The confusion between perfection and excellence

July 2, 2009

Always betterWhen hiring people, I have heard many times their claiming to be perfectionists, either as one of their top three qualities or one of their top three “weaknesses”. Actually, it has always sounded to me like everyone wants things to be “perfect” all the time.
On the other hand, I very rarely have heard anyone mentioning the word “excellence”. This is strange, because many of the “perfectionists” are not really looking for perfection, but they simply want to do an excellent job.
So, what is the difference between the two terms? Actually, it is very simple. Since nobody can define what perfection exactly means, perfection cannot be attained, and therefore should not be set as a goal. On the contrary, excellence, because it is a dynamic and relative concept can be translated rather easily into performance objectives that can be quantified.
Perfection is the quest of an abstract absolute, while excellence is the desire to constantly improve. Therefore, the so-called perfectionists can be split into two groups: the bitter idealists and the driven achievers.
Members of the first group are easy to identify, as they are never satisfied and always have to criticize or blame something or someone for the according-to-them unsatisfying performance. What is also remarkable is that they never seem to make mistakes and they are in never the cause for any problem. They tend to have a negative attitude and they never are happy.
Members of the second group are quite different. They, too, are difficult to satisfy, not so much because performance is below expectations, but because they see ways of doing better or of having been able to do better. Their attitude is generally positive and they are always ready to go again to improve things. Their main motivation is to do beat the previous record and certainly to always beat the competitors. They also do not waste their time blaming, justifying or criticizing, and if they realize that they performance is not good, they will feel mortified and they will take action themselves to correct the situation and meet their goals. Their drive and their knowledge that tomorrow is the other day when they will do better keeps them optimistic, happy and stimulating.
So, if you want superior performance, choose your group! Be enthusiastic, shake things, never give and deliver the goods! Do not focus on why things went wrong, bring solutions and fix the problems!

Copyright 2009 The Happy Future Group Consulting Ltd.

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The only true Mission Statement

May 12, 2009

Nowadays, about every company has a Mission Statement. It has become part of the business culture and it is included in every business plan.
In many offices, you can even see it framed near the reception desk.
And yet, those mission statements, for as sophisticated as they may be, do not matter that much. OK, I already hear some denial, and I probably am just nothing else than an iconoclast.
Just ask your staff to tell you what the official mission statement of your company is, and you very quickly will see my point. Most employees, and that includes senior executives, simply do not know it! The reasons for that are many. The employee joined the company recently, there is a poor communication from the top, there is lack of interest for it, and in most cases: the statement is too long and too complicated to memorize.
Here is another disappointment for those who worked hard at formulating those magic words: your customers do not know your Mission Statement, either. Why? Because they care about their business first. Moreover, they have seen your Mission Statement in many variations at your competitors’ places, too.
Too many mission statements just sound all too familiar. They are all about your company being the first choice supplier of top quality that cherishes the customers to whom they add value, etc, etc.
When companies differentiate themselves in the same way, they just go back to square one: making themselves commodities.
So what is the only true Mission Statement? The answer is “To make money”! It is true, it is simple to remember by your employees, and the way to do it is to do all the right things right.
Simple, isn’t it?

Copyright 2009 The Happy Future Group Consulting Ltd.


The best time for prospecting

April 5, 2009

In most cases, companies do their prospecting at the worst time, which is when they have surpluses to sell.
This statement might sound a bit surprising at first, but as I am going to explain, this will make quite some sense.
As long as sales are in balance with production, most companies will try to find commercial arrangements with existing customers to deal with minor volume fluctuations. After all, when you deal with a regular business contact who knows your company and products, it is easier to set up some promotion deals and move extra volumes.
In the same idea, as long as companies can move their own production without much trouble, they do not see the point of actively going out there prospecting for new customers, as they have nothing to offer. Or so they think.
When surpluses reach levels that are not manageable anymore with the regular customer base, then they initiate a massive prospecting campaign to be able to move the extra volume.
All of this will sound like plain logic to most business owners, so why is actually the best time for prospecting the time when you are sold out?
The answer is simply because it puts you in the driver’s seat, which is not the case when you need to get rid of your products.
In many industries, surpluses for sale rarely happen to an isolated company, but very often the whole sector is suffering. The reason can be because the recent times had been quite good and everybody thought that they should increase their volumes to meet demand, but when a whole sector takes this kind of action at the same time, you can be sure that this volume increase is also going to come onto the market at the same time. The result is a saturated market, in which all participants need to move the extra volumes, sometimes at any price (and also at any cost). So prospecting in such conditions gives all the power to the buyers, who have nothing else than being patient as the sales people will come over and over again trying to out-price each other so that they can move their production. This results only in margin erosion.
In the same way, when you are short of product, in many cases there is a fair chance that your competitors have to deal with the same, and are not able to satisfy demand from their own customers
Why prospect when you have nothing to sell?
There are two main reasons for this. First, because this way, there is a lot less pressure to reach a deal, which helps you being much stronger in the commercial negotiation. Secondly, because this could be the time that you mean the most to a customer by helping out, as you could fill a gap left by one of your competitors.
Of course, you might ask how to help out and sell something you do not have. Massaging your sales and production planning can be a way to do this, or playing broker for once can do the same, and helping out makes your company look quite good, which will be useful when you are the one who needs to be helped out.
Prospecting, not out of necessity, but as a strategy to grow your business at the expense of your competitors is the way to go, and is also the most cost-efficient way. After all, remember that, on average, prospecting to get a new customer costs between 10 and 20 times as much as growing with an existing one. So, it better be well-targeted, margin oriented and fitting in a sound business strategy!

Copyright 2009 The Happy Future Group Consulting Ltd.


Always be market-driven!

April 5, 2009

This is always the right approach, even when the market is good. The alternative, being production-driven will only bring you gloom eventually.
A very recent example to illustrate this is the construction industry in the USA. The reason why they are in trouble is because they forgot to be market-driven. As their market was good, and easy, they became overconfident and instead of being business people, they actually became speculators. They assumed that the market was to never change, that the only way would be up, and they built more and more houses without having any contract at all, as they thought that there always would be buyers.
By ignoring how markets function, they created their own demise. First, markets always fluctuate; they never go up in a straight line, so they had to prepare for a downturn. Secondly, they ignored the simple law of offer and demand. By taking demand for granted, they did not anticipate the possibility of ending up with more offering than the market would absorb. And thirdly, they did not produce according to what they could sell, but they produced an inventory; that is the production-oriented error.
Of course, one could argue that the situation they face is the result of the sub-prime mortgage fiasco. This is untrue. The sub-prime issue just accelerated the problems for the construction industry. If they had built only on the basis of solid contracts, all their houses would have been, per definition, sold.
Of course, the number of mortgage defaults and foreclosures is pushing prices of houses down, but this is by far not the only reason why houses in the US are losing so much value. The inventories of unsold newly built houses are huge and the market will have to absorb the surplus.
By not being market-driven, the builders have brought themselves in a working capital crunch. Their accounts payable are going up (yes they have to pay their bills) and their accounts receivable are not coming in fast enough because of the inventories. So, in order to pay the bills and not get into bankruptcy, they have to move the inventories. Profit becomes second to cash. This is why they are selling much cheaper than they had speculated. If only they had been market-driven…
The US builder story is just a superb illustration of the advantage of being market-driven, but this is actually a very common story. Especially when a market is good, companies tend to think that this is the normal state of affairs. Add to this a normal dose of greed and then you have the perfect recipe for a disaster to happen.
Know your market and do not let yourself drag into overconfidence!

Copyright 2009 The Happy Future Group Consulting Ltd.


The little divide between buyers and sales people

April 5, 2009

Last year, I posted 2 questions on the LinkedIn Q&A just to see if sales people and buyers were sharing the same views on the deal process. I was asking sales people what in their view explained not closing a deal, and I asked buyers what mistakes they found sales people were making that turned them off from buying from them.

Although the survey has no pretention of being scientific, some very clear conclusions seem to come out.

What turns buyers off the most are:

  • Arrogant, pushy or condescending attitude.
  • Telling lies or pretending to know more than they actually do.
  • Talking and telling their story instead of listening to what the buyer wants.
  • Trashing the competition.
  • Sales person not identifying their needs.
  • Poor follow-up from the sales person.
  • Sales people looking for excuses or blaming others or something for poor performance.

What the sales people see as a reason for a failed sales negotiation are:

  • Not having established the customer’s needs.
  • They were not talking to the right person.
  • Their product does not add value to the customer.
  • Poor pre-qualifying of potential customers.
  • Not having established a good enough relationship.

So, clearly the buyers are looking to be treated like mature responsible professionals. They want to hear how the product or service that the sales person offers adds value to them and meets their needs. They are not interested in hearing lies or negative story about other suppliers.
They want the sales person to identify what they are looking for and then hear why the supplier product is the best for them. That is all.

Although sales people acknowledge some of the previous issues, they see the weakness mostly in the preparation and in the person on the other side. None of them mentioned that their demeanor was part of the problem. Addressing the preparation is a good thing, and yet the area where they can score the most is pretty easy: it is about asking questions to the buyer and listening to the answers. It is so much easier to offer the right solution once you know which problems need to be solved.

For sales people it is not about showing all you know, it is about thinking along with the customer. I guess that kills the idea that to be a good sales person you must be a smooth talker. No, to be a good sales person, you need to want to help others. And if your product is useless, then pass the message onto your boss and adjust your offerings.

Copyright 2009 The Happy Future Group Consulting Ltd.


Intelligent growth

April 4, 2009

Everybody in the business community will tell you: you must grow your business.
But what does this mean exactly? What do you grow? How do you grow?
For having seen the good, the bad and the ugly of growth, these questions are quite important.
My answer is: Grow your business intelligently! And of course, all business leaders do exactly this, don’t they?
Well…
So let’s get back to the basic questions first!

What to grow?
This is the tricky area.
The risk for a successful business is to think that growth will be linear. In other words, if you produce x units and make a profit of y, by growing to 2x you will make 2y profit. Sometimes you do, sometimes you don’t.
Good business people want to make money and what you should grow is your profit. There is no point of selling more if you do not make more profit, as that means that you do not make money on the extra sales. Then, why invest and hire and complicate your business if you do not have any marginal advantage in doing so? This sounds obvious and yet the number of companies that do exactly the wrong thing is amazing. Volume matters within certain limits but margin must come first.

How do you grow?
The first thing you need to know is how big is the market, who are your competitors, what do they plan to do and how do you compare with them. If they are stronger than you , maybe you should keep a low profile and not go into a frontal confrontation with them.
If you are the stronger player, as most CEO’s like to think of their companies, realize that this does not make you invincible.
The key is a sound and realistic business plan.
Start with the sales plan: how much more can you sell for a profit in the market? Then you have an idea about the required volume of your operations.
Then review all the costs implications that the new situation will create and look at the bottom line. Here the key is to not do any wishful thinking or to make the numbers match because your boss demanded some bold performance from you. A helpful rule of thumb is that you probably will sell only half of the extra volume for the profit you think you can make, and the extra costs will be double of what you expect. Enter these revised numbers in your P&L budget and see what comes out.
Base your assumptions on ambitious but realistic data, and while having a dream is nice, do not let you lead by vain objectives. It is nice to be the largest, only if it makes your company the richest, too. Market share is nice, but it is not an indicator of success, never forget that the force that will drive your ability to get the price you want is the law of offer and demand. Even if you had a market share of 90% but had grown the business beyond what the market can absorb, you will not be able to keep the prices high, and depending on the elasticity for your product, you can very well end up selling at a loss. Always be market-driven!
There is nothing wrong with being conservative. There is much wrong in having your organization taking too many risks.
Another key point in your growth plan is the phasing. You need a longer term view on where you want to be and set yearly goals for your growth plan. Be aware that you can go only one step at a time and that you cannot skip steps. Like with building a house, you start with the foundations, then build the floors one after another, and you do not build floor#2 before you have finished floor#1.
And finally, you have a choice of either growing organically or acquiring another company (see my previous article on M&A).

Remember that the most important for a business is to keep existing, and growth is only one of the ways to achieve this.

Copyright 2009 The Happy Future Group Consulting Ltd.