Oxygen for your Transformation, or “Show me the Money!”

From the Lionesses of Africa Operations Dept

Last weekend, we looked at ‘Lean Transformations’ and within that we pointed out that McKinsey had shown that 70% of transformations failed due to no buy-in from or a failure to carry these important stakeholders: Board, Management, Employees (and not necessarily in that order).

‘Buy-in’ of course is a movable feast, just because one group says ‘yes’ and appears to be fully committed on Day1 means nothing the following week when things go wrong and tough decisions have to be taken. We turned to the ‘Fount of all Knowledge’ (or so it says above the door to the Head of Finance (HoF)’s office(!)), how do we ensure continued support from these important stakeholders?, we asked.

Giving what possibly on a good day could at a pinch and if we were being highly charitable, be described only as a bad effort at being Tom Cruise (we are certainly being very charitable indeed here), the expression: “Show me the money!” came back from our HoF! So that is exactly what we shall do as we call this: Quick wins and moments for celebrations!

‘Show me the Money’ is all about increasing revenue in a quick, short and efficient way to encourage belief in the process (as in the film Jerry Maguire with Tom Cruise and Cuba Gooding Jr., this is the route being taken by Jerry (Tom) as his only Client (Cuba) promises to support him). This increase in revenue is like Oxygen to the core of the fire that you and your Team have lit. Absolutely necessary.

This is important because stakeholders do not necessarily have the same time frame in mind as you. Remember you own the company and you are looking for growth over the next 6 month, 12 months, 3 years, your employees on the other hand are simply wanting to get paid at the end of each month (in our film, Tom needed to rebuild his business, Cuba needed a quick win in the form of cash to prove that his decision to support Tom was the correct one). That is a significant time and expectation differential. 

If growth over a long time scale, means cuts now, that is extremely painful for your employees (who may have had to take pay cuts or have lost work colleagues and friends in the shake out) and if having signed up to this, something does not quite go according to plan (and please remember, this is not a straight line graph, there will be downs), employees will start to think they might have to pull their belts in a little tighter still, so support starts to crumble. An increase in revenue therefore helps by funding the journey (so you are not having to dig into savings or reduce headcount further); generates momentum (there is nothing like cash coming in to encourage further support); and increases confidence (“See! I knew it would work!”).

So let’s drill down into your company to see how this could work in practice:

Revenue comes from your Sales.

Hunters vs Farmers.

What do we mean by this? Within all sales units you will have those who are Hunters - you send them out to fetch new clients, but the day to day managing of a customer bores them. It is the thrill of the chase that is important. They want a blank sheet of paper on their desk each morning that they can fill with new customers (and get rewarded for this).

Farmers on the other hand come out in hives if they are asked to ‘cold call’, but allow them to nurture a customer, to ensure that when the customer calls they are greeted with a welcoming smile and then direct the customer to not only supply their wants and needs, but also to move them onto higher margin products, then you have seriously made their day. They want to see and track customer sales and follow up on sales, so each morning they want a printout of exactly that sitting waiting for them on their desks when they arrive. They will then call these customers and encourage further sales based on what they know already of the buying patterns and customer.

This is an easy win if you have not already done it. Both sets of people will be released from their gloom and doom of things they would rather not do. Of course they still have to work together, new customers will be shocked if the moment after they put in their first order your Hunter (in whom they have put their trust) disappears and a Farmer turns up (with their spreadsheets, analytics and efficiency) as it takes time for customers to recognize that they are better served in the long run by a Farmer who is highly efficient than a Hunter who is always looking at the next catch. This is an important ‘Tag Team’ effort.

With these two now firing on all cylinders you can now sit with them to design increased sales (they after all know their hunting ground or customers better than anyone) perhaps to target their own customer groups with specific sales of particular products or services; or bundling together current offers; or improving loyalty programs and targeted promotions; or even simply moving one-time sales (what a wasted asset) to repeat customers or subscriptions.

Check out all those one-time sales, don’t be shy, contact them, bring them back into the fold. As we have pointed out in previous newsletters, this is a warm customer, they have already paid for a product. Either there was a problem (and that is useful market research you should know) or a one off win that could have been turned into multiple wins with a small follow-up. Indeed sometimes a call from the Founder is all it takes for the Customer to feel loved and return to the fold.

Look at the way in which you incentivize these two groups. Nothing says “Show me the money!” more than a bonus based on sales at the end of each quarter (if this is new, remember to pay it only once the cash is in - even you need to ‘see the money’. If this is anyway an add-on to current bonuses, then this becomes quite difficult to change as you do not want to desentivize, but you do need the data so that you can show the teams how much you paid them in bonuses, whilst still waiting payment from the customers, they will soon get the hint).

For each positive there must be a negative - your sales team will not like it, but take away their ability to offer discounts, this is like throwing sweets into a playground, sales people love to be popular, but that is just buying support. You end up not knowing if it is your product or the cheap price that attracts customers. The problem with going cheap is that this is a race in which there are no winners, or if there is one particular winner it will be the huge players such as Chinese suppliers who can flood the market and bang, your business has no customers, just like that! 

You have to standardize the pricing and this must be aggressively followed up. In your sales systems there will be the ability to force a new price through that everyone in sales will know about (if there is one thing guaranteed in life, sales teams will know how to do this!). Block that immediately and allow a change of price only on the basis of permission, but it has to be a very good reason. The Boston Consulting Group see this as one of the major drivers of revenue growth (and a quick win) - so, no! It is not automatically true as your Sales Team will argue (and believe us - they will argue this!) that the customers will instantly disappear into the warn embrace of a competitor or rush to buy cheap Chinese imports. Instead perhaps suggest to your Sales Team that this will allow them to show their customers the benefit by moving up the value scale through purchasing the higher range that gives them far more bells and whistles, whilst increasing your revenue and profit.

As we have discussed previously, tightening up your invoicing processes (technology is your friend here), ensuring timely collection, direct debits or direct withdrawal is essential and is a large quick win. Tighten this area.

Check your contracts with your customers. It is amazing how many times agreed pricing has fallen away as time has moved on or pricing vs quantity or even Minimum Order Quantities (MOQ’s) have simply been ignored. You won’t find many Chinese factories agreeing to lowering their MOQ’s and this is because they have calculated to the exact margin what each component creates in profit and even how much it costs to turn on the machines to produce 10 widgets rather than 1,000. This is (one reason) why they can charge such low prices. If you offer a bespoke product then of course it costs more because the machinery, electricity and man hours are not significantly different as they all still need to be turned on (and constantly fed with expensive Coffee if our HoF is anything to go by!). 

We all expect airline flights to be significantly cheaper for shorter distances, but the reality is that most of the fuel is burnt at take off, you still need the same ground crew and checks (“Don’t worry Bill, we’re only flying 500 miles, leave the checks!”, is not something you want to hear from the Captain just as you board), the training is still the same (you certainly don’t want ‘a few bad apples’ in this industry), so it is no wonder that for short flights all the frills such as food and drink have been taken away. The same is true of factories and offices. 30 minutes into the day everything is working as planned, but that first 30 minutes has been taken up with arrival, coats down, small talk, coffee being made and so on (all important aspects of building a great place to work of course which helps you in the long run, but that first hour is still inefficient and if you have to turn on large machinery to make 10 rather than 1,000 widgets and your staff have still been trained to the same high standard - you begin to see where the money is going). So if you have MOQ’s stick to them unless you have a very good customer. But again - this and all the others (such as pricing changes) are Executive Decisions, not Sales.

The Process.

As with so much, this cannot happen immediately just because you woke at 3am, drew it on a piece of paper and gave it to your Sales Team as you arrived in the office. Create a structure.

1. Talk to your Sales Team (Hunters and Farmers) to design the new ‘special offers’ or ‘grouped products’ and of course your Warehouse chief, who will know of the difficult to shift products that are hiding in the dark places. If they can be shifted by being added to other items to bring yet more value to your customer, now is the time (just be careful not to devalue the entire group of products, there is usually a good reason they are unsold). What areas will bring you the best and quickest results? As we mentioned before, your Hunters and Farmers will know their customer groups best, so should have no problems designing these.

2. Test out the theories. As with so many changes, there are no guarantees, but far better that you test the planned sales with a small hand picked group of customers, make mistakes and discuss with this group how you could have done it better, than simply offer to your entire customer base and just look stupid when it doesn’t work and have to publicly back off and change direction.

3. Once you have the success you want, scale and scale fast.

As with all Hollywood films everyone lived happily ever after (well, the films we watch anyway!), the boy gets the girl (“You had me at hello!”) and Jerry bags an $11.2 million deal for his friend Cuba, but for your business? 

This sadly is not Hollywood. 

Remember, if it was easy, everyone would be doing it!

Good luck and stay safe.