.”
You know the saying about assumptions. Why are you still making them?
Assumption testing has always been important in organizations. Right now, however, it’s more critical than ever. Markets are evolving so fast that the wrong assumptions can be fatal. Worse yet, an organization’s inability to routinely identify and test assumptions is a cultural defect that can be very difficult to correct.
It’s understandable that colleagues sometimes fail to challenge each other. We live in a multi-disciplined world in which we need to trust the expertise of our colleagues. When those from other disciplines speak, we may not have the direct knowledge to evaluate the intricacies of what they said, let alone establish whether it’s right. As a result, assumptions go unchecked. This problem escalates when power is added to the equation.
It’s naïve and dangerous for any executive to believe that employees will automatically voice anything, especially when that “anything” is negative or challenging. The way to truly create an organization that identifies and checks critical assumptions is to build it into the cultural expectations. Only if it becomes the behavioral expectation in the organization will it become real.
“We have a great strategy but have trouble executing it.”
Recently you included a wide range of employees to assist in developing a critical new strategy. Employees felt involved and engaged; they had a sense of enthusiasm and ownership. But suddenly it’s been six months and you’re sitting in a meeting struggling with familiar issues … the great strategy you developed is long forgotten or ignored. What happened? Daily tasks, emergencies, and problems diverted your team from its strategic initiatives.
Today, this inability to execute efficiently and reliably is deadly. It may not be sexy or exciting, but well-crafted strategies are useless unless you drive the successful, timely execution of those strategies. You’re responsible for results, and your entire executive team must, must, must focus on execution. And there are two core competencies involved: clarity and consistent discipline.
CONCLUSION
Do you have any burning questions that we can address in a future issue of the CEO Challenge? Please contact us here. And if you know a CEO (or aspiring CEO) who could benefit from the CEO Challenge, please forward it liberally!
We also love your comments, questions, and debate, so please share your thoughts with us here, and thank you for taking this journey with us.
