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Time to share your Secret Sauce

Successful businesses used to protect their No.1 position by keeping their guard up at all times. Investing huge sums in protecting their winning ideas, strategies and practises. Keeping their key employees under lock and key (with lips sealed). In a nutshell, doing everything possible to keep their secret sauce bottled and firmly corked.

However, there is a new breed of business emerging that does the complete opposite – and they are reaping the rewards as a result.

Think about businesses like Zappos , Southwest Airlines, Innocent Drinks, Starbucks. What is it that they all have in common (aside from becoming hugely successful businesses over the past decade)?

It is that they are not afraid to share their secret sauce – in fact they’ve turned sharing their secret sauce with the world into a game-changing competitive advantage. Whilst their laggard competitors invest huge sums in a vain attempt to defend their fleeting advantage, these new businesses are open and transparent in providing access to their culture, working practises, what makes them tick and even show-casing their key employees’ thoughts and strategies.

Identifying and then sharing your business’s secret sauce with your customers, your competitors and the world might seem counter-intuitive to most business owners, yet time and again in recent years, it proves to be that elusive missing ingredient that can be attributed to the success of that new kid on the block.

Isn’t it time for you to find and start sharing your firm’s secret sauce with the world?

[Post script: if you’ve yet to find your secret sauce, there’s never been a better time to start experimenting with some new recipes and ingredients]

Think differently to engage and reward employees

Most companies pay bonuses to reward high performing employees – I recently had the pleasure of discussing more interesting ways of engaging employees with a fast growth tech company client.

Beforehand, we’d discussed the tricky financial difficulties that may lie in-store for the majority of folk over the next 5 years given our perilous financial deficit in the UK. At the opposite end of the spectrum, the company has spare cash earning disappointing rates of interest on deposit. Given the potential economic uncertainty ahead, the management team was keen that any employees laden with existing expensive personal debt could clear it as soon as possible given the stress that this can cause. So they wanted to discuss ways of helping employees reduce any personal debt e.g. credit card, store cards etc with available spare cash available in the company.

We discussed the possibility of setting up a company hardship fund especially for company employees to crack this problem. The thinking is that the company would lend money to employees who apply for financial assistance and pay a relatively low interest rate (compared to the rate suffered on credit cards yet more than the company can receive on deposit). The loan could be repaid either by repayment or by salary sacrifice. We are currently working with the management team to consider ways of helping the company achieve this without triggering any unexpected tax charges e.g. for the salary sacrifice option.

How refreshing to see a company that puts its employees’ welfare on a pedestal like this – there are others that have shown that this works to build successful profitable businesses.

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John Timpson talks Upside Down Management

upside down managementJohn Timpson talked Upside Down Management to kick off Manchester Business School’s (MBS) Vital Topic series this evening.

Having built the Timpson business into a £100m+ turnover and £10m+ annual profit group, John Timpson had plenty of contrarian business ideas to share with the enthralled and packed MBS auditorium.

Built around his Upside Down Management philosophy – that came to him as a lightbulb moment during a failed bid to acquire a competitor – it became “obvious” to Timpson that the key to success was to have:

  1. Happy Customers
  2. Great Jobs

To achieve this the Upside Down organisational chart was born with customers at the top and Mr Timpson himself at the bottom. From now on, the frontline shop employees would run the business by putting a smile on the faces of customers whilst the management team would serve them. To achieve this, Timpson introduced two new rules:

  1. Look the part and put the money in the till
  2. You can do anything else to best serve customers

This relaxation initially fell on deaf ears as the employees didn’t trust this new regime, however, a further rule got the wheels of change moving:

  1. You can spend up to £500 to settle a customer complaint (without management authorisation)
  2. Charge whatever you like – the price list is a guide only

Timpson explained how the key to success of the business is in choosing frontline shop staff who have personality. “You can train for the job but you can’t train for personality”. This is reinforced by an interview assessment form that used by Timpsons which is disinterested in past qualifications and experience and instead focuses on the key personality attributes using a Mr Men style analogy. An approach that has worked wonders for the past 10 years.

Here are some other fascinating facts from the world of Timpson’s Upside Down Management:

  • Staff are actively encouraged to use their initiative and try new ideas. “If the ideas work, tell me. If they don’t work, just stop.”
  • Employees are encouraged to let management know if they’ve got themselves into some personal financial difficulty. To help them stay happy and focused on their work, Timpson operates a financial assistance package with £350k currently on loan to staff – “we normally get pretty much all of it back”.
  • There are 5 holiday homes available for staff to use for free.
  • Employees are invited to submit their Dreams Come True entry once a year and a lucky few have their dreams fulfilled e.g. family reunions, holidays, concerts etc.
  • Get rid of poor performing staff quickly.
  • Weekly bonus scheme – all staff are eligible for the weekly bonus payment which is based on the store’s sales less the wages paid x 4.5 (“because 4.5 works”). 15% of this profit is shared between store employees each week.
  • The proportional share of the 15% weekly bonus is increased for the more highly skilled employees based on (internal) courses attended and completed – “so we have staff pleading to attend Health & Safety courses!”
  • All internal manuals contain illustrations rather than words. Staff take the manuals home to absorb – would they do this with folders full of words….?
  • A key internal training course is (as you might expect) Customer Care. Participants are asked to nip out to buy bits for the course not knowing that the bulk of the course is spent discussing their experience of shopping for the requested items.
  • Most customers are a miserable bunch. Don’t just encourage staff to smile, it is their role to put a smile on the face of their customers.
  • No advertising – “our customers do that for us”
  • Delegate authority but NOT responsibility. “This is what most external people misunderstand.”
  • How to be a great boss = Listen + praise (praise 10 x more than you criticise). Email has placed a premium on the hand written thank you letter (ideally with a hand written envelope and a stamp sent to their home address perhaps with a hand written bonus cheque).
  • Avoid meetings. A waste of time.
  • Avoid excessive time spent budgeting. Get out on the road to visit your shops and customers to get real-time information.
  • Watch cash. Daily.
  • Avoid formal salary structures. Review each employee’s remuneration on the anniversary of their joining – this avoids gangs of staff receiving wage appraisals at the same time (and comparing notes).
  • No appraisals. Stopped this 25 years ago and best thing ever. Danger with appraisals is that the best staff are encouraged to look at their weaknesses whilst positives are looked for in the weaker staff!
  • No head office staff allowed to issue orders. This is upside down management, remember?
  • No management head office structure.
  • Capital expenditure is the only decision requiring head office input.
  • No marketing. No PR.
  • A final salary pension scheme that is open to new entrants (!). This rewards loyal employees and is worth the added cost.
  • Birthdays – a day off on your birthday.

If you like this, I recommend you listen to this recorded interview in which John Timpson shares more of these ideas. Or you could purchase his book Upside Down Management: A Common Sense Guide to Better Business.

A refreshing talk from an older established business that has a forward thinking approach to doing business – and is doing very nicely out of it too.

Championing Honest Business

Matt Langford (MattFlies.com) and Chris Pearson (Personified.com) recently exchanged views on whether businesses could be driven by values other than profit?

Their skepticism appears to be swayed by the values of BIG business which can become skewed toward profit as the company grows – even if it didn’t start out that way.

The challenge is for businesses to embrace a mixture of values: people, planet, profit – the triple bottom line.

This is easier when businesses stay small. But why do we assume that the natural passage for all successful businesses is to grow into monstrous globalised entities? Hasn’t the past few years demonstrated that faceless, global businesses lack the trust of the public?

Your thoughts on the way forward?

Carbon Reduction Commitment (CRC) – Dawning of Constructive Capitalism?

Today’s the day that a mandatory carbon reporting and trading scheme comes into force for some 5,000 UK businesses (the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme is its full title if you’re interested!), yet confusion still reigns regarding its implementation, enforcement and its overarching policy goals.

This is most evident from a Telegraph article today in which, not only are the quotes in the body of the article pretty much unanimously derogatory toward the scheme (e.g. “the scheme is likely to add 6% to affected business energy costs next year” etc) but more interestingly, there are also some 28 highly disparaging reader comments (at the time of writing). Most reader comments refer to climate change being some sort of conspiracy theory (or even April Fool’s joke!) aimed at lining the pockets of politicians, experts and consultants, without a single positive comment to the effect that we might actually need a change of tack in our approach to doing business – and that attempting to change business behaviour by implementing a limit on carbon usage might (just might…) help wrestle in global warming.

Admittedly, the introduction of the scheme does not appear to have been as widely publicised as it could have been. As a result, the opportunity to clearly spell out the vision of success in reducing carbon emissions by 2020 (and ultimately 2050) and what this might mean for climate change has been missed. The danger now is that the naysayers get the opportunity to nit-pick and detract from a potential game-changing opportunity. Surely, even those sceptics who contest whether pumping fossil fuel fumes into the atmosphere actually impacts on global warming, must agree that extracting oil and fossil fuels at the rate we are now cannot continue infinitum?

Our current mode of business revolves around extracting and spending (most of) the natural capital resources of future generations when really we should be confining ourselves to spending and investing its income only (“spending capital”, “getting in debt for future generations….” does this sound familiar?).

Bringing the extractive qualities of businesses (in this case, energy consumption) sharply into focus for business decision-making and strategy should help empower new ways of thinking. Less about short term profits and targets and more about longer term value. New modes of thinking such as:

Sustainability. Responsibility. Accountability. Transparency. Community. Innovation.

Building sustainable value for the long-term. We can’t put this off any longer.

It was Umair Haque who aptly coined thick or constructive capitalism. A new way of thinking about business that is centred around building sustainable long term value.  Could the introduction of CRC represent another small step toward the dawning of constructive capitalism?

Photo credit: Kuyzetac

Build your business around its WHY?

What is it about a businesses like Apple that allow growth in market share plus increasing profits? All whilst retaining a cool and forward-thinking market perception?  Is it due to Apple Mac’s relentless focus on growing its profits and market share?

Partly perhaps, but there’s something else. Apple understands its WHY?

It exists to create innovative and beautifully designed products that are simple to use. The increased profits and market share follow this why – the old adage, build the fire and the heat will come is apt.

Building a successful business is easier when you understand WHY you are in business – understanding your purpose.

Understanding your WHY? helps you:

  • At best: Solve a world need
  • At worst: Solve a local need (still an incredibly compelling purpose)
  • Build a crystal clear vision
  • Inspire customers
  • Inspire employees
  • Inspire community
  • Have a mission
  • Make strategic decisions – is the issue congruent with your why? If not, bin it
  • Make a contribution to society
  • Attract like-minded customers
  • Turn off unsuitable customers
  • Make price irrelevant – your why becomes your market differentiator
  • Do good – your why must be about more than making money – it must solve a problem
  • Take pride in your business purpose
  • Tell your story (about your why) to influence your customers
  • Avoid becoming a commodity
  • Contribute – rather than extract value
  • Be focused
  • Diversify – as long as you stay true to your WHY.

Is your business WHY clear?

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What’s in a price?

Getting the price right for your products or services is key if you are to survive – let alone thrive – but how do you achieve this?

Most businesses reverse-engineer pricing – put simply, they work out how much it costs to buy and / or assemble the raw materials or goods, factor in other indirect costs (e.g rent, power etc) and then add a profit margin. This approach is widely accepted and, although its a reasonable start, it is fundamentally flawed.

There is a far better way. But it’s harder as it takes imagination. It also requires that you step away from the safety of the herd.

1. Customer experience = Customer value (Price)

YOU should not dictate YOUR perceived value (aka price) for YOUR goods / services onto me as a customer.

Think about it – if you start from the perspective of:

YOUR cost of purchasing goods + YOUR rental (+ other indirect costs) + YOUR perception of the ‘right’ profit margin = Price

then you completely miss MY (all important) customer perception of value. There’s far too much of you as the business in this equation and too little about me as a customer. This is exactly where most businesses go wrong – and ultimately end up in a price-war because they’ve no other competitive-edge.

What if you could:

  • Single out the aspects of your service or product that are unique or different?
  • Make it a pleasure to deal with you.
  • Change the rules.
  • Focus on those aspects that your competitors are blind to.
  • Ask for my opinion.
  • Be a game-changer.
  • Ask for feedback and suggestions for improvement (and act on them).
  • Innovate.
  • Engage me as part of your community.
  • Listen.
  • Support me and the initiatives and interests that are important to me.

How could this be different for your business?

Clue: me (+ lots like me) will become blind to your price and loyal to you + your business. Trust me.

2. Potential for exponential growth

Once you’ve cracked point 1, the (ingrained) correlation between YOUR costs and price become disconnected. This is key.

  • Now your price is determined by your customers.
  • Your customers determine the market value and this has nothing to do with your ‘behind the scenes’ costs or how hard you are working. This is irrelevant (and quite right too!).
  • Value and therefore price is driven by customer experience.
  • This makes the competition irrelevant.
  • The rewards for being the best in your market are disproportionately high.
  • Combine this with the fact that technology opens your market to practically six billion + customers

and you have the recipe for exponential growth in your business.

Cracking No.1 is the hard bit. But its worth it. What the world needs now is Soul Businesses that deliver exceptional service like no other. Its an open goal…

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Forward thinking Engineering business supports future NW innovation

I enjoyed a great catch-up with the Managing Director (MD) of a (target) company of mine today.  This family owned business is a leading advanced engineering company in the North West and the MD’s insights into business and the way things are changing is always sharp and insightful.

We discussed the economic challenges of the past 12 months and, given the long life-cycle of procuring and then manufacturing their products he saw the next 6-12 months as a period of “consolidation”.  Many of their competitors had already been squeezed out, although he suspected there would be more to come – especially as businesses who survive then suffer from over-trading as the market (hopefully) returns “in around 2012” – the mantra Cash is King will remain as crucial as ever.

What was most interesting was the sense of cohesiveness mixed with a strong focus and direction that he was building within the organisation.  The tough times over the past 12-18 months have clearly made them much more focused on their core strengths and therefore more inclined to sub-contract the work that they do not believe they can do as well – this is brave but strategically right for the longer term. Likewise they are actively seeking opportunities to assist other engineering firms with their expertise and resource to help meet demands or short term resource needs.  A flexible approach that the MD could see being a key growth area in the business.

They have also continued along a path of identifying and nurturing new and emerging engineering talent within the North West – an area which is of strategic importance for them over the longer term but which is clearly already bringing success.  This commitment to supporting early stage engineering ideas and businesses is crucial to the future of the North West economy and is refreshing to see within a long established family company.

Picking up on the team cohesiveness, the MD explained how his choice of location for their new offices was largely dictated by where his team live (“we really wanted to keep them”) and how he would like to increase the commitment of the business to social responsibility by allowing staff to complete 4 week sabbaticals on hands-on roles such as building orphanages in Africa in the not too distant future – all on full-pay.  Notwithstanding such lofty goals, the MD was both surprised and warmed by the team’s response to his impromptu decision to give all staff an extra 2 days holiday over Christmas this year – “I’ve handed out pretty decent bonuses in the past and have been greeted with a “thanks (but I’ve earned it)” kind of response but was stunned by the response to this gesture!”

A great business with a great leader.  We need more like it.

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What Matters Now – Soul Business

Riffing off Seth Godin (and his collaborators’) contributions to the fantastic and recently published What Matters Now ebook, I thought I would add my one-pager (should Seth have asked me to contribute – maybe next time huh?)

What Matters Now?

Soul Business

Making meaning through business.  Solving global problems.  Engaging people in work that fulfills them. Making cool stuff. Existing for more than making a profit.  Businesses that make meaning.  Business can have soul.

Big business (used) to make the rules.  They made stuff that generates the biggest profits.  Enroll staff to work and make the stuff.  Pump millions of £s into advertising to make people want to buy the stuff that the big companies are making.  It has no enduring meaning.  Everyone knew it, there just wasn’t the ready means to challenge or change it (you needed money, and lots of it).  Business lost soul.

The internet has changed everything.  It allows mom and pop businesses to flourish from the kitchen table. It allows people who might otherwise never meet to collaborate to make cool stuff.  To put passion into business. To build businesses that make a difference to society.  To the world.  To challenge (slow, lumbering) big businesses through the delivery of new services or products, unparalled customer service and an overarching authenticity and meaning that resonates with customers. Business can use soul for competitive advantage.

The internet has also added one other killer advantage for small business: low cost.  There is now nothing stopping small ‘kitchen table’ businesses from competing side by side with major established big businesses.  Cool stuff can be made and then marketed online before being shipped to a global customer base whilst consulting services can be delivered globally via the cloud. The costs and overheads of establishing and running small businesses today are low (and are getting lower). Meanwhile big businesses have large, costly, unwieldly infrastructures built over many years to meet the demands of the old 20th century economy. Business soul is indiscriminate – it favours business of all shapes and sizes.

We are standing at the threshold of a huge opportunity.  We can now focus on building and supporting throngs of small businesses that matter.  Businesses that solve global problems and needs.  Businesses that can stay small because being big is no longer a necessary constituent of being globally successful.  Businesses that engage and enthuse their people. Businesses that make meaning ahead of profit. In a nutshell, business with soul.

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