• Innovative Strategies That Create More Profits

Tag: Management

 How To Repeatedly Make Sound Decisions  

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 Make Sound Decisions Repeatedly

A survey of top executives showed that executives only make “sound decisions” 52% of the time.

That’s only 2% better than flipping a coin. So if you could improve just a few percent, you could be

in an elite class of decision-makers who make sound decisions repeatedly.

Why is it only 2% better than flipping a coin? There are three reasons:

1. Their extensive industry knowledge and expertise.

2. Their reliance on analysis and critical thinking

3. Their self-limiting perspective.

 

Industry expertise can hurt your ability to make sound decisions.

 

In becoming a decision-maker, you have accumulated extensive knowledge and experience in your industry, market, products, and services.

You have talked to many customers. You know how what works and what doesn’t work.

You have established patterns, processes, and a culture of how “we do it here.”

While all of this is necessary, it has also established automatic thought patterns, which you can refer to quickly.

And at the same time, it limits your ability to think outside of your industry and market

to understand how other markets and industries might think about and handle the problem or opportunity.

So they decide based on the past rather than exploring new ways to think about the problem or opportunity.

Hearing about how a different market does something often gives them ideas on

how they might use this idea or process to solve a problem or improve their strategy, product, or service.  

All this built-in knowledge and experience keeps them from repeatedly making sound decisions.

 

Over-reliance on analysis prevents making sound decisions. 

 

 We learned that gathering enough information and analyzing the data thoroughly

was the “the way” to solve problems and create a better way forward.

Unfortunately, making data-driven decisions often does not work because analyzing the data is all about the past, not the future.

So, if you need to move forward into the future, all those old solutions and ideas will not work.

Here’s an article from Forbes if you want another view.  

Critical thinking is a good process and should be used,

but the object of critical thinking is to judge whether the information you have is correct or not, true or not.

That is undoubtedly important to understand the problem or opportunity,

but it will not help you look into the future to solve this new problem or exploit this unique opportunity.

The goal, of course, is to make sound decisions repeatedly.

Here is a traditional view of critical thinking from the Critical Thinking Organization.

 

Limited perception inhibits making sound decisions. 

 

 The first and maybe the most important thing you need is to see the problem or opportunity.

In other words, your perception. It is your perception that will design a solution.

One of the best ways to explain this is with an example. Here is one from Edward de Bono.

A group of 12-year-old boys was always picking on Bobby, one of the boys.

Because that is what they do at that age, one day, they showed Bobby two coins,

a larger one worth one dollar and a smaller one worth two dollars, and they told Bobby

he could pick one of the coins and keep it.

Bobby picked the larger coin, and the other boys laughed and talked about how dumb Bobby was. 

They made this offer whenever they wanted a good laugh at Bobby’s expense.

One day an older man saw what they were doing and told Bobby that the smaller coin was worth twice as much as, the larger coin.

Bobby said he knew that. But if he took the two-dollar coin, they wouldn’t keep returning and giving him additional coins.

 

Conclusion

 

Expertise and analysis are essential, but you must look forward rather than just backward

and broaden your perception if you want to move forward.

So, your perception of the situation is often not considered and is critical to your decision.

That is how you will make sound decisions repeatedly. 

 

You will want to check out our blog post, “How To Get Significantly Better Results In Less Time.”

Also, check out our website, How To Create Strategies That Turn Goals Into Results.

 How To Break Free From A Competitive Market

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 How To Break Free From A Competitive Market

Many companies today face a very competitive market and are looking for a way to break out.

When every competitor focuses on short-term tactics (i.e., special sales, drawing for a prize, etc.),

the solution only lasts until one of the competitors comes up with a new tactic. Then, you have to dream up another short-term tactic.

This kind of competition is self-destructive. Each competitor is destroying their margins.

This kind of self-destructive competition is one of the problems W. Chen Kim and Ranee Mauborgo take on with their book, “Blue Ocean Strategy.”

Their strategy is to create new demand by eliminating costs for features customers don’t value

and using that money to add features and benefits they do value. This allows you to add value at no additional cost.

Stop Benchmarketing The Competition

Too many companies focus their strategic thinking on the competition, which puts the competition, not the customer, at the core of their strategy.

Stop benchmarking the competition and responding to their strategic moves because it means you look more like the competition.

Instead, put your strategic focus on the buyer and innovate new ways to deliver more value.

Note: just because a  competitor is doing something, doesn’t mean it’s of value to buyers.

For example, if your company is experiencing:

1. Margins shrinking

2. Competition is growing more intense

3. Competition driving commoditization

4. Rising costs

One way to reimagine your market is to take the features each competitor competes on for the X-axis,

and the value the customer puts on that feature on the Y-axis.

Then draw a horizontal line for each competitor, and you will see the differences between competitors.

You should be able to add value at no additional cost.

A quick example would be Cirque du Soleil.

They combined traditional circus acts with modern acrobatics and then put then the performance in a theatre,

which increased value, the price of the tickets, and significantly improved margins.

Focus On The Buyer

Put your strategic focus on the buyer and innovate new ways to deliver more value.

Note: just because a  competitor is doing something, doesn’t mean it is of value to buyers.

In summary, you have to re-think or re-frame how you approach the market.

Then compare and contrast your offering with what competitors are offering (your x- and y-axis analysis).

Then introduce the first product to a market with lots of pain -they will be more eager to buy.

Then, finally, you expand your product offering to the bigger market and build revenues.

Think about these questions:

1. Which features of your product or service could you eliminate because the buyer does not value them?

2. How much would this reduce your costs?

3. What products or services could you add with those savings that would have value to the customer?

4. Which market segment can you enter to establish your base?

Conclusion

If you are looking for ways to break free from competitors, examine what your competitors are doing.

Which elements (features, functions, benefits) of their offer due the customers find of value

and which elements contribute little value. Each of the elements has a cost.

If you eliminate the elements that have little value, you can use those funds to add to or create new benefits that customers want.

Again think of what Cirque du Soleil was able to do.

If you know someone struggling in an overly competitive market, tell them about this post.  Maybe it will help.

You might also be interested in our blog post, How Do You Know When It’s The Right Time To Scale?

You might also be interested in checking our website Harbor Capital Group,  The Proven Secrets Of Successful Startups.

Jim Zitek 

 

 

Do You Know When To Scale?

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The goal of every founder is that moment when you have product-market fit

and you are ready to scale the business, But understanding when that moment has arrived is difficult.

Many startups jump the gun and begin to scale too quickly and end up just burning cash.

Net; getting the timing right is critical. If you have discovered a pathway to repeatable revenues,

you are beginning to get organic revenues (proving product-market fit) and are convinced you are ready to scale.

In general, you are correct about product-market fit,

But these early sales are most likely from early adopters.

You still have one or two obstacles to get over. According to Steve Blank, if you are introducing

a new product in a new market, you don’t have a market. You have to create the market.

So, as you run out of early adopters, about 16 percent of the market, you will have to educate

buyers who are unfamiliar with you, your product, and its benefits. That will take some time and money to accomplish.

Therefore, after that early revenue peak, your new revenues are likely to begin slowing down rather

than speeding up until you have the mainstream market educated.

So timing is critical because marketing costs from scaling up are rising, and revenues are not.

A lot of companies have been caught in this trap.

If you are introducing a new product into an existing market, your goal is

to take sales away from your competitors. The market is there.

Therefore, you should be able to keep revenues growing with your better product.

However, you still have to cross the chasm from early adopters to mainstream customers,

and they are more skeptical than the early adopters, and it takes time to convince them to switch over to your product.

Therefore, your Scaling should be more in sync with your revenue growth.  Unless, of course, money is no object.

For startups, timing is an essential element that you must always be conscious of.

 On the other hand, Scaling isn’t the same as increasing sales.

Scaling also means enhancing and improving your capacity and capability; scaling requires a well-thought-out plan

(written down) that includes all of your sales and marketing, operational systems,

the technology that will help with both revenue generation and operations,

financial requirements necessary to scale, and potential risks.

At the same time, Scaling also requires that you continue to focus on your customers.

It would be best if you thought like Amazon, which puts billions into infrastructure

and operations to take care of its customers. Is your goal to have your startup scale?

If yes, do you have the profit margins and market size to scale?

If not, you can still have a great business, but it will be hard to attract investors.

Recognize And Adapt To Your Stage Of Business

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Recognizing the growth patterns of small businesses and the peculiar set of challenges presented by every stage of development are indispensable for every budding entrepreneur who often seems to get lost in the process of penetrating the market. Businesses, especially small-scale ones, are in constant growth. They start with just a few employees and a very limited range of objectives, but they all have the potential to embark on major expansion with properly crafted and well-executed action plans. While all small businesses are unique in terms of organizational structure, strategy, and managerial style, they have one thing in common: they experience or follow the same set of growth patterns.

A business does not simply come into existence and become profitable overnight. Businesses have to go through a sequence of developmental steps and overcome all the challenges that every step creates. Believe it or not, the same pattern applies to every company including startup with just a handful of employees to the multi-million dollar software developers. 

The similarity of the growth pattern makes it easier for startup founders to understand the opportunity and obstacles ahead of time, and create an effective plan in accordance with market conditions, so they can survive and thrive in the long run. 

Such an understanding is the foundation for business owners to devise a creative plan that ensures the efficient use of available resources.

Growth Pattern

Various studies have attempted to come up with a definitive model to examine the growth of a small business, but the most commonly used pattern is as follows.

 Planning

At this very early stage, the business to be established must answer these questions:

  •  Does the idea (of goods or services) fill a need in the market? 
  • Will the company make a profit?
  • How will people react to the product idea?
  • What is the right business model for this business?

The “initial” plan is just that: initial. You cannot stick to that same plan over the years and expect steady growth. The key to a successful startup is adaptability, meaning the business plan must change in accordance with current market conditions and consumers’ demands. Every single part of the action plan must be under constant review and ready for quick adjustment. Many times the plan also includes a requirement for outside investment.

 Establishment

The next growth stage is Establishment, in which the business is starting to take shape, and therefore a change of plan is most likely necessary. A small business undergoes a massive difference at this stage because the initial plan can no longer sustain growth. Some of the most common challenges include:

  •  Seeking outside investment because the actual budget exceeds the allocated amount
  • Hiring more employees to support day-to-day operation, which also adds more expense
  • Establishing market presence and customer base
  • Ensuring a balance between cash reserves, expenditures, and sales
  • Determining more appropriate management styles due to market demands

In the establishment stage, the most important thing to achieve is sustainable operating procedures with risk management.

Early Growth

A significant milestone in building a business is the ability to gain steady cash flow from the customer base. It is a sign that the production and delivery of goods and services are well-managed. At this point, small businesses have overcome all the difficulties endured during the earlier stages of growth and are in the process of generating revenue. As profit starts to come through the door; however, competition is catching up and bringing some new challenges:

  •  Fulfilling the demands of an increasing number of customers
  • Streamlining company operation to minimize operational cost
  • Keeping up with competitors
  • Increasing the volume of cash reserves

During the Early Growth stage, the deciding factor is whether the company can recognize the key profit driver and optimize its impact on the business itself.

 Profitability

With more reliable distribution channels and effective marketing strategy in place, small business has earned its place in the market despite fierce competition and makes money. Being profitable is a sign that the business is moving toward the expansion process. Naturally, the company is seeking to:

  •  Stay ahead of competitors
  • Acquire competitors whenever possible
  • Expand the business sectors
  • Increase the volume of production

 Many small business owners think that Profitability is the final stage, and they are not entirely wrong. After all, the purpose of building a business is to earn a profit. However,  complacency at this stage often leads to a decline, mostly because the competitors can afford to stay creative. There is always room for improvement, for example, employee engagement, customer satisfaction, brand image, and collaborations with partners.

 Revitalization

 Also often referred to as the maturity stage, Revitalization is the beginning of a process where the business must think about new and improved products or services or an effective exit strategy. As you know, the market is always changing; your goods and services need to stay relevant if you want to stay in business. Go back to the drawing board and craft a new plan to support and encourage innovations. But this time it will be easier because you have reliable financial resources to get the job done.

Considerations When Launching A Startup

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Launching a startup business from scratch is a massive undertaking. It is as if you have to manage somehow an engine in which there are many moving parts,  all moving at the same time. Every small business owner understands how complicated this process can be, mainly because the company is in an early stage and unable to afford a lot of professionals’ to help.

In most cases, a one-person owner serves multiple roles as manager, bookkeeper, marketer, and customer service. There are fun parts such as brainstorming business, a name or drawing a product design. And then you have to deal with the stressful parts, for example, registering with the government, filing the taxes, and making financial decisions.

 The entrepreneurial world is full of stories of success and failures. With careful planning, however, you can avoid the latter and lean toward the former. A business plan exists to help you launch and run the business using the methods you prefer; every action listed in the document allows you to take a step back and review your strategy.

A useful approach to getting the business off the ground as smoothly as possible is to consider all possibilities and think through every aspect which may affect the company as it grows. In short, you have to consider the legal side of the business, marketability, organizational structure, and of course, investment.

Key considerations

 There are at least ten significant considerations to think through, even before the business officially exists.

 1 Legal setup

 Here is one thing to put in mind: venture capitalist or any other investor will not want to pour money into a startup that doesn’t have a reliable legal structure. If the legality of your business is in question, outside investment is hard to come by. Do not make rookie mistakes such as failure to register with the local authority, registering incorrect business forms, having poor contract agreement with co-founder, poor employment documentation, or using a weak contract. It can be a headache to have proper legal setup from the start, especially if you have no help, but you cannot ignore the importance of this matter.

 2 The market

 Startup owners are naturally excellent problem-solvers. They have ideas on how to create products that will solve existing problems consumers have. But in reality, everybody can have ideas; the most significant difference between business owners and everybody else is the ability to transform ideas into a profitable venture. Market research is the key. You need to conduct research continuously to see how consumers at large (or those in your target market) respond to the solution you propose. Document your research, for example, the problems your products solve, who the customers are, what the competitors do, and how big the demand is. In short, you need practical knowledge of the market before you launch.

3 From ideas to reality

 All business ventures have challenges. One of the first obstacles is bringing your idea into reality. Chances are you don’t have a factory capable of mass-production or a team of professionals to provide services. YOu will need to develop collaboration with other businesses to help you execute the ideas, run production, and bring the products to market.

 4 Organizational system

 It would help if you had constant report updates to know how the business is doing on a day-to-day basis. Critical financial information of the company must be accessible and current at all times. Otherwise, you cannot devise an effective plan to keep the venture going.

 5 You need advice from professionals.

 Admit that you don’t always have the right answer to every question that arises during the launching process. There can be all sorts of legal issues and organizational problems for which you need advice from more knowledgeable people. It costs money to consult professionals, but it would be money well-spent. Investors will also take you more seriously if you make the right decisions based on suggestions from the experienced.

 6 Fundraising

 Unless you have a lot of money at your disposal, you cannot stay away from investors. Just like with everything else, do your research regarding potential investors, for example, their track records in your industry/niche and how to get in touch with them. Investors have the money, and sometimes you have to devote serious effort and time to meet them. 

7 Not every investor you meet will be interested

 Your startup is not worth a billion-dollars; you are not a Unicorn. It only makes sense if some investors turn down an offer to invest. Improve your ideas or look for other investors. Sometimes an investor wants to wait a little longer until a startup shows signs of development, and only by then, the decision to fund the company comes to the surface.

 8 Startup ownership

 Every investor has share ownership of your startup company. Be careful with what you give away. Otherwise, you may lose the company entirely. Remember that you can always seek advice from professionals to avoid this mistake. Investors will appreciate your decision not to give away too much.

9 Vesting

 Most investors want you to stay active in the company, at least for the first several years of development. You understand the idea better than anybody, and therefore you are the best person to oversee how the plan transforms into profits.

 10 Have a legal counsel

A lot of startup owners rely on their investors’ legal teams for documentation and advice. Although it is not always a bad idea, you’ll feel more confident with a legal counsel who works for you and your best interests. In every negotiation and tough financial decision, the legal counsel will help you understand all the risks involved, including when you have to deal with your investors.

Get 10x More Done In Less Time

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Most everyone agrees that execution is critical to the development of a company. In fact, many investors in Silicon Valley, believe that execution is the number one risk when it comes to startups and early developing companies. We will have many articles on this topic because it is so important. But, I want to start with how to get more done in less time.

There are so many things that need to be accomplished and often not enough time or people to do all of these jobs. So the question is: If everyone has the same number of hours in a day, how is it that some people get exceptional results and others get very little done?

Here is one way to do it. I am sure you have heard of the Pareto Rule or the 80/20 rule. That rule works for most things and you can use it to become more efficient and more effective and in fact, do bigger things. Gary Keiler, in this book, “The Surprisingly Simple Truth Behind Extraordinary Results” tells how he accomplished more by doing less.

He says things were not working out with his job and his life. Too many demands, too little time and he had to do something. He went to a consultant and was told to do less. He was told to narrow his focus to one thing. In fact, the more narrow your focus the more successful you will be. “To achieve an extraordinary result you must choose what matters most and give it all the time it demands”

He was told to answer this question: “What’s the one thing I can do such that by doing it everything else will be easier or unnecessary?”

It all boils down to this very simple thing but something you have to practice at to become good at. In other words, you need to get out a calendar and make an appointment with yourself, four hours at a time, every day, to focus and work on that one thing that must get done. No distractions such as email, phone, chit chat with other workers or friends. Tell people you are busy. Four (or more) uninterrupted hours to focus on what is important. That is how you master your craft and that is how you get things done.

Here is a couple of examples. Harry Browne, America’s most successful salesman, worked four hours a day selling different things including cars and in the afternoon did other personal things including writing. He says selling is easy and we will be discussing his methods and ideas in
other articles.

Michael Phelps practiced six hours a day, 365 days a year, a 52-day practice advantage over
his competitors, which resulted in 22 gold medals, the most ever by an Olympian.

Focusing a minimum of 4-hours a day on being the best rather than doing your best is the answer.

As you knock down one goal, the next one gets easier. But, you have to protect your time blocks. Don’t let those time blocks get moved or interrupted Until that one thing gets done, everything else is a distraction.

Try it. You will be amazed at what you will accomplish and how good it feels to complete difficult tasks quickly and how many tasks you will get done and the progress you will make because each completed task moves you closer to your goal.

How to stay focused on your key objectives

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This article will cover a brief overview of the OKR (Objective and Key Result). All companies, including nonprofit organizations, are goal-oriented, purpose-driven, and yearning for accomplishments. Regardless of size and industry, however, they all operate with a limited amount of resources.

It doesn’t matter whether you run a startup or a company worth billions of dollars; you always need an effective goal-setting and measurement process. This is where OKR comes in.

What is OKR?

In simple words, OKR (Objective Key Result) is a framework used for setting strategies and defining goals to be achieved within a specified amount of time. At the end of the specified period, OKR provides a reference on how well the individual or company has performed in executing strategies and achieving the goals. As the name suggests, there are only two significant points:

Objectives: these are the goals you hope to accomplish within a specified time. At Google, for example, the results (goal plus where you are in completing the process) are on a dashboard for the entire company to see. OKRs help the whole company stay on schedule and give the company time to adapt if they are not on the schedule.

Key Results: think of key results as indicators of or pathways to achievement. Commonly the indicators are written in numbers, for example, percentage, time, reference, or monetary value. Numerically-based objectives or expectations are often easier to measure, as well. For example, the Objective is to (specific goal)  by (date).

Not every key result is quantitative or indicated in numbers. Instead of using numbers to track progress, you can use a qualitative (milestone) method. Every milestone represents a specific challenge or a portion of the larger initiative. Each milestone met means a step closer to the objective. For example, step one (25% of tasks required) completed (date) as scheduled and currently on track to achieve the overall goal as expected.

The maximum a person should have is four to five significant objectives. Four meaningful goals and four tasks to each means focusing on sixteen tasks.

Why use OKR?

To make sure that every individual and team in a company is on the same page, OKR must be widely distributed and easily understood. OKR is crucial because it acts as a management and communications framework.

Key results, ether quantitative or milestone-based, are measurable values used as the foundation to determine overall performance. Key results are indicators that mark both the easiest and hardest parts of an initiative. This way, the company can define the right strategy to focus on and the most immediate challenges by diverting or allocating more resources accordingly without compromising workflow in progress.

Main benefits of OKR

In addition to measuring success, OKR opens the door to better utilization of resources. As simple as it may sound, this is a complicated process; yet when done correctly,  it promises a wide range of benefits including but not limited to:

Effective employees: well-communicated objectives and key results allow the companies to focus on the most important task at any given time. The sense of achievement with every milestone met is also a strong motivation to keep on moving forward as employees realize that they are closer toward project completion.

Better planning: based on current achievements and remaining resources available, a company can craft strategies and execute all elements in more efficient ways. OKR gives a good understanding of the company’s situation and performance.

Manageable execution of strategies: the key idea here is prioritization. OKR helps a company to recognize any weak points in the planning or performance that will hinder progress and the completion of the objective itself. The company can then prioritize resources to address the identified shortcomings.

The idea behind OKR is to manage and measure success. Because some objectives can be too difficult to achieve, given a limited amount of time and resources, a generalized statement of success or failure is not good enough. OKR gives a clear overview of how far or close you are to achieving goals and foretells possible difficulties to come.

Here is an example of how to use OKR. T.J.Rogers, CEO of Cypress Semiconductor, who, through a dashboard, reviewed each person’s status daily. If an employee were behind in reaching his goals, he would call the person and ask,” how can I help.” He assumed they would have completed the task unless there was an obstacle holding him/her up. That’s a positive management tool and a positive approach to team members.