If customers are so important, why don't we know more about them?

                                                                                               

[Editor's Note: In an age where there is so much talk about the being close to the customer, why is service so bad, leaving customers feeling more estranged than ever from providers of products and services. CRM, customer-friendly, customer intimate, and customer-centric language abounds. Could it be that company resources are stretched, trying to please too many customers? Perhaps we would have better performance if we focused on our best customers. - dpm]

•  KNOW WHO YOUR BEST CUSTOMERS ARE. All customers are not created equal. Research indicates that it is not unusual to find that over 50% of a typical company's customers are unprofitable when all cost factors are considered. In some companies, over 85% of the profit may come from as few as 10% of the customers. Start by ranking your customers by net profit generated. Include all costs of doing business - direct product and service cost, handling, order processing, administration, delivery. What are the patterns? Which customers present the greatest opportunity for profitable revenue expansion?

• DON'T TREAT ALL CUSTOMERS THE SAME. You can't be all things to all people. Once you have determined your best customers, focus on deepening the relationship. Gaining additional share of a customer's business is usually much more profitable than finding a new customer. Offer meaningful services that demonstrate their status. Such services as a priority position in the manufacturing schedule, priority delivery, access to training, etc. need not add much cost to your operation, but can clearly bring your "best" customers closer to you.

•  CHOOSE YOUR CUSTOMERS. Develop profiles of your best customers. Are there common characteristics?  Once the profiles are developed, go out and find more customers just like your best customers. Use market research and on-line tools to develop targets so that you focus your resources.

• MAKE YOURSELF INDISPENSABLE TO YOUR CHOICE CUSTOMERS. Make it your business to learn your customer's business. Find the pain in your choice customer's business and look for ways to help him solve it. Do that a few times and you will be perceived as not only valuable, but indispensable.

• MAKE "KNOWING YOUR CUSTOMER'S BUSINESS" PART OF YOUR CULTURE.Create special programs that identify your best customers to all of your employees. Make it every employee's job to find ways to better serve the choice customer. Make certain that compensation and reward systems recognize the importance of pleasing the key customer. 

• ALLOW OTHER CUSTOMERS TO "OPT-IN". Companies that have adopted this "choice customer" strategy have been pleasantly surprised to find that many of their other customers select them and opt-in. Although these customers may pay slightly higher prices and have different service levels, they find the customer-centric culture appealing. Many companies have developed different tier priority service designations for these opt-in customers, but find additional ways to demonstrate superior relationships.

We help clients think differently. The Mead Consulting Group helps clients develop a process to identify net profitability by customer and product and then to develop strategies and tactics - and the cultural norms needed - to increase the client's share of the most profitable business. If you would like more information on how this might be applied in your organization and how we might help you and your company accelerate the process of adding value and moving your company to the next level of performance,  please contact me by email or (303) 660 -8135.

Avoid Becoming a Commodity

[Editor's Note:In a recent conversation, the leader of a company explained that his was a commoditized business - just like many others in his industry. I asked him why anyone would choose to buy from him  unless he offered the absolute lowest price. He looked a bit bewildered by my comment and then responded that fighting price competition was his company's biggest issue. It made me think of an article about differentiation. I hope you find it useful.                                    -dpm] 

 

All products become commodities. All industries become mature.

You wake up one morning and realize that your products have become commodities. Your competitors all have basically the same "stuff" to sell and your sales people are constantly pressured to lower prices. Margins are being squeezed. You can't believe the price that a competitor just quoted to lure one of your customers. You know all of the competitors - they are not in any better position than you. This just isn't fun anymore!

 

Welcome to life in a maturing industry where growth is slowing - or may even be declining, all of the competitors and customers are known, and customers change suppliers or products for a lower price. Maturity comes to all industries - materials, products, or services. Whether you provide concrete or steel, or develop and sell software, your industry matures and your product sooner or later becomes a commodity. In today's environment, the path to market maturity is much faster than ever before.

 

Good News. Your customers know the answer.

There is some good news. There is big money to be made in mature markets. Some companies in mature industries command premium prices, have low customer attrition, make excellent margins, and continue to grow. But, it requires some different thinking about your customers, products, and markets.

 

Don't look for the answer inside your company. Creating services and solutions around products is not the answer if you are not pointed in the right direction. Get to know your best customers better (that is, your most profitable customers on a net profit basis). Ask them about their business, their problems, their pain. Survey and interview customers. Go to their facilities. Meet with their top managers. Listen and Observe. What are they really buying? Where do they need help?

 

When is a product more than a product.

Years ago, one of our clients was selling sophisticated diagnostic scopes to physicians, but technological advances slowed and it was difficult to expand the market. Pricing became very competitive. It was difficult to convince physicians to make a big capital purchase. The company interviewed dozens and dozens of physicians and office managers and discovered an interesting issue. Since the scope had to be sterilized between patients and the sterilization procedure for scopes is lengthy, physicians and their staffs continually had a problem having a sterilized scope available. The company decided not to sell scopes to physicians, but to offer a fee-based service - providing clean, sterilized scopes to physicians. They wrapped a product with a service and solved the real problem for physicians. Margins soared. Pricing was no longer an issue...they were selling more than a scope.

 

Do things your customer doesn't do well or want to do.

A client in the industrial distribution business found that some of its customers were having difficulties hiring and retaining qualified welders, and there were safety concerns with their customers' painting and welding production environments. The client offered to begin to deliver "finished" components (cut to size, fabricated, welded, and painted) right to the final assembly line. Revenue and profits increased. What is even more significant is that the customer now has an indispensable relationship with the supplier.

 

Change the way your product is packaged, managed, delivered, or used.

Another manufacturing/distribution client found that their customers were poor planners. Routinely the customer would show up at their warehouse in the morning to pick-up product and materials for the day's job. By the time they arrived at the job site, it was after 10:00 am. The client offered two services to help: An early morning pick-up - any order that arrives by voice mail, fax, or email by 11:00 pm is staged and ready for pick-up by 6:00 am. They also offer a project management service. The distributor manages the delivery of materials according to a job project schedule which the distributor continuously monitors for the construction customer. This ensures that the right materials are delivered to the right site at the right time. The distributor cannot command a significant premium for these services, but doing business in this manner actually saves them money and builds customer loyalty.  

 

Can technology change things up?  

Another company produced capital equipment which provided a static diagnostic testing for their customers in the power industry, The problem - it required that the customer's equipment be turned off during the diagnostic test. The company came up with a means to add sensors to their customer's equipment and to provide a continuous monitoring service for a monthly fee. Margins and market size both increased dramatically. Customers were ecstatic about not losing productive time on their equipment   

 

Your Customers may hold the key to differentiating your commodity product or service

• Determine what the CUSTOMER is buying? Survey and interview the customers - Listen to their pain and their needs in their business

• Change the way your product is packaged, managed, delivered, or used

• See how technology might change the economics or competitive environment

• Perform some of the processes and/or functions now performed by your customers

• Make the product more than a product

  

What are your thoughts about these key points? Share your reactions.

  __________________________ 

 

We help clients think differently. If you would like to discuss how we might help you and your company accelerate the process of adding value and moving your company to the next level of performance, please contact us. 

Top Ten Criteria for Hiring a Consulting Firm to Help Your Small or Middle Market Business

[Editor's Note:In today's market, there are folks and firms that purport to have all the answers to issues facing small and mid-size businesses. Firms and individuals pop up with articles in local newspapers, blogs, and business magazines with all the answers. New models with fancy and catchy acronyms like RED and FAST appear on the scene. Sometimes, it is difficult for companies and business owners to determine who can really help them navigate the road ahead.

We offer the following comments about what companies should be looking for in a partner to help them realize their potential. This is a reprise of an article published several times over the years. . One of our long-standing clients suggested to me that it might be valuable to update it again.            -dpm] 

 Top Ten Criteria for Hiring a Consulting Firm to Help Your Small or Middle Market Business 

Focus: Beware of "one stop shop" firms that say they do everything. These include accounting firm add-ons, investment banking/M&A firms, or interim CFO firms. Accounting firms provide valuable services - audits, tax assistance, internal controls, and compliance. CFO firms provide accounting, controller, and finance functions. Investment banks/M&A firms provide a great service in the transactional work of selling your company. 

The firm you engage needs to specialize in helping companies in your size range with your range of strategic and value issues ... and have the track record to prove it!  

Execution:

Most consulting firms focus on the front end (their plan and their intellectual input). Make certain you feel comfortable with the execution and their proven ability to assist you in achieving results.  

Overcoming Barriers to Success:  

Most consultants do not actually help organizations understand - and overcome - what is preventing them from being successful at the next level. Those can be tough discussions, but you can't make real progress until these barriers are addressed. 

Value: Many consultants focus on the top line (revenue line) without understanding the key drivers of value.

Flexibility - to YOUR needs:Most firms have a "one size fits all" model and they will squeeze all clients into that same model. 

Tell the Hard Truths: Most firms do not offer truly independent objective advice - they will not tell clients the difficult truths since they want the follow-on business. If it seems too good - or too easy- to be true, it usually is. There are no magic pills or magic bullets. Success in business is generally the product of good direction and hard work.

Been in Your Shoes: Most consulting firms will not have folks that have actually been in your shoes (as owners or CEOs) - and emerged successfully. It's very different when it's not your capital at risk. Ask if they have ever led a company through a period of rapid growth, weathered a downturn, or led a business through a successful sale.

Beware the "Temporary" Consultant: Beware of individuals or firms that sprung up recently. Firms with less than 5 years experience many times exist only as long as it takes for the principals to find their next full-time job, or to have their traditional business volumes return. That could leave your company in the lurch when they lose interest in you.

Talk with Their Clients - Present and Past: Talk with owners of client companies of the consulting firm. Ask them, in the end, what results were achieved. Did the consulting firm exceed expectations? Get specific about the numbers.

Aligning Their Interests with Yours: Will the consulting firm share in the risk /reward proposition with you? Are they willing to risk a portion of their fees based on your company's results?

Small and middle market companies are typically the most significant asset of the owner. They are the product of many years of tireless effort and risk. Selecting a partner who will work alongside you to help your business achieve its potential is an important decision.

 

What are your thoughts about these key points? Share your reactions below.

  __________________________

 If you would like to discuss how we might help your company accelerate the process of adding value and moving your company to the next level of performance, please contact us.

Who Moves Your Organization Forward? Engaged vs Disengaged Employees

[Editor's Note: In 2016, I saw a startling statistic from Gallup. Of the employees in the largest 30,000 companies in the U.S., over 68% were disengaged - not connected to the objectives and goals of the organization. I was stunned, but over the years, I have come to realize that it is very true.

As companies struggle to attract and retain good employees I thought you might enjoy the following insights from Curt Coffman (author of "First Break All the Rules") about the differences between satisfied employees and engaged employees. Which type of employees do you have in your organization?           -dpm]

  

                                                         Who Moves Your Organization Forward?

Satisfied Employee	Engaged Employee
Lagging indicator as contribution to Shareholder Value	Leading indicator as contribution to Shareholder Value
Reactive -- "I do what I'm asked."	Proactive -- "I do what needs to be done - even if not directed to."
"That's how we do things here!"	"How can we do this better?"
"I work here"  "I do my job."	"I am part of the organization's fabric."     "I am not limited by a job description -     I want to make a broader contribution."
Short term focus (steps) "How should I do this?"	Long term focus (outcomes) "What result is required?"
Easy to manage -- "I go along to get along."	More difficult to manage - does more than required - pushes the boundaries
Seeks answers	Seeks results
Points out problems	Solves problems - prevents problems
Applies learning to a current situation	Applies learning to improve future situations
"What do you want me to do?"	"How can I help?" "What else can I do?"
Don't make waves - avoid conflict	Challenge the status quo - constructive conflict
Flies below the manager radar whenever possible	Demands relationship with manager
Powerless -- wait for direction	Powerful - act, then ask for forgiveness
Risk avoidant -- "I follow the rules."	Takes calculated risks -- "I bend rules as needed to achieve the required results."
"I try to do a good job."	"My work energizes me. I give it my best."

© 2006 Curt Coffman Consulting LLC, All rights reserved

"People are normally productive for about 5.7 hours in an eight-hour business day.  

But any time a change of control takes place;  

their productivity falls to less than an hour."

 If you would like to discuss how we might help your company accelerate the process of adding value and moving your company to the next level of performance, please contact us.

Strategic Planning is fundamental to a company's success. But, do you have a plan that your company can really execute?

At an initial strategic planning kick-off session for a client company, the senior vice president of marketing spoke up: "I've been through these strategic planning processes before at other companies. Over the course of several months, our management team would spend several days together. We put together a fantastic looking plan, then it would sit on the shelf and it was never looked at again."

I looked the seasoned executive in the eye and offered this challenge: "It's obvious to me that the CEO and management team at those companies may never have been truly committed to executing the strategic plan in the first place."  

"Oh, but we were!" he replied. "We just never converted the great strategic dialogue and consensus into strategic actions. Then we got so buried in our day-to-day duties that we never took the time to focus on executing the plan."

 

A good plan well executed is better than an excellent plan poorly executed.

The point is clear. To receive value for the time and money invested in strategic planning, you must employ a well-defined continuous process, execute strategic actions and routinely update and refresh your plan.

 

Four key checkpoints

The key to securing this value is a CEO and an executive team disciplined enough to ensure that the organization stays focused on plan execution. Value exists in the strategic process of analyzing current strategic direction and determining future strategic focus. However, this value is greatly reduced without commitment and focus to implement the plan.

 

Four key checkpoints can ensure that you place adequate focus on strategic plan execution during the planning and development process.

 

CEO commitment from the outset

The first checkpoint: determine whether the CEO and management team are truly committed not only to developing the strategic plan, but also focusing resources on executing the strategic plan. Commitment to execution is particularly challenging for entrepreneurial-minded CEOs of closely held companies who tend to be very opportunistic. These CEOs often view the strategic plan process as limiting their ability to "jump at good opportunities."In other cases, significant company-based issues may exist that must be resolved before the CEO and management team can focus on strategic plan development and execution. Regardless, it's critical at the outset that the organization challenge itself to ensure that it is truly committed to strategic plan execution and follow-through.

 

Validate your plans with the market

Just because you decide on a sexy new strategy does not necessarily mean that your company can be successful implementing it. It is important that you understand how customers and prospects perceive your company and that you have an honest appraisal of your strengths, weaknesses, and core competencies. Suppose the strategic planning team at Kmart were to decide to that they needed to adopt a strategy to become a high price/high service retailer like Nordstrom. Do you really think the market would accept that from Kmart?

 

Translating strategic direction to strategic action plans

Before preparing to initiate the strategic planning process, strategic planners often ask CEOs to produce a copy of their most recent strategic plan. Usually, a direct correlation exists between how long it took the CEO to find the document and whether the strategic plan included clearly defined strategic action steps.

Many strategic plans assess the current company situation, market, industry and competitive environment. These plans may also provide a clear strategic framework for the company. However, they often fall short in translating defined strategic direction into strategic actions. Without clear strategic actions that identify who's responsible, metrics and deadlines, it will be difficult, if not impossible, to achieve your goals.

 

Implementing a process for strategic plan follow-up and execution

More sophisticated organizations may implement integrated strategic execution processes. For example, the "Balanced Scorecard Approach" builds the strategic plan around key business success drivers. It links measurable corporate and business unit goals and related strategies with the performance management system. And it builds regular plan execution reporting into the process. However, some companies may not believe they have the resources to develop and implement an integrated approach. If you fall into this group, consider the following options:

• Hold quarterly planning update sessions to review status against plan.
• At key manager or board meetings, create a standard agenda item that requires some discussion/review of the strategic plan.
• Report and update employees on major elements of the strategic plan. A commitment to employee communication will keep execution of strategic initiatives top-of-mind with the management team.
• Assign a key member of the planning team to help the CEO keep execution of strategic initiatives foremost on the management team's priorities.
• Create opportunities through strategic assessment tools that force the organization to periodically review results and performance against key strategic objectives (e.g., benchmarking, customer satisfaction surveys, etc.).

A valuable asset to any organization

A continual strategic planning process can be tremendously valuable to any organization. However, its ultimate value is significantly reduced if there's a lack of commitment and focus on implementing the plan. Make certain that you can execute your plans in order to get the real benefits.

 The Mead Consulting Group has been helping clients develop and execute Strategic Growth& Execution plans for many years. Check out our website for descriptions of some client success stories.