Month: June 2019

Business Growth Tips

For almost three years, JR Andersen, CEO of mid-size software company Andersen High Tech (AHT), and his board have been uneasy. Business growth has been “OK” at eight percent but the market has been growing at a 15 percent annual rate. With almost half the growth from price increases, unit growth for the main product line has been less than five percent. Fortunately, margins have been expanding nicely along with management bonuses, so things aren’t too bad.

Or are they?

With business growth rates well below the market, AHT is losing customers and hence market share. At a minimum, this means lost opportunities.

Competitors are gaining enough critical mass to develop the next product faster or better. AHT’s biggest competitor has won three bids with “leading edge” requirements, leaving JR worried about his next generation product.

If you were JR and his board, where would you look to escape this predicament? My experience suggests the answer is in marketing strategy, not in technology.

To increase your company’s business growth, your new thinking and priorities should focus on:

– Finding hidden opportunities – Your potential business growth solutions are buried inside your current approach to product enhancement and development.

– Applying product discipline – You need to find and apply the right balance of technical and business factors for proactive product management.

– Discovering customer niches — You need to find specific customers with unique needs that you can serve better than others could.

Six months ago, JR started down this road. Here is his path to business growth success:

Finding the hidden portfolio gold & fixing your R&D investment black hole

AHT had a large “portfolio” of products and product enhancements in development. Like many companies I’ve seen, AHT’s pipeline had many small, incremental projects and very few truly innovative ones.

To fix his R&D problem, JR decided that he needed to divide the projects into 3 categories:

1. Major new products: Greater than 10 percent of firm revenue within three years.

2. Significant product enhancements: defined as substantial new customer functionality.

3. All other.

JR knew there were only four new products underway, counting two in the very early stages. He was surprised to find only seven significant enhancements, and even more surprised to find 73 “all other” projects.

Next, JR needed to understand the resources assigned to each category. Because there had been no central resource tracking, this step was hard for JR’s staff. They had to visit each product group and each functional organization several times before obtaining the necessary information. Everyone was surprised to discover only 20 percent of the resources assigned to major new products and another 15 percent on enhancements–with the remaining 65 percent working on “all other.”

The solution was obvious. Take resources from “all other” and add them to new product development or product enhancements. Not only did this improve confidence in launch dates, it opened a floodgate of possibilities for new products.

Applying Product Discipline

While looking at the AHT product development projects, JR first drew them out on a calendar showing launch dates. Then he asked his engineers and product managers some questions. They included:

– When are intermediate reviews scheduled and who is participating?

– Can you show me the specific customer needs that preceded the technical work?

– For existing products, do the product plans line up with corporate objectives?

– What are the skills and background of the people in product manager roles?

Like many companies, he found AHT only addressed these issues intermittently, meaning he received many answers he did not want to hear. In discussions with the vice presidents at the next staff meeting, JR and his executive management team agreed they needed to personally apply more consistent attention and focus.

Discovering Niches and Segments

Next, JR dug into the product plan for AHT’s product with the largest growth objective. He found the sales target, marketing communications plan, and the planned product enhancements. But the assessment of competitors was weak. Worse, the description of target customers and applications was missing. In other words, no description of why a customer would buy AHT’s product or which customers should be interested.

I’ve seen this pattern at many companies. The value proposition is missing or too broad, without real and specific customer benefits. Crafting a great value proposition includes becoming very specific about benefits in terms that affect the customer’s bottom line.

JR quickly realized that the most productive place to look for revenue growth was in incremental uses and new customers for AHT’s three key existing products. He asked his marketing, sales, engineering and customer service leaders to carefully understand and document each benefit received by current customers, then identify other similar customers.

Business Growth’s Bottom Line

After six months of focus, JR and his board are feeling better. Revenue growth for the last quarter was 17 percent and the most recent product launch was on time. The whole company now has a positive outlook and people are buzzing with energy. It took two new product managers and a lot of executive attention, but the customer niche/value proposition concept has really taken hold. The VP of sales even became a believer when he landed an elusive key account after a presentation of AHT key product benefits (rather than their technical capabilities)

How To Identify Business Growth Road Blocks & Overcome Them

What challenges you most about your management and leadership role as business owner? Do you think about it? Our observations suggest too many business owners work according to learned practices which they do not renew. The result is company financial performance staying well below potential. Good and reasonable performance can become a hindrance to excellent and exceptional results. It’s easy to think ‘we are doing OK, there’s no need to change.’

The first step to facing uncertainty and challenges is to admit there are potential roadblocks to creating business growth. The second is perhaps admitting ‘I need help to remove the roadblocks’. If you take the second step to seek help, you are in the top 25% of business owners. Most resist help. A recent classroom experience at a prominent Australian University highlights this. A working student from India observed Australian business owners seem to be very independent and commonly have the view it will all work out in the end. ‘She’ll be right mate’ still prevails. This attitude may cost your business significant profit performance.

There is a key understanding every business owner needs to grasp if consistent growth is to become normal. We all have blind spots and beliefs we hold onto and thereby restrict success, breakthrough and improvement.

Will we confront and remedy our blind spots? Gaps in vision, strategy planning, marketing plans, leadership and management practice, our experience and even how we view our own industry or product groupings can form craters of restriction.

Let me suggest 3 questions every business owner could answer to start to identify gaps and reveal blind spots. You may find the questions confronting. None of the answers are necessarily easy to find, let alone the solutions simple to implement and establish in your business. Don’t put aside the questions if you are overwhelmed by the multi-faceted specifics required to instigate change and create growth. Consider the exacting specifics of research and change required in industries such as airlines, development technology, communications, security, automation, medical practice and more, where blind spots or neglecting systems can cost lives.

Q1. What time, energy and money are you prepared to invest in research, relationships and skill acquisition to begin or accelerate business growth?

Any change or adjustment will upset routines, historical practices, processes and systems, or the current lack of them. This is often the reason change and improvement is avoided. It disturbs routines, the status quo and demands careful change management. The easier part is usually discovering what is required but the high level challenge is in execution and implementation of the business plans to be introduced.

We’ve observed so many businesses try to create a strategic plan using basic goal-setting practices, but the day-to-day pressures pull staff back to operational and more urgent matters. There is no overriding business plan in place to maintain accountability and ensure target achievement. Strategic planning is not only the realm of large companies.

Q2. How will the required changes be achieved and what process will be used to advance all facets of a new business plan?

A Harvard Business School study found that 70 to 80 per cent of small businesses fail to see the projected return on investments due to the inflexibility or lack of strategy. Many small to medium business owners ignore or resist strategic planning for growth because it’s too hard or perceived as irrelevant. Hence, there is no certainty of business practices or clarity of company purpose beyond basic revenue generation and continued existence.

A successful business plan begins where we are and moves us towards where we want to be. Strong implementation and execution must articulate how we are going to move there. Clarifying goals and expectations is part of the process and ideally should be in light of relevant product and market life cycles. Plans start with small, deliberate steps for what’s important now and then create projects with longer-term specific action plans. Maintaining team focus on the desired outcome will then happen.

Q3. When was the last occasion your senior team members spent dedicated time with you as business owner to grapple with the high level thinking, leadership and creativity needed to see a breakthrough into new ways of running the business?

We worked with a company that supplied and installed a hi-tech product with increasing demand. The company had a staff of 10 people and the business was growing quickly. The director of this company argued in an elevated tone that he needed no one’s help, he was self-sufficient and no person can change how they operate. He was certainly right about himself. Discussions with staff showed he was blind to the true needs in the business and most staff were cruising well below capacity. A strategic plan would have accelerated the business into exceptional growth.

Robert S. Kaplan and David P. Norton, authors of The Strategy-Focused Organization, identified in larger businesses, 85 per cent of executive teams spend less than one hour per month discussing business strategy. Too many SMEs never even mention a strategic plan. To lead a business into high-level thinking, leadership and creativity the key team must be reading, studying and keeping up to date with what is happening in their industry and business at large.