Fine-Tuning Your Business for Greater Success
Almost every business owner starts with a vision and feels the desire to act on that vision. What happens next determines the future of the business.
What tends to happen is that in order to make the organization operational, business owners hire experts to work on the areas of their business in which they have the least knowledge or expertise. For example, a software developer starting his own business might hire a seasoned sales person with a strong track record in selling software. This may seem like a logical decision, but hiring an expert leads to success only when there are systems to follow that the owner has established or has co-developed with the new employee. Having no systems in place to support the productivity of the employee almost always leads to disappointment in both parties, termination of the employee and damage to the success of the business.
The bottom line is, you cannot leave the discretion of the functional operations of the business to your employees. This is in essence abdicating responsibility rather than delegating it. I am not suggesting that your employees cannot hold roles of great responsibility; you need their expertise and creativity, as we will discuss later. However, the fact that they are smart, creative and even experienced does not qualify them to do your job.
A Step-By-Step Guide to Systems Evaluation & Innovation
One of your main accountabilities as a business owner is to manage and evaluate the systems that comprise your organization.
If you have not yet developed and implemented systems in your company, please review the previous issue of The BDC Spotlight, entitled, “Five Simple Steps for Systematizing Your Business” or if you would rather view a short on-line video tutorial on the topic. Putting these practices to work will make a profound difference in the operation of your organization and its ability to perform consistently and predictably well over time.
Once you have developed and implemented marketing, sales , operations and administrative systems and your company is operating fairly smoothly, it is time to innovate your systems to achieve a new level of customer value, revenue generation and profitability.
Where should you start? Here is one way to approach the process:
- First, create a list of systems that you would like to innovate.
- Rank each system on a scale of 1 to 5 (1 being lowest and 5 highest) on the degree to which each system:a) impacts your customersb) uses a large amount of company resources (such as employee time, capital, equipment or materials)c) is expensive to operated) impacts employee productivitye) affects the quality of your products or servicesf) affects the delivery of your products or services
- Total the score for each system.
- Take the system with the highest score and use it in the next exercise, as this system is your best candidate for evaluation and innovation.
Once you have identified a good system to innovate, you need to dissect it, looking at all aspects of it to uncover where you can tweak or change it to deliver a more desirable result.
Here’s a guide to this process of evaluation and discovery:
- First, identify the system’s inputs. Identify what you need to “feed” the system in order for it to operate. Is it time, money materials or any combination of these? The cost of a mailing list, the cost of designing, producing and mailing a mailing piece are examples of system inputs for a direct mail sales system.
- Quantify the inputs in measurable units, such as in minutes or dollars.
- Assess the quality of the system’s inputs. For example, if one input element is time, consider whether the time is that of a junior or senior level employee in the organization and question whether that is appropriate for the system.
- Ask, “What outputs does this system produce?” Clients or qualified prospects are obvious examples of outputs in a sales system.
- Quantify the output in measurable units, such as number of sales leads or new clients. Evaluate the value of a converted client.
- Assess the quality of the output in measurable units. For example, consider whether the type of new client engagement the system produces typically generates high or low revenue or profitability for the organization.
- Assess whether the system produces the results you are looking for. If not, what result would you like to see and what change to the system might produce that?
- Determine whether the system is efficient. Even if you are getting the results you are seeking, at what expense? Could the system be improved to produce the same result at lower cost in input?
- Is the system complete and easy to use? Can others follow the system and reliably produce the result desired? If not, what is missing in the system?
- Document the input and output of your current system before testing innovations, to establish a baseline from which to evaluate future adaptations.
How we reduced marketing costs…
We applied systems innovation at Business Design Corporation when I noticed that our sales lead generation system was becoming increasingly costly to execute. Several years ago, our lead-generation system involved sending direct-mail invitations to attend a free seminar. We would then host seminars in various geographic regions, such as Chicago or London, and then sign new clients who found the seminars highly valuable and desired more of what we had to offer.
The cost of executing this system was approximately $2,000 per new client and the output or revenue generated by the new client was approximately $10,000. Thus, our sales and marketing costs were 20 percent of the total revenue and that worked in our business model. The problem arose when we began to see many costs rising, including the cost of travel, printing and postage, to the point that our cost of acquiring a new client rose to $3,000 and eventually to $5,000 without an increase in output, which no longer supported our company’s model of profitability.
This required us to re-think our processes and, by dissecting our lead generation system, we began to see new ways to achieve our goals. Today, rather than hosting live seminars, we conduct webinars, which eliminates our travel costs and time lost to travel that could be used more productively. In addition, we now charge for our webinars, which helps offset our sales and marketing costs and actually increases our “show-up/attendance” rate. With these changes, we were able to make our system fit into a profitable business model once again.
The role of your employees
Although the management of your company’s systems is your ultimate responsibility, your employees play a key role in innovation, given they have day-to-day experience with executing the systems and can provide valuable feedback on how well the systems are performing. As part of your systems innovation initiative, invite your employees to offer feedback in the form of edits (Microsoft has a ‘Track Changes’ mode) to the systems they work on and to discuss these with their managers. Working together, these teams of systems innovators can then benchmark the input and output of each system as it is, test the employee’s suggested changes and then measure the results. If the results are positive, accept the changes and update the system. In this way, you can tap into the creativity, intelligence and experience of your employees without abdicating more control than necessary.