How to make the most useful dashboard

The need for real time information

From sports car to aircraft to super tanker, successful operation depends upon the pilot’s understanding and urgent timely use of a dashboard.  Real time information is critical to real time decision-making, and increasingly in the modern business world, decisions are made by management without extended meetings or discussion with others.

Managers need real time information

And with the rise of modern technology-driven businesses, the same is true of management in the business world.  A good dashboard of relevant real time information is now available for most any business, often created by computer software from data derived from monitoring real time tasks within the business.

Consider these critical pieces of information

You should consider creating such a dashboard or reviewing the one you use if already driving with one at hand.  I’ve developed four criteria for use in creating and evaluating your dashboard.  When constructing yours, you should consider the following:

  1. Controllable outcomes: There is no use for information for which there is no ability to control changes as a result of analysis.  Ensure that you include only information for which you have a way to alter future outcomes in a positive direction.  An example would be a real time display of the value of the dollar against the yen.  If your business has no trade with Japan that could be affected by arbitrage, early shipments or other tactics that take advantage of the moving value of these currencies, that statistic is irrelevant to the dashboard – even if interesting to you.
  2. Earliest warning metrics:  [Email readers, continue here…]     What good is information if you can’t act upon it in a timely manner?  Find metrics that will be “leading indicators” of trouble to come.  Think of labor efficiency (future product or service delivery impairment) or warehouse inventory (sales slowdown, supply chain management problems) as examples.
  3. Items in the critical path (bottlenecks): This is one of my focus issues for my workshops, it is so important. One of your chief duties is to remove bottlenecks in the delivery process for your product or service, enabling all resources before and after the bottleneck to achieve maximum efficiency.  If a critical path machine or employee is slow or down, your own email box overflowing with questions from subordinates needing answers, or any other measure of critical path impairment in need of fixing, you should know about it at the earliest possible moment.  Add a measure of each that you identify with to your dashboard.
  4. Items impacting cash (now or later): Cash is the oil of your business.  Slowing of production, deliveries, raw materials, receivables collections, billing for work completed – all are going to influence cash flow soon and should be tracked when out of expected range.

Some simple indicators you can track

Simple indicators that affect multiple areas above include increasing backlog, call center delay time denigration, increases in finished goods inventory amounts, unbalanced work in process inventory buildups, and reduced efficiencies in billed time for consultants or experts.

And how about projecting cashflow?

How about projecting cash on your dashboard:  cash on hand plus expected accounts receivable collections subtracting necessary accounts payable payments and payroll.  You will find many more candidates for your personal dashboard.  Try to limit yours to five or fewer critical measures that can be updated no less often than daily if not in real time.

You will be steps ahead of most of your competitors and in a much better place to succeed if you create and maintain an effective dashboard.

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Posted in General, Growth!, The fight for quality | Leave a comment

Crowdsourcing, collaboration, support groups. Oh my.

At the MIT Center of Collective Intelligence, professors and graduate students are wrestling with an important opportunity – and gaining ground.  With new collaborative tools available for use in the cloud, people are no longer isolated in their creative endeavors. Some label this “crowdsourcing,” a term used to describe one form of this new empowerment.

How to use the new tools for collective intelligence

How do you use the new tools for collaboration to enable people and computers to be connected so that collectively they act more intelligently than any individual?  MIT has come a long way in identifying tools and techniques.

Help from your peers

You can do the same.  First, realize that no individual in your organization, including yourself, is as effective alone as with collaborative help from peers.  Then find ways to build concepts, plans, documents, and actions through the collective collaboration of your key group.  Explore and implement one of the many collaborative environments available through cloud computing, products from Microsoft, Google, IBM, and others.

How to test the system

[Email readers, continue here…]  It is easy to test the system. Create a document with your basic plan or idea for action.  Post the document using one of these common tools and invite members of your group to add to or comment upon this beginning effort.  Respond and build upon the result.  You will note that within a short time, you will have created a plan or document usually far better than if you had worked alone.  And the added benefit is that the group will feel ownership in the result, a powerful step toward a successful outcome.

 

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Posted in General, Growth!, Positioning | Leave a comment

How to measure your power in the Internet marketplace.

There are several key performance indicators that help new generation company management see more clearly their progress and corporate health.  The old measures, including return on investment, percentage of profit against revenue or employee count, and more, obviously are still relevant.   But businesses that expose their story to tens of millions of potential customers through the Internet need additional tools.  Some of these are also applicable to non-Internet businesses.

Some of these measures, and how to calculate them.

You will recognize the value of these for any business, even if they have not been in common use in the past.

  • CHURN (% customer cancelling each month)
    • This is calculated by dividing the number of cancellations by the total number of customers before cancellations and multiplying by 100.
  • CMRR  (Contracted Monthly recurring Revenue)
    • A simple statistic which can be derived from a good general ledger using GAAP accounting procedures. Revenues are recorded as earned, not paid, especially when paid in advance.  This number is increasingly used by appraisers and buyers in valuing a business, with some multiple of this number being one measure of the value of the enterprise.
  • [Email readers, continue here…   ]   LPC (Lifetime Profit per Customer)
    • This is the total expected revenue for a customer (usually calculated with a five year life no matter what the type of business) less the cost of acquisition (see below) less the recurring direct costs of serving the customer or of product estimated to be sent to the customer over the lifetime relationship.
  • CACR (Customer Acquisition Cost Ratio)
    • This is a measure of capital efficiency, focusing upon the cost of acquisition of the customer (including direct sales, commission payable, direct marketing and other direct costs) divided by the expected gross revenues over the customer’s estimated lifetime of purchases. The lower the ratio, the more successful the customer acquisition campaign.
  • CPA (Cost per Acquisition)
    • This is simply the sum of the month’s direct costs for sales and marketing divided by the number of new customers acquired, yielding a dollar cost per average new customer. The lower, the better.
  • MBE (Months to breakeven)
    • A better measure of capital efficiency. Total new customers this month times the average expected revenue – divided by total direct sales and marketing cost together with the cost of product or service for those customers for the month. The result will yield the number of months the average account takes to be profitable for the company.  The lower the number, the more efficient the marketing and sales campaign, and the more efficient the use of financial capital in customer acquisition.

Shedding light on your efficiencies

Surely some of these measures would, if used by your organization, shed additional light on the efficiency of the operation and over time the trends related to efficiency.

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Posted in Finding your ideal niche, Positioning | 1 Comment

Traditional marketing vs. social engagement

Woe to those teaching yesterday’s methods

We all know that the world of marketing has turned upside down these past years through the power of the Internet.  College professors teaching marketing must be having a real challenge keeping up with the new channels of communication, the relative values of advertising buys in this new world and explaining how to make the most out of these cheaper and more powerful channels.

The new power model of marketing

Although there is still a place for display advertising in this new world, increasingly small businesses are discovering that creating buzz and engaging their audiences through social media are more powerful and cost effective.

The old “seven impression” model

Marketing texts and college professors say that it takes at least seven impressions – exposures – before a person recognizes and acts upon the message.  That’s an expensive proposition for small companies.  On the other hand, your target audience is already talking to their friends and associates about products and services they like and use.  Plugging into those conversations gives you the power to multiply your message many times over, often at no cost at all.

Using influencers to tap their massive group of followers

[Email readers, continue here…]    How do you engage your customers in a conversation instead of merely broadcasting your message again and again in hope that some one remembers it?  The answer comes in several forms, but centers around your finding the thought leaders within circles of influence, attracting the “influencers” that people follow.  Now companies engage and pay influencers to get your attention and want their products. To do this, your message must resonate in a way that it appears unique.

The way to do this for most of us

If you cannot incorporate social content into your product, surround your product with social content.  Create groups in Facebook, followers on Twitter, a comments section on your blog or website, and more.  Identify a number of influencers, and then offer to let them use your product or service at low or no cost if they will join your informal advisory group on the ‘net.  Ask for endorsements when appropriate.  Just be aware that most influencers today make their living by charging for their “blasts” about your product to their usually gargantuan base.

The golden rule of today’s marketing

Above all, make every outreach an attempt to engage your customers, listening to their responses and responding one-to-one wherever possible.  Make each customer feel important and valued.  In this new world of engagement marketing, the customer has a voice much earlier and much louder than ever before.

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Posted in Finding your ideal niche, Positioning | 2 Comments

Economics 101: If water flows downhill, then why fight it?

You’ll get the importance of this in a moment. Hang in there.

Substitute the word “money” for “water” and we have an explanation for most all the reasons why successful products move from concept through early adopters through mass market.

How money flows through the system

Money flows to the cheapest effective solution to a problem.  Fighting this fact will just extend the misery of accepting a result with as product or marketing failure in the marketplace.  Want examples in the “real world?”

Examples of the proposition

Take for example, adoption of solar panels or electric vehicles in the mass market.   Most of us want to do well for the environment. But most of the time we are willing to do so only if we do well for ourselves when measuring alternative costs.  Solar panel installations break even only after over years of use, even with subsidies offered by the electric companies or by the Federal government. And adoption of solar technology for home and business was relatively slow until solar companies began offering systems as rentals with guaranteed returns.

Solar panels are getting closer to economic savings

[Email readers, continue here…]    As solar panel efficiency increases from the present average of 22% to 30% and more, and as electricity prices rise, the net break even for solar panels should decrease dramatically.  It’s already happening in some sunny areas of the country. When subsidies stop, the economic break even will decrease to a few years as mass acceptance becomes real.  And the reason for the delays, as well as the later successes, will surely be in the money saved, not just in “doing well by doing good.”

Note the exception of states where rooftop solar panels are now required for new construction, a clever way to increase acceptance.

Electric cars as an example

Electric cars become attractive investments when the extra cost can be amortized over a year or two of savings in fuel.  And we are a long way from that. Making this more difficult, the cost of fuel for gas-driven cars is volatile, making the calculation more difficult.

Yes, many people salivate over the latest Tesla; and the sales of the Chevy Volt are surprisingly strong, priced low enough for commuters to calculate that break even is close enough to satisfy the desire to help the environment while enjoying daily savings.

Back to the water flowing downhill example.

Whenever someone asks why a product or service has taken so long to succeed in the marketplace – when so obviously a success with early adopters – why not try using the water flowing downhill analogy?  It provides a proper insight almost every time.

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Posted in General | 4 Comments

How much is that one additional unit worth?

Most college econ courses teach marginal economics.  So, not to scare those who didn’t take econ, here is a simple explanation.

Let’s use breakeven as our test

Let’s say that your company is exactly at breakeven. Here’s the importance of that event and how it affects every productive move you make after that moment. There is amazing leverage in high gross profit margins once a company is past breakeven.  Every dollar of gross profit falls to the bottom line, increasing net profit faster with each transaction.

An example to make this clear

A ten percent increase in revenues for a company with 50% gross margin and 5% net profit before the increase would double net profit for the period with that ten percent increase in revenue.  That’s impressive sales leverage.  Just to be fair, a 5% cut in costs would also double net profit.

The point is that once your company is stable at or above the breakeven point, one incremental unit generates robust increases in net profit.

How does this work with online-based companies?

[Email readers, continue here…]  In an Internet-based business, power comes not just from high gross margins, but also from an increase in the percent of conversions.  Visit to purchase, click to close, or other terms are used in various industries to describe the measure of conversion rate from initial landing on a page displaying purchase information about a product or service.  No good Internet-based business fails to measure conversion rate carefully and experiment with photo placement, ad words, key descriptions, product positioning – all to increase conversion.

Still comfortable with direct mail?

Well, let’s start with direct mail is slow, costly, hard to measure, and impossible to change once the mailer has gone out.

And that’s why the major focus that used to be in the direct mail business to drive sales is now focused upon email marketing campaigns, social networking marketing, influencer marketing, and location-based sales using tools to recognize shoppers at the point of sale.

Back to the incremental unit

All these new tools are used to drive sales of the incremental unit, sales that would have been lost if not for the ability to recognize specific qualified buyers from within the general public.  Cheaper marketing cost – more targeted to a ready-to-buy audience, all toward driving incremental sales, has been made possible by the use of the Internet to seamlessly gather information and present offers at the right time to the right potential purchasers.

The purpose is to see that incremental unit

Which brings us back to our start.  Getting to breakeven, allows us to at least double our net profit with the next unit sold.  And that’s power!

Perhaps you should reach out and touch someone

If you are still worrying over what tools you need to reach your potential customer, perhaps this is the time to reach out to the new class of marketing professionals who understand how to capture and utilize targeted data and present products and services to a pre-qualified audience at the right time for increasing purchase decisions.

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Posted in General, Growth! | 1 Comment

Should you cast your net where the big fish swim?

This is one of those “My dad used to say” homilies.  You’ve probably heard the accompanying “It takes just as much effort to sell a small deal as a big one,” over the years.

It is not that simple in the business world

The truth of this is more nuanced.  Some businesses will prosper in the shadow of larger competitors by specializing in those smaller accounts that are just not attractive to those with higher overheads and larger aspirations.

Aim high for that major account

But for most, the true sign of success and potential for even more is in the landing of a major account, one that validates the pricing, quality and competitive advantages of a company’s offering.  For this reason alone, it makes sense for most of us to aim high once we have worked the kinks out of our offering with smaller customers.

But readiness is the major test

On the other hand, the worst thing you can do is land a big fish when not prepared to reel it in.  It is hard to recover from any failure to perform, but doubly so when the customer is highly visible in the industry.  So, it is worth building the business’s capabilities through stages of customer size if the goal is to serve the biggest and outdistance the competition at that level.

How large a fish can you handle?

[Email readers, continue here…]   I have been on the board of a services company that specializes in the middle of the market, knowing that very large competitors throw lots of resources at the largest accounts – resources that our company just does not have. Rather than being constantly beaten in this arena, the company has chosen to compete in an area of the market it can defend with superior service, which the larger competitors – with their higher cost structure – could not reproduce in smaller accounts without large losses.  Further, scaling the enterprise and its infrastructure to go after the few very large accounts would be at the cost of development for the midrange of the market and perhaps subsequent loss of that share to others.

A personal story about dealing with too large a company

And I am reminded of a cousin of mine who years ago sold custom window blind product to Sears, by far his largest customer, scaling his plant to produce more and more for Sears as orders flowed.  One day a sixteen-wheeler full of returned product drove into his loading area.  Sears, which granted a no-questions-asked return policy to its customers (even for customer errors in measuring their window blind orders) just dumped the product back on the supplier without explanation, nearly bankrupting the small company.

Even though there are many advantages to casting your net to attract the big fish, you should be well aware of the risks involved and have resources available to manage those risks.

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Posted in Growth!, Positioning, Protecting the business | 2 Comments

Let’s talk about whistle-blowers

Assuming that a corporate whistle-blower is not tooting about you individually, such a class of people have been granted protections under the law and serve a function that needs to be acknowledged.

Motive of the whistle-blower

First, the assumption is that such a person is not making his or her gesture for personal profit, but to give proper notice that there is something illegal going on within the company that the person cannot accept and must tell someone about.  Note that I use the word “illegal” to differentiate the tell-tale from the legitimate whistle-blower. A tell-tale almost always has a motive based upon political or personal gain, with the exception of when there is a perception or the reality of any form of sexual interference or bullying being reported.  That’s a subject for a separate discussion, and there are civil penalties as recourse for such proven behavior.

Are whistle-blower brave or are they tattle-tales?

Whistle-blowers, on the other hand, if not motivated by a personal reward, are often brave beyond need, risking job and reputation to call attention to an illegal act or acts.  If the person comes to you with evidence of such acts, you must act immediately to address the issue, often including reporting the incident to the authorities along with the whistle-blower.

That’s particularly tough if the consequence is going to be severe against the company itself.  But, if we have learned anything at all from the last several decades of such incidents reported from within highly visible companies, covering up the problem results in amplifying it beyond anyone’s wildest imagination.  Quickly dealing with it and the consequences always is the lesser of numerous alternatives.

Legal protections for the whistle-blower

[Email readers, continue here…]   And of course, the whistle-blower is protected by law and cannot be punished in any way for the deed of reporting a wrongdoing that breaks the law, whether later proved true or false.

Personal motivation? Government agency rewards?

Some agencies offer cash rewards for whistle-blowers that are in proportion to the amount recaptured by a taxing authority or penalties assessed.  Such rewards blur the heroic act into one where personal gain can easily be assumed to be more of a motive for a good deed than brave action. And there are raging arguments from company offices to the halls of Congress about whether a whistle-blower should or must first approach senior management within the company before reporting to authorities. But, no matter what the outcome or how high the reward, that does not change the protection the whistle-blower has under the law.

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Posted in Protecting the business | 1 Comment

Which is more important? Workplace safety or profits?

Its a new world out there

Some businesses never sent people to work from home, told they were “essential businesses.”  Soon more will reopen as weeks and months go by.  That’s a relief for most of us from the combination of boredom and lack of social interaction.  Even if we were safer at home as we became experts sharing screens in Zoom.

We have new worries and responsibilities to protect those who return to the office.

With this new environment of the invisible virus lurking somewhere on a surface or in a throat nearby, we will assign super cleaning responsibilities and certainly enforce social distancing rules, hand washing and temperature checks.   But it is easy to envision some entrepreneurs and senior management wondering whether we go overboard for safety as a balance of cost and labor efficiency. Or does a leader just order a return to the normal we knew only six weeks or so before but with a little extra care for cleanliness?

Common sense or possible protection of life?

Much of workplace safety is just common sense.  But there is a natural tension between economy of operation and provision for safety for employees in this age of the invisible killer, and we in management must weigh the resulting risk to the enterprise more carefully than ever before.

How your board of directors should be involved

[Email readers, continue here…]   Good boards of directors have a committee of the board to deal with “audit” issues, which should include analysis and recommendations to management about workplace safety as a part of a broader issue of risk management.  After all, the board and management together are responsible for keeping the company alive and employees safe, protecting the corporate asset on behalf of all stakeholders – including shareholders, employees, and customers.

Safety in a product manufacturing environment

Especially in a manufacturing environment, there are laws created by OSHA and other agencies, and even by those who have experienced the result of earlier accidents that impose upon all companies the hard-earned lessons from the past.

Too many rules and laws?

Many of us groan when reading or hearing of these detailed, burdensome rules and laws.  Yet workplace accidents are harmful to health and safety for all, to morale, and they ultimately cause financial hardships upon the company, whether in the form of lost productivity, increased insurance cost, or debilitating lawsuits that inevitably follow.   And now we add the invisible killer to the mix and worry even more.

How about the tiny startup?

No company, even the smallest, is immune to safety issues.  In this computer keyboard-driven office world, programmers, accounting and office personnel, and many others are exposed to carpel tunnel, back, and leg and neck problems, just by sitting in place.  A single cough into a keyboard or worse yet in the kitchen can be deadly in this new environment. And nowadays the risk of injury, worker compensation insurance claim, lost productivity, and lawsuit are only slightly less in the office than on the factory floor.

Some of us will still travel, adding new risks

And how do you protect your employees who return to travel by air or by car? Are you and they aware of the procedures for extra care around unknown people and new places as they travel? And are your travelers aware of how to inform insurance companies, use their credit card companies and local resources in the event of an accident or sickness while traveling?   How about the extra risk when traveling out of the country? To whom do they turn when in unsafe environments, let alone after an accident or sickness, when isolated from their local infrastructure?

Too many questions, probably never previously addressed

None of us likes to think of these issues which detract from the focus upon growth and customer service.  But these very issues can derail the best of organizations at the worst of times.  At the very least, management and its board should discuss the exposures to safety risks and how they might be mitigated in advance.

And then there is our newest salutation: “Stay safe out there.”  As if we shouldn’t have worried about this before the world turned upside down.

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Posted in Depending upon others, Protecting the business | 2 Comments

Have you experienced your disaster recovery event yet?

Have you ever lost all your data on your smartphone, laptop, company server or desktop PC?  If not, it is probably only a matter of time until you do.  Those of us who have experienced this heart-stopping event now regularly back up our data and many of us create daily images of our entire hard drives often, ready this time to address an effective recovery.

The initial shock of data loss

But what about the shock of a fire, a major natural disaster, or even the loss of an important company top executive?  Are you or your board prepared to immediately jump into a pre-planned recovery?  From experience on more than forty boards over the years, I can state that few have even considered the possibilities.  All of us have a phone listing of our employees and associates. But very few have a phone tree for simultaneous contact of larger numbers of people to marshal a recovery from any type of disaster.

Duties of your board of directors

Boards of directors for companies of all sizes should have a person or better yet a committee dedicated to considering the preparations for disaster recovery.  Often, we consolidate this task into the audit committee of a board; and often we expand the subject to ‘risk management’ which includes examination of all forms of risk, from insurance coverage to OSHA compliance and more.

The management and board’s risk register

[Email readers, continue here…]  It is good practice to create a “risk register” listing all the risks to the company you can imagine, who should be contacted first, and recovery steps that are best practices.

The larger the organization, the more the risk

When a company is very small and the company’s assets reasonably replaceable with existing or easily borrowed funds, the event is less likely to threaten the existence of the organization.  As a company grows in size and complexity, more stakeholders depend upon the wisdom of the CEO and the board to think in advance of these unpleasant things, and to attempt to insulate the company’s dependents from a disaster.

Backing up yourself

How about yourself?  Have you been open in sharing your knowledge and talent with a backup, or even a potential successor?  It is prudent and certainly a sign that you take this responsibility personally as a leader among your peers and subordinates.

My past examples of frightening risk events

I have three unfortunate examples in my past of founder-CEOs dying suddenly at their prime.  The shock to each organization was a threat to the very core in all three instances.  Yet as we will discuss in detail in a future insight, in one, the board stepped in immediately to reassure the stakeholders, elect a new CEO from within the board, and reach out to the community with a plan for succession that allowed the business to continue with minimal interruption.  In another, the creditors threatened to close the company, and the board was completely unprepared to respond.  The contrast was quite a lesson to me – one that I would never want to repeat as a board member or senior manager.

How to start the planning process

What if?  How about dedicating at least a half hour of your next executive or board meeting to the subject, and creating a checklist and assignments for covering at least the greatest three risks identified?  It is yet another sign of your growth and growing wisdom as a leader.

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Posted in Protecting the business | 2 Comments