Operational excellence is a systematic management of all processes to achieve world class performance by:

- Efficient utilization of tools
- Optimization of Resources
- Elimination of process waste/inefficiencies

Successful organizations approach operational excellence in a holistic manner and work towards improving all aspects of the business and not just limit it to manufacturing processes. The approach results in a fully integrated organization where all functions are aligned and everyone works toward common goals and objectives. The ultimate benefit is higher return on company assets and resources as well as continuous improvement in cost structure and profitability.

Integrated Operational Excellence engages organization at all levels and consists of five steps:

1. Defining company’s vision and deploying through clearly articulated goals and strategies for all the functions within the organization
2. Base-lining current state of operations and identifying gaps between desired results and current state
3. Developing action plan, determining performance measurements, and establishing ownership to achieve company and functional goals
4. Tracking progress towards company and functional goals on an ongoing basis
5. Identifying problems before they grow and taking corrective action

The only way to achieve Operational Excellence is to make it part of Company’s culture so it becomes a continuous cycle and not a one-time exercise.

YOU CAN’T EVER STOP LEARNING HOW TO SELL
BOOK OF THE MONTH: Spin Selling by Neil Rackham

It would appear that pretty much everyone who’s trying to convince you of the importance of something these days has an acronym.  But SPIN  is one of the rare ones that really means something, and which defines a process that can make a significant positive difference in your business—particularly in these turbulent and troubled times when selling is both excruciatingly difficult and extraordinarily critical.
Spin Selling was first published twenty years ago, but it was so smart and innovative, and so far ahead of its times, that it remains fresh and valuable today.

SPIN stands for:
Situation
Problem
Implication
Need-payoff

SPIN is “a powerful probing (or investigating) strategy” designed for major sales, which argues that “questions persuade more powerfully than any other form of verbal behavior,” and that “success in the larger sale depends, more than anything else, on how the investigating stage is handled.”

So remember to keep asking your potential customers and your current clients questions, and always remember that if you want to beat the competition, you’ve got to keep learning, and use what you learn to keep innovating.

As the recession has deepened, most businesses have been keeping an ever closer eye on their competition.  And understandably so: it can be a cutthroat environment, when fierce competitive moves like the willingness to substantially cut prices—all the countervailing expert advice notwithstanding—can send a company reeling with the loss of major customers.

There are, however, more intelligent, and ultimately, more successful approaches than wild price cutting.  Some of them include the following recent recommendations:  (And since company blogs are one of the hottest things around, they all come from the blogs of leading business publications.)
•    Fast Company blog, April 2009: “The Outthinker: Mavericks That Out Innovate the Competition” by Kaihan

…innovative companies are not innovative just in the area of their products and services, but they are innovative in everything they do!Build a culture of innovation….You don’t have to limit your innovative thinking to cool new products and services. You know, the stuff the media seems to exclusively focus on when they discuss “innovation.”  Instead, ask yourself the questions below to see if you can build a better tool kit for yourself and your business.

1. What is in MY tool kit?
2. What stories or patterns have I identified within my industry or business?
3. What examples of innovative behavior can I share with my company?
4. How can I unlock new patterns for myself and my employees?

•    Harvard Business Review blog, March 2009: “Why Small Companies Will Win In This Economy” by Peter Bregman

We simply don’t trust companies anymore. We trust people. And in big companies, it’s transferred to another menu whose options have changed.

That gives small companies a huge advantage.

Small companies with low overhead, reliable owners, a small number of committed employees, personal client relationships, and sustainable business models that drive a reasonable profit are the great opportunity of our time.

Small is the new big. Sustainable is the new growth. Trust is the new competitive advantage.

•    “Freakonomics” blog in The New York Times, March 2008: “Using the Minimum Wage to Beat the Competition” by Daniel Hamermesh

Germany is considering a new government-imposed minimum wage — a price floor in the labor market — to apply to postal carriers and related workers.

One of the major proponents of the plan has been one of Germany’s biggest employers — its privatized postal service, Deutsche Post.

One might wonder why a big employer is pushing a plan that might raise its  average variable cost. The reason is that the German Post, which is a high-wage employer, faces increasing competition from lower-cost carriers. If the minimum wage is imposed, it will not raise Deutsche Post’s average variable cost by much, since most of its workers already make more than the proposed minimum wage; but it will raise its competitors’ costs.

That will give Deutsche Post an advantage over its competitors — or at least reduce its disadvantage. It will be able to compete more successfully against its formerly lower-cost competitors.

Deutsche Post is thus proposing to help workers — and help itself!

•    Financial Times blog, March 2009: “Upwardly mobile—Huawei” by Kathrin Hille and Andrew Parker

(Chinese telecom hardware maker Huawei)  has made…speed and flexibility the backbone of a strategy that has helped distinguish it from its rivals…. Notably for a Chinese company, 75 per cent of Huawei’s revenue comes from overseas.  It has achieved this by being both low-cost and nimble, and by successfully melding its natural cost advantages with advanced management techniques…. a culture of perseverance…is deeply rooted in the company.  High performance/price ratio products and highly efficient services are Huawei’s primary advantages.  These have also become the primary competitive weapons in Huawei’s international strategy

Alternatively, another innovative path toward beating the competition is simply to go where they’re not: Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne, was published in 2005, and in the short time since has become one of the most influential business books in the world, with translations into 41 languages.

The basic idea driving Blue Ocean Strategy is to leave the red ocean of competition behind, and to create a new, blue ocean, thereby making the competition irrelevant.  And it is not merely an idea or theory, but covers both strategy formulation and strategy execution through a comprehensive set of methodologies and tools designed to create new market space.

The ideas and work are based on the simultaneous pursuit of differentiation and low cost, built on Blue Ocean Strategy’s three key conceptual building blocks:

•    value innovation
•    tipping point leadership
•    fair process

Perhaps Blue Ocean Strategy could make a major difference for your company.

What’s one thing you learned during the workshop?

“How to maintain customers.”

“That there are tools to help make my business grow and logical steps.”

“Channel marketing and how to optimized marketing budgets.”

“How to maintain customers.”

“[How to] Define my market.”

“Following integrated marketing channels [and] making this chart make sense to my business.”

LET YOUR COMPETITORS BEAT THEMSELVES

Fast Company published this article on business judo two years ago, but it’s even more relevant today, given the fact that so many companies have fewer resources today than previously.

One of the key principles of judo is that “good technique can win out over sheer strength,” and it’s just as pertinent in business as in a judo match.  In fact, any number of judo’s key elements make sense for the business person struggling today to overcome—with limited means– what seem to be superior competitor positions:

•  “…maximize every opportunity.”

• “Minimum effort with maximum efficiency.”

• “…think several steps ahead all the time.”

• “…anticipate what your opponent is going to do so you can either counter his move or execute an attack before he does.”

If you keep your eyes wide open, and your brain turning, you can beat even a competititor who appears to be stronger than you.

Bob Dylan once wrote, “The times, they are a-changing”, in an attempt to create an anthem for social and political change. While his song undoubtedly touched the pulse of a shifting generation, it seems that when it comes to the current economic landscape, he got that right as well.   We have seen large companies tumble, others hang on to edge of financial stability, and a few market booms. Cash is tight for almost everyone and in this economic climate we must keep our eyes open to new market opportunities while distancing ourselves from competitors.

Early this month, Business Week published an article on four key strategies to keep competitors at bay. Steve McKee, president of McKee Wallwork Cleveland Advertising, believes that now more than ever we must raise our competitive barriers to prevent our market shares from dwindling.  He believes in the power of the “Four Rs”: regulation, reputation, regeneration and real estate:

Regulation:  while regulation protects ideas and prevents unfair competition, too much could lead to one’s own demise.

Reputation: branding is important; differentiate yourself from the rest.

Regeneration: stay on top of market innovations (e.g. social networks) and use them to your advantage.

Real estate:  physical locations as well as “digital” locations are crucial in gaining a stronger presence and inevitably a larger market share.

So it goes without saying that it is of utmost importance for companies to adapt to market changes, and the “Four Rs” are undoubtedly a helpful reminder of the areas to focus in this competitive environment.

In mid 2008, we started offering Recession Contingency Planning to our clients.  At the time, no one was ready to even mention the ‘R’ word. Today, it is painfully clear that we are in a recession and that it is a recession which is quite different from all previous ones.

Previously, while demand for certain products and services evaporated, and the overall economy slowed, certain industries were still growing.   In the current recession, on the other hand, demand for almost all products and services are still present,   but liquidity has evaporated:  people want to buy what you have to sell, but they don’t have the cash flow and/or credit lines to pay for it.  As a result, fear of a crashing economy is creeping into everyday decisions and stopping people from spending any of their hard earned cash.

This situation is not likely to change anytime soon.  Things will get worse before they improve.  Our conservative estimate is that it will be 2010 before the economy begins to bounce back.  Therefore, bearing that in mind, following are ten practical tips not only to help you cope with deteriorating market conditions, but to come out the other side with a strong and successful company.

1.    You don’t have to beat the recession :  just outrun your nearest competitor.
This is an equal opportunity recession. Everyone is in the same boat. Therefore,  go back to the basics of running a business, outmaneuver your competitors,  and you will succeed.

2.    It’s not ROI that matters:  cash / liquidity is the critical measure.
In good times,  we used to manage a business by  its Income Statement.   Now, however, it’s time to manage by the Balance Sheet.  The business with a better Asset to Liability ratio will win. Out of all the assets you have, cash is the most important one. So whatever business decisions you make, make sure they are focused on generating immediate cash.

3.    You’re in trouble because your customers are:  show empathy to them.
It really is the thoughts that counts. People don’t judge service by how much it costs to provide.
So a simple thoughtful gesture to show compassion will help you win over your customers, and thereby, gain sales.

4.    Before you can multiply, you must first learn to divide:  build strategic partnerships.
If you’re in trouble because your customers are, then your vendors are in trouble because you are. Solve their problem by elevating your relationship from that of a mere vendor to becoming a strategic partner.

5.    Increase Prices:  eliminate unprofitable clients.
The Pareto Principle rocks: 20% of your customers are responsible for 80% of your profits. Therefore, increase your prices to eliminate unprofitable customers.   It may sound contrary to point #3 above, but it really isn’t.

6.    Don’t cut prices:  change the business model.
Cutting prices only infuriates your customers:  “Boy was I dumb to have paid three times the price for the same product!”  Instead, create lot more value,  and/or change the pricing model.

7.    Avoid the Dead Sea effect :  retain your talent.
In the Dead Sea, water leaves only by evaporation, which means that over the years, the Dead Sea has become very salty.  As a result, it is generally unable to support life. Across the board cuts may also create a poisonous atmosphere which will make your top talent flee.  And you must retain your top talent, because without them you won’t succeed.

8.    It’s not the time to do more with less:  it’s time to do more on less.
Focus, focus, focus on a few key and high priority initiatives and put more money, more staff, and more resources into them so that they can be successfully implemented.  That way, you’ll  get  the biggest bang for your buck.

9.    Uneasy lies the head that wears the crown:  lead with conviction.
There’s no need to sugar coat the realities of a business. Become transparent, keep the focus on what can be changed, and not on what can’t. Be cognizant that your own appearance and manner influences others.

10.    There is opportunity in every downturn:  invest in the future.
You can’t fix a plane when it’s flying.   But the slow economy is your opportunity to fix what was broken, and you didn’t have the time to fix it.  If your production is down, why don’t you have your staff do some R&D for the future? Why don’t look at your processes and eliminate waste, thereby improving efficiencies and profitability? This is the time to invest in the future.

These days, the Chinese word Wei-ji seems to be regaining popularity.  President Kennedy first used the term to rally the troops, and since then Nixon, Condoleezza Rice, and others have employed it–Al Gore even used it in his Noble Peace Prize acceptance speech.

President Kennedy said:

“When written in Chinese, the word ‘crisis’ is composed of two characters — one represents danger and one represents opportunity.”

Linguistically speaking, this interpretation of ‘Wei-ji’ is probably incorrect, but the fact remains that there is always opportunity in every crisis.   Just ask a plant: a plant needs darkness right after the sunlight to grow. If you keep a plant under a light for too long, it will die.

In my mind, there is no doubt that crisis = danger + opportunity.  Do you agree?  I believe that the current economic slowdown presents tremendous opportunities for businesses to see their situation from a different angle, and to find new opportunities and ways to capitalize on the value that they have previously created. There could be many avenues where you are creating value but aren’t thinking about how  to monetize it.

One critical example is your sales and marketing operations.  You see, in many organizations,  going to market is the single largest expense of any kind, with the possible exception of physically making products. This portion of expenses is increasing at a steady rate, while production costs are going down as markets have segmented and media and distribution channels have multiplied.

In the good old days, you used to sell through a salesperson; now you work on the phone, maintain a website, sell through distributors, partners, and retailers; not to mention advertise in newspapers, on radio, TV, and the internet. An average company spends around 20 – 25% of revenues to sell its products and services.  For a $10 million company, that’s roughly $2 –2.5 million per year in go-to-market costs. That’s a lot of money–and lot of potential cost savings too.

Furthermore, this is typically the cost segment which is least well controlled and least well understood. As a result, this could be an excellent  time to look at your sales processes and optimize them for maximum profitability while increasing new revenue opportunities at the same time.  One way to accomplish this is to break through the silos of your distribution channels and make them work together through the stages of a single sales transaction. Here are three possible ways:

•    Imagine how your business would change if you suddenly had 50% more sales people. Would it grow?  Definitely!  You probably don’t have the money to actually hire those new sales people, but what  if you could increase the productivity of your current sales force by 30 – 40%?  For example, keep in mind that what most sales people hate most, yet spend most time on, is lead generation.   So if instead, you started to use low cost channels like the internet and telemarketers to generate leads, it would free up to 40% of your sales people’s time, and give them more time to work on real revenue generating activities like negotiation and closing!

•    You may well be surprised to note that for a sales transaction of $5,000-$10,000, on average, your  sales person costs you between $1,500 and $2,000, including  salary, commission, meals, entertainment, travel,  and other expenses. So what if you start to sell some of  your products through channel partners and distributors?  They’ll cost you much less–usually 10 – 20% less. And then imagine if you were to start collaborating with your distributors—e.g. your sales staff working with your partners’ sales staffs.  Wouldn’t it increase your reach in the market and improve your profits?

•    John Wannamaker famously said:  “I know half of my advertising spend is wasted; I just don’t know which half.”   So if you’re serious about managing your costs and want to eliminate the wasted half, the key is to get closer to your customers.   In today’s economy,  consumers are more loyal to a sales channel than to a brand.   So find out how they want to do business with you, and concentrate on that channel!

Those are just a few of the tactics you’ll read about in my upcoming book on multichannel sales and marketing strategies that present a solid framework for increasing your top and bottom lines, while providing exceptional customer experiences.

Please email me if you’re interested in getting an advance copy of the book.

Harvard Business Review, Fall 2008, Special Issue: “Growing Your Business in a Dowturn”, Darrell Rigby, “Moving Upward in a Downturn”

In 2001, Rigby proposed a useful meteorological metaphor as a way of looking at economic crises and industry downturns:

1    Storm clouds gather.

2    The hurricane hits.

3    Skies clear on the horizon.”

In so far as it’s pretty obvious, in extending the metaphor to 2009, that the hurricane has hit, companies would do well to follow Rigby’s virtually universally appropriate situational advice,  to “look beyond the bad times.”

Rigby also stresses the importance of contrarian thinking in a time when most are following the conventional wisdom: for example, rather than focusing solely on cutting costs, “smart companies look beyond the storm and even find ways to grow while it rages around them.”

Among other ways in which they focus their efforts, they “build loyalty with other stakeholders.”  And for those companies in a position to make acquisitions, he notes that smart strategic acquisitions can strengthen the core and reduce earnings volatility.

In other words, keep in mind that the thing to do may be just what the other guys are too afraid to do.

With no apparent end in sight, it may help to look at the recession from a different perspective. (After all, a fresh perspective can bring inspiration even in the darkest hour.) If we look at the recession as a sports game, (as suggested in bNET’s special section, “Smart Business in Tough Times”) we may find that as in other games, on both offense and defense, some of the players are fumbling and failing.

Needless to say, in a real sporting event it’s hard to play both sides of the game and win. However, in this example, playing both sides actually has its advantages. The defense involves covering your bases and ensuring that no area of weakness is exposed. Meanwhile, the offense involves takings risks that others may be too afraid to take, which may or may not pay off in the end.

A key point the article makes is in regard to advertising/marketing:  the best defense in today’s economy is a good marketing offense.

As Susanna Hamners and John Maas discussed in their bNET  article,“Double down on Strategic Advertising,” innovation is the time-tested key to success.

Hamners and Maas believe that, now more than ever, it is important to fine tune one’s message to the customer’s changing attitudes. And if we are playing a good marketing offense it may also be a good idea to employ the internet’s new communication opportunities, for example, to target new customers and markets.

The internet removes the fourth wall, thereby granting customers access to a company’s inner workings and creating a more open relationship between them and the company.

So in the end, the more customers, or “fans”, a company has, the more likely it is to survive in this economic game.